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Coverage Pointers - Volume XXII, No. 24

Volume XXII, No. 24 (No. 590)
Friday, May 14. 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. 

Special thanks to the great editing work performed, week after week, issue after issue undertaken in this publication by two other editors, Agnes Wilewicz and Patty Rauh, and our 15 columnists, all of whom who never miss a deadline!

We welcome back Mike Perley’s very occasional but always appreciated Liening Tower of Perley column in this week’s issue. If you have any questions about liens, he’s d’man.

We appreciate the feedback we received on our Special Edition, on the bad faith legislation recently introduced.  We will keep you advised.

It has been a busy week for all of us in Coverage Pointers land.

The Fourth Department went one for two.

In this week’s issue we offer two cases worthy of close review.  One was a “Thousand’s Flee” case from the Fourth Department (that’s one that just doesn’t make sense to us under established precedent).  The other was an excellent decision from the same court that supports the Court of Appeals decisions in Burlington (considering we represented the winning party, we’re sure of it).

In the County of Erie case in my column, the County claimed additional insured coverage under a policy issued by Philadelphia to a contractor.  The only evidence of coverage (because there wasn’t an additional insured endorsement) was a Certificate of Insurance identifying the County as an AI.  In the Fourth Department, there is precedent that an insurer can be estopped from denying coverage if (a) the Certificate was issued by an agent of the insurer and (b) the purported AI, in this case, the County, relied on the Certificate to its detriment.

The court held that the insurer had the burden of disproving agency and the insurer had the duty of disproving reliance.  Respectfully, to my friends in the Rochester appellate court, that’s simply wrong.  If the County wanted to demonstrate reliance or agency, it should have the burden of proving it – proving the existence of coverage in the first instance is always on the party claiming coverage.

You’ll also find a case from the First Department, where the court wittingly or unwittingly rewards an insurer for its coverage error.   Hmm.

I thank Agnes for her work in outlining for you, in her letter below, the topics covered by our 15 regular columnists and others who stop in from time to time.

 

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 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.

     

ruMIRNAtions:

On the road this week.  Be safe, Mirna.

 

He Only Speaks Mexican:

The Daily Times
Davenport, Iowa
14 May 1921

GIRL ROBBED OF HER PURSE; SUSPECT HELD

 

          Jose Sanchez is being held by the Davenport police facing a charge of larceny from the person as a result of Miss May Whipple, 10131/2 West Third street, losing her pocketbook to a “dip” at Second and Brady streets last evening.  Although Sanchez, who claims he speaks only Mexican, knew enough English to deny that he was guilty.

          According to the girl’s story two men, one of whom she identified as Sanchez brushed into her while she was walking along Second street last evening.  A few minutes later she noticed that her purse containing $4.80 in cash had disappeared.  The girl immediately summoned Patrolman Rhodenbaugh, of the Davenport police department.  A short time later Sanchez was seen coming out of Martin’s cigar store, Second and Brady streets.  The girl identified him as being one of the men who had brushed against her.

          The purse was found in the cigar store lying in the secluded place between the cash register and a show case.  Sanchez, it is claimed, stood just in front of the register a few minutes before.  It is the opinion of the police that the man saw that the girl had reported the theft to the police so he decided to get rid of the purse.  The case will be taken up in police court Monday morning. 

 

Peiper on Property and Potpourri:

We have a treat for you this week in the Property column.  To set the stage, let me take you back to 1997.  For those of you who may remember that far back, the top grossing moving was Titanic, Seinfeld was the top rated tv show, the top selling car was the Toyota Camry, and the minimum wage was $5.15 hour. 

That year also marked the release of the mob classic, Donnie Brasco. You might recall the movie portrays the real-life FBI investigation into the Bonanno crime family, and stars Johnny Depp and Al Pacino.   The characters meet, for the first time, in a bar where Lefty (Pacino) tries to sell a stolen diamond ring to Donnie Brasco (Depp).  Well, it was a fake and the rest is history. 

Fast forward about 25 years, and it turns out that not every jeweler is as street smart as Donnie Brasco.  Read more below to find out, or simply wait for the movie in a few years.  I’m sure Joe Pesci’s people have already been contacted.

In addition to great storylines, we also have a few great cases.  From the first party side of things, check out the Preferred Mutual case which creates very good law for the latent defect exclusion.  There is not much, before this decision, on that very often referenced exclusion.  You might also consider the interesting read involving whether a law firm can recover back legal fees directly from an insurer where the insured had choice of counsel rights. 

That’s it for this week.  Stay safe. 
 

Steve
Steven E. Peiper

[email protected]

 

How Cars Are Wrecked, 100 Years Ago:

Honolulu Star-Bulletin
Honolulu, Hawaii
14 May 1921

How To Wreck
Your Automobile

Insurance Company Makes Public Some of
the Causes of Accident Which Indicate
That Something More Than Warning Signs
Are Needed in a Safety-First Campaign.

          The Home Insurance company of Hawaii is keenly interested in the proposed work of the Honolulu Automobile Club in providing against accidents, and desires to be of any assistance it may in carrying out such a program.

          From the records of more than a hundred losses paid since January 1, it would appear—so far as this company is concerned, at least—that very few of the accidents could have been avoided because of warning signals.  This does not argue that warnings should not be used where needed, but that the exercise of care is of far more importance.
 

How Cars Are Wrecked
 

          1.       Skidded on turning into a side street and hit a telephone pole.

          2.       In order to avoid a road hog the assured was forced over the road into a ditch three feet deep.

          3.       Skidded and ran into a post, damaging the radiator, wind shield, bent axle and broke spring, repair bill amounting to $478.00.

          4.       Trying to pass between two cars and skidded into one of them, damaging radiator, wind shielded, lights and fenders.

          5.       The steering knuckle broke and the automobile ran into a street care, causing damage which cost $415.00 to repair.

          6.       In turning to avoid three horses which were running loose on the road, the assured turned to the left side of the road and collided with a fourth horse which ran out from under a tree, resulting in a broken radiator, broken head light lens, buckled running board, bent hood and broken hub caps.

          7.       In a heavy storm the assured hit a pike of earth which had been washed onto the road, which in turn caused the car to skid and go over a 25-foot embankment.  The gas tank then exploded and burned up what remained of the wreck.

          It will be noted from these items, taken at random, that accidents will happen, no matter how careful the driver may be, but a great many more occur because of thoughtless driving—usually too fast—and failures to inspect the condition of cars at frequent intervals.

 

The Home Insurance Co. of Hawaii, Ltd.

Maintains one department devoted entirely to
automobile insurance.

Wilewicz’ Wide-World of Coverage:

Dear Readers,

This week, a little departure from my usual rants and raves about the weather, my kid, environmental coverage, the Circuit Courts, and the ABA. Rather, since our roster of CP columns has recently expanded, I thought that I would take this opportunity to re-introduce you all to them, and what they write about faithfully, for you, every other week. So, in order of appearance in the attached newsletter:

Kohane’s Coverage Corner, by Dan Kohane – a biweekly survey of every single New York Court of Appeals and Appellate Division decision that even remotely discusses insurance coverage and isn’t covered by another columnist. He’s been doing it for decades and hasn’t missed one!

Peiper on Property (and Potpourri), by Steve Peiper – all the latest in first party property decisions from throughout New York State, along with a dash (or should it be a pinch?) of potpourri, namely anything else of particular import or interest to the Peiper.

Dishing Our Serious Injury Threshold, by Mike Dischley – every decision in the past two weeks dealing with serious injury threshold matters and New York Insurance Law § 5102(d).

Wilewicz’s Wide World of Coverage, by Agnes Wilewicz – a biweekly recitation of all Second Circuit Court of Appeals decisions on insurance coverage, and occasionally a particularly interesting one from a different Circuit Court.

Barnas on Bad Faith, by Brian Barnas – highlights and analysis of bad faith decisions from New York and around the country (often from outside of New York, because we don’t have bad faith!).

Lee’s Connecticut Chronicles, by Lee Seigel – the latest and greatest from the Great Nutmeg State of Connecticut, from the lower courts to its Supreme Court, and everything in between.

Bucci on “B”, by Diane Bucci – detailed reporting on anything and everything Coverage “B” related, for all your personal and advertising injury needs.

Off the Mark, by Brian Mark – from the man with two first names comes a biweekly column detailing as many construction defect cases as he can find, both within and outside of New York State.

Boron’s Benchmarks, by Eric Boron – a national survey every-other-week of notable insurance coverage decisions from the highest or most supreme courts of the U.S.

Ryan’s Capital Roundup, by Ryan Maxwell – bringing you the latest from the New York State Capital, including legislative developments, proposed statutes, and analysis of regulations, both pending and proposed.

CJ on CVA and USDC(NY), by C.J. Englert – all of the latest cases coming down stemming from the New York Child Victims Act, along with periodic analysis of Federal District Court insurance coverage decisions.

Rauh’s Ramblings, by Patty Rauh – from a hybrid attorney comes a hybrid column, in this column you will find case summaries dealing with both personal/life insurance coverage cases, as well as noteworthy environmental coverage decisions from around the country.

ruMIRNAtions, by Mirna Santiago – one of our newest columnists, Mirna explores a range of topics within the diversity, equity, and inclusion space, with a particular focus on how trends and developments impact the insurance industry.

Storm’s SIU Examen, by Scott Storm – a biweekly detailed analysis of first party property damage cases, claims, investigations, and decisions resulting therefrom.

Heintzman’s Hideout, by Nick Heintzman - covering selected and interesting coverage cases from the lower courts, the plenary courts (in New York, the lowest state court is called the Supreme Court).

Liening Tower of Perley, by Mike Perley – an occasional columnist, as Dan mentioned above, here we bring you any and all matters discussing any and all types of liens.

Check back next time for more from my regular column and from your national Federal Circuit Courts!
 

Agnes
Agnes A. Wilewicz

[email protected]

 

Secretary of Labor No Longer to Separate Wage Earners by Race:

The New York Age
New York, New York
14 May 1921

No Segregating Negro Wage Earners
From Other Races

Secretary of Labor Explains Abolishment of
Division of Negro Economics—Was
Fundamentally Un-American, He Says.

(Special to The New York Age)
 

          Washington, D.C.—Regarding  the Division of Negro Economics, the Secretary of Labor made the following announcement:

          “The co-called Division of Negro Economics had been abolished by the Secretary of Labor largely because there is no such thing as segregating the ‘economics’ of Negro wage-earners from those of any other race.  It is fundamentally un-American to create classes or to recognize classes.  Our laws to not distinguish between white men and Negroes or any other class or classes.

          “It is recognized that there is a race distinction and sometimes it is even convenient to have the assistance of a representative of a race in dealing with the members of that race.  So far as labor matters are concerned the race distinction becomes more pronounced in the field of collective bargaining when troubles between employers and employees threaten.  For that reason a member of the Negro race has been appointed a commissioner of conciliation, who has been detailed to serve wherever the Secretary may feel the need of race representation and to advise the Secretary. 

          “This change in policy so far has been working very satisfactorily.  Much valuable information has been gathered regarding pertinent data and statistical information relative to Negro workers and a brief release is now available bearing on the approximate trend of industrial employment and unemployment among Negro toilers.  The publications of the Department ‘Negro Migration in 1916-17’ and ‘The Negro at work during the World War and during Reconstruction’ are still available for free distribution through the Department of Labor, Washing, D.C.”

 

Barnas on Bad Faith:

Hello again:

Normally I would spend this space telling you about my excitement about the Blue Jays returning to Buffalo or the NFL Schedule, but this week we have an important legislative development in New York on bad faith that requires attention.  Hopefully, you caught our special edition summary of Assembly Bill 7285 that went out on Monday May 10.  If not, here is another link to it.

The proposal suffers from no shortage of problems that are discussed in the linked article.  One that I find particularly concerning is the potential for a multitude of frivolous statutory bad faith claims.

The rule has been well-established in New York that an insured is entitled to counsel fees it incurs when its insurer places it in a defensive posture in litigation; it is not entitled to such fees when it brings affirmative litigation to contest coverage.  The bill creates an incentive for an insured to bring a claim of statutory bad faith any time it brings a suit to contest a denial.  If the insured can establish such vague offenses as the insurer failed “to provide the claimant with accurate information” or failed to provide a “full and complete explanation” of a denial, it would become entitled to attorney’s fees and punitive damages.  Surely, enactment of this bill would lead to almost every lawsuit brought over a denial, even a simple good faith disagreement about coverage or the facts of the loss, to include a statutory bad faith claim whereby policyholder council could hope to recover fees.  New York courts have appropriately limited attorneys’ fees and punitive damages to egregious bad faith and tortious conduct on the part of the insurer, and I would submit that it should remain that way.

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

Brian
Brian D. Barnas

[email protected]

 

Film Censorship in the Spotlight:

Buffalo Evening News
Buffalo, New York
14 May 1921

MOVIE CENSORSHIP BILL
SIGNED BY GOVERNOR

          ALBANY, May 14.—Governor Miller signed the Laisk-Clayton motion picture censorship bill yesterday, it was announced at the executive chamber today.

          The law creates a motion picture commission of three members, appointed by the governor, and confirmed by the senate, at annual salaries of $7500 each.  The commission will review films before exhibition in the state and may refuse to license any films that are “obscene, indecent, immoral, inhuman, sacrilegious, or are of such a character that their exhibition would tend to corrupt morals or incite to crime.”

          Provision is made that the commission, when it denies a license, shall furnish the applicant for the license a written report of the reasons for the refusal, and the applicant may then have the matte reviewed by the courts.

 

Off the Mark:

Dear Readers,

My oldest turns 13 this weekend.  Where does the time go?  For his big day, he has requested a trip to The Metropolitan Museum of Art.  Yes, he is much more cultured than I am.  That said, I am honestly looking forward to it.  We used to go often when he was younger, but haven’t made it back there in recent years.  We will be driving into the City and have already planned a picnic lunch in Central Park.  As the weather looks good, it should be a memorable day.

Unfortunately, there were no newsworthy construction defect cases to report on this edition.  Check back in two weeks.

Until then …
 

Brian
Brian F. Mark

[email protected]

 

For Six Dollars, You Can Have Your Eye Returned:

Democrat and Chronicle
Rochester, New York
14 May 1921

Verdict of $6 for Conductor
Struck in Eye

          Punching a conductor in the eye and breaking his glasses cost Donald Lepine $6 in cash.  A Supreme court jury yesterday afternoon returned this verdict before Justice John B. M. Stephens in trial term.  James McNamara, a conductor on the West avenue line, was the complainant in the action.

          The case grew out of a dispute between McNamara and Lepine when the latter found a jeweled pin on the floor of the car and was ordered by the conductor to turn it over to him.  Lepine refused, saying he would hand it over to any official of the street railway company.  McNamara, it was alleged, took him to the end of the line, where hot words ensured which were followed by blows.  McNamara charged that Lepine broke his glasses.

 

Boron’s Benchmarks:

Did you ever notice how as soon as you cross one thing off your “to-do” list, two more things are added to it?  I’ve sure been noticing this phenomenon in my life lately. Work is as busy as always.  And now, the warmth of Spring brings with it yardwork that patiently (and sometimes not so patiently) awaits my return home from work each day.  Hopefully, the yardwork (or is it “yhardwork”, with a silent “y”?) put in now will pay off later, when our annuals and veggies and herbs all blossom and grow and yield.  The first step is getting them all into the ground.  Wish my back luck, folks. 

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 offer for your consideration a Minnesota Supreme Court opinion, King’s Cove Marina, LLC vs. Lambert Commercial Construction et al, issued on April 14, 2021.   The case considers, in pertinent part, whether a CGL policy including on its Declaration Page a separate limit of coverage for the “products-completed operations hazard” must cover property damage caused by the insured’s own completed work, notwithstanding the CGL policy’s express exclusion of coverage for property damage arising out of the insured’s work.  

Have a healthy and happy next two weeks, folks.
 

Eric
Eric T. Boron

[email protected]

 

Kissing is BAD:

Buffalo Evening News
Buffalo, New York
14 May 1921

KISSING IS BAD FOR
HEALTH, SAYS FRONCZAK

Commissioner Issues Warning
Against Osculation Dangers
As Summer Approaches

 

          Kissing is insanitary, points out Health Commissioner Francis E. Fronczak.

          He felt called upon today to issue a warning against this pastime as well as a number of others, now that summer is approaching.  “The threshold of summer is a time of danger,” says the doctor.

          Persons are urged not to overdo, not to go into strenuous sports such as tennis without some preparation, not to go swimming before the water is warm, not shed seasonable clothing too soon.

          Regarding vacations in the country, Dr. Fronczak once more urges people to avoid doubtful drinking water which may contain typhoid contamination.  He also says a word against the common drinking cup.  It is decidedly dangerous, he declares, and it is better to go thirsty than to drink from it, he says. 

 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

With the NFL schedule release, Buffalo Bills fans are once again a buzz with their latest theories of “disrespect” from the league and others across the nation. The latest is that our Week One 1:00 pm game against Pittsburgh does not match the caliber of our roster after losing in the AFC Championship game last year. But let’s tone it down a little bit, can we? Let’s talk about back-to-back Thanksgiving games, from Dallas to the French Quarter! Let’s talk about a Sunday Night, AFC Championship playback! Let’s talk about hosting the Patriots in Buffalo on Monday Night Football in December! Let’s talk about a 4:25 start against the reigning Superbowl Champion Buccaneers on their turf in Week 14! Tennessee Titans on Monday Night Week Six? Why not? Now I’m pumped; are we there yet?

In this week’s column, we have three bills kicking around the New York State Legislature. The first would authorize municipal insurance reciprocals to return operating reserve balances to subscribing members. The second would authorize a study examining insurance premiums and the availability of insurance coverage for affordable housing developments. The third would permit the New York State Insurance Fund to cover in-state policyholders' out-of-state work.

Until next time,
 

Ryan
Ryan P. Maxwell

[email protected]

 

Tarring and Feathering Leads to $350 Verdict:

New Castle News
New Castle, Pennsylvania
14 May 1921

Allen Gets $350
Verdict In Case

Very Small Award in Claim
For $25,000 Made By Jury

SIX DEFENDANTS ARE ELIMINATED
 

          It took the jury in the case of Water Allen against twenty men of this city, from whom he sought to secure damages to the amount of $25,000 for alleged injuries and humiliation sustained April 29, 1918, when he was brought into this city and covered with tar and grease, following his refusal to purchase a Liberty bond, four hours to bring in a verdict for $350 against fourteen of the defendants and relieving five remaining defendants of responsibility in the case.  The costs follow the verdict.

          The jury left the court room at 25 minutes past 12 o’clock Friday and the verdict was returned at 4:30 p.m.  The jury arrived at the verdict after much discussion, part of the jury being against any damage award, it is understood.  Attorneys for the defendants were unable to state today whether there would be a petition presented, asking for a new trial.

 

CJ on CVA and USDC(NY):

Hello all,

It’s hard to believe that we are already half-way through May and the unofficial start to summer is right around the corner. I don’t know about you, but I am enjoying the extra few hours of daylight after work and looking forward to warmer temperatures. As courts get back to normal as well, I have doubts that we’ll see the usual summer slowdown in decisions, meaning CP will always be chock-full of all the coverage news fit to print!

This edition I discuss a COVID-19 Business Income case out of the Western District of New York. Our friends at Philadelphia Insurance secured a well-deserved victory dismissing the insured’s claims for coverage, even after plaintiff alleged, and the court accepted as true, that the virus did indeed infiltrate the insured premise. The court also held that the availability, but lack of inclusion, of the ISO virus exclusion does not prove an insurers intent to incorporate the exclusion.

See you in two weeks,
 

CJ
Charles J. Englert, III

[email protected]         

 

Toronto to Buffalo Flight Takes 90 Minutes:

The Buffalo Enquirer
Buffalo, New York
14 May 1921

BIG PLANE REACHES CITY

 

          The giant commercial hydroplane Santa Maria landed at the wharf of the Buffalo Yacht club at 12:45 this afternoon having left Toronto at about 11:15 this morning.  Since leaving Montreal the trip has been without incident.  The delay in that city was for repairs.

          The committee appointed by the Aero club of Buffalo and the committee appointed by the Chamber of Commerce to welcome the plane’s passengers were on hand as well as a large number of member of the Aero club and the Yacht club.

          As the big seaboat settled to the waters of the Niagara and swept up to the pier in a long, graceful circle a throng gathered on the water’s edge.

          The passengers were Mr. and Mrs. Howard Coffin of Detroit, Inglis M. Uppercu, president of the Aeromarine Plane & Motor Co. of Keyport, N.J., and C. F. Redden, sales manager of the same firm.  Col and Mrs. H. M. Alden are also aboard.

Editor’s Note: You can drive from Buffalo to Toronto in just over 90 minutes today.

 

Dishing Out Serious Injury Threshold:

Dear Readers,

Happy belated Mother’s Day to all the mothers out there. Hope everyone was able to enjoy the day and spend some time with the important people in their lives. Thankfully, my mother is relatively easy to shop for. Unfortunately, I cannot say the same about Father’s Day.

In the Serious Injury Threshold world, we have a special decision out of the Third Department on a case handled by our own Brian Webb. This case addresses plaintiff’s failure to rebut defense expert range of motion findings and establish permanent consequential limitation or significant limitation of use.

Be well,
 

Michael
Michael J. Dischley

[email protected]  

 

Husband Expendable to this Bride:

The Buffalo Commercial
Buffalo, New York
14 May 1921

MRS. SOUTHARD SAYS
SHE GOT NO INSURANCE

Omits Name of Third in
Giving Honolulu Policy
Husbands’ Names

DIED OF POISONING

Idaho Chemist’s Report Leads to
Investigation And Subsequent Arrest

By The Associated Press
 

          HONOLULU, May 14.—Mrs. Paul Vincent Southard, held in jail here on a charge of murdering her fourth husband, Edward Meyers, at Pocatello, Idaho, denied today she had collected any insurance on the lives of her former husbands.  Chief of Detectives Arthur McDuffie said he asked her for a list of her former husbands and that she gave him the names of Robert C. Dooley, William McHaffie and Meyers, omitting the name of Harlan Lewis, said to have been her third.

          A search of Mrs. Southard’s effects, according to McDuffie, has revealed an insurance application form of a leading insurance company.

          The jail warden declared that she appears cool and normal but that she eats very little.  At the request of Idaho officials extraordinary precautions have been taken to forestall any attempt to take her own life.

 

Bucci on “B”: 

Hello readers,

I hope all is well with you and yours.  I only found one case for this issue that actually discussed Coverage B.  Have a read.  Contact me with questions/ comments.  I hope everyone read Monday’s Special Edition regarding the efforts to pass Assembly Bill 7285 and bring statutory bad faith to New York for both the third-party claimant and the policyholder.  Definitely worth the read.  It’s a very important issue in New York, and would flood the court with cases for bad faith, and bad faith will be alleged in probably every coverage dispute.  

What I really want to say today is that I’m very lucky to have the colleagues and friends I have here at Hurwitz & Fine.  At least for me, it is rare to find an entire group of such fine lawyers with the depth of knowledge and experience these lawyers have, that are also great human beings.  Hurray!
 

Diane
Diane L. Bucci

[email protected]

 

Burglaries Increase Premium:

The New York Times
New York, New York
14 May 1921

Burglary and Theft Insurance Rates Go Up;
Crime Forces Increase—New Form of Policy

 

          In a memorandum sent yesterday by burglary insurance companies to agents and brokers in this city announcement was made that, beginning the first of next month, burglary and theft insurance rates would be increased that that a new form of policy would be written. 

          “A considerable amount of money has been lost on resident burglary and theft insurance during the last few years,” the memorandum begins.  “Rates have been raised from time to time but the loss ratio has continued to rise.  Careful consideration has been given to various plans suggested for writing this class of insurance, with the object of placing the business on a profitable basis without restricting the coverage and without making any radical increase in rates.  A new policy form has  been adopted with those objects in view.

          “For many years it has been customary to provide blanket coverage under one section of a policy on all household goods and personal property common in residences generally.  This property has not been classified, and divided into three sections.

          “The property to be insured under Section A consists of jewelry, precious stones, watches, articles of gold, platinum and sterling silver; furs and articles made entirely or principally of fur.  Property to be insured under Section B consists of money, securities and stamp and coin collections to an amount not exceeding $50; and wearing apparel, laces, rugs, tapestries, pictures, paintings, plate ware and other house goods, including professional instruments, electric light, plumbing, as and water fixtures.” 

          The memorandum says that the only property to be insured under the last class is wines, liquors and other alcoholic beverages acquired before the Volstead act became operative, and lawfully owned by the policyholder at the time of its loss.  It adds that a separate rate has been fixed for insurance under the last class. 

          It is explained that under the new form of policy clauses commonly referred to as the “riot and strike clause” and the “mechanics’ clause” have been eliminated, and the rules for issuing policies have been changed so that risks will be met by policyholders in proportion to the probability of their sustaining losses.

 

Lee’s Connecticut Chronicles:

Somehow, it’s two weeks later than it was only two weeks ago. I’m not sure how that happened, but it seems to happen over and over again.

Ordinarily, I write on issues of Connecticut law here, but instead I’m returning to my roots and expertise: bad faith law. Hopefully, you’ve already seen our alert on the pending New York bad faith bill. A version of our analysis is coming soon to a Law360 publication near you. If you have questions about how this bill, if enacted, will affect you, please reach out.

Keep being smart and staying safe.
 

Lee
Lee S. Siegel

[email protected]         

 

Struck by Train with Severe Wounds Leads to $2,000 Verdict:

The Buffalo Times
Buffalo, New York
14 May 1921

INJURED WOMAN WINS
 

          A $2,000 verdict was awarded Mrs. Anna C. Bennett of No. 318 Winslow Avenue by a jury which reported to Justice Sears in Supreme Court Saturday. The case was won against the International Railway.  Mrs. Bennett was injured in a street car accident the week before Christmas, 1919, according to Ford White, who tried the case for the plaintiff.

          He explained that she was returning from participation in the work of the White Light Mission.  At Fillmore Avenue and Sycamore Street she crossed the street to board a northbound car and was caught between that care and one going south.  She sustained severe scalp wounds and other injuries, Mr. Ford claimed. 

         

Rauh’s Ramblings:

Hello everyone,

In the last Coverage Pointers issue, I mentioned that I may be changing up my column since there does not appear to be many noteworthy case decisions involving life insurance as of late.

That being said, I am pleased to report that I will now be providing you with summaries of recent case decisions involving various environmental coverage issues with a particular focus on cases outside of New York (at both the state and federal level). Lately, I have found myself becoming more and more interested in environmental coverage work and learning how different types of environmental coverage can be impacted by different state and federal environmental regulations.  Of course, if any notable life insurance cases come up along the way, I will report on those as well!

The first environmental coverage case that I will be reporting on comes out of the 11th Circuit Court of Appeals and involves a marine insurance policy, Hurricane Irma, and the demise of a 92-foot yacht named M/Y My Lady.  Read on for more!
 

Patty
Patricia A. Rauh

[email protected]        

 

Vaccines Administered, 100 Years Ago

Independence Daily Reporter
Independence, Kansas
14 May 1921

DR. M’COWAN
SPECIALIST

Chronic Disease
 

606 and 914 Serums and Vaccines Administered.  Electric
and Manipulative Treatments.  Medicines Furnished. 
Nothing but Specifics and strictly scientific methods used.

Office, Kress Building,
Independence, Kansas.

Office Hours:  9-12 a.m.; 1-5
and 7-8 p.m.

 

Storm’s SIU Examen:

Hi everyone:

In this edition of The Examen, we will review:

  • A favorable decision for an insurer on a first-party property claim where the insured alleged “bad faith” under 42 Pa. C.S. § 8371 due to a 3-month 19-day delay between the adjuster's inspection of the property and payment of the undisputed amount of the loss.
     

  • A PIP claim where a physician failed to attend his EUO twice based upon an allegedly busy schedule and because of the insurer’s refusal to grant lengthy adjournments, which was held to be insufficient as a matter of law to defeat summary judgment to the insurer. 
     

  • How to determine whether the amount in controversy exceeds $75,000 for removal of a case from state court to federal court based upon diversity jurisdiction.
     

  • An insurer’s motion for summary judgment which was granted under the Federal Declaratory Judgment Act and Pennsylvania's Insurance Fraud Act due to an insured’s material misrepresentations in the presentment of a commercial property claim in submitting altered invoices as substantiation for values of property items. 
     

  • Three COVID-19 1st-party property business income victories.  2 in N.Y. and 1 in Pa. 
     

This edition’s encouraging word: “In order to succeed, we must first believe that we can.”  ~Nikos Kazantzakis

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

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]

 

This is the 200th Anniversary of the First Small Pox Vaccine Inoculation:

The Pittsburgh Press
Pittsburgh, Pennsylvania
14 May 1921

This Day in History.
 

          This is the anniversary of the first inoculation for small pox in 1796, when Dr. Jenner, the discoverer, tried the vaccine on a small boy named Phipps.  Vaccination, though opposed, came into use and practically wiped out small pox.

 

Heintzman’s Hideout:

Dear Readers:

As I write this, I eagerly anticipate H&F’s first softball game of the year tomorrow. Although my softball skills are woefully lacking (at 6’5”, basketball is my sport), the games are always a lot of fun. In 2019, I played on the H&F team while I was a summer law clerk at H&F between my 2L and 3L years, and softball was a big part of how I bonded with my colleagues at H&F. Two years and a pandemic later, I am eager for some H&F social activities and comradery, and I think many at H&F are thrilled to have softball back.

Today’s column features two cases: in the first, the Supreme Court of Kings County applied Pennsylvania law and found that the insurer’s recission of an insurance policy on material misrepresentation grounds was ineffective when applied to an innocent third party. In the second, an assignee of no-fault benefits from MVAIC successfully argued to the Civil Court of the City of New York in Kings County that testimony from a EUO transcript affecting the assignor’s no-fault eligibility was inadmissible hearsay.

Best Wishes,
 

Nick
Nicholas J. Heintzman

[email protected]

 

Japanese Cooking Myth Shattered:

Times Union
Brooklyn, New York
14 May 1921

JAPANESE SHATTER
ORIENTAL COOKING MYTH

          Glen Cove, May 14.—An advertisement for a cook, appearing this week in Glen Cove papers, would seem to explode the myth of the superiority of Japanese cookery.  “Three Japanese business men desire the services of a cook for their summer residence in this city and one qualification is that the cook must be white.”  This is emphasized equally with the demand that the applicant must be a “good cook.”

 

Liening Tower of Perley:

Greetings from a cool but clear Buffalo, New York.  The calendar says May, but the weather continues to say March as we Western New Yorkers longingly look forward to the arrival of summer as Dan Kohane gazes from his window to the shores of Canada waiting for the border to reopen so that he may return to Crescent Dreams.  Today’s issue provides a reminder that General Obligations Law § 5-335 does not have an unlimited reach.  It is subject to preemption by self-funded ERISA plans whose rights under federal law preempt that New York statute.  The Second Department’s decision also serves as a reminder that one should not attempt to extinguish a claimed lien right without proper notice to the health insurance provider. Appropriate notice and consultation could have avoided this outcome. 
 

Mike
Michael F. Perley

[email protected]

 

Headlines from this week’s issue, attached:

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]
 

  • Named Insured’s Carrier Fails to Comply with Insurance Law Section 3420(d)(2) and is Eventually Rewarded for It

  • Burlington means what Burlington says.  Mere Fact that Employee of Named Insured was Injured Does Not Mean Carrier Must Provide Additional Insured Coverage

  • Named Insured Breached Its Insurance Procurement Clause by Securing Additional Insured Coverage Only “Caused By”  Named Insured’s Conduct Rather than Required “Arising Out of” Language

  • Word to the Wise – RTFP:  “Read The …. Furnished  … Policy”

  • Failing to Submit to a Premium Audit is Not Evidence of Lack of Cooperation to Allow Coverage Denial

  • Coverage by Estoppel, an Issue of Fact.  Insurer has Burden of Proving Lack of Agency and Lack of Reliance?  Thousands Flee

 

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

Property

  • Real Jewels but Fake Customer Triggers Dishonest Character Exclusion

  • Failing Living Room Walls Fall Outside the Scope of Coverage on the Basis of Latent Defect Exclusion 

  • Right to a Premium Audit was Preserved in Policy Conditions

  • Refusal to Participate in Premium Audit is Not the Equivalent of Failure to Cooperate

 

Potpourri

  • Simple Interest Accrues on Arbitration Award from Date of Decision through Date of Payment

  • Plaintiff’s Release of Tortfeasor Potentially Voided based on Fraudulent Inducement

  • No Standing to Sue Carrier for Past Legal Fees where Client/Insured Controlled Selection (and Discharge) of its Representation

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley

[email protected]
 

  • Plaintiff Expert Failed to Rebut Defense Expert Range of Motion Testing in Order to Establish Permanent Consequential Limitation or Significant Limitation of Use

 

WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz

[email protected]
 

  • On the road again.

 

BARNAS on BAD FAITH
Brian D. Barnas

[email protected]
 

  • Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing Survived Summary Judgment as Not Duplicative of Breach of Contract Claim

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]
 

  • The Connecticut state and federal courts have let us down, yet again, producing no new insurance decisions.

 

BUCCI on “B”
Diane L. Bucci

[email protected]
 

  • Can This Be Negligence?

 

OFF the MARK
Brian F. Mark
[email protected]e.com
 

  • No interesting construction defect cases to report on this week.

 

BORON’S BENCHMARKS
Eric T. Boron

[email protected]
 

  • CGL Policy – No Coverage for Insured Contractor’s Defective Work

 

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell

[email protected]
 

Legislative List

  • Proposed Law Would Authorize Return of Subscribing Member Operating Reserve Balances to Members of a Municipal Insurance Reciprocal.

  • Proposed Law Would Direct DFS to Study the Insurance Premiums and Availability of Insurance Coverage For Affordable Housing

  • Proposed Law Would Allow New York State Insurance Fund to Enter Into Agreements With Private Insurers To Cover Out-Of-State Work.

 

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

[email protected]
 

  • While the Ability to Proceed Anonymously is not Guaranteed, in CVA Litigation the Trial Court has Broad Discretion to Allow it. 

  • Direct Physical Loss to Property is Required Even When a Virus has Contaminated an Insured Property.

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]
 

  • Since There is No Entrenched Maritime Rule Governing Captain or Crew Warranties, Florida Law Applies to Determine the Effect of Ocean Reef’s Breaches Under the Travelers Policy

 

ruMIRNAtions
Mirna M. Santiago

[email protected]
 

  • On the road this week.

 

STORM’S SIU EXAMEN
Scott D. Storm

[email protected]
 

  • As a Matter of Law, 3-Month 19-Day Delay Between the Adjuster's Inspection of the Property and Payment of the Undisputed Amount of the Loss Did Not Constitute Clear and Convincing Evidence of First-Party Property Insurer’s Alleged “Bad Faith” Under 42 Pa. C.S. § 8371.  Expert's Suggestion that the Adjuster was Overwhelmed or Pressured, Even if True, Did Not Establish the Adjuster's Knowing or Reckless Disregard of Lack of a Reasonable Basis to Deny Payment and, Therefore, Did Not Defeat Summary Judgment to Insurer. Bad Faith Must be Proven by Clear and Convincing Evidence and Not Merely Insinuation or Simple Negligence
     

  • Physician’s Failure to Attend EUO Twice Based Upon an Allegedly Busy Schedule and Because of Insurer’s Refusal to Grant Lengthy Adjournments was Insufficient as a  Matter of Law to Defeat Summary Judgment to Insurer.  The Request of Plaintiff for a Flat, Up-Front Fee of $5,000 Per Claimant to Testify at the EUO was Improper, as Opposed to Seeking Reimbursement for Any Loss of Earnings and Reasonable Transportation Expenses as Set Forth In the  Regulations
     

  • Determining Whether the Amount in Controversy Exceeds $75,000 for Removal of a Case from State Court to Federal Court Based Upon Diversity Jurisdiction
     

  • Insurer’s Motion for Summary Judgment Granted Under Declaratory Judgment Act and Pennsylvania's Insurance Fraud Act Due to Insured’s Material Misrepresentations in the Presentment of a Commercial Property Claim in Submitting Altered Invoices as Substantiation for Values of Property Items
     

  • This edition’s COVID-19 1st-Party Property Business Income Victories

 

HEINTZMAN’S HIDEOUT
Nicholas J. Heintzman

[email protected]
 

  • Court Applied Pennsylvania Law and Determined that Recission of Insurance Policy on Material Misrepresentation Grounds was Ineffective when Applied to Innocent Third Party

  • Court Held that EUO Transcript of Assignor of No-Fault Benefits which Affected the Assignor’s No-Fault Eligibility was Inadmissible Hearsay

 

LIENING TOWER OF PERLEY
Michael F. Perley

[email protected]
 

  • The Second Department Enforces Preemption for a Self-Funded ERISA Plan’s Medical Liens 

 

Pay attention to the Bad Faith legislative updates we provide, as crisis might develop quickly.

 

Dan

 

 

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

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


NEWSLETTER EDITOR
Dan D. Kohane

[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz

[email protected]

ASSISTANT EDITOR
Patricia A. Rauh

[email protected]

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

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

Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Diane L. Bucci
Mirna Martinez Santiago
Scott D. Storm
Brian D. Barnas
Eric T. Boron
Ryan P. Maxwell
Charles J. Englert
Patricia A. Rauh
Nicholas J. Heintzman
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

Heintzman’s Hideout

Liening Tower of Perley

 

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

 

05/13/21       Technology Insurance Company v. First Mercury Ins. Co.
Appellate Division, First Department
Named Insured’s Carrier Fails to Comply with Insurance Law Section 3420(d)(2) and is Eventually Rewarded for It


So what happened here.  Technology Insurance Company (“TIC”) tenders to First Mercury on behalf of itself and its insured P&R Equities. Inc. (“P&R”) the property owner, seeking additional insured status. First Mercury denies coverage only to TIC but never copies the general contractor. Its disclaimer was based on a policy exclusion, which triggers the obligations of the insurer to comply with Insurance Law Section 3420(d)(2).  

First Mercury conceded P&R was an additional insured and raised the exclusion in the letter to TIC but did not notify or copy P&R.

The Court of Appeals has held, in Sierra v. 4401 Sunset Park, LLC, 24 NY3d 514, that where an insurer tenders on behalf of its insured, as here, the insurer has an obligation to send the disclaimer to the purported AI, not just the insurer:

GNY was not an insured under Scottsdale's policy; it was another insurer. While GNY had acted on the insureds' behalf in sending notice of the claim to Scottsdale, that did not make GNY the insureds' agent for all purposes, or for the specific purpose that is relevant here: receipt of a notice of disclaimer. GNY's interests were not necessarily the same as its insureds' in this litigation. There might have been a coverage dispute between GNY and the insureds, or plaintiff's claim might have exceeded GNY's policy limits. Because the insureds had their own interests at stake, separate from that of GNY, they were entitled to notice delivered to them, or at least to an agent — perhaps their attorney — who owed a duty of loyalty in this matter to them only. As the Appellate Division correctly held in Greater N.Y. Mut. Ins. Co. v Chubb Indem. Ins. Co. (105 AD3d 523, 524 [1st Dept 2013]), the obligation imposed by the Insurance Law is "to give timely notice of disclaimer to the mutual insureds . . . not to . . . another insurer."

Scottsdale argues that it has "substantially complied" with the statute, relying on Excelsior Ins. Co. v Antretter Contr. Corp. (262 AD2d 124 [1st Dept 1999]) and Cincinnati Ins. Co. v Sirius Am. Ins. Co. (51 AD3d 1365 [4th Dept 2008]). Excelsior, as the court in GNY v Chubb pointed out (105 AD3d at 525), may be distinguishable: in that case, as a result of a settlement, the insured had no real interest in the litigation, and the insurer to which the disclaimer was sent was the only real party in interest (see Excelsior, 262 AD2d at 127). In any event, if Excelsior and Cincinnati are read to stand for the general proposition that notice to an additional insured's liability carrier serves as notice to the additional insured under section 3420 (d) (2), those cases should not be followed.

Because First Mercury refused to defend P&R, TIC on behalf of P&R settled the case with the plaintiff and then brought an action on its behalf and that of its insured against First Mercury, seeking a determination that P&R was an additional insured and First Mercury had lost is right to disclaim because of its failure to comply with the provisions of the Insurance Law.

The First Department ruled in favor of First Mercury because of the settlement, thus giving the named insured’s carrier incentive, if it fails to comply with the Insurance Law, to remain recalcitrant:

The settlement paid by the insurer left "the insured[] with no actual interest in the case and ma[de]. . .[plaintiff] insurer[] the real party in interest" … Accordingly, "the argument that [defendant]'s disclaimer was invalid under Insurance Law § 3420(d) [is] unavailing, since the protections of. . .§ 3420(d) [are] inapplicable to one insurer's claim for reimbursement from another insurer" … To the extent plaintiff insured seeks a declaration that defendant is obligated to defend and indemnify it, the settlement has rendered the additional insured's claims moot.

Editor’s Note:  This sends the wrong message.  Had a judgment been entered against P&R, and TIC not paid it, Allied would be on the hook.  But, because TIC complied with its good faith obligations to its insured and picked up its defense, it loses its right to enforce its insured’s rights. This was our case as well, so my peeves on the ruling are personal!

 

05/11/21       Parsons McKenna Construction Co. v. Allied Insurance Co.
Appellate Division, Fourth Department
Burlington
means what Burlington says.  Mere Fact that Employee of Named Insured was Injured Does Not Mean Carrier Must Provide Additional Insured Coverage

This one was our victory.

A fellow was hurt in a fall from a stack of doors, that were piled at a construction site.  He sued the owner, Auburn, and Parsons McKenna (“Parsons”), the general contractor.  Allied insured the plaintiff’s employer and the policy contained an additional insured endorsement covering the contractor, Parsons, only for liability arising out of accidents “caused in whole or in part” by the employer’s ongoing operations..

Parsons’ carrier settled the case with the plaintiff, before verdict, so there was no finding of responsibility on anybody’s part.

The lower court found that Auburn was an additional insured but Auburn conceded during oral argument that it was not, and the court reversed a finding that it was an additional insured.

With respect to Parsons, the court vacated the award of summary judgment against it:

Although Parsons, unlike Auburn, is listed as an additional insured on the face of the policy, and although the laborer was undoubtedly "performing operations" on his employer's behalf, we nevertheless conclude that issues of fact with respect to proximate cause preclude an award of summary judgment, citing to Burlington Ins. Co. v NYC Tr. Auth., 29 NY3d 313, 321 [2017]; 

Causation means causation, and simply because the plaintiff was injured on the jobsite doesn’t mean that additional insured status will be provided to the general contractor.

Editor’s Note:  How will Parsons prove causation in a case that it settled?  Inquiring minds want to know.

 

05/11/21       Live Nation Worldwide, Inc. v. Best Buy Stores, L.P.
Appellate Division, First Department
Named Insured Breached Its Insurance Procurement Clause by Securing Additional Insured Coverage Only “Caused By”  Named Insured’s Conduct Rather than Required “Arising Out of” Language


Live Nation did not provide the insurance for Best Buy that it was required to provide under the agreement between the parties. The agreement at issue stated that Best Buy would obtain liability insurance which named Live Nation as an additional insured for injuries arising from Best Buy's operations. This language required Best Buy to obtain coverage whereby Live Nation would be an additional insured for injuries originating from, incident to, or having a connection with Best Buy's operations, even if Best Buy was not at fault.

However, the insurance Best Buy purchased only provided that Live Nation would have coverage as an additional insured if Best Buy was a proximate cause of the injuries.

 

05/04/21       The Burlington Ins. Company v. Tour Central Park, Inc.
Appellate Division, First Department
Word to the Wise – RTFP:  “Read The …. Furnished  … Policy”


Burlington made a prima facie showing of its entitlement to summary judgment as a matter of law by submitting an affidavit of its premium audit and accounts receivable manager, along with a certified copy of the insurance policy, the audit performed by Burlington at the office of insured defendant Tour Central Park Inc.'s (Tour) accountant, and the statement of account.  Apparently, the insured did not realize that the policy was “auditable”.

The court held that the insured had the duty to read the insurance policy or have it read to it, as well as the duty to correct any inaccuracies present on the insurance application. Had Tour done so, the notation that the "Auditable" box was checked on the declarations page and the "Premium Audit" language contained in Section IV, Paragraph 5 of the Commercial General Policy Form, would have provided notice that the policy premium was subject to audit.

05/04/21       Amer. Empire Surplus Lines Ins. Co. v. L&G Masonry Corp
Appellate Division, First Department
Failing to Submit to a Premium Audit is Not Evidence of Lack of Cooperation to Allow Coverage Denial


The first named insured's failure to submit to a premium audit is not in this case a sufficient basis for the vitiation of coverage as there no language in the contract indicating that the failure to submit to a premium audit was a condition of coverage. Failing to submit to an audit is not the same as failing to cooperate.

Moreover, the insurer did not demonstrate that it had validly canceled the insurance policy previously.

St. Augustine and Mega, who were also being defended by the insurer, are entitled to attorneys' fees. Contrary to plaintiff's contention, these insureds were cast in a defensive posture by the legal steps taken by plaintiff in an effort to free itself of its policy obligations, and they prevailed on the merits. While the insurer  withdrew the part of its motion seeking summary judgment as against these additional insureds, it named them in the complaint and sought a declaration that it was not required to defend or indemnify them.

 

04/30/21       County of Erie v. Gateway-Longview, Inc.
Appellate Division, Fourth Department
Coverage by Estoppel, an Issue of Fact.  Insurer has Burden of Proving Lack of Agency and Lack of Reliance?  Thousands Flee.

Erie County commenced this action seeking a declaration that the Philadelphia Insurance Companies (“PIIC”) is obligated to defend and indemnify it as an additional insured in the underlying actions. PIIC moved for summary judgment, declaring that it had no obligation to defend or indemnify plaintiff on the ground that plaintiff is not an additional insured under the relevant policy.

Contrary to plaintiff's initial contention, the court did not abuse its discretion in allowing PIIC on its motion to submit a certified copy of the subject insurance policy in reply.  It raised no new arguments regarding the policy and, instead, simply corrected the defect in admissibility by providing a certified copy of the same policy that it had provided in its moving papers.

However, PIIC failed to satisfy its initial burden on the motion of establishing that the County was not entitled to additional insured coverage under the PIIC policy.

It is well established that a certificate of insurance, by itself, does not confer insurance coverage, particularly [where, as here,] the certificate expressly provides that it is issued as a matter of information only and confers no rights upon the certificate holder and does not amend, extend or alter the coverage afforded by the policies" A certificate of insurance is only evidence of a carrier's intent to provide coverage but is not a contract to insure the designated party nor is it conclusive proof, standing alone, that such a contract exists.

However, the Fourth Department, unlike most other courts in the state, has adopted an approach that permits “insurance by estoppel”.  An insurance company that issues a certificate of insurance naming a particular party as an additional insured may be estopped from denying coverage to that party where the party reasonably relies on the certificate of insurance to its detriment For estoppel based upon the issuance of a certificate of insurance to apply, however, the certificate must have been issued by the insurer itself or by an agent of the insurer.

Unlike the court below, the appellate court found that there was an issue of fact whether PIIC was estopped from denying additional insured coverage to plaintiff. In its moving papers, PIIC did not present any evidence addressing the City’s reliance on the certificate of insurance or establishing that "neither it nor an authorized agent issued the certificate[] of insurance.

Editor’s Note:  Wouldn’t the burden of proof on agency and reliance be on the insured, rather than the insurer? 

 

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

Property

05/13/21       Crown Jewels Estate Jewelry, Inc. v. Certain Underwriters
Appellate Division, First Department
Real Jewels but Fake Customer Triggers Dishonest Character Exclusion

In our “coming to a theatre near you” segment of Coverage Pointers, we bring you this curious case.  Plaintiff was contacted by an individual purporting to be Paul Castellana; an executive with Sony Pictures International.  Mr. Castellana indicated that he was shooting a video with Jennifer Lopez in South Florida and wished to “borrow” certain jewelry for the production.  Negotiations resulted in plaintiff providing “JLo” with five different pieces of jewelry which were valued at $2.09 million.

To certify the legitimacy of the request, Mr. Castellana produced a certificate of insurance suggesting the items were covered.  He also provided plaintiff with a contact at the insurance producer’s office who further verified the identity and legitimacy of Mr. Castellana.   

All went off without a problem, except JLo wasn’t involved and Paul Castellana was actually James Sabatino.  Mr. Sabatino is a member of the Gambino Crime family and was residing at the federal prison in Florida when he was supposedly running the JLo set.  Eventually, Mr. Sabatino was caught with a number of cell phones and forged Sony Pictures email addresses.  Mr. Sabatino pleaded guilty to a RICO violation, and was sentenced to further confinement with the United States Government. 

Plaintiff, in turn, turned to his insurance company who promptly told him… “fuhgeddaboudit!”  The policy included an exclusion which removed coverage for theft occasioned by the act of a dishonest character to whom the jewelry was entrusted.  On that basis, the trial court found the exclusion applied and the First Department affirmed. 

 

05/07/21       Lynch v. Preferred Mutual Ins. Co.
Appellate Division, Fourth Department
Failing Living Room Walls Fall Outside the Scope of Coverage on the Basis of Latent Defect Exclusion  

Plaintiff commenced this action seeking to recover amounts he paid to repair the living room walls of his home.  Apparently, the walls were “bulging” due to rafter spread which was occasioned out of the defective design of the rooms vaulted ceilings.  The rafters had been in place for approximately 25 years without incident.

Preferred denied the claim on the basis that it was a latent defect, and thus excluded.  The Court noted that the understood meaning of latent defect is “a defect that his hidden or concealed from knowledge as well as from sight which a reasonable customary inspection would not reveal.”  Preferred provided an expert affidavit from an engineer confirming the defective design, and as such it met its burden on summary judgment.

 

05/04/21       The Burlington Ins. Co. v. Tour Central Park, Inc.
Appellate Division, First Department
Right to a Premium Audit was Preserved in Policy Conditions

Burlington sought to enforce recovery of a premium audit.  In support of its motion, it produced an affidavit of the accounts receivable manager, a certified copy of the policy and a copy of the audit performed.  In opposition, Tour failed to raise a question of fact.

Tour, apparently, argued that it was not on notice that its policy was subject to premium adjustments.  However, the policy’s Declarations page provided that the “Auditable” box was checked. In addition, the Conditions section of the policy also provided specific language noting that the premium was subject to audit.  The insured’s apparent ignorance to the terms and conditions of its policy was not a valid excuse, as an insured has a duty to read the terms of its contract.

 

05/04/21       Am. Empire Surplus Lines Ins. Co. v. L&G Masonry Corp.
Appellate Division, First Department
Refusal to Participate in Premium Audit is Not the Equivalent of Failure to Cooperate

Plaintiff sought to conduct a premium audit, and L&G appears to have refused to participate. In response, plaintiff advised that refusal to engage in the process would be deemed a violation of a condition to coverage and all resulting coverage vitiated.  The Court rejected plaintiff’s theory that a violation of the premium audit condition was akin to the policy’s companion cooperation clause.

In addition, the Court also rejected plaintiff’s claims that it had canceled the policy prior to the underlying claim.  It appears plaintiff did not meet the very specific requirements set forth in the policy documents, and as such its attempted cancellation was invalid. 

As plaintiff commenced this case against L&G, and L&G ultimately prevailed, it followed that plaintiff also owed all attorneys’ fees incurred by L&G.

 

Potpourri

05/11/21       Kemeny v. Liberty Mutual Ins. Co.
Appellate Division, First Department
Simple Interest Accrues on Arbitration Award from Date of Decision through Date of Payment

Plaintiff appears to have commenced this action seeking to enforce an arbitration award.  Although Liberty delayed payment for approximately three months, it eventually tendered the full arbitration award plus interest accrued from the date the award was rendered.  Under those circumstances, Liberty had complied with its obligations and plaintiff’s claims were, in effect, moot.   

In so  holding, the Court affirmed that plaintiff was only entitled to simple interest from the date of the award through the date of payment.  Further, the Court noted that the trial court providently exercised its discretion in denying plaintiff’s applications for sanctions and attorneys’ fees.

 

05/07/21       Cain-Henry v. Shot
Appellate Division, Fourth Department
Plaintiff’s Release of Tortfeasor Potentially Voided based on Fraudulent Inducement

Plaintiff allegedly sustained injury in a motor vehicle accident.  Approximately two months later, plaintiff, without representation, agreed to accept $1,500 from the tortfeasor’s insurance carrier in exchange for releasing the driver and owner from any and all future claims arising out of the incident. 

Sometime later, plaintiff retained counsel and commenced the instant lawsuit.  The released defendants moved to dismiss on the basis of the previously obtained Release.  The Court noted that the defendants met their initial burden by proffering the signed Release.  Nevertheless, plaintiff countered by advising that defendants’ carrier told her that she would not be able to sue the defendants because “she did not have any major surgeries or life-threatening injuries.”  On a motion to dismiss, plaintiff’s allegations must be accepted as true.  Thus, if accurate, plaintiff’s version of her interaction with the carrier were sufficient to void the Release on the basis of fraud. 

 

04/29/21       Mintz Fraade Law Firm, P.C. v. Federal Ins. Co.
Appellate Division, First Department
No Standing to Sue Carrier for Past Legal Fees where Client/Insured Controlled Selection (and Discharge) of its Representation

Plaintiff appears to have been selected to defend Federal’s named insured in a malpractice claim.  Under the terms of the policy, the insured retained the right to select counsel and Federal consented to the retention of plaintiff.  At some point, the relationship between plaintiff and Federal’s insured soured because plaintiff stopped getting paid.  Plaintiff then commenced this action seeking to recover directly from Federal as the insurer providing defense under the policy. 

In affirming the trial court, the Appellate Division noted that plaintiff did not have standing to pursue a claim directly against Federal.  Its recourse, if any, was to seek payment of its legal fees directly from its client under the terms of the retainer agreement.  In so holding, the Court also dismissed plaintiff’s claims for unjust enrichment.  We are advised that Federal will reimburse its insured, up to its full policy limit, all indemnity and associated defense costs.  Under those circumstances, there is no basis to claim Federal was somehow enriched.  It has an obligation to pay the obligations of its insured, but it does not have any obligations to any other party.

Finally, plaintiff’s claims for tortious interference were dismissed where, as here, a client is always free to discharge his or her lawyer.  As plaintiff did not actually plead how Federal interfered with the lawyer/client relationship, its claim also failed on procedural grounds. 

 

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

 

05/06/21       Sharon L. Rosenblum v. Nicole C. Irby
Appellate Division, Third Department
Plaintiff Expert Failed to Rebut Defense Expert Range of Motion Testing in Order to Establish Permanent Consequential Limitation or Significant Limitation of Use

In October 2016, plaintiff Sharon L. Rosenblum was involved in a motor vehicle accident in the Town of Bethlehem, Albany County, when the vehicle she was driving collided with a vehicle owned and operated by defendant. Thereafter, in July 2017, Rosenblum and her spouse, derivatively, commenced this action against defendant claiming that, based upon injuries to, among other things, her back, neck, head and left shoulder, she sustained a serious injury within the meaning of Insurance Law § 5102 (d) and also sustained economic loss greater than basic economic loss. Following joinder of issue and completion of discovery, defendant moved for summary judgment dismissing the serious injury claims on the basis that the medical evidence did not establish that plaintiff sustained a serious injury within the meaning of Insurance Law § 5102 (d). Plaintiffs opposed the motion and cross-moved for summary judgment on the issue of liability. The Supreme Court granted defendant's motion and denied plaintiffs' cross motion. Plaintiffs appeal.

The Appellate Court noted that plaintiffs did not oppose defendant's motion with respect to the permanent loss of use category of serious injury. Summary judgment with respect to such claim was therefore properly granted. As to the remaining categories of serious injury, based upon their review of the record, the Appellate Court were satisfied that defendant tendered sufficient admissible evidence — including Rosenblum's medical/treatment records, imaging studies, deposition testimony and the affirmed report of defendant's expert, Douglas Petroski — to meet the threshold burden of establishing that Rosenblum did not sustain a serious injury.

With regard to the defense expert, Petroski, a board-certified orthopedic surgeon, performed an independent medical examination (hereinafter IME) of Rosenblum in October 2018, two years after the accident. The Appellate Court found that his report reflects his review of Rosenblum's medical history, medical records and reports of imaging studies of her head, cervical spine and thoracic spine, as well as plaintiffs' various bills of particulars and Rosenblum's deposition testimony. Petroski found that, using a hand-held goniometer to measure range of motion, Rosenblum had full range of motion of her cervical and thoracic spine, with no evidence of spasms or paraspinal or trapezii tenderness to palpation. With respect to the left shoulder, Petroski recorded a slight loss of active range of motion, but the normal range of motion with respect to internal and external rotation of the shoulder. Petroski diagnosed Rosenblum with "resolving" cervical spine strain, "resolved" thoracic spine strain and a "preexisting cervical degenerative disc disease." Although Petroski found an "unresolved" left shoulder sprain and determined that there was evidence of a "mild causally related disability," the Appellate Court opined that the presence of a "mild, minor or slight" limitation does not amount to a serious injury with the meaning of the statute. Imaging tests performed revealed no fractures or positive findings in either her cervical or thoracic spine and the CT scan of her head was normal. Rosenblum's medical records and her deposition testimony reveal that she was out of work for one week following the accident, returned to work on a part-time basis 10 days after the accident, and returned to work full time in the middle of December 2016. Rosenblum testified further that her responsibilities at work were the same when she returned to work part time as they were prior to the accident. Moreover, records and reports from Rosenblum's medical providers and her deposition testimony established that no restrictions or limitations were placed on her daily or physical activities.

In opposition, plaintiffs offered the affirmation of Todd Shatynski, Rosenblum's treating orthopedist, records of her physical therapy and chiropractic treatment, and additional IME reports conducted by other medical professionals prior to the IME conducted by Petroski. Upon review of the records, the Appellate Court found that none of the medical evidence submitted in opposition to defendant's motion provided "objective medical evidence sufficient to raise a triable issue of fact regarding the existence of a serious injury" under the permanent consequential limitation or significant limitation of use categories. Indeed, in Shatynski's report dated December 13, 2016, it was noted that Rosenblum's neck exam revealed "full range of motion for flexion, extension, rotation, and lateral bending, negative Spurling's test bilaterally." With respect to the shoulder exam, Rosenblum was noted to have "full range of motion for forward flexion, abduction, and external rotation." In Shatynski's January 12, 2017 report, Rosenblum was noted to have "normal range of motion at the shoulders without impingement and normal flexion and extension at the cervical and thoracic spine with diminished lateral bending and rotation to the left cervical. She has intact strength, sensation and reflexes, however, of the proximal and distal musculature of the upper extremities." Further, and also with respect to the 90/180-day category, it is noteworthy that, in addition to being medically cleared to return to work full time in mid-December 2016, the reports and records from Rosenblum's medical providers do not contain any restrictions or limitations on her daily activities. As such, the Appellate Court found that Rosenblum did not provide objective medical evidence to support her self-serving assertions that she was prevented from performing substantially all of the material acts that constituted her usual and customary daily activities for the relevant period, thus failing to raise a triable issue of fact as to the 90/180-day category.

Based on the foregoing, the Appellate Court found that the Supreme Court properly granted defendant's motion and affirmed the Supreme Court decision.

 

WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz

[email protected]
 

On the road again.

 

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

05/05/21       25 Bay Terrace Assocs. v. Public Service Mut. Ins. Co.

Appellate Division, Second Department

Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing Survived Summary Judgment as Not Duplicative of Breach of Contract Claim

Plaintiff commenced this action seeking damages for breach of contract and bad faith related to Defendant’s handling of a Hurricane Irene claim.  The court denied both parties’ motions for summary judgment motion on the breach of contract claim.  Defendant raised triable issues of fact regarding whether the damage was caused by Hurricane Irene or whether it was attributable to wear and tear and prior maintenance work.  However, Plaintiff also raised triable issues of fact by offering proof that strong winds loosened and tore fascia from the roof, which caused water infiltration.

The court also found that Defendant failed to establish it was entitled to summary judgment on the bad faith claim.  The court reasoned that the unresolved issues regarding the cause of the damage to the property were “issues central to both causes of action,” and noted that the cause of action for breach of the implied covenant of good faith and fair dealing was not necessarily duplicative of the breach of contract claim.

Defendant also moved for imposition of a sanction based on spoliation of evidence.  Defendant claimed that Plaintiff failed to identify tenants and failed to disclose and produce its leases, rent rolls, and maintenance records.  The court below denied the motion, but it ordered Plaintiff to promptly furnish relevant documents.  The Second Department held that Defendant failed to demonstrate Plaintiff engaged in willful or contumacious conduct that would warrant dismissal of the complaint or any other severe sanction.  However, the court below acted properly in ordering the disclosure of the relevant items.

The court also denied Defendant’s motion to renew seeking to dismiss Plaintiff’s claim for extra expense coverage.  The court concluded that the leases and rent roll offered in support of the motion to renew were new in the sense that they had not been offered on the prior motion for summary judgment.  However, it concluded that there remained an issue of fact on the cause of damage issue that precluded summary judgment for either party.

 

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

The Connecticut state and federal courts have let us down, yet again, producing no new insurance decisions.

 

BUCCI on “B”
Diane L. Bucci

[email protected]
 

04/29/21       First Mercury Insurance Company v. Triple Location LLC d/b/a Club O.
N.D. Ill. Apr. 29, 2021
Can This Be Negligence?

Triple Location was sued by Emily Sears, Lina Posada, and Lucy Pinder (“Plaintiffs”).  Each are professional models who alleged that Triple Location published their images without their consent in order to promote its strip club, Club O, through postings on Club O's Facebook and Instagram pages. The Plaintiffs alleged that Club O's postings “create[d] the false impression that [they] ha[d] consented or agreed to promote, advertise, market, and/or endorse Club O,” which caused them to “sustain[ ] injury to their images, brands, and marketability by [their] shear affiliation with … a strip club.” The Plaintiffs further alleged that Triple Location “totally and completely destroyed” any “copyright” that existed in their photos by “morphing, editing, or otherwise altering the original photographs.”

Plaintiffs’ alleged claims under Lanham Act, 15 U.S.C. § 1125(a), for false advertising and false endorsement; (2) the Illinois Right of Publicity Act (“IRPA”), 765 ILCS 1075/10 et seq., for violation of their right to publicity and for being placed in a false light; and (3) state law negligence.

The question for the court was whether First Mercury had a duty to defend under Coverage B.  The court easily held that at least one of the personal and advertising offenses was satisfied, most likely “personal and advertising injury” arising out of the publication of material that “slanders or libels” a person, “violates a person's right of privacy,” or “[i]nfring[es] upon another's copyright.”

First Mercury alleged that three “exclusions,” applied.  Exclusion (a) excludes “personal and advertising injury” that is “caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury.’ ” Exclusion (b) excludes “personal and advertising injury” that “arise[s] out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity.” Exclusion (p) excludes “personal and advertising injury” that “aris[es] directly or indirectly out of any action or omission that violates or is alleged to violate” the Telephone Consumer Protection Act (“TCPA”), the CAN-SPAM Act of 2003, or any other “statute, ordinance[,] or regulation … that prohibits or limits the sending, transmitting, communicating or distribution of material or information.”  First Mercury also sought to rely on an endorsement, “Field of Entertainment—Limitation of Coverage,” which stated in pertinent part:

This insurance does not apply to … “personal and advertising injury” … actually or allegedly arising out of, related to, caused by or attributed to by any of the following, but only as each applies to the “Business of The Insured in The Field of Entertainment.”

a. Invasion of the right to privacy;

b. Infringement of copyright, whether under statutory or common law; libel, slander or other forms of defamation; …

“Business of The Insured in The Field of Entertainment” is defined to include “[t]he ownership, licensing, operation maintenance or use of merchandising programs, advertising or publicity material or paraphernalia, characters or ideas, whether or not on premises of the insured or in possession of the insured at the time of the alleged offense or ‘occurrence[.]’ ”

According to the Court, the Plaintiffs alleged negligent acts against Triple Location, to which none of First Mercury’s defense applied.  First Mercury asked the court to look behind the labels because Plaintiffs’ claims concerned Triple Location's “alleged knowing, intentional, and/or fraudulent misrepresentation that the Plaintiffs were affiliated with Club O.”  First Mercury argued that despite claims of negligence, the allegations were only the sort of knowing or intentional misconduct that Exclusions (a) and (b) except from coverage.

The court disagreed.  It noted that the claim alleged First Mercury [sic] was negligent in “its failure to promulgate policies and procedures concerning the misappropriation of the [i]mage[s] of [the] models that were used on the Club O Website and social media accounts.” Id. at *2.   The complaint alleged in the alternative that if First Mercury had such policies, it “negligently failed to enforce th[em], communicate them to employees, and/or [screen, train, and] supervise its employees in order to ensure that these policies, along with [f]ederal and Illinois law, were not violated,” and further that Triple Location published the Plaintiffs’ images without their authorization as a proximate result of its “negligence.” Id

The court acknowledged that the Plaintiffs’ also alleged intentional conduct, but clarified that there was no law suggesting that alternative pleadings were impermissible and thus, when a complaint alleges negligent and intentional conduct, the issue is resolved for th insured and the insurer had a duty to defend.  According to the court, exclusions (a) and (b) required knowledge on behalf of the  insured which, according to the court, was not required for the negligence claims. 

Also, the Court, considering Exclusion (p) (even though it held that First Mercury waived it argument under this Exclusion, relied on W. Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc., 2020 IL App (1st) 1330494, at ¶¶ 6, 42 (Ill. App. March 20, 2020).  There, the court held that Exclusion (p) did not preclude coverage because its catch all provision, “[a]ny statute, ordinance or regulation, other than the TCPA or CAN-SPAM Act of 2003.” was “meant to encompass any [s]tate or local statutes, rules, or ordinances that, like the TCPA and the CAN-SPAM Act, which regulate specific methods of communication such as e-mail and phone calls and bars coverage for the violation of a very limited type of statute.” Id. at ¶ 43.

The court in G.M. Sign, Inc. v. State Farm Fire & Casualty Co., 18 N.E.3d 70 (Ill. App. 2014) interpreted a substantially similar exclusion to encompass common law claims arising from the same conduct as a statutory claim brought in the same suit.   The court ultimately held that Exclusion (p)’s catch-all did not encompass the underlying complaint's Lanham Act and IRPA claims. Both statutes, said the court, address, prohibit, or limit the dissemination or distribution of material or information without limit to a particular method of communication.

Turning to the Field of Business Limitation, the court agreed with Triple Location that the policies cover “personal and advertising injury” caused by negligence associated with privacy right or copyright infringement in “[the insured's] ‘advertisement[s]’ ” or with “[t]he use of another's advertising idea in [the insured's] ‘advertisement[s],” while the Limitation would exclude the very same injury if it arises out of the insured's “advertising.  Given the stark incompatibility of these dueling provisions, the court held the Endorsement created an inconsistency that, at least for purposes of the duty to defend, had to be resolved in Triple Location's favor.

 

OFF the MARK
Brian F. Mark
[email protected]
 

No interesting construction defect cases to report on this week.

 

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

04/14/21       King's Cove Marina vs. Lambert Commercial Construction
Supreme Court of Minnesota
CGL Policy – No Coverage For Insured Contractor’s Defective Work

King’s Cove Marina (the “Marina”) sued Lambert Commercial Construction LLC (the “Contractor”) alleging breach of contract and negligence concerning construction the Marina hired the Contractor to do.  The Marina alleged faulty construction work of the Contractor and defective building products were used by the Contractor on the construction project.   The Contractor sought coverage from its insurer, United Fire & Casualty Company (the “CGL Insurer”). The CGL policy contained a general aggregate limit of $2 million, a products-completed operations aggregate limit of $2 million, and an each-occurrence limit of $1 million. An umbrella policy contained a general aggregate limit of $1 million. The CGL Insurer denied coverage for the claims but defended Lambert under a reservation of rights.  

Among other things, the Supreme Court of Minnesota was asked in this case to determine whether a commercial general liability insurance policy which includes coverage for the “products-completed operations hazard” covers property damage to the insured's own completed work, notwithstanding an express exclusion set forth in the policy for property damage arising out of the insured's work.   The Minnesota Supreme Court held that a commercial general liability insurance policy does not cover property damage to an insured's own completed work under the plain language of a “your work” exclusion, which applies to work included in the “products-completed operations hazard.”  Supreme Court held that the plain language of the “your work” exclusion from coverage of property damage arising out of the insured’s own work bars coverage for the claimed property damage to Lambert's own work, notwithstanding the products-completed operations hazard limit set forth in the policy’s Declarations Page.  That limit was merely a different potentially applicable limit of coverage, but nonetheless subject to exclusions in the policy. The Minnesota Supreme Court noted that a majority of courts across the country have found no ambiguity between an exclusion for “Property damage” to “your work” arising out of it or any part of it and the products-completed operations hazard, because insureds “are not entitled to coverage for their own faulty work”.   The argument of the Marina that the products-completed operations hazard is a distinct category of coverage was rejected by the Minnesota Supreme Court.   The declarations page merely shows that the products-completed operations hazard has “a different applicable limit”—not that it is “a separate form of coverage.”  The policy was never intended to be “a performance bond” covering the insured contractor’s work.

The Supreme Court also considered whether a so-called “Miller-Shugart” settlement agreement entered into in this case that failed to allocate between claims that are covered and not covered by the insurance policy was per se unreasonable and unenforceable against the insurer.  This is an issue unique to Minnesota common law. Supreme Court’s Opinion held that the failure to allocate between covered and uncovered claims does not make the Miller-Shugart settlement agreement per se unreasonable.  In addition, Supreme Court rejected a per se rule that invalidates unallocated Miller-Shugart settlement agreements in cases involving a single defendant, instead adopting a flexible approach that allows a district court to consider all relevant facts and circumstances in determining the overall reasonableness of the settlement and in allocating the settlement between covered and uncovered claims. Supreme Court remanded the case down to the court of appeals to resolve the remaining issues on appeal considering the coverage determination and allocation standard announced in Supreme Court’s Opinion.

 

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

Legislative List

05/04/21       Municipal Insurance Reciprocal Operating Reserve Balances
New York State Senate
Proposed Law Would Authorize Return of Subscribing Member Operating Reserve Balances to Members of a Municipal Insurance Reciprocal.

Last week, the New York State Senate passed a bill (Bill No. S04112) that proposed an amendment to Insurance Law § 6109, which would permit a municipal insurance reciprocal to return of any outstanding subscriber operating reserve balance to its members. The bill was delivered to the New York State Assembly and currently resides with the Assembly’s Insurance Committee.

According to the Sponsor Memorandum:

“The New York Municipal Insurance Reciprocal (NYMIR) is a licensed property and casualty insurance program formed in 1993 in order to provide essential property and liability coverage for New York's general-purpose local governments. Beginning with just 26 members (called Subscribers), it now includes 926 counties, cities, towns, and villages from across New York State. The mission of NYMIR was to provide a stable, predictable insurance market for local governments and it has succeeded in doing so for 27 years. Rated A- Excellent by AM Best, NYMIR is a financially secure vehicle which has been able to maintain stable and reduced member premiums.

Over its history, NYMIR has been able to build necessary surplus that, under existing provisions of the NYS Insurance Law which this legislation seeks to amend that requires that it fund member operating reserves with 25% of any annual underwriting profit. With a rating from AM best reflecting a secure capital position, NYMIR now seeks to return the outstanding balances that currently remain inaccessible in members' operating reserve accounts. This would amount to approximately $6.3 million dollars shared amongst municipal members.

At a time when the impacts of COVID-19 and related events have dramatically impacted municipal revenue streams and put local government budgets under great financial stress, this legislation would provide meaningful and immediate relief to the majority of New York's local governments which have come together to participate in the NYMIR cooperative insurance program.”

The proposed law would add new language to Insurance Law §6109(1)(a)(3)(C) that provide:

(3) Notwithstanding the foregoing, the superintendent may, upon application from the attorney-in-fact:

***

(C) in the case of a municipal reciprocal insurer, authorize the return of any outstanding subscriber operating reserve balance.

If passed, the act would take effect immediately.

 

05/05/21       Insurance Premium Study for Affordable Housing
New York State Senate
Proposed Law Would Direct DFS to Study the Insurance Premiums and Availability of Insurance Coverage For Affordable Housing

Last week, the New York State Senate passed a bill (Bill No. S05231) that would direct the department of financial services, in coordination with the division of housing and community renewal, to conduct a study examining insurance premiums and availability of insurance coverage for affordable housing developments. The bill was delivered to the New York State Assembly and currently resides with the Assembly’s Ways and Means Committee. 

The proposed study would seek to identify the potential impact of premium increases and insurance unavailability for the development and preservation of affordable housing over the next ten years. The Sponsor Memorandum indicates that these issues “can stifle the development of new affordable housing in New York State, creating a financial barrier for both affordability of units as well construction.”

The study would “analyze the factors that increase insurance costs for such housing developments and analyze the factors that may limit insurers from offering coverage for affordable housing projects.” Additionally, it would seek further information regarding “the projected total reduction in affordable housing units by region, the inability to develop affordable housing in certain areas and any other topic or issue that is determined to be relevant to the completion of the study by the department and the division.”

Within eight months of the bill’s enactment, the Department of Financial Services and Division of Housing and Community Renewal are directed to jointly prepare a report “containing findings and recommendations for potential legislative and regulatory actions to address the costs and unavailability of insurance.”

Maxwell’s Minute: I would reframe this study as an examination of “insurance premiums and insurance coverage availability” for this sector, without prejudgment of any conclusions therein.

 

05/05/21       State Insurance Fund and Out-Of-State Work
New York State Senate
Proposed Law Would Allow New York State Insurance Fund to Enter Into Agreements With Private Insurers To Cover Out-Of-State Work

Last week, the New York State Senate passed a bill (Bill No. S06196) which would allow the New York State Insurance Fund (NYSIF) to cover an in-state policyholders' out-of-state work by entering into agreements with private insurance providers licensed to provide workers' compensation benefits under the laws of states outside of New York.

Currently, businesses in New York using NYSIF as their workers' compensation provider must procure insurance from an out-of-state private insurance provider in order to receive workers compensation coverage for work being done outside of the state. This increases costs for New York based businesses and impacts NYSIF’s ability to compete with private insurers—necessary to ensure a fair marketplace.

If passed, Workers’ Compensation Law §76 would be amended to add a new subdivision, 1-a providing as follows:

  1. The purposes of the state insurance fund are hereby enlarged to permit it to enter agreements with insurers licensed to write workers' compensation insurance in states outside New York to issue policies to state insurance fund policyholders covering those policyholders' obligations to secure the payment of workers' compensation benefits under the laws of states other than New York. The state insurance fund shall also be authorized to receive premiums into its workers' compensation fund for policies written under such agreements and to pay from such fund:

    1. reimbursement of all losses and loss adjustment expenses under such policies; and

    2. fees and other costs, including but not limited to those for claims services, relating to such agreements.

An agreement under this subdivision shall not include the provision of claims services for any claim under this chapter.

  1. For a policyholder to be eligible for insurance in states other than New York provided through agreements entered into under this subdivision, either:

    1. the policyholder's workers' compensation premiums with the state insurance fund covering its employees under this chapter must be greater than the premiums charged to cover the policyholder's obligations to pay workers' compensation benefits in all states, in the aggregate, other than New York when covered under such agreements; or

    2. the payroll for the policyholder's operations in New York must be greater than the policyholder's payroll in all states, in the aggregate, other than New York when covered under such agreements for the prior policy period.

For determining eligibility, "premiums" mean estimated premiums as determined by the state insurance fund at the beginning of the policy period. In addition, for a policyholder to be eligible for insurance in states other than New York through the state insurance fund, the policyholder must meet the state insurance fund's underwriting criteria for other states coverage as specified by rules of the commissioners.

The act would take effect immediately.

 

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

04/23/21       Kim-Chee LLC v. Philadelphia Indemnity Insurance Co.
United States District Court, Western District Of New York
Direct Physical Loss to Property is Required Even When a Virus has Contaminated an Insured Property.

Plaintiffs operate a martial arts and fitness studio and in 2019 obtained an insurance policy from defendants effective June 5, 2019 to June 5, 2020 (the “Policy”). The Policy includes both first-party commercial property coverage and general liability coverage. Plaintiffs seek compensation for losses in revenue they sustained when their business closed due to the COVID-19 pandemic and related executive orders in the spring of 2020.

Included in the Policy is the “Businessowners Special Property Coverage Form,” which provides that the insurer promises to “pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.”  The form defines “covered cause of loss” as “Risks of Direct Physical Loss unless the loss is a. Excluded in Section B., Exclusions; or b. Limited in Paragraph A.4, Limitations…” The Policy also provides for coverage of loss of business income as a result of a covered cause of loss as set forth below:

We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your ‘operations’ during the ‘period of restoration.’ The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss of damage must be caused by or result from a Covered Cause of Loss.

“Period of restoration” is defined in the Policy as “the period of time that: a. Begins: (1) 72 hours after the time of direct physical loss or damage for Business Income Coverage ... caused by or resulting from any Covered Cause of Loss at the described premises” and ends at the resumption of business or a reasonable repair period. In addition, the Policy provides for loss of business income as a result of “action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss.”

Plaintiffs alleged that they did indeed sustain a “Covered Cause of Loss,” alleging that: 1) plaintiffs’ employees, customers and vendors were exposed to the virus, became ill, and were instructed by civil authorities to self-isolate and suspend business operations; 2) the insured property was exposed to the virus and closed due to orders of the civil authorities, that prohibited plaintiffs’ access to the insured property; 3) Property in the vicinity of the insured premises was also exposed to the virus and closed by the authorities; 4) The virus is “ubiquitous, such that it exists everywhere,” including the insured property and other properties within a mile; 5) The presence of the virus causes direct physical loss and/or damage to the insured property; and 6) As a result of the virus and related governmental orders, plaintiffs ceased business operations in March 2020. Plaintiffs argue that the Policy provides “all-risk” coverage which protects them against any loss not expressly excluded or limited in subsequent provisions of the Policy and that Defendants’ failure to include an exclusion of loss due to virus or bacteria in the policy language is evidence of the parties’ intent to cover loss or damage resulting from a pandemic.

In determining the scope of the Policy’s coverage, the court considered the losses alleged in the complaint. These allegations establish that the pandemic resulted in the closure of multiple business, including plaintiffs’, that the virus was present in plaintiffs’ dojo, and that plaintiffs’ business was shuttered as a result of various government orders and directives. Tellingly, the plaintiffs did not allege any direct, physical loss to their insured property.

The court here followed the multitude of COVID-19 business interruption cases that have been heard by both federal and ruled that while the virus particles may have circulated in the air within the insured premises and settled on the exposed surfaces. These particles multiply within a host such as a human being, but they do not last long on their own in the atmosphere. They are invisible. Importantly, these particles do not alter the characteristics of the covered property in any way except that their presence creates a health risk for humans who enter the premises. The building itself remains unharmed by the vims and would be safe for occupancy except for the arrival of people who bring new sources of infection. While the court accepted that contamination of a structure may qualify as a direct physical loss, such as if a building was contaminated by the seepage of gasoline which impaired the building’s function, or the intrusion of lead rendering a home uninhabitable and unfit for occupancy. Here, the contamination was temporary in nature, and the building itself remained unchanged and unimpaired. The court found that the losses sustained by plaintiffs were the result of state shutdown orders, not the consequence of a direct physical loss or damage to the insured premises. The court similarly upheld the denial of payment under the three types of extended coverage in the Policy (business income, extra expense, and civil authority coverage). Noting that each of the extended coverages requires a direct physical loss, which was not present here.

The court then takes on plaintiffs’ contention that absence of an available virus exclusion in the Policy proves defendants’ intent to provide coverage for loss cause by virus or bacteria. The court disagreed, stating that the absence of the exclusion does not increase coverage where the language of the direct physical loss clause is ambiguous.

Plaintiffs also made a claim that defendants violated New York State General Business Law § 349. Plaintiffs contended that defendants expressly misrepresented to their policyholders that coverage decisions would be made on a case-by-case basis given the factual circumstances or policy provisions of individual policyholders and that he absence of the ISO virus exclusion from their policy should have caused Defendants to process Plaintiffs’ COVID-19 business interruption claims differently than claims submitted by policyholders whose policies included the virus exclusion. The court held that plaintiffs did not plausibly allege an injury as a result of defendants’ misleading marketing and sale of the Policy, and therefore cannot state a claim under GBL § 349.

Based on the above, the court dismissed plaintiffs’ claims.

 

05/07/21       PB-7 Doe v. Amherst Central School District et al       
Appellate Division, Fourth Department
While the Ability to Proceed Anonymously is not Guaranteed, in CVA Litigation the Trial Court has Broad Discretion to Allow it

Plaintiff filed this action pursuant to the CVA and moved by order to show cause for permission to use a pseudonym. Defendants then appealed the order granting plaintiff the ability to proceed as “PB-7 Doe.”

Defendants contended that the CVA, as enacted, bars the use of pseudonyms. The court, however, found no support for defendants’ position. Citing both state and federal case law dating back to 1978, the court concluded that, where circumstances warrant, a party may be permitted to proceed in a matter under a fictitious name. The ability to proceed in an applicable matter under a fictitious name being seen as common law, the court opines that only clear and specific legislative intent can override this presumption. The court turns to the decisions of various trial courts in Westchester and Rockland counties, which when presented with this issue, held that the non-CVA case law surrounding a litigant’s desire to proceed anonymously applies equally to CVA cases.

The court does not go so far as to say every CVA case can be brought anonymously. Instead, the court holds that the longstanding practice of the trial judge exercising his or her discretion over an application to proceed anonymously shall stand. The court suggests that, “a court has discretion to permit the use of a pseudonym where the complaint “allege[s] a matter implicating a privacy right so substantial as to outweigh the customary and constitutionally embedded presumption of openness in judicial proceedings” (“J. Doe No. 1” v CBS Broadcasting Inc., 24 AD3d 215, 215 [1st Dept 2005]; see Doe v Doe, 189 AD3d 406, 407 [1st Dept 2020]).

In affirming the order granting anonymity, the court does note that plaintiff’s affidavit in reply to defendant’s opposition which alleged that she was employed by the county in which these allegations arose, that her job may be in jeopardy as a result of the allegations, and that she experienced “emotional distress, suicidal thoughts, depression, anxiety, feelings of worthlessness, and many other psychological damages, painful feelings, emotions, nightmares, flashbacks, as well as physical manifestations of these problems” that would recur if her name was publicized. Provided sufficient weight to tip the balance test, and provided that the reasons behind plaintiff’s request for anonymity outweighed the presumption of openness in the judicial process. Further, the fact that plaintiff did not request the court filings be sealed in this manner supports her request for anonymity.

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]
 

05/06/21          Travelers Property Casualty Company of America v. Ocean Reef Charters LLC
U.S. Court of Appeals, Eleventh Circuit
Since There is No Entrenched Maritime Rule Governing Captain or Crew Warranties, Florida Law Applies to Determine the Effect of Ocean Reef’s Breaches Under the Travelers Policy

Ocean Reef Charters, LLC (“Ocean Reef”) is the owner of a 92-foot yacht named M/Y My Lady that was primarily moored in Key Largo, Florida.  Ocean Reef insured the yacht with Travelers.  The policy at issue in this case concerns the renewal policy with effective coverage dates of October 2016 to October 2017 (the “policy”).  The policy contained two express warranties – the “captain warranty” which required Ocean Reef to employ a full-time professional captain approved by Travelers, and the “crew warranty”, which required Ocean Reef to have one full- or part-time professional crew member onboard.

Ocean Reef purchased the policy through its insurance agent, Keen Battle Mead & Company (“Keen”) located in Homestead, Florida.  Travelers negotiated and issued the policy through its producing agent, Hull & Company (“Hull”), based in Fort Lauderdale, Florida.  The policy listed Ocean Reef as the insured with a New York address, but listed Key Largo, Florida as the yacht’s primary mooring location.

In early September 2017, Hurricane Irma was heading towards Florida and unfortunately, Ocean Reef had failed to employ a professional captain or any professional crew.  Mr. Richard Gollel, the named operator of the yacht sought permission to move the yacht to a safer location, but Hull (Traveler’s agent) told Keen (Ocean Reef’s agent) that the yacht should not be moved.  Mr. Gollel did his best to secure the yacht, but due to the fierce impact of Hurricane Irma, the yacht ended up hitting a sea wall and ended up sinking.  The damage resulted in a total constructive loss under the policy.

Travelers filed this lawsuit against Ocean Reef and denied coverage six weeks later, asserting that Ocean Reef had breached the captain and crew warranties in the policy.  Following discovery, the parties filed cross-motions for summary judgement.  Travelers argued that federal maritime law requires strict compliance with express warranties in marine insurance contracts, and that a breach bars coverage even if it is unrelated to the loss.  Ocean Reef countered that Florida’s “anti-technical statute” should apply and that under that statute, breaches did not preclude coverage because they were unrelated to the loss.

The district court granted Travelers’ motion for summary judgment concluding that “the Eleventh Circuit has fashioned an entrenched rule of admiralty: express warranties in maritime insurance contracts must be strictly construed in the absence of some limiting provision in the contract.” Ocean Reef appealed.

The Court of Appeals reasoned that since this case lies in admiralty, federal maritime conflict of laws control, citing the case of Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151, 1161 (11th Cir. 2009).  The Court also looked to the controlling (yet controversial) case on this issue, which is Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310 (1955).  The Wilburn case, according to the 11th Circuit’s interpretation, instructs a court to “look to see if the specific warranty at issue is (or should be) the subject of a uniform or entrenched federal admiralty rule.” (Note: the Ocean Reef decision involves quite a lot of criticism of SCOTUS’ decision in the Wilburn case and how the reasoning set forth in that case is based on a flawed premise.  Nevertheless, the 11th Circuit in Ocean Reef attempts to make sense of the SCOTUS decision in Wilburn and acknowledges that it is the controlling case on this matter).

Ultimately the court reasoned that the precise question to consider here is whether there exists an entrenched federal maritime rule(s) governing captain or crew warranties.  The court answered that question in the negative.  The Court concluded that “[I]t may be that Wilburn Boat was a bad (or at least badly written) decision…[B]ut we are stuck with it, and finding no established maritime rule governing captain and crew warranties, we hold that Florida law governs.”  The 11th Circuit reversed the lower court’s order granting summary judgment to Travelers, and remanded for further proceedings.

 

ruMIRNAtions
Mirna M. Santiago

[email protected]
 

On the road this week.

 

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

05/05/21       Brenda Desalis v. Nationwide Property and Casualty Insurance Company
United States District Court, E.D. Pennsylvania
As a Matter of Law, 3-Month 19-Day Delay Between the Adjuster's Inspection of the Property and Payment of the Undisputed Amount of the Loss Did Not Constitute Clear and Convincing Evidence of First-Party Property Insurer’s Alleged “Bad Faith” Under 42 Pa. C.S. § 8371.  Expert's Suggestion that the Adjuster was Overwhelmed or Pressured, Even if True, Did Not Establish the Adjuster's Knowing or Reckless Disregard of Lack of a Reasonable Basis to Deny Payment and, Therefore, Did Not Defeat Summary Judgment to Insurer. Bad Faith Must be Proven by Clear and Convincing Evidence and Not Merely Insinuation or Simple Negligence

Facts: 

Desalis sued Nationwide for breach of contract and bad faith in violation of 42 Pa. C.S. § 8371. Nationwide moved for summary judgment on the bad faith claim only and to preclude the testimony of Plaintiff's expert witness whose report focuses on the bad faith claim.

On 11/18/19 a fire in a nearby building caused fire and severe smoke damage to plaintiff’s rowhouse. The public adjuster reported the loss to Nationwide 3 days after the fire. Nationwide’s adjuster confirmed that the policy covered the loss and conducted an inspection on 12/5/19, the earliest date offered by the PA.  7 business days later Nationwide issued a $15,000 advance. Nationwide issued $2,950 monthly payments for additional living expenses.  The Nationwide adjuster completed the preliminary estimate of the dwelling damages on 2/12/20 and submitted it to his manager for review which entailed "a back and forth revision" process.  On 2/26/20 the PA submitted documents to Nationwide for the first time requested Nationwide to cover the cost of the roof's replacement. Nationwide agreed to coverage for the roof without conducting an additional site inspection.  On 3/20/20 the manager approved the adjuster’s estimate and 4 days later issued a supplementary payment for the dwelling damages in the amount of $57,758.66. On 5/6/20 Nationwide issued a payment for the personal property in the amount of $7,640.40.

Legal Standard:

Summary judgment shall be granted if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.  An issue is genuine only if there is a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party, and a factual dispute is material only if it might affect the outcome of the suit under governing law. The moving party is entitled to a judgment as a matter of law where the nonmoving party has failed to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof.

Claims of bad faith brought under 42 Pa. C.S. § 8371 must be proven by clear and convincing evidence.  This standard requires that the plaintiff show that the evidence is so clear, direct, weighty and convincing as to enable a clear conviction, without hesitation, about whether or not the defendants acted in bad faith.  Accordingly, the plaintiff's burden in opposing a summary judgment motion is commensurately high in light of the substantive evidentiary burden at trial.

Pa.’s bad faith statute allows the recovery of interest on the amount of an insurance claim, punitive damages, and attorneys’ fees from the insurer "[i]n an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured." 42 Pa. C.S. § 8371.  The Pa. Supreme Court has premised recovery under the statute on plaintiff's presentation of clear and convincing evidence: (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis. Bad faith claims are fact specific and depend on the conduct of the insurer vis à vis the insured.

An evaluation of whether the insurer did not have a reasonable basis for denying benefits under the policy requires "an objective inquiry into whether a reasonable insurer would have denied payment of the claim under the facts and circumstances presented." Insurer conduct actionable under the statute is not limited to outright denial of claims. 

A bad faith insurance practice can include an unreasonable delay in handling claims. To succeed on a statutory bad faith claim premised on an insurer's delay, the plaintiff must establish: that the delay is attributable to the defendant; that the defendant had no reasonable basis for the actions it undertook which resulted in the delay; and that the defendant knew or recklessly disregarded the fact that it had no reasonable basis to deny payment.  While delay is a relevant factor in determining whether the insurer has acted in bad faith, a long period of delay between demand and settlement does not, on its own, necessarily constitute bad faith.  Rather, courts have looked to the degree to which a defendant insurer knew that it had no basis to deny the claimant; if delay is attributable to the need to investigate further or even to simple negligence, no bad faith has occurred.

A showing of "mere negligence or bad judgment" is insufficient to prove a claim of bad faith.  Proof of an insurer's motive of self-interest or ill-will, while potentially probative is not a mandatory prerequisite to bad faith recovery.  A delay attributable to the uncertainty of the claim's value or the insurer's need to investigate further does not constitute bad faith.

Decision: 

Nationwide granted summary judgment on the “bad faith” issue.  Plaintiff's bad faith claim was premised on the delay between the insurance adjuster's inspection of the property on 12/5/19 and payment of the undisputed amount of the loss on 3/24/20, a period of 3 months and 19 days. Plaintiff failed to raise a material dispute of fact or point to clear and convincing evidence that this delay in paying her claim was without reasonable basis. The undisputed facts provide an objectively reasonable justification for the delay: the investigation, preparation, and approval of the adjuster's estimate. 

A reasonable basis is all that is required to defeat a claim of bad faith. The adjuster promptly began preparing the estimate on the day of his inspection and submitted it to management for review after he completed it on 2/12/20. Between the site inspection and the submission of the preliminary estimate, Nationwide made a $15,000 advance payment on the dwelling damages, which also expanded in scope after the discovery of soot behind partition walls. Plaintiff submitted materials concerning damage to the roof for the first time on 2/26/20, weeks after the adjuster submitted his preliminary estimate, which suggests that the delay is not entirely attributable to Nationwide. Nationwide issued further payment on the dwelling damages approximately one month later, after the review, revision, and approval of the dwelling damages estimate. On these facts, no reasonable jury could find “clear, direct, weighty and convincing" evidence of bad faith delay.

Even assuming that the delay in preparing the preliminary estimate was unreasonable, Plaintiff fails to point to clear and convincing evidence that Nationwide "knew or recklessly disregarded the fact that it had no reasonable basis to deny payment. As Plaintiff notes, when Nationwide's adjuster was asked during his deposition why it took two months to prepare a preliminary estimate, he stated, "I don't have a reason." But the adjuster's testimony shortly thereafter in fact provided multiple reasons why two months was not an unreasonable length of time given the circumstances of Plaintiff's claim. The adjuster disagreed that the claim was "not complex" and that the delay was "unreasonable," explaining that the claim involved "more than cleaning and painting to [Plaintiff's] home," but also involved repairs to the roof, "removal of ceilings, [and] removal of floors." He also explained that he learned of the full scope of the damage to the Property only after the site inspection. Accordingly, this testimony did not establish by clear and convincing evidence that Nationwide knew or recklessly disregarded that it had no basis for the delay.

Relying on her expert report's finding that the adjuster appeared "overwhelmed or at least [was] feeling pressure from his volume of work," Plaintiff also contends that the adjuster "was too busy with other claims to address Plaintiff's claim in a timely manner," which Defendant disputes. However, the expert report's suggestion that the adjuster was "overwhelmed" or "pressure[d]," even taken as true, does not establish the adjuster's knowing or reckless disregard, and therefore does not defeat summary judgment. Bad faith must be proven by clear and convincing evidence and not merely be insinuated. At most, the evidence suggests "simple negligence" in the insurance adjuster's failure to complete the preliminary estimate more promptly.  Nationwide’s motion to preclude the testimony of Plaintiff's bad faith expert was then denied as moot.

 

04/30/21       Jules Francois Parisien, M.D., a/a/o Gonzales, Nicanor v. Travelers Ins. Co.
Civil Court of the City of New York, Kings County
Physician’s Failure to Attend EUO Twice Based Upon an Allegedly Busy Schedule and Because of Insurer’s Refusal to Grant Lengthy Adjournments was Insufficient as a  Matter of Law to Defeat Summary Judgment to Insurer.  The Request of Plaintiff for a Flat, Up-Front Fee of $5,000 Per Claimant to Testify at the EUO was Improper, as Opposed to Seeking Reimbursement for Any Loss of Earnings and Reasonable Transportation Expenses as Set Forth In the  Regulations

Action to recover assigned 1st-party no-fault benefits. Travelers is granted summary judgment dismissing the complaint on the ground that plaintiff failed to appear for an examination under oath on two separate dates where defendant refused plaintiff's requests to reschedule the EUOs for lengthy adjournments of 2 to 3 months.

Background

Assignor, Gonzalez, was allegedly injured in a motor vehicle accident.  Plaintiff rendered medical services on 3/9/17.  Defendant received bills for services on 3/30/17.  By a letter dated 12/9/16 addressed to the Rybak Firm, PLLC, defendant's counsel scheduled an EUO of plaintiff to be held on 1/11/17 sending it by regular mail to the Rybak Firm with a copy to plaintiff.

By a letter dated 1/5/17, the Rybak Firm replied that the chosen date was inconvenient for Dr. Parisien and should be rescheduled to a date in March based upon the Dr.’s allegedly busy schedule and demanding payment of $5000.00 per claimant at the commencement of the EUO as compensation for his loss of income and business opportunities he would suffer while preparing for, traveling to, appearing at and traveling from the EUO.  On 1/11/17, defendant's counsel placed a statement on the record 11:48 a.m. that he had been present at the EUO location since 9:46 a.m. and no one has appeared.

By a letter dated 1/12/17 addressed to the Rybak Firm defendant's counsel stated that the EUO scheduled for 1/11/17 "will be recorded as a non-appearance" and scheduled a follow-up EUO for 3/8/17 further stating, "We will require submission of detailed appoint [sic] logs before considering any further reschedule date for the EUO. . . . Please note your response fails to include documentation substantiating your demand for $5,000 . . . Travelers will issue a disbursement for loss of earnings and travel expense claims for medical providers up to $500, immediately after EUO has been conducted. Compensation beyond $500 will be considered only after documentation substantiating the amount demanded has been received and examined. There is no requirement that compensation occur in advance of the scheduled examination". The letter was sent by regular mail to the Rybak Firm.

By a letter dated 2/27/17, the Rybak Firm again indicating that the chosen date was inconvenient for Dr. Parisien and should be rescheduled alleging that it is very common for medical providers to have their schedules fully booked for 2-4 months, asking for proposed dates in May.  By letter emailed and faxed to the Rybak Firm Defendant's counsel declined to reschedule.

On 3/8/17 defendant's counsel placed a statement on the record at 10:58 a.m. that he had been present at the EUO location since 9:45 a.m., that no one has arrived and no one had contacted him to indicate they were attending.

The claims were denied and plaintiff commenced this action to recover for the unpaid services, plus interest and attorneys' fees

Decision:

An appearance at an EUO is a condition precedent to the insurer's liability on the policy.  To establish its prima facie entitlement to summary judgment dismissing a complaint on the ground that a provider had failed to appear for an EUO, an insurer must demonstrate, as a matter of law, that it had twice duly demanded an EUO from the provider, that the provider had twice failed to appear, and that the insurer had issued a timely denial of the claims.

Generally, proof that an item was properly mailed gives rise to a rebuttable presumption that the item was received by the addressee.  A party can establish proof of mailing through evidence of actual mailing (e.g., an affidavit of mailing or service) or—as relevant here—by proof of a sender's routine business practice with respect to the creation, addressing, and mailing of documents of that nature.  Actual mailing may be established by a proper certificate of mailing or by an affidavit of one with personal knowledge.  For proof by office practice, it must be geared so as to ensure the likelihood that the item is always properly addressed and mailed.  A properly executed affidavit of service raises a presumption that a proper mailing occurred, and a mere denial of receipt is not enough to rebut this presumption. 

Here, defendant established mailing of the EUO scheduling letters, by submitting affidavits of service, which stated that the EUO scheduling letters were sent by regular mail.  Plaintiff points out that the EUO scheduling letters did not include the floor number or suite number in the address, and therefore argues that the EUO scheduling letter was sent to the wrong address. However, minor errors in the mailing address will not render service void where it is "virtually certain" that the mailing will arrive at its intended destination.  Here, defendant submitted copies of the letters from plaintiff's counsel, who acknowledged receipt of the EUO scheduling letters.

Although plaintiff argues that defendant must also submit an affidavit from someone with personal knowledge that plaintiff failed to appear at an EUO, a certified transcript memorializing the missed appearance is sufficient.  Plaintiff extensively argues that defendant failed to establish that it had objective reasons for requesting plaintiff's EUO.  However, the 2nd Department has repeatedly ruled that defendant was not required to set forth objective reasons for requesting EUOs in order to establish its prima facie entitlement to summary judgment.

Contrary to plaintiff's argument, "there is no requirement to establish willfulness".  "The doctrine of willfulness . . . applies in the context of liability policies, and has no application in the no-fault context".

Plaintiff next argues that defendant cannot meet its burden that plaintiff failed to appear at the EUOs "because it repeatedly scheduled EUOs that were inconvenient to Plaintiff and made no effort to cooperate with Plaintiff to schedule the EUOs at a time and place that was reasonable for all parties".  As plaintiff points out, "All examinations under oath and medical examinations requested by the insurer shall be held at a place and time reasonably convenient to the applicant" (11 NYCRR 65-3.5[e]). The regulations do not place a limit on the number of times an applicant for no-fault benefits can request to reschedule an EUO. However, one cannot assume that an EUO is mutually rescheduled merely because a request to reschedule an EUO was made.  However, if plaintiff requested to reschedule an EUO and received no response, then the insurer is not entitled to summary judgment dismissing the complaint as a matter of law.

If an insurer refuses a timely and proper request to reschedule, then an issue of fact arises as to whether the EUOs were scheduled to be held at a time or place which was "reasonably convenient" to plaintiff.  One lower court has ruled that an insurer may not unreasonably refuse to adjourn the exams "where a good-faith request is made to re-schedule and the adjournment sought is not excessive". 

Plaintiff did not raise a triable issue of fact as to whether the requests for adjournments were proper, or that they were made in good faith. Plaintiff requested two lengthy adjournments of the EUO for two to three months, ostensibly for the reason that plaintiff is a doctor. If that reason, without more, constituted a good faith basis for an adjournment, then plaintiff could postpone an EUO indefinitely. As plaintiff's counsel points out, when an insurer schedules an EUO, the insurer must inform the applicant seeking no-fault benefits that "the applicant will be reimbursed for any loss of earnings and reasonable transportation expenses incurred in complying with the request" (11 NYCRR 65-3.5[e]), which occurred here. Thus, any concern for the loss of earnings would not be a valid reason to reschedule an EUO. Additionally, when requesting to reschedule, plaintiff offered no specific dates which would be convenient for plaintiff. On this motion, plaintiff did not come forward within any additional information to support the contention that such lengthy adjournments would be reasonable under the circumstances. Thus, plaintiff failed to raise a triable issue of fact as to whether his requests for adjournments for two to three months were either proper or made in good faith.

Lastly, plaintiff contends that defendant "failed to agree to reimburse the provider" for loss of earnings. Plaintiff demanded a flat, up-front reimbursement in the amount of "$5,000 per claimant", which plaintiff insisted be tendered by check "at the commencement of the EUO". However, plaintiff's counsel cites no authority for the proposition that the insurer must reimburse the lost earnings before the EUO takes place, and that the lack of reimbursement prior to the EUO would excuse the person to be examined from having to appear. As a practical matter, the duration of an EUO may be an important factor in calculating the reimbursement of lost earnings. In this case, the request of plaintiff's counsel for a flat, up-front fee of $5,000 per claimant was improper, as opposed to seeking reimbursement for any loss of earnings and reasonable transportation expenses as set forth in the regulations.

Finally, the certified EUO transcripts reflect that defendant's counsel stated on the record that he had been present before the scheduled start time of the EUOs. Thus, no reasonable inference could be drawn that plaintiff had appeared at the EUOs and left before defendant's counsel had checked for plaintiff's appearance. Neither does plaintiff submit an affidavit stating that he had appeared for any of the EUOs.  Thus, plaintiff fails to raise a triable issue of fact as to whether plaintiff twice failed to appear for duly scheduled EUOs.

The Court also goes on with a lengthy analysis that the plaintiff failed to raise a triable issue of fact as to whether the denials were untimely. 

In the plaintiff’s favor, the Court said that any deficiencies in plaintiff's proof of mailing were cured by defendant's submission of the denial of claim form in defendant's motion papers, which admitted receipt of the bills.

 

04/29/21       Guillermo E. Herrara, et al. v. Liberty Ins. Corp.
United States District Court, E.D. Pennsylvania
Determining Whether the Amount in Controversy Exceeds $75,000 for Removal of a Case from State Court to Federal Court Based Upon Diversity Jurisdiction

Liberty removed this case to federal court based upon diversity of citizenship pursuant to 28 U.S.C. §§ 1332 and 1441 (parties are citizens of different states and the amount in controversy exceeds $75,000).  The Court disagreed that the amount in controversy exceeded $75,000 and, therefore, remanded the case back to state court. 

The federal court has an independent obligation to determine whether subject-matter jurisdiction exists, even when no party challenges it and may remand a case sua sponte.

A defendant removing a case from state court under § 1332(a) bears the burden of demonstrating, by a preponderance of the evidence, that the opposing parties are citizens of different states and the amount in controversy exceeds the $75,000.00 jurisdictional threshold.  Removal statutes are strictly construed against removal, and all doubts are resolved in favor of remand. 

Asserting that the amount in controversy exceeds the jurisdictional threshold, Liberty contends that the complaint demands "an amount in excess of $50,000" and that the plaintiffs attached an estimate of their claimed damages in the amount of $193,076.44 to the complaint. The Court said that these facts are insufficient to establish that the plaintiffs' claims exceed the jurisdictional threshold.

First, the complaint does not contain an ad damnum clause stating the amount of damages claimed. It merely "demand[s] judgment against Defendant for all losses with interest."  Because Pennsylvania does not allow a demand for a specific sum of money where damages are not liquidated, the plaintiff in state court can only request damages in excess of or less than the amount for determining eligibility for arbitration. See Pa. R. Civ. P. 1021(b) and (c). Where the complaint seeks damages "in excess of" an amount below the federal jurisdictional amount, it is an "open-ended claim," which does not inform the amount-in-controversy inquiry. 

In removal cases, the court determines the amount in controversy from a reading of the complaint filed in the state court to see if it informs the reader, to a substantial degree of specificity, that all elements of federal jurisdiction are present.   When the complaint does not make a demand for a precise monetary amount, the court must "independently appraise" the claim's value to determine if it satisfies the amount-in-controversy requirement.  The "amount in controversy is not measured by the low end of an open-ended claim, but rather by a reasonable reading of the value of the rights being litigated." 

Conducting an independent appraisal of the value of the plaintiffs' claim based on a reasonable reading of the complaint, the Court could not determine whether the amount in controversy exceeded the jurisdictional threshold. Other than stating that the house "sustained covered losses due to water," the complaint does not describe the kind or extent of damages to the house for which it seeks coverage and payment from Liberty.

Nor does the estimate attached to the complaint show that the amount in controversy exceeds $75,000.00. The estimate, which was in the amount of $193,076.44, is part of the exhibit attached to the complaint. The complaint makes no reference to the estimate. It does not discuss the estimate's contents. One cannot determine if the plaintiffs are claiming all repairs itemized on the $193,076.44 estimate or just some of them. There is nothing in the complaint alleging what Liberty paid on the claim and what amount the plaintiffs contend remain unpaid or at issue. Absent allegations in the complaint clarifying the amount of damages claimed by the plaintiffs, the Court could not discern how much is at issue.

 

04/12/21       State Auto Property and Casualty Ins. Co. v. Sigismondi Foreign Car Specialist, Inc.
United States District Court, E.D. Pennsylvania
Insurer’s Motion for Summary Judgment Granted Under Declaratory Judgment Act and Pennsylvania's Insurance Fraud Act Due to Insured’s Material Misrepresentations in the Presentment of a Commercial Property Claim in Submitting Altered Invoices as Substantiation for Values of Property Items

This is a commercial property insurance coverage dispute in which State Auto seeks a declaration of its rights and obligations under a policy it issued to Sigismondi, an auto repair shop. State Auto also brings claims against Sigismondi for violations of Pa.’s Insurance Fraud Act, common law fraud, and reverse bad faith. Sigismondi brought a counterclaim against State Auto for statutory bad faith, which the Court had previously dismissed.  Sigismondi now asks the Court to vacate its decision dismissing the counterclaim and both parties filed motions for summary judgment.  The Court denied Sigismondi's motion to vacate the order dismissing its counterclaim, as well as its motion for summary judgment. The Court granted State Auto's motion for summary judgment in part.

Sigismondi presented a claim under its commercial property policy for water damage to its building and certain inventory, including automobile and audio equipment.  Sigismondi retained a public adjuster, Ron Spay, who in turn hired Canio Pascale of AC Estimates, LLC to help prepare a list of the damaged inventory. State Auto retained Chad Foster & Associates, LLC Salvors and Appraisers to determine the replacement cost value of the damaged inventory.

Foster created a spreadsheet of the damaged items with replacement cost figures. He testified that he used more than four hundred price sources to determine the replacement cost values for those items. Foster sent the proposed spreadsheet to Pascale and requested that he forward the inventory to Sigismondi to confirm the replacement costs.

In response, Sigismondi provided Foster with claimed replacement cost figures. Many of those figures were substantially greater than the values determined by Foster. Because of this discrepancy, State Auto asked Sigismondi to submit supporting documentation for the claimed valuations. Sigismondi then emailed approximately ten vendor invoices to Foster. Sigismondi now admits that it used computer software to edit at least some of the invoices submitted to State Auto, including by entering price information and dates.

State Auto requested the Examinations Under Oath of Mr. Sigismondi and Debbie Miller, an employee of Sigismondi.  Sigismondi provided sworn testimony that the invoices provided to State Auto were scanned into a computer and altered. He also testified that Miller called a vendor to obtain the price for an item listed on an altered invoice, which was false. Miller testified that she never contacted any vendors for the claimed replacement cost valuations and that Mr. Sigismondi provided her the values of the inventory items to enter into the altered invoices. Furthermore, the president of the vendor in question submitted an affidavit stating that neither Sigismondi nor Miller contacted the vendor to ask for pricing information.

Based on the discovery of the altered invoices, State Auto denied Sigismondi's claim. State Auto filed the instant action.

Decision:

Sigismondi first asks the Court to vacate the order dismissing the counterclaim, which alleges State Auto acted in bad faith.

To prevail on a bad faith insurance claim, a party "must present clear and convincing evidence (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis."  For procedural reasons, the Court declined to vacate the order dismissing the counterclaim.  However, it then said that even if it were to reach the merits of the counterclaim, Sigismondi's motion for summary judgment would be denied, and State Auto's cross-motion would be granted. Sigismondi has pointed to no record evidence indicating that State Auto lacked a reasonable basis for denying benefits under the policy, let alone that State Auto "knew of or recklessly disregarded" the lack of such a basis. To the contrary, the record reflects that State Auto responded reasonably to learning that Sigismondi had submitted altered vendor invoices to support its claim under the policy.

State Auto moved for summary judgment on the following Counts: the declaratory judgment (Count I), violations of Pennsylvania's Insurance Fraud Act (Count II), and common law fraud (Count III).

Declaratory Judgment (Count I):

The Court granted State Auto’s motion on its declaratory judgment claim (Count I), declaring that Sigismondi "violated the Concealment, Misrepresentation or Fraud Condition" in the policy, that State Auto is not obligated to provide coverage for the claim, and that the policy is void by operation of Sigismondi's concealment, misrepresentation or fraud.

The Declaratory Judgment Act permits "any Court of the United States to "declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a).

Generally, to void an insurance policy under Pennsylvania law, an insurer must prove the following factors by clear and convincing evidence: "(1) the insured made a false representation; (2) the insured knew the representation was false when it was made or the insured made the representation in bad faith; and (3) the representation was material to the risk being insured."  The clear and convincing evidence standard requires evidence that is “so clear, direct, weighty, and convincing as to enable the trier of fact to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue." 

Sigismondi materially breached the policy's concealment or fraud provision by altering the invoices at issue.  Pennsylvania courts have long ruled that a violation of the fraud and concealment provision of an insurance policy serves as a complete bar to the insured's recovery under the policy.  Sigismondi does not dispute that he made misrepresentations to State Auto by submitting altered invoices, or that he knew its representations were false when it made them. The Court's analysis turned on whether the misrepresentations were material.

In an insurance action, a misrepresentation will be considered material if a reasonable insurance company, in determining its course of action, would attach importance to the facts misrepresented.  A fact is material if it concerns a subject relevant and germane to the insurer's investigation as it was then proceeding, or if a reasonable insurance company, in determining its course of action, would attach importance to the fact misrepresented. 

Sigismondi argues its misrepresentations were not material because witnesses testified that an item's purchase price does not necessarily determine its replacement cost since some items, including electronics, change in value over time. Sigismondi argues this testimony establishes that the original purchase price would have little, if any, influence on what was determined to be replacement cost or the actual cash value for an item.

The Court held that Sigismondi's fabricated invoices were material to the insurance claim. State Auto requested the invoices because Sigismondi submitted its own replacement cost figures. State Auto points to record evidence indicating that it "specifically requested supporting documentation in response to Sigismondi's claimed replacement cost figures" and that "Sigismondi was aware that State Auto would use the invoices to determine and verify the amount of loss." Construing the record in the light most favorable to Sigismondi, and applying the clear and convincing evidence standard, the Court said that no reasonable jury could find that Sigismondi did not knowingly make false representations by submitting altered invoices in support of the claim and that the representations were material.

Pennsylvania's Insurance Fraud Act (Count II):

Next, State Auto moves for summary judgment on its claim that Sigismondi violated Pennsylvania's Insurance Fraud Act, which creates a private cause of action for insurers to remedy various types of fraud. See 18 Pa. Stat. and Cons. Stat. Ann § 4117(g) (West 2021) ("An insurer damaged as a result of a violation of this section may sue therefor in any court of competent jurisdiction to recover compensatory damages, which may include reasonable investigation expenses, costs of suit and attorney fees.").

A person violates Pennsylvania's insurance fraud statute by: (1) presenting false, incomplete, or misleading statements to [the insurer]; 2) that were material to the claim;' and 3) which were knowingly made with an intent to defraud. District courts within the Third Circuit have disagreed about whether the applicable burden of proof is preponderance of the evidence or clear and convincing evidence.

The only issue is whether Sigismondi made the false representations "with the intent to defraud." 18 Pa. Stat. and Cons. Stat. Ann § 4117(a)(2) (West 2021).  Fraudulent intent may be inferred if the facts show the insured had presumptive knowledge.  Where it affirmatively appears from sufficient documentary evidence, that false answers are shown to have been given by the insured under such circumstances that he must have been aware of their falsity, the court may direct a verdict or enter judgment for the insurer.

The Court inferred Sigismondi's intent to defraud from the fact that he knew its statements (i.e., the falsified invoices) were false when he made them. Later, Sigismondi attempted to cover up the misrepresentation by falsely contending, under oath, that his assistant had contacted a vendor to obtain the pricing information even though he had provided it.  As such, the Court said that on this record, no reasonable jury could find for Sigismondi even under the heightened clear and convincing evidentiary standard.  The Court State Auto was entitled to summary judgment on its Pennsylvania Insurance Fraud Act claim.

Common Law Fraud (Count III):

State Auto also moved for summary judgment on its common law fraud claim.  Under Pa. law, a plaintiff establishes common law fraud by proving:  (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance.  The burden of proving fraud must be established by clear and convincing evidence.

State Auto satisfied the claim's first four elements.  However, the Court concluded that State Auto had failed to point to record evidence satisfying the fifth prong—i.e., that it justifiably relied on the misrepresentation. Even assuming, arguendo, that investigation and litigation costs standing alone could constitute justifiable reliance under Pa. law, State Auto had not pointed to specific record evidence of such reliance. Therefore, it denied this portion of State Auto’s motion. 

This edition’s COVID-19 1st-Party Property Business Income Victories:

05/05/21        Mareik Inc. d/b/a Nicole Miller Philadelphia v. State Farm Fire and Casualty Company
United States District Court, E.D. Pennsylvania

04/22/21       Kim-Chee LLC and Yup Chagi Inc d/b/a Master Gorino’s Pil-Sung Tae-Kwon-Do v. Philadelphia Indemnity Ins. Co., et al.
United States District Court, W.D. New York

03/30/21       Mangia Restaurant Corp. v. Utica First Ins. Co.
Supreme Court, Queens County

 

HEINTZMAN’S HIDEOUT
Nicholas J. Heintzman
[email protected]
 

04/29/21       Matter of Metropolitan Group Prop. & Cas. Co. v Newkirk
Supreme Court, Kings County
Court Applied Pennsylvania Law and Determined that Recission of Insurance Policy on Material Misrepresentation Grounds was Ineffective when Applied to Innocent Third Party

Here, Tiffany Newkirk and John Chogllo were driving their own vehicles when they were involved in a collision in the Bronx, New York. Ms. Newkirk sought coverage for the accident from Mr. Chogllo’s insurer, Lyndon Southern Insurance Company (Lyndon).  Embark General Insurance Adjusters, LLC (“Embark”), acting as Administrator for Lyndon, concluded that Mr. Chogllo’s original application for insurance from Lyndon was based upon his misrepresentation that he resided in and garaged his vehicle in Pennsylvania, when he actually resided in New York. Embark denied coverage and rescinded the insurance policy with Mr. Chogllo, and it refused to provide coverage for Ms. Newkirk. The Court found that Embark should provide coverage to Ms. Newkirk.

First, the Court used choice-of-law analysis to determine that Pennsylvania, as opposed to New York, law should apply. The Court was vague and unspecific in its reasoning, but it found that Pennsylvania was the state with the most significant relationship to the insurance policy between Mr. Chogllo and Lyndon and that when the policy was created, Lyndon believed that Mr. Chogllo would primarily be operating his vehicle in Pennsylvania.

Applying Pennsylvania law, the Court found that Embark’s denial of coverage to Mr. Chogllo was proper, as Pennsylvania law permits the retroactive rescission of an insurance policy when the insured makes a material misrepresentation to the insurer. However, under Pennsylvania law, recission is ineffective when applied to innocent third parties like Ms. Newkirk, as such third-parties, through no wrongdoing of their own, are reliant on the insured’s policy for coverage. Thus, the Court held that Embark should provide coverage to Ms. Newkirk.

 

05/20/21       Masigla v. MVAIC
Civil Court of the City of New York, Kings County
Court Held that EUO Transcript of Assignor of No-Fault Benefits which Affected the Assignor’s No-Fault Eligibility was Inadmissible Hearsay

Plaintiff and medical provider, Maria Masigla, as assignee of Jean Baptiste, sought to recover Mr. Baptiste’s first-party no-fault benefits from defendant Motor Vehicle Accident Indemnification Corporation (“MVAIC”) for the medical services she provided Mr. Baptiste following a motor vehicle accident. The issue was whether, before trial, Ms. Masigla made a prima facie showing that Mr. Baptiste was not in possession of the motor vehicle he drove at the accident for more than 30 days, thus making him a “qualified person” eligible for no-fault benefits from MVAIC.

Mr. Baptiste testified at an Examination Under Oath (“EUO”) that the car he drove at the time of his accident was insured on the date and time of the accident, it had been sold to his friend previously, and that Mr. Baptiste had borrowed the car back from his friend at some point before the accident.

MVAIC sought to use Mr. Baptiste’s EUO testimony to establish that he was the de facto vehicle owner and thus ineligible for MVAIC benefits. Ms. Masigla argued the EUO transcript constituted inadmissible hearsay evidence, and MVAIC countered that the transcript was admissible under the “party admission against interest” hearsay exception. The Court held that the “party admission against interest” exception did not apply and that the transcript was inadmissible hearsay evidence.

The Court based its reasoning on the “New York doctrine,” that declarations of an assignor of property or right, whether made before or after the assignment, are inadmissible as against the assignee. It held that Mr. Baptiste’s EUO transcript was inadmissible at trial unless used for impeachment purposes. Thus, given the inadmissibility of the EUO transcript, the Court found that Ms. Masigla established her prima facie burden that Mr. Baptiste was a qualified person for no-fault benefits from MVAIC.

 

LIENING TOWER OF PERLEY
Michael F. Perley
[email protected]
 

05/05/21       David v. David
Appellate Division, Second Department
The Second Department Enforces Preemption for a Self-Funded ERISA Plan’s Medical Liens
 

In the process of obtaining the approval of an infant settlement, plaintiff’s counsel obtained a court order in Supreme Court of Queens County declaring Horizon BlueCross/BlueShield of New Jersey had no lien against the recovery pursuant to General Obligations Law § 5-335.  The court order eliminating the lien was apparently obtained without naming BlueCross/BlueShield as a party.  BlueCross/BlueShield appealed as a non-party to the Second Department and provided the court with proof that it was a self-funded ERISA plan as outlined in 29 U.S.C. § 101 et seq.  The court analyzed the governing document of the employee benefit plan which contained a reimbursement provision and demonstrated that the plan was self-funded and not used for the purpose of purchasing insurance.  Applying Wurtz v. Rollings Company, LLC, 761 F.3d 232, 2nd Cir. and its progeny, the Second Department reversed that portion of the court order that determined the lien was not enforceable against the infant settlement proceeds.  This case is a good reminder that issues involving the application of General Obligations Law § 5-335 necessarily involve the determination as to whether or not any health insurance lien or right of subrogation arises from a self-funded ERISA plan.  It is improvident to attempt to extinguish the lien without affording any plan that claims to have ERISA rights the opportunity to present its evidence and allow for a thorough analysis of its governing documents. 

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