Coverage Pointers - Volume XXII, No. 25

Volume XXII, No. 25 (No. 591)
Friday, May 28, 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.  Pardon the brevity of my note, but I am on vacation!  Whee.

I send you greeting from West Palm Beach, where I have just arrived for a week of holiday.  We’ve left the cat, Frank, and the cat sitter, behind, minding the home front.

I thank Agnes Wilewicz and Patty Rauh for putting this issue together and you will forgive the brief note this week as I look forward to a cocktail on the balcony, looking at the Intercoastal.  This was my first air flight since COVID arrived.

Watch the Bad Faith bill which has moved out of the New York State Assembly Insurance Committee.  Keep in touch with your trade organizations and do what you can to stop this wrong-headed, poorly drafted legislation.  Want to know more about it?  Our Special Edition, on May 10, gives you all you need to know.

We welcome the newest member of our Coverage Team, Tom Casella, whose bio you can find here.  He is a terrific addition to our fabulous team, having spent the previous 10 years of his career in the insurance industry.

And, we welcome Kara Eyre to our litigation team, an experienced litigator who adds more quality to that great team.

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:

Diane Bucci (Bucci on “B”) reached out to me last week and said, “tell me how I can be an ally to you.” She said she had been reading up on racial equity and realized that she—as a white woman—needed to learn how to become an effective ally for BIPoC, especially in white spaces.

*stands up at desk and gives Diane a standing ovation*

When I do a workshop on interrupting implicit bias (or any other Diversity, Equity and Inclusion topic), one of the practical tips I always give is, “in every room you enter, look around and ask yourself ‘whose voice is missing in this room?’” That is because for many BIPoC, we are always in the minority in every professional setting. When you are the only one of your kind or in the minority, it is very easy to fade into the background and feel like you do not have a voice. That is where allies come in.

Allies are those people who are willing to use their privilege and position in society to lend a voice to those who may not have any. When I speak about allyship in my trainings, I often highlight a photograph of Dr. Martin Luther King, Jr. speaking to a crowd. In that crowd, you see a rainbow of faces, listening raptly. It is often at the end of a march. I say that, without allies, the civil rights movement of the 1960’s would not have gained any traction. That is not to denigrate the work of Dr. King—the man literally gave his life for the cause—it is to point out that, at only 10% of the population in the United States in 1960, Black Americans did not have the critical mass needed to effectuate change on their own. They needed allies to amplify their voices and speak out about the injustices they were facing.

All that to say that this week, I’m providing 5 tips for being a better ally. ? And, by the way, you don’t need to be steeped in white, male privilege to be an ally. You just have to be willing to stand up and speak out on behalf of another group of people who may be suffering an injustice. As a Black Latina woman born in Central America, it may appear that I don’t have much privilege to trade on. But as an attorney, a frequent lecturer, a DEI consultant and so on, I often have a high pulpit from which to speak. I bet that every single reader of Coverage Pointers has a “privilege” they can use for the benefit of others.

Enjoy this week’s CP and have a wonderful Memorial Day weekend!

Mirna
Mirna M. Santiago
[email protected]

 

Daily News
New York, New York
28 May 1921

COURT’S 10 RULES FOR HUSBANDS NO CURE IN THIS CASE

Watson Fails to Obey

Judge’s “K.P.” Sentence.

          Magistrate John Kochendorfer’s prescription of K. P. duty for erring husbands reached its second day of trial yesterday with no success registered.

          When Mrs. Joseph Watson, 126 Fifth street, Long Island City, appeared in the Magistrate’s Court to accuse her husband of late hours, non-support and laziness, Judge Kochendorfer ruled that the man be compelled to do the housework for his wife for a week.

          At the end of that time, the judge says, the erring husband will realize that the housewife’s life is no rosy dream.  Moreover, after he has washed the dishes and made the beds for seven days, Magistrate Kochendorfer thinks the laziest man in the world would be willing to go to work elsewhere.

          Mrs. Watson, the first wife to be part of this judicial experiment, does not take much stock in it.

          “This is the second day of the plan,” she declared, marshalling her four lively children to be photographed.  “My husband left the house at 9 this morning.  He came in at 2 last night.  Does that look as if the plan worked?”

          Miss Mary Hickey, probation officer in Long Island City and Jamaica, is charged with the enforcement of magistrate Kochendorfer’s sentence.  Upon her two visits, so far made in the week, she has not found the sentenced husband at his post in the kitchen.  She feared yesterday it would be necessary to detail an officer if the sentence is to be literally carried out. 

 

Peiper on Property and Potpourri:

A quiet two weeks for the Court leaves little to comment upon for us insurance scribes.  We do review an interesting malpractice claim in this issue’s Potpourri, and in so doing have a bone to pick with the fine court located in Brooklyn Heights.

In Fricano, the Appellate Division was asked to review, inter alia, whether an insured’s material misrepresentation in the procurement of her policy severed proximate cause.  The Court found that defendant did not meet her burden on the motion, but went one step farther by stating that questions of materiality are usually left to the jury.  Respectfully, we disagree; particularly if the movant has paid attention to its burden.

Recall, in order to win a motion on material misrepresentation, one must proffer evidence of both the misrepresentation (usually in the form of the application with supporting proof demonstrating the error) and evidence of the materiality.  That is done by producing the actual underwriting record, guideline, or protocol which the inaccurate disclosure triggered.  In other words, material misrepresentations are won on the documentary support.  They are lost, however, when the documentary Record is left wanting.

That’s it for this issue.  Best wishes for a safe, peaceful and normal Memorial Day Weekend.

Steve
Steven E. Peiper
[email protected]

 

Buffalo Morning Express and
Illustrated Buffalo Express
Buffalo, New York
28 May 1921

Big verdict against N. Y. C.

          Josephine Bieber, as administratrix of the state of Michael Bieber, was granted a verdict of $10,500 against the New York Central by a jury in Justice Wheeler’s part of the supreme court yesterday.  Bieber was killed on the Ohio street crossing of the New York Central last year.  Hamilton Ward represented the Bieber estate.

 

Wilewicz’ Wide-World of Coverage:   

Dear Readers,

Diving right in this week, as our own Second Circuit has served up not one, but two insurance coverage decisions for your edification and reading pleasure. Both only touch upon coverage and were actually decided on jurisdictional grounds. However, a good takeaway from that is that if you cannot get past the procedural hurdle of even having jurisdiction in the first instance, your otherwise potentially meritorious case will never see the light of a courtroom. Full write ups and direct links to the cases themselves are annexed in this week’s edition.

First, in Great Lakes Ins. v. American Steamship, the Second Circuit looked at whether the case had subject matter jurisdiction sufficient for the court to hear it. There, the basis of Federal subject matter jurisdiction was arguably Federal judicial power over cases of admiralty or maritime matters. However, as the case as pled was actually about conspiracy and the alleged improper termination of insurance coverage, that jurisdiction did not apply.

Second, the court brought us Emiabata v. Farmers Ins., also out of our Second Circuit. This time, the question was whether there was diversity of the parties (one each side of the “v.”) sufficient to warrant them being heard in Federal Court. At the end of the day, the plaintiff was unable to conclusively establish her residence at the time of the filing of the complaint. Without such proof, jurisdiction could not be established and the case was dismissed.

Until next time,

Agnes
Agnes A. Wilewicz
[email protected]

 

Buffalo Morning Express and
Illustrated Buffalo Express
Buffalo, New York
28 May 1921

PUBLISHERS ON RECORD AGAINST A 44-HOUR WEEK

By the Associated Press

          Binghamton, May 27.—The New York State Publishers’ association, at a meeting here today attended by representatives of practically all of the dailies in the state outside Greater New York, reaffirmed resolutions passed at previous meetings, against the 44-hour work week and extending to all New York state publishers upon whom demands have been made for the 44-hour week, the financial, moral and material support of the association.

 

Barnas on Bad Faith:

Hello again:

I am very much looking forward to the upcoming long weekend.  However, I am looking forward to the Tuesday after it more, as that is when the Blue Jays are going to be playing their first “home” game in Buffalo.  I was lucky enough to get tickets for a bunch of the games.  It is still pretty surreal to me that my favorite team is coming to play Major League Baseball games in my hometown just down the street from where I am typing this note.  I cannot wait to soak up as much of the experience as possible for as long as they are here.  Hopefully, they will try winning a few games too.  It has been a rough stretch for the home team lately, Vladimir Guerrero Jr. aside.

I have a bad faith case from Pennsylvania in my column today, which illustrates a difference in New York and Pennsylvania bad faith law.  As you may know, in New York, an insurer cannot be found liable for bad faith based on a coverage position where it had an arguable basis for its interpretation of the policy, even if that interpretation is ultimately incorrect.  The insured must show that the carrier’s position was so egregious that no reasonable carrier would have asserted the policy interpretation the carrier advanced.  The insurer in the case in my column today tried to make a similar argument on a motion to dismiss, arguing that its position that an exclusion relieved it of its duty to defend was reasonable and not in bad faith.  The court, citing various Pennsylvania cases, concluded that the “reasonable interpretation” rule only applies to situations where that area of law is in flux.  It strikes me that the Pennsylvania rule is too narrow and leaves out situations where the reasonable argument could be based on particular facts of the claim/case rather than just an unsettled question of law.  Let me know if you disagree or think I have it wrong.

That’s all for now.

Brian
Brian D. Barnas
[email protected]

 

Little Rock Daily News
Little Rock, Arkansas
28 May 1921

 

BEER REGULATIONS OUT NEXT WEEK

          Washington, May 28.—Regulations regulating the use of beer as medicine will be promulgated next week, it was announced today, following a conference between Internal Revenue Commissioner Blair and Prohibition Commissioner Kramer.  Blair and Kramer discussed plans for the reorganization of the prohibition enforcement squads but reached no definite development.

 

Off the Mark:

Dear Readers,

Our visit to The Metropolitan Museum of Art went well and the whole family seemed to enjoy the trip.  Every time we go, I see something I somehow missed the last time.  There were also some new exhibits that we were able to see, including the Big Bird exhibit on the rooftop.  Now the kids and I are preparing for our annual camping trip in the Catskills.  Looks like we will be leaving on Saturday due to rain.  I can tell you from experience, setting up and camping in the rain is no fun. 

We are officially in a drought, as there were no newsworthy construction defect cases to report on this edition.  Hopefully, things change in two weeks.

Until then …

Brian
Brian F. Mark
[email protected]

 

The Brooklyn Daily Eagle
Brooklyn, New York
29 May 1921

WOMAN’S PRESS CLUB STAGES MOCK TRIAL

          Jurywomen simply cannot agree; there is no use to impanel an all-feminine jury.

          The Woman’s Press Club and the Brooklyn Women’s Bar Association met and fought it out yesterday afternoon at the Waldorf and the “I Told You Sos” triumphed.  One hundred women were called before the necessary 12 could be mustered and then no agreement was reached.

          But that didn’t prove that women should not be given duty in New York State, argued Amy Wren, Brooklyn lawyer, who staged a mock trial to prove her point.  “it’s good propaganda, anyway,” she said.

          It all had to do with the purchase of an engagement ring by a certain young man who later broke his compact before he had succeeded in paying for the diamond symbol of happiness; of a girl who refused to give it up, and of a shop which claimed that it was a conditional sale only.

          Several jurywomen were disqualified because they were engaged, expected to be engaged or wanted to be engaged.  Mrs. Letitia Cornell, Mrs. Eva Phipps and Mrs. Josephine Libby, all of Brooklyn, were on the jury.

 

Boron’s Benchmarks:

Looking forward to Memorial Day, so I can start dressing for work like a 1960’s Colonel Sanders.  Just kidding. I didn’t intend to offend any KFC fans out there.  But the thought is prompted by the unwritten fashion rule that you can only wear white between Memorial Day and Labor Day.  I can attest there actually is an agency named The Fashion Police that monitors what people – particularly yours truly – wear throughout the year. I know this because I live with one of its long-time Admin VPs.

In any event, 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 an Oklahoma Supreme Court opinion, Morgan vs. State Farm Mutual Automobile Insurance Company, issued just this week, on May 25, 2021. The case considers two questions certified to the Oklahoma Supreme Court by the U.S. Court of Appeals for the 10^th Circuit.  A full write up of the case and a direct link to it is annexed in this edition. Whether you read my write up of the case or not, don’t forget to go dig out those white shorts and pants from the back of your closets, because Memorial Day is right around the corner.  Yippee!

Have a healthy and happy next two weeks, folks.

Eric
Eric T. Boron
[email protected]

 

St. Albans Daily Messenger
Saint Albans, Vermont
28 May 1921

PRICE SLASHED

From $5,000 to $3,500 for a main road 65-acre farm, 9 cows, pair horses and farming tools, 400 sugar trees equipped, plenty wood, running water, less than mile from nice village.

Phone 142-23

 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

For those that are unaware, I played NCAA Div. III Men’s Volleyball a few years back (okay, ten). I grew up with the sport and played competitively for a number of years after college. By and large, I have dropped playing (and coaching) as life provides only so many (billable) hours in a day. That has not prevented me from broadcasting NCAA Div. II games for Daemen College’s Men’s and Women’s Teams (yet). However, last week, I laced them up once again, or whatever the beach equivalent is, and traded my brief case for board shorts. My vertical is not what it used to be, but my four-year-old son loved the world’s largest sandbox (didn’t have the heart to tell him it wasn’t). Hopefully, I will have more opportunities this summer to pass nails and throw down a few “no-look cutties”.

With the recent passage of the NYS Marijuana Regulation & Taxation Act, most individuals and businesses have more questions than answers regarding the impact of recreational cannabis on New York residents and businesses. Our Cannabis Law Practice Group is here to help provide answers. Join us Wednesday, June 2, 2021, where we will present our WEBINAR: What Your Business Needs to Know About NY’s Recreational Cannabis Law, in conjunction with our partners at the Cheektowaga Chamber of Commerce. Registration for the 9-10AM Webinar is available here, with topics to include:

• Overview of NYS Marijuana Regulation & Taxation Act
• Employment Law Considerations
• Business Insurance Impact (5 mins with yours truly)

More presentations are on the way in the near future.

This time around, Ryan’s Capital Round-Up will provide a brief update on bad faith bills making the round in the New York State Legislature, as well as a bill that would prohibit the use of lead paint exclusions. Also, in the Regulatory Wrap-Up, we discuss a recent Consent Order on two life insurer’s violations of DFS’ Cybersecurity Regulations, as well as a new Part 3 of the Financial Security Regulations concerning FOIL Requests.

Until next time,

Ryan
Ryan P. Maxwell
[email protected]

 

The Coffeyville Daily Journal
Coffeyville, Kansas
28 May 1921

NOTICE—A large collection of pictures and descriptions of beautiful ladies sent free to anyone upon request.  Address Prof. Ward, B536, Valley, Nebraska.                                                           5-28-1x

 

CJ on CVA and USDC(NY):

Hello all,

I hope this edition finds you well and easing your way into the holiday weekend. I am certainly looking forward to unofficially kicking off summer with a few hot dogs and some ice-cold beverages. Hopefully, the weather holds out where you are, and you all can enjoy the unofficial start of summer as well!

This week I have a decision from the Eastern District, in which the court tackles the age-old question of “does the additional insured receive a defense?” Here, the insurer argued against providing a defense partly because the underlying action alleged that the additional insured proximately caused the damage. The court noted, while that is true, the underlying action also alleges that the named insured proximately caused the damage and that the additional insured’s acts or omissions contributed.

See you in two weeks,

CJ
Charles J. Englert, III
[email protected]      

 

The Post-Star
Glens Falls, New York
28 May 1921

 

PASTOR STANDS OFF MASKED MOB

He Threatens to Shoot the First Person Who Advances

          HATTIESBURG, Miss., May 27.—Pistol in hand, the Rev. G. S. Harmon, a Methodist preacher, stood off last night a masked mob intent upon removing Casey E. Jones from the Methodist hospital here.

          Jones was wounded yesterday by J. S. Mosely, after he had shot and dangerously wounded Mrs. Mosely.  Dr. Harmon, commissioner of the hospital, upon learning that feeling was aroused against Jones, asked for police protection.  Before the officers arrived, however, a number of masked men slipped into the building to find themselves confronted by the preacher.

          “Doctor, we aren’t going to make any racket,” said one, “we just want our man.”

          “I am a Methodist preacher,” replied the doctor, “in charge of this hospital, and responsible for all in it.  You dare not come up those steps unless you cross my dead body.  Now shoot if you dare!”

          The mob had dispersed when the officers arrived.

 

Dishing Out Serious Injury Threshold:

Dear Readers,

Happy early Memorial Day weekend to everyone. Hope everyone is able to get out and enjoy the long weekend and hopefully the weather will cooperate.

In the Serious Injury Threshold world, we have a special decision out of the First Department. This case shows that a plaintiff expert who fails to examine plaintiff until six years after the accident cannot opine as to causation due to the remoteness in time.

Be well,

Michael
Michael J. Dischley
[email protected]  

         

The Brooklyn Citizen
Brooklyn, New York
28 May 1921

SAY HER SKIRT WAS LIKE A BARROOM

Woman and Her Husband Arraigned on Unique Accusation.

          This skirt was added yesterday to the police list of rum-carrying “vehicles,” which had previously ranged only from brief-cases to bath tubs and from baby carriages to motorboats.

          Detectives had, on several occasions, made unsuccessful searches for liquor in a saloon at 2647 Pitkin avenue.  Seeing men frequently stagger out of the place, they became convinced that there was some whisky there, but repeated searches failed to reveal any.

          One of the detectives finally noticed that Mrs. Charles Papkus, wife of the proprietor, was wearing a skirt of Civil War capacity, with great ruffles and pleats.  They noticed also that Papkus, like the husband of a celebrity, was a lonesome and solitary figure, while Mrs. Papkus was always the centre of a crowd.

          At last a plainclothes man of insinuating address got himself admitted to the circle of gallants and danced attendance on Mrs. Papkus and discovered the secret.  The skirt, he alleged, was not only a vehicle, but a complete set of bar furniture, with large hidden pockets stocked with liquor and glasses.  The popular woman and the neglected husband were arraigned yesterday before County Judge Haskell.

 

Bucci on “B”: 

Hello readers,

Not much on the Coverage B front this issue.  There was a case  that we looked at from the Supreme Court of Illinois addressing whether the sharing of biometric data falls within the purview of the TCPA and CAN-SPAM Act, which is interesting, but it is unclear why the Supreme Court granted Cert because it just affirmed the appellate court decision, which we also brought you on 4/2/21.  

Hurwitz & Fine has a significant number of training programs addressing most coverage issues.  If your adjusters (or you) are unclear on any given topic, we can help.  Just reach out.  It is an easy process.  And if there is anything that you need training on that we do not have, by golly, we will put a program together.

Thank you, Mirna, for the shout out.  It is so important to communicate and reeducate people in these times and to try to get involved somehow, and asking for help does not hurt.

Oh yeah, I planted a garden this year, with actual perennials that will come back every year.  I have never done that before and I wanted (and got) lots of colored flowers.  Actually, I have never landscaped.  It was a friend that did the digging and planting, but I am enjoying having the freshly planted colorful flowers every day, except I may need a watering system.  Spraying water from a hose is not going to work for long.  Too lazy about such things.

That is really all I have this week, and it has been a long one.  Thankfully, I am getting away for Memorial Day to the beach.  I love the beach.

Diane
Diane L. Bucci
[email protected]

Buffalo Courier
Buffalo, New York
28 May 1921

CARUSO SAILS, TAKES MILES OF SPAGHETTI

          New York, May 27.—Several miles of spaghetti for the personal use of Enrico Caruso and his party were on the steamer Presidente Wilson today which will sail for Italy tomorrow with the famous tenor on board.

          Caruso is not “carrying coals to New Castle,” for there is a reported shortage of spaghetti in his homeland, and he has merely seen to it that no one accompanying him shall be without the delicacy while on board the ship or during their stay in Italy.

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Life in Connecticut is slowly showing signs of a return to normalcy. As one of the states leading the nation in vaccination rate, at over 70% of adults, mask requirements and social distancing restrictions (in most settings) are gone. Yet, even as retailers are taking down their masking signs, Connecticut residents still seem to be sporting their masks in most settings. You don’t get to be the insurance capital of the nation without a little bit of risk management entering the public consciousness.

The Courts here, however, are showing no rush to return to in person appearances. By most accounts, it seems that judges and practitioners alike have adapted to and are embracing virtual appearances and Zoom depositions. Is this the new normal – only time will tell.

As we approach this Memorial Day Weekend, please join us as we remember and honor our heroes.

Lee
Lee S. Siegel
[email protected]      

         

Buffalo Courtier
Buffalo, New York
28 May 1921

Mount Everest.

          The expedition that is to attempt the ascent of Mount Everest, the world’s highest mountain, is now at the India-Tibetan frontier.  The Courier, believing that its readers will wish to follow the efforts of the scientists and mountain climbers to reach the top of the world, has arranged to give them this news through special cable dispatches.  The first of these, by Col Howard Bury, leader of the expedition, was published yesterday.  Whether you are looking for pure adventure or information you will be sure to find it in the accounts of the attempt to scale the great peak of the Himalayas.  Every possible preparation to insure the success of the expedition has been made but the difficulties of the ascent in the last few thousands of feet have led more than one experienced mountain climber to doubt that the top will be reached.  And when it comes to that last struggle, for which only a few of the most fit men will be chosen, you may sit here in comfortable summer weather and read of what’s happening on Everest, the only remaining unexplored part of the world.  With wireless, telegraph and cable, distance is little handicap nowadays to news gathering.

 

Rauh’s Ramblings:

Dear Readers:

Only a few more days until the summer season officially kicks off!  I am really looking forward to summer this year.  While I expect that it won’t be 100% back to “normal”, I think it will be much better than last summer as more and more people continue to get vaccinated.  I went yesterday and bought all the flowers and plants for my yard this year, so of course, the next few days are supposed to be well-below average temperature! Fingers crossed all the flowers are still alive by next week!

In the last issue of Coverage Pointers, I announced that in addition to reporting on life insurance decisions, my column would also start addressing various environmental coverage case decisions with a focus on decisions outside of New York.  While I do have an interest in environmental coverage and Hurwitz & Fine has been working to grow our environmental coverage practice group, there just weren’t many life insurance cases being decided to sustain my column, so I decided to switch it up.  That being said, today I will be reporting on . . . a life insurance case!  Figures! This case comes out of the Second Circuit and involves the question of whether an insurance company violated ERISA when it decided to pay life insurance proceeds to the decedent’s adopted children instead of his estate.  Enjoy!

Until Next Time,

Patty
Patricia A. Rauh
[email protected]     

 

The La Crosse Tribune
La Crosse, Wisconsin
28 May 1921

Martial Law For Ireland Contemplated

          LONDON.—By The Associated Press.—The government’s policy for sterner repression of the criminal element in Ireland, as it is phrasal in authoritive quarters, involved the strengthening of the crown forces in Ireland with military reinforcements which will be drawn from units now in foreign service.  No increase of the auxiliary police or “Black and Tans,” or the constabulary is contemplated is declared.

          There is some likelihood of the extension of martial law to the whole of Ireland with the exception of Ulster, it is indicated, but the initiative rests with General Sir Nevil MacReady, the military commander of Ireland, as it does in the question of introducing the Kitchener blockhouse system.  It was officially stated Saturday that the reinforcements to be sent will be considerably less than 50,000 in number.

 

Storm’s SIU Examen:

Hi everyone:

In this edition of The Examen, we will review cases on:

• Dismissal of Plaintiff’s “bad faith” claim against an insurer which denied coverage for a homeowner’s claim based on an intentional act (arson). 

• Material misrepresentation in the application that a building was a 3-unit rather than a 4-unit, granting summary judgment to the insurer. 

• A Forgery or Alteration coverage provision when hackers wire-transferred money from the insured’s account and the Plaintiff had purchased the incorrect type of coverage. 

• Medical providers attempting to preclude the Court from exercising diversity jurisdiction and arguing that an insurer’s common law fraud and unjust enrichment claims were barred by the statutes of limitations. 

• The failure to show for an EUO was a breach of a condition precedent voiding coverage for all PIP claims retroactively to the date of loss and not to be determined on a bill-by-bill basis.

I had the pleasure of speaking this week at the International Association of Auto Theft Investigators (IAATI) about proving motive in fraud cases.  Great organization, you should check it out.

This edition’s encouraging word: “I learned this, at least, by my experiment; that if one advances confidently in the direction of his dreams, and endeavors to live the life which he has imagined, he will meet success unexpected in common hours.”  ~ Henry David Thoreau

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]

 

Heintzman’s Hideout:

Dear Readers:

In March 2020, when the pandemic started, I was in Durham, North Carolina, for law school. We learned that the Canadian-US border could be closing (I’m a Canadian citizen and my family all lives in Canada), so I made the difficult decision to get back to Canada as fast as possible, taking only my essential belongings. A friend in the Carolinas kindly moved everything out my Durham apartment and put them in storage – where they have been for well over a year. I’m happy to announce that this weekend I’ll be meeting my friend in Pennsylvania and retrieving my long-lost belongings from law school, including my tv and book collection. The long weekend will be a busy one spent hauling my belongings around and getting them carried into my apartment in Buffalo, but it is another welcome sign that we are moving past this pandemic. Here’s hoping the tv still works!

Today’s column features two cases: both are Supreme Court, New York County, cases, and both involve defendants trying (and failing!) to dismiss complaints. In the first, a defendant fails to get a bad faith claim dismissed (shockingly the court thought discovery might be important), and, in the second, the court rejects a defendant’s attempt to get the complaint of additional insureds dismissed.

Best Wishes,

Nick
Nicholas J. Heintzman
[email protected]

 

Headlines from this week’s issue, attached:

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

• Insurer Demonstrated Misrepresentation on Policy Application Which Would Have Raised Liability Coverage Rates.  Even Though Not Fraudulent, it Was Enough to Void Property Coverage

 

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

• Defendant’s Motion on Material Misrepresentation Fails Where Briefings Do Not Include Full Copy of the Policy or the Insurance Application

 

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

• Plaintiff’s Expert, Who Failed to Examine Plaintiff Until 6 Years After the Subject Accident, Was Deemed Too Remote to Raise an Inference that Limitations were Causally Related to Accident

 

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

• Second Circuit Affirms Dismissal of Suit for Lack of Subject Matter Jurisdiction in Admiralty Case Involving Alleged Conspiracy and Alleged Improper Termination of Insurance Coverage

• Second Circuit Dismisses Pro Se Complaint Against Carrier, Where Plaintiff did not Sufficiently Demonstrate Existence of Diversity Jurisdiction

 

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

• Court Could Look Outside the Four Corners of the Underlying Complaint in Considering whether Insured had Stated Cause of Action for Bad Faith

 

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

• Dog Bite Exclusion Takes a Bite out of Coverage Action

 

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

• Publication Requirement Satisfied by Disclosing Information to One Third-Party Vendor Upheld

 

OFF THE MARK
Brian F. Mark
[email protected]

• No construction defect cases to report on.

 

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

• Statute of Limitations Defense Viable As To Only One of Two Claims Arising From Insurer’s Failure to Secure Release of all Claims in Negotiated Settlement 

 

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

Legislative List

• Bills Have Been Proposed In Both Legislative Houses That Would Needlessly Expand New York Bad Faith Law. Thousands Flee

• Proposed Law Would Prohibit The Use Of Lead Paint Exclusions In Insurance Policies Issued To Rental Property Owners

   

Regulatory Wrap-Up

• DFS Penalizes Life Insurers For Violations of Department Cybersecurity Regulations Which Led to Phishing Attacks Exposing Consumer Data

• Final Adoption of New Part 3 to New York’s Financial Services Regulations (23 NYCRR) Replaces FOIL Requests Under Insurance Regulation 71

 

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

• When Additional Insured Status is Conferred by Endorsement, the Insurer Must Cover the Additional Insured for Damage Proximately Caused by the Named Insured

 

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

• Life Insurer Did Not Violate ERISA When It Paid Insured’s Policy Proceeds to His Adopted Children Instead of His Estate

 

ruMIRNAtions
Mirna. M. Santiago
[email protected]

• Allies in social justice

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

• Dismissal of Plaintiff’s “Bad Faith” Claim Against Insurer Which Denied Coverage for a Homeowner’s Claim Based on an Intentional Act (Arson).  The Court Found there to be Sufficient Evidence that the Insurer Reasonably Concluded that the Plaintiff Set the Fire.  Plaintiff’s Motion for Summary Judgment to Dismiss the Coverage Defense and the Insurer’s Counterclaim for Fraud were Denied
• Material Misrepresentation in the Application that the Building was a 3-Unit Rather than a 4-Unit, as well as the Failure to Disclose an Ongoing Eviction Proceeding.  Insurer was not Required to Submit Evidence of its Underwriting Practices with Respect to Applicants with Similar Histories.  The Fact that the Increase in Premium for a Four-Unit Dwelling was Related to Liability Coverage, as Opposed to Property Coverage, was not Relevant to the Determination of Materiality

• No Coverage under Forgery or Alteration Coverage Provision when Hackers Wire-Transferred Money from the Insured’s Account where the Plaintiff had Purchased Forgery or Alteration Coverage for Losses from Forged or Altered Checks, Drafts, Promissory Notes, and Similar Documents Directing Payment of a Sum but had not Purchased Other Available Coverage for Losses Caused by Fraudulent Instructions to Forward Funds or Computer Theft

• State Farm Commenced a Suit Against Medical Providers Alleging Common Law Fraud and Unjust Enrichment Due to a Scheme to Submit Fraudulent No-Fault Insurance Charges.  Medical Providers Filed Motions to Dismiss to Preclude the Court from Exercising Diversity Jurisdiction; and Arguing that State Farm's Common Law Fraud and Unjust Enrichment Claims were Barred by the Statutes of Limitations.  State Farm Filed a Motion to Strike Defendants' Answers Based on Default in Discovery

• The Failure to Show for an EUO was a Breach of a Condition Precedent Voiding Coverage for all PIP Claims Retroactively to the Date of Loss and not to be Determined on a Bill-By-Bill Basis

 

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

• Court rejects Insurance Company’s Motion to Dismiss Plaintiff’s Complaint Alleging Bad Faith and Claiming Compensatory Damages

• Court Rejects Defendant’s Motion to Dismiss Declaratory Judgment Complaint of Additional Insureds Seeking Coverage under Defendant’s Policy

 

Stay safe.

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

 

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

05/20/21       Konstantakopoulos v. Union Mutual Fire Insurance Company
Appellate Division, First Department
Insurer Demonstrated Misrepresentation on Policy Application Which Would Have Raised Liability Coverage Rates.  Even Though Not Fraudulent, it Was Enough to Void Property Coverage

Union Mutual, demonstrated that plaintiff's insurance application contained a material misrepresentation, voiding the policy ab initio (see Insurance Law § 3105[b][1]; The underwriter's affidavit and excerpts from the underwriting guidelines show that defendant would not have issued the policy if it had known the true nature of the risk, i.e., a four-unit dwelling as opposed to a three-unit dwelling and an ongoing eviction proceeding.

Union was not required to submit evidence of its underwriting practices with respect to applicants with histories.  The fact that the increase in premium for a four-unit dwelling was related to liability coverage, as opposed to property coverage, is not relevant to the determination of materiality.  A misrepresentation need not be fraudulent to be material.

Editor’s Note:  Kudos to the Gold Benes firm for this victory.

 

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]6/21

05/26/21       Fricano v. Law Offices of Tisha Adams
Appellate Division, Second Department
Defendant’s Motion on Material Misrepresentation Fails Where Briefings Do Not Include Full Copy of the Policy or the Insurance Application

Plaintiff retained Ms. Adams as counsel relative to a 2011 insurance claim involving wind and water damage to her property.  We are advised that settlement of that claim was not achieved, and that legal action was not commenced by plaintiff against the carrier more than two years after the date of the loss.  Having no settlement and having lost a right to commence a lawsuit by operation of the suit limitation clause, plaintiff filed the instant malpractice claim.

Defendant opposed and moved for summary judgment on the grounds that her retained services did not include the obligation to initiate legal proceedings, that she had no attorney/client relationship with plaintiff’s business, and that plaintiff’s claims were baseless anyway due to material misrepresentations she made in the process of obtaining the policy. 

With regard to the scope of the representation question, the Appellate Division noted that a question of fact existed as to whether counsel’s duties included litigation.  The Court also found a question of fact existed as to whether defendant’s words and actions created a duty to plaintiff’s business. 

On the misrepresentation question, defendant also failed to meet her burden.  The Court noted that plaintiff failed to include a complete copy of the insurance policy and failed to proffer any form of the insurance application.  Finally, the Court noted that defendant also wholly failed to demonstrate how plaintiff’s alleged misrepresentations were material.  In so holding, the Court advised that questions of materiality are usually left to the domain of the jury. 

 

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

05/13/21       Walter Antepara v. Dominico A. Garcia
Appellate Division, First Department
Plaintiff’s Expert, Who Failed to Examine Plaintiff Until 6 Years After the Subject Accident, Was Deemed Too Remote to Raise an Inference that Limitations were Causally Related to Accident

This appeal was based on an Order from Supreme Court, Bronx County (John R. Higgitt, J.), entered on or about December 12, 2019, which, to the extent appealed from as limited by the briefs, granted defendant's motion for summary judgment dismissing the complaint on the grounds that plaintiff's injuries do not meet the serious injury threshold of Insurance Law § 5102(d).

The Appellate Court found that defendant met his prima facie burden of showing that plaintiff did not sustain a serious injury to his spine, right hip, right elbow, or left knee by submitting the report of an orthopedic surgeon, who found full range of motion or only slight limitations, and opined that plaintiff's alleged injuries had resolved. Defendant also met his burden with respect to plaintiff's claimed injuries to his cervical spine and lumbar spine by submitting the report of a radiologist who found that plaintiff's post-accident MRIs showed preexisting degenerative changes not causally related to the accident.

In opposition, the Appellate Court found that plaintiff failed to raise an issue of fact. Specifically, that plaintiff's expert examined him one time, six years after the accident, which is too remote to raise an inference that any limitations were causally related to the accident. Furthermore, plaintiff's expert failed to address prior and subsequent motor vehicle accidents in which plaintiff claimed to have suffered spinal injuries, or explain why those injuries were different from those claimed as a result of the subject accident. Plaintiff's expert also failed to address the findings in plaintiff's MRIs, showing degenerative conditions in his cervical and lumbar spine, or the medical records reflecting a history of chronic neck and back pain, or to explain why those preexisting conditions could not have been the cause of plaintiff's current complaints. Plaintiff offered no objective evidence of serious injury to his right hip, right elbow, or left knee, but only minor, temporary complaints such as contusion or mild joint effusion.

Based on the foregoing, the Appellate Court found that Defendant is entitled to dismissal of the 90/180-day claim in the absence of evidence of a causal connection between plaintiff's condition and the subject accident. Furthermore, plaintiff's testimony that he was confined to home for only a few days after the accident defeats his claim.

As such, the decision granting defendant's motion for summary judgment was affirmed.

 

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

05/24/21       Great Lakes Ins. v. American Steamship Owners Mutual
United States Court of Appeals, Second Circuit
Second Circuit Affirms Dismissal of Suit for Lack of Subject Matter Jurisdiction in Admiralty Case Involving Alleged Conspiracy and Alleged Improper Termination of Insurance Coverage

Great Lakes Insurance SE (“Great Lakes”) appealed from a judgment that dismissed its lawsuit against American Steamship Owners Mutual Protection and Indemnity Association, Inc., Shipowners Claims Bureau, Inc., George Gourdomichalis, and Efstathios Gourdomichalis (collectively, “Defendants”) for lack of subject matter jurisdiction.

Upon review, the court assessed factual findings for clear error and legal conclusions de novo. Citing Federal judicial power “to all Cases of admiralty and maritime Jurisdiction” the court wrote that 28 U.S.C. § 1333(1), gives federal district courts original jurisdiction over “[a]ny civil case of admiralty or maritime jurisdiction.” To invoke jurisdiction pursuant to § 1333(1) over a tort claim, the claim “must satisfy conditions both of location and of connection with maritime activity.” The location test is satisfied if “the tort occurred on navigable water” or “injury suffered on land was caused by a vessel on navigable water.”

Great Lakes here asserted tort claims “based on Defendants’ alleged conspiracy to wrongfully abandon the M/V ADAMASTOS (the ‘Vessel’) in Brazil and to improperly terminate the Vessel’s insurance coverage.” Although the negligent abandonment of a commercial vessel on navigable water might give rise to admiralty jurisdiction, Great Lakes’ complaint does not allege that this Vessel’s abandonment, as opposed to its prior detention or the termination of its insurance, caused Great Lakes’ injury. Indeed, when the complaint mentions abandonment, it explicitly alleges that Defendants “abandoned the Vessel. . . rather than honor their respective obligations to the Vessel’s contractual partners,” and that the abandonment “was a self-serving rejection of coverage” for the cargo claim, rather than allege that the abandonment was an action that caused damage to cargo.

Great Lakes’ other claims are based on Defendants’ alleged conspiracy to improperly terminate the Vessel’s insurance, which does not satisfy the location test of Grubart: neither Defendants’ associated conduct nor Great Lakes’ injury occurred on navigable water, and Great Lakes’ “injury suffered on land” was not “caused by a vessel on navigable water.” Because Great Lakes’ claims do not satisfy the location test, the court did not need to determine whether they satisfy the maritime connection test, but rather just affirmed the decision.

 

05/20/21       Sylvia Emiabata v. Farmers Insurance Corporation
United States Court of Appeals, Second Circuit
Second Circuit Dismisses Pro Se Complaint Against Carrier, Where Plaintiff did not Sufficiently Demonstrate Existence of Diversity Jurisdiction

Plaintiff-Appellant Sylvia Emiabata, proceeding pro se, appealed from a judgment of the District Court that had granted the motion to dismiss of Defendants-Appellees Farmers Texas County Mutual Insurance Company and Farmers Insurance Corporation Insurance Company (collectively, “Farmers”) for insufficient pleading of subject matter jurisdiction, service of process, and personal jurisdiction. Emiabata’s Complaint had raised state law claims of bad-faith dealing, negligence, breach of contract, vicarious liability, and unjust enrichment arising from a car accident in Tennessee. She alleged that she is a citizen of Connecticut, and that Farmers were citizens of Texas and California.

Under 28 U.S.C. § 1332, federal courts have subject matter jurisdiction to hear cases where the amount in controversy exceeds $75,000 “and is between . . . citizens of different States” (diversity jurisdiction). Section 1332 requires that “all plaintiffs must be citizens of states diverse from those of all defendants.” “An individual’s citizenship, within the meaning of the diversity statute, is determined by his domicile . . . [in other words] the place where a person has his true fixed home and principal establishment, and to which, whenever he is absent, he has the intention of returning.” A person can only have “one domicile at any given moment.” “For purposes of diversity jurisdiction, the relevant domicile is the part[y’s] domicile at the time the [C]omplaint was filed.”

Here, the Second Circuit agreed with the District Court that Emiabata had failed to establish that she was a citizen of Connecticut at the time the Complaint was filed, and thus the District Court lacked diversity jurisdiction to hear this case. A plaintiff asserting subject matter jurisdiction bears the burden of proving by a preponderance of the evidence that it exists. The parties in this case did not dispute that Farmers Texas County Mutual Insurance Company is a citizen of Texas. However, while Emiabata alleges that she was a citizen of Connecticut at the time the Complaint was filed, she did not prove Connecticut residency by a preponderance of the evidence. Emiabata did not dispute that she alleged that she was domiciled in Texas when she initiated another action in January 2018 in the Western District of Oklahoma. Therefore, Emiabata needed to demonstrate that her domicile changed to Connecticut as of November 8, 2018, the date that her Complaint in this action was filed.

Generally, a plaintiff demonstrating change in domicile must “prov[e] the required intent to give up the old and take up the new domicile, coupled with an actual acquisition of a residence in the new locality.” The District Court found that her reported Connecticut address was that of a UPS store, not a residence. In response to the District Court’s order to submit evidence that she was domiciled in Connecticut by November 2018, Emiabata provided evidence of activities in Connecticut in 2019. This too failed to demonstrate that she had actually acquired a residence in Connecticut by November 2018. Emiabata also continued to send legal mail from Texas throughout the litigation. These considerations revealed no clear error in the District Court’s conclusion that she remained “domiciled” in Texas when she filed her Complaint, and thus its dismissal for lack of subject matter jurisdiction was proper.

 

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

05/20/21       Maronda Homes, LLC v. Motorists Mutual Insurance Company
United States District Court, Western District of Pennsylvania
Court Could Look Outside the Four Corners of the Underlying Complaint in Considering whether Insured had Stated Cause of Action for Bad Faith

Plaintiff constructed a series of homes, that were allegedly damaged as a result of improper excavation and site preparation work by Plaintiff’s subcontractor, Frey.  The homeowners noticed defects after taking possession of their homes and brought an action against Plaintiff in state court.  Plaintiff filed a lawsuit against Motorists seeking coverage as an additional insured under an insurance policy issued by Motorists to Frey.  Plaintiff’s complaint contained causes of action for breach of contract and bad faith.

Motorists moved to dismiss.  The court concluded that the allegations in the complaint did not foreclose coverage for Plaintiff based on the policy’s completed work/intended use exclusion.  The court also concluded that Plaintiff had adequately pled a claim for bad faith, but that the claim for breach of the implied covenant of good faith and fair dealing was subsumed by the breach of contract claim.  Motorists moved for reconsideration, arguing that the court misapplied Pennsylvania’s first manifestation rule by finding that the allegations in the underlying state court complaints do not establish that damage to the homes did not manifest before the homeowners took possession of the residences.  Motorists also argued that the court improperly considered evidence outside the underlying complaint in declining to dismiss the bad faith claim.

The court disagreed and upheld the prior decision.  On the breach of contract analysis, the court found that the underlying complaints only alleged when the damage to the homes was discovered.  They did not allege when it first manifested, which could be the same date as the discovery of the damage (which would put it outside the scope of the policy) or earlier (potentially brining it within coverage).  The court thus concluded that the allegations in the underlying complaint did not completely foreclose the possibility of coverage.

The court also concluded that Motorists was not entitled to dismissal of the bad faith claim.  Motorists argued that it put forth a reasonable interpretation of the policy exclusion, and thus, it could not be found liable for bad faith.  The court disagreed, citing case law holding that the “reasonable but incorrect interpretation” rule only applies where the area of law in question is in flux.  The court also noted that such a determination is usually made on summary judgment and not a motion to dismiss.  Motorists also argued that the court erred by referring to allegations outside of the underlying complaint.  The court concluded the four corners rule did not apply because the second element of statutory bad faith requires consideration of the insurer’s knowledge of and disregard for lack of a reasonable basis for denying coverage.  Such evidence is clearly outside the underlying complaint.  Thus, the court had properly considered allegations regarding the conduct of the insurer to the insured.

 

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

05/08/21       Williams v. MESA Underwriters Specialty Insurance Co.
United States District Court, District of Connecticut
Dog Bite Exclusion Takes a Bite out of Coverage Action

On cross-summary judgment motions, MESA won a finding of no coverage for a $250,000 stipulated judgment on the strength of its animal liability exclusion. Williams, a minor, was attacked by a pit bull when visiting MESA’s insured’s apartment complex. Williams alleged that the apartment complex was negligent in allowing a precluded dog breed on the premises.

MESA denied coverage, relying on the animal liability exclusion. A second and third amended complaint were not provided to MESA. Significantly, the third amended complaint added factual allegations regarding the insured’s policies regarding dogs and its awareness of the dog's presence on the property. The tort parties entered into a stipulated judgment with the insured assigning its rights against MESA to Williams. Suit was commenced in state court and removed by MESA. Approximately one month later, the parties cross-moved for judgment.

MESA’s exclusion provided: “This exclusion applies to all liability claims relating to or arising from animals, including the failure to train, supervise, or control animal (s).” Pretty cut and dry it seems. Williams argued that the underlying lawsuit was not a liability claim, barking that the exclusion is inapplicable because a “suit” is not a “liability claim.” Farfetched and, well, just plain wrong. Let’s see what Judge Dooley, a Trump appointee, did.

First, the plaintiff conceded and the court held that in determining MESA’s duty to defend, only the initial complaint was relevant. The court then properly stated Connecticut law on the duty to defend and the standard of contract review, accurately summarizing the issue: “…the question here is whether Plaintiff's underlying lawsuit might have been covered by the MUSIC Policy given the language of the animal liability exclusion.”

While the court noted that the terms claim and liability claim were not defined, it refused to “torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity.” Citing Hammer v. Lumberman's Mut. Cas. Co., 214 Conn. 573, 584 (1990). The court concluded that “a “liability claim” is a demand for money due under the law. Such is the precise nature of the underlying lawsuit. …Therefore, the underlying lawsuit was a “liability claim” as set forth in the animal liability exclusion.” The court went on to write that, “Despite the policy's use of the terms “claim” and “suit” and the unremarkable observation that different policy language could have been used to draft the exclusion, there is no reasonable definition of “liability claims” not inclusive of suits.”

Plaintiff’s next argument is one we see in many contexts in an effort to separate the underlying negligence from the immediate injury-causing act. Here, Williams argued that the insured’s liability did not arise from the dog bite but rather from the insured’s negligent failure to maintain the property. The court wasn’t buying this either. Noting that Connecticut, like most jurisdictions, give broad scope to the terms “relating to” and “arising from,” it considered that MESA need only show that the liability was connected with or incidental to the dog bite. Finding that the complaint “repeatedly alleges that the Plaintiff’s injuries were the result of an animal attack,” the court refused to toss a bone to Williams. “It would therefore strain reason to the breaking point to conclude that the lawsuit did not “arise from” or “relate to” animals given the broad reading of such language in the courts.”

 

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

05/20/21       W. Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc.
Illinois Supreme Court
Publication Requirement Satisfied by Disclosing Information to One Third-Party Vendor Upheld

We brought you the appellate court decision in this matter in our 4/2/20 issue of Coverage Pointers in  W. Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc.

Klaudia Sekura had to provide Krishna Schaumburg Tanning Salon with fingerprints in order to tan at L.A. Tan.  Sekura brough suit under the Biometric Information Privacy Act (Act) (740 ILCS 14/1 et seq. (West 2014) because Krishna disclosed her fingerprints  to a third-party vendor, SunLync.  Under the Act, Biometric Information is defined as:

“Biometric identifier” means a retina or iris scan, fingerprint, voiceprint, or scan of hand or face geometry. Biometric identifiers do not include writing samples, written signatures, photographs, human biological samples used for valid scientific testing or screening, demographic data, tattoo descriptions, or physical descriptions such as height, weight, hair color, or eye color..

The primary question at the appellate level was whether any of the claims involved enumerated offenses and the court found that the complaint alleged the enumerated offense of “oral or written publication of material that violates a person's right of privacy.” The appeals court held that publication to one third-party was sufficient to satisfy the publication requirement.  It found that the common understandings and dictionary definitions of “publication” clearly include both a limited sharing of information with a single party and the broad sharing of information to multiple recipients.

The Illinois Supreme Court noted that that the personal injury coverage defined injury “other than bodily injury” that arises out of an “oral or written publication of material that violates a person's right of privacy.” While the complaint did not specifically allege bodily injury, according to the Court, it did find that Sekura alleged a potential allege that she suffered an injury, other than a bodily injury (emotional upset, mental anguish, and mental injury).  Given the duty to defend standard, the Court held that the complaint potentially alleged nonbodily injury liability.

Turning to publication, relying on various authorities, the Supreme Court agreed with both lower courts that “publication” in this context could be satisfied whether the fingerprints were provided to one party  or many, rendering the language ambiguous.

With respect to the right of privacy language, the Court again looked to common meanings and, citing Black’s Law Dictionary, noted the “right of privacy” is the right to personal autonomy.”  According to the Court, under the Act, disclosing a person's biometric identifiers or information without their consent or knowledge necessarily violates that person's right to privacy in biometric information. (citations omitted).   Having agreed with the appellate court, the Supreme Court addressed the duty to defend, which it found was triggered by the allegations and potential ambiguities.

West Bend argued that its exclusion prohibiting “communicating of information” applied, and Krishna replied that it based on the TCPA and CAN-SPAM Act title confirmed that it only applies to violations of statutes that regulate methods of communication like telephone calls, faxes, and e-mails. West Bend  contended that “other than” language in the exclusion means other than the limited methods of communication the statute.  Krishna argued that the policy language was ambiguous and should be construed against the drafter.   The appellate court agreed with Krishna, relying on the types of information disseminated.

After examining the title of the exclusions, the court agreed that they prohibit the communications of emails, faxes and phone calls.  The court relied on the doctrine of ejusdem generis to hold that “other than” meant other statutes of the same general kind that regulate methods of communication like the TCPA and the CAN-SPAM Act, and the Act was not in that category.  The court held that not only is the Act different for that reason but also because it did not regulate methods of communication.

 

OFF the MARK
Brian F. Mark
[email protected]

No construction defect cases to report on.

 

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

05/25/21       Morgan vs. State Farm Mutual Automobile Ins. Co.
Supreme Court of Oklahoma 
Statute of Limitations Defense Viable As To Only One of Two Claims Arising From Insurer’s Failure to Secure Release of all Claims in Negotiated Settlement 

The United States Court of Appeals for the Tenth Circuit certified to the Supreme Court of Oklahoma two questions of law:

1. Where a plaintiff is injured by entry of an adverse judgment that remains unstayed, is the injury sufficiently certain to support accrual of a tort cause of action based on that injury under applicable Oklahoma state law before all appeals of the adverse judgment are exhausted?

2. Does an action for breach of an insurance contract accrue at the moment of breach where a plaintiff is not injured until a later date?

These questions arose as a result of a lawsuit instituted by the victim of a serious vehicular accident, Jesse Atkins, against the driver of the vehicle that hit him, George Morgan, and Morgan’s auto insurer, State Farm.

Here’s the background.  Mr. Morgan was driving his truck drunk and struck Mr. Atkins at more than 40 miles per hour, causing severe injuries and resulting medical bills for Mr. Atkins’ treatment totaling more than $2 million.  State Farm provided liability insurance to Morgan at the time of the accident.  Morgan’s State Farm auto policy had a $100,000 liability limit. State Farm negotiated and executed a settlement with Atkins in April 2010 whereby State Farm paid its policy limit of $100,000 to Atkins in exchange for Atkins releasing his claims against Morgan.

During the same timeframe, Atkins pursued a workers' compensation claim in Kansas because Atkins had been traveling for work when he was injured. The workers' compensation court issued a preliminary order for compensation, and the workers' compensation insurer began making payments to Atkins.

The workers' compensation insurer's subrogee, New York Marine and General Insurance Company (NYM), then sued Morgan in Oklahoma state court in June 2011 for reimbursement of the amounts paid to Atkins. Morgan retained personal counsel to represent him in the action.  State Farm also provided counsel to Morgan. In defense of Atkins’ suit, Morgan and State Farm argued that by releasing Morgan, Atkins severed any reimbursement claim NYM might have against Morgan due to NYM's status as subrogee. The trial court denied State Farm's motion for summary judgment on this basis on November 22, 2013. Then on February 27, 2014, a jury returned a verdict in favor of NYM in the amount of $844,865.89, finding State Farm knew about NYM's potential claim, but failed to apprise NYM of its pending settlement with Atkins. The judgment was entered against Morgan on April 8, 2014. The Oklahoma Court of Civil Appeals affirmed the judgment on June 10, 2016.

Morgan then brought this lawsuit against State Farm on May 23, 2017, alleging State Farm's failure to secure NYM's release as part of its settlement with Atkins amounted to (1) breach of the implied duty of good faith and fair dealing; and (2) breach of contract. The United States District Court for the Western District of Oklahoma found that Morgan's claims accrued in 2010, when State Farm negotiated the original settlement with Atkins.  On this factual basis the District Court concluded the applicable two- and five-year statutes of limitations under Oklahoma law for the tort and contract claims, respectively, were complete defenses barring Morgan's suit. Morgan appealed the summary judgment to the 10th Circuit Court of Appeals. The 10th Circuit then certified the two questions recited above to the Oklahoma Supreme Court.

The Oklahoma Supreme Court answered the first certified question as to Oklahoma law with a “no.” When the injury alleged in a tort cause of action is an adverse judgment, the claim accrues when the appeal is finally determined in the underlying case. The entry of a judgment, which remains subject to appeal, is not sufficiently certain to support accrual of a cause of action for breach of the implied duty of good faith and fair dealing. This answer means the statute of limitations defense relied upon by Morgan and State Farm against the alleged breach of the implied duty of good faith and fair dealing (tort) cause of action in Atkins’ suit is inconsequential.

The Oklahoma Supreme Court answered the second certified question with a “yes.”  Noting that the prevailing view of courts around the country is that a breach of contract action accrues when the contract is breached even if the plaintiff does not sustain damages resulting from the breach until later, the Oklahoma Supreme Court opined that under Oklahoma law, an action for breach of contract accrues when the contract is breached, not when damages result. This answer means the statute of limitations defense relied upon by Morgan and State Farm against the alleged breach of contract (contract) cause of action asserted in Atkins’ suit is viable.

 

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

Legislative List

05/25/21       New York Insurance Bad Faith Bill
New York State Legislature
Bills Have Been Proposed In Both Legislative Houses That Would Needlessly Expand New York Bad Faith Law. Thousands Flee

I will not write separately about this bill (A07285 / same as S06813) except to say that a version of the bill now resides in both New York Legislative Houses. For more on our thoughts, be sure to view our special edition on the topic from a few weeks ago available here (Vol. XXII SE). This is not the first time, and it will not be the last time such a bill rears its head.

 

05/20/21       Prohibition of Lead Paint Exclusions For Rental Properties
New York State Assembly
Proposed Law Would Prohibit The Use Of Lead Paint Exclusions In Insurance Policies Issued To Rental Property Owners

Last Thursday, by a twenty-two to two vote, the New York State Assembly’s Insurance Committee voted favorably on a bill (A07488 / same as S03079) that would prohibit the exclusion of coverage for loss or damage caused by exposure to lead-based paint at a rental property.

If you’re a subscriber to our sister Newsletter, Products Liability Pointers (one of many, if you’re interested), you may have caught in the latest edition our very own Chris Potenza’s brief note on the introduction of this bill in the Assembly:

If that is not enough, there is more perilous insurance coverage legislation pending as a bill that would ban the use of lead paint exclusions in insurance policies for rental property owners is moving in the NYS Assembly.   While similar attempts at this legislation have stalled in the past, we are keeping a close eye on this situation which could potentially open the flood gates for new lead paint claims that were otherwise not pursued due to lack of coverage.

According to the Sponsor Memorandum, this bill serves “to protect renters who are exposed to lead-based paint,” which “will remain in U.S. housing for decades to come . . . .”

The bill would prohibit DFS from “permit[ing], authoriz[ing], or approv[ing] any exclusion for injury or damage resulting from exposure to lead-based paint, except as specifically provided for in law,” and void any such exclusion previously permitted, authorized, or approved. These prohibitions would self-implement twenty-six months after the effective date of such law.

Maxwell’s Minute: In a phrase, this bill promotes “moral hazard” on the part of rental property owners in New York. Without accountability on the part of property owners to remediate these issues or face municipal fines and penalties, as well as, dare I say, uninsured monetary losses, there is no incentive for those individuals and entities in the best situation to prevent lead exposure to step-up and do so. A better legislative solution might be to assist property owners in funding lead remediation—possibly in the name of increased property values and tax incentives. Public policy is best served by a hard pass on this legislation, or we will see admitted carriers withdrawing from insuring certain types of properties altogether. (Yes, I’m looking at you, properties built more than 40 years ago).

 

Regulatory Wrap-Up

05/13/21       In Re First Unum Life Ins. Co. et al
Department of Financial Services
DFS Penalizes Life Insurers For Violations of Department Cybersecurity Regulations Which Led to Phishing Attacks Exposing Consumer Data

Two weeks ago, a Consent Order was entered between DFS and two life insurers, First Unum Life Insurance Company of America (“First Unum”) and Paul Revere Life Insurance Company (“Paul Revere”), resolving charges stemming from violations of DFS’s Cybersecurity Regulation that caused the exposure of sensitive, non-public, personal customer data for thousands of customers.

DFS’ investigation of the matter, as defined by 23 NYCRR § 500.01(d), concluded that First Unum and Paul Revere violated numerous provisions of its Cybersecurity Regulations, including:

1. the Companies’ O365 email environments did not have multi-factor authentication (“MFA”) fully implemented for all users until August 29, 2019, and no reasonably equivalent or more secure access controls than MFA were approved in writing by the Companies’ Chief Information Security Officer(s) (“CISO”), in violation of 23 NYCRR § 500.12(b);
    

2. a misconfiguration error in MFA settings exposed a broad set of First Unum IP addresses to unauthorized third-party access in further violation of 23 NYCRR § 500.12(b); and
    

3. First Unum and Paul Revere falsely certified compliance with the Cybersecurity Regulation for the calendar year 2018, in violation of 23 NYCRR § 500.17(b).
    

Underlying the above violations, DFS expressly found two distinct Cybersecurity Events as defined by 23 NYCRR §500.01(d). The first was discovered on September 20, 2018, when a phishing email was sent to a large number of employees, prompting many to enter their user login credentials in a fake Microsoft Office login page, enabling an unauthorized third-party to collect and use those credentials between June 1, 2018 and October 20, 2018. The second was discovered on October 10, 2019, when a First Unum Sales Account Executive reported that emails were being sent from his account that he had not personally drafted. It was determined that a subsequent phishing attack had compromised fifteen email accounts between October 1, 2019 and October 10, 2019.

Following the first Cybersecurity Event, the insurers implemented multi-factor authentication that could have prevented exposure of consumer data through the phishing attack. Despite the implementation of MFA, and leading directly to the second Cybersecurity Event, “whitelisting” procedures were implemented that permitted certain, “trusted IP addresses (such as service accounts that do not have interactive log on) [to] gain access to [the] system, [] without the need to go through security protocols such as MFA.” A misconfiguration error in a range of “whitelisted” IP addresses allowed an unauthorized third-party to bypass MFA and gain access to those accounts compromised by the second discovered phishing emails.

First Unum and Paul Revere agreed to pay a $1.8 million monetary penalty and to implement further improvements to their existing cybersecurity program to ensure that their cybersecurity controls are fully compliant with the Cybersecurity Regulation.

 

05/20/21       Public Access to Department Records
Department of Financial Services
Final Adoption of New Part 3 to New York’s Financial Services Regulations (23 NYCRR) Replaces FOIL Requests Under Insurance Regulation 71

The newly adopted 23 NYCRR Part 3, entitled “Public Access to Department Records,” has replaced 11 NYCRR Part 241 (Insurance Regulation 71), which is now repealed. The process for requesting documents through FOIL is largely (if not entirely) the same. This change is merely the excision of a remaining vestige of our dearly departed New York State Insurance Department.

You may recall (at least I do) that we wrote about this update when it was proposed in a prior issue. (Vol. XXI, No. 19).

 

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

05/12/21       The City of New York v. Fleet General Insurance Group, Inc.
United States District Court, Eastern District Of New York
When Additional Insured Status is Conferred by Endorsement, the Insurer Must Cover the Additional Insured for Damage Proximately Caused by the Named Insured

This lawsuit presents the question whether an insurer has a duty to defend the City of New York (“the City”) in a state-court lawsuit over millions of dollars in property damage that allegedly occurred when a section of Northern Boulevard in Queens collapsed during a construction project. Consistent with a City requirement, the general contractor on the Northern Boulevard construction project—the Perini Group, Inc. (“Perini”)—obtained an insurance policy that covers the City as an additional insured “only with respect to liability for . . . ‘property damage’ . . . caused, in whole or in part, by [Perini’s] acts or omissions.” The state-court action, brought by Consolidated Edison (“Con Edison”) seeks recovery for damages totaling $4.8 million, it allegedly suffered due to the collapse. The City has now filed this federal lawsuit arguing that Perini’s insurer, Fleet General Insurance Group, Inc. (“Fleet”), has a duty to defend the City in the Con Edison case.

This action and the Con Edison case stem from a construction project in Queens. Perini was retained as the general contractor and was directing excavation work that was being performed at the project. The City allegedly issued various violations and stop work orders to Perini and its subcontractor related to issues surrounding the excavation of the worksite.  Con Edison alleges that one of New York City’s “underground water mains or fire hydrant service lines at or near the [p]roject . . . leaked.” The water allegedly “wash[ed] away the soil supporting the road and sidewalk adjacent to the [p]roject.” It also allegedly washed away soil supporting “the retaining wall on the [p]roject” and nearby “gas and electric facilities.” Con Edison further alleges that in January 2019, the excavation work at the Northern Boulevard site “caus[ed] a 75 by 6 feet section of Northern Boulevard and a 75 by 5 feet section of sidewalk adjacent to the [site] to collapse” when the “excavation wall suffered a catastrophic failure.” The collapse allegedly damaged “gas and electric facilities” adjacent to the site and caused “the loss of natural gas from Con Edison’s gas transmission main.” Con Edison allegedly “deployed an emergency response and performed necessary and reasonable repairs to its gas and electric facilities.”

Con Edison filed a property-damage action in the Supreme Court of the State of New York, Queens County. The Con Edison complaint, in addition to various causes of action against other defendants, asserts a cause of action of common-law negligence against the City. This cause of action asserts several theories of liability against the City. First, the complaint alleges that the City negligently “inspect[ed] and monitor[ed] [the] construction, excavation, and development work being done throughout the City.” Second, the complaint alleges that the City negligently “operate[d] and maintain[ed] the water and sewer systems.” Third, the complaint alleges that the City negligently “fail[ed] to take proper and necessary actions to investigate, remediate, and repair the street depression reported by Con Edison on December 16, 2018.” The Con Edison complaint also alleges that the City is “directly or vicariously liable” for Con Edison’s injuries.

Fleet had issued a commercial general liability insurance policy to Perini covering the period of the Northern Boulevard collapse. Under the policy, Fleet agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies,” and acknowledged that it had “the right and duty to defend the insured against any ‘suit’ seeking those damages.” By endorsement, the City was included as an additional insured on Perini’s policy. The endorsement specified that the additional insured would be covered “only with respect to liability for ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ caused, in whole or in part, by [Perini’s] acts or omissions or the acts of omissions of those acting on [Perini’s] behalf in the performance of [Perini’s] ongoing operations or in connection with property owned by [Perini].”

The court found that Fleet has a duty to defend the City in the Con Edison action, because there is at least a reasonable possibility that Fleet will be required to indemnify the City in that case. The additional insured endorsement at issue states that an additional insured is covered “with respect to liability for . . . ‘property damage’ . . . caused, in whole or in part, by [Perini’s] acts or omissions.” Following the reasoning in the New York Court of Appeals decision in Burlington Ins. Co. v. NYC Transit Authority, the court held that the endorsement covers the City as an additional insured for any claims of property damage proximately caused by actions of Perini. The court reads the endorsement as encompassing liability for property damage with only one limitation: acts or omissions of Perini must have been a proximate cause of the damage. That includes the City’s direct liability for damages proximately caused by Perini’s acts or omissions. The surrounding language bolsters this understanding, because it specifies that an additional insured is covered “with respect to liability for . . . ‘property damage’ . . . caused, in whole or in part,” by Perini.

The court also looks to the history of this particular endorsement. The court notes that a prior version of the endorsement applied to injuries “arising out of” the named insured’s actions. Some courts ruled that the endorsement covered an additional insured’s direct liability for damage arising from the additional insured’s sole negligence, concluding that a named insured need not be a proximate cause of the damage, so long as the named insured’s acts or omissions were a “but for” cause. It is suggested that in response to this interpretation, the endorsement was changed to replace the language ‘arising out of’ with ‘caused, in whole or in part.’ Accordingly, this language requires an insurer to defend an additional insured when the complaint alleges that actions of the named insured were a proximate cause of the damages being sought.

Fleet was unsuccessful in persuading the court that the endorsement only applies when the additional insured could “be liable for the negligent acts of” the named insured. So construed, the City would only be indemnified if it were vicariously liable for Perini’s negligence or were jointly and severally liable with Perini. Fleet seizes on a sentence of the Burlington opinion where the Court of Appeals explained that the endorsement was designed to “provide coverage for an additional insured’s vicarious or contributory negligence, and to prevent coverage for the additional insured’s sole negligence.” This court disagreed adding that the Court of Appeals’ statement regarding “sole negligence” does not help Fleet; it simply confirms that acts or omissions of a named insured must be a proximate cause of the injury for the endorsement to apply. Further, the Court of Appeals’ reference to “an additional insured’s . . . contributory negligence” strongly suggests that the Court of Appeals understood the endorsement would reach cases in which an injury results from the negligence of both a named insured and an additional insured.

The court found that even though the Con Edison complaint alleges that the City was the proximate cause of the damage to the Con Edison property, the complaint also specifically alleges that the Perini’s actions were the proximate cause of the damage. Because the complaint alleges the Perini’s actions—as well as the City’s—were proximate causes of the property damage for which Con Edison seeks to recover, Fleet owes the City a duty to defend.

 

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

05/14/21       Campbell v. We Transport, Inc., et al
United States Court of Appeals, Second Circuit
Life Insurer Did Not Violate ERISA When It Paid Insured’s Policy Proceeds to His Adopted Children Instead of His Estate

Plaintiff-Appellant Collette Campbell (“Plaintiff”), brought this action pro se, alleging that although she incurred expenses paying for her brother’s funeral, she was wrongfully denied payment of the proceeds of his life insurance policy.  Plaintiff filed this suit pursuant to the civil enforcement provision of the Employee Retirement Income Security Act of 1974 (“ERISA”) and brought claims against the insurer Defendant-Appellee Unimerica Life Insurance Company of New York (“Unimerica”), and her brother’s former employer, Defendant-Appellee We-Transport, Inc. (“We Transport” or collectively, “Defendants”).

The Plaintiff raised three arguments on appeal: (1) That Unimerica misinterpreted its policy terms to mean that it had discretion to pay her brother’s life insurance benefits to his adopted children instead of to his estate (of which she was the administrator); (2) That Plaintiff was denied the “full and fair review” of her claim, as required by 29 U.S.C. § 1133(2); and (3) That Defendants should have commenced an interpleader action to resolve her dispute with them over her brother’s life insurance benefits.

In regard to Plaintiff’s first argument, the relevant policy language states that:

If there is no named beneficiary living at the Covered Person’s death, We will pay any amount due to the estate or, at Our option, to his: 1. legal spouse; 2. natural or legally adopted children in equal shares; or 3. estate.

 

ruMIRNAtions
Mirna M. Santiago
[email protected]

Black people do not need allies. We need people to stand up and take on the problems borne of oppression as their own, without remove or distance.

We need people to do this even if they cannot fully understand what it’s like to be oppressed for their race or ethnicity, gender, sexuality, ability, class, religion, or other marker of identity.

We need people to use common sense to figure out how to participate in social justice.

-Roxanne Gay

With all due respect to Roxanne Gay, Black people ABSOLUTELY need allies. AND we need people to stand up and understand the issues we face. As do women. And members of the LGBTQ community. And the aging. Don’t forget those with disabilities and those discriminated because of the religion they practice. Seriously, anyone who is not in a position of power needs allies.

If you’re stepping into the role of an ally, though, there are certain things you need to be mindful of. I have put 5 tips together that I hope will help.

1. Welcome discomfort. This work and sitting in this space is not easy. And if YOU are uncomfortable hearing about white privilege, slavery, segregation/Jim Crow, sexism, the wage gap, voter suppression, police brutality against Black men, anti-Asian attacks, antisemitic language, etc., imagine how it feels to the people who lived and/or continue to live it. Force yourself to listen and to learn.
    

2. Get Educated. This does not mean asking a BIPoC person all sorts of asinine questions. Sorry, but this needed to be said. It is not our job to educate you. Like Bucci did, read a book, watch documentaries and then ask targeted, meaningful questions that will allow you to gain a better understanding of the BIPoC (or any other) experience.
    

3. Listen. And Practice Empathy. This is another staple in my practical tips. Most people cannot extend past their past own lived experiences; if they have never experienced racism, then racism does not exist. If they have never experienced sexism or bigotry or antisemitism, then it does not exist. That is simply not true. Put yourself in someone else’s shoes. And even if you disagree vehemently, keep listening. This is not about you in your everyday life; this is about you being an ally to a marginalized person. If you have decided that you will be an ally, that includes strapping in your judgment and not a having a knee-jerk reaction or response whenever someone relates what they perceive is an “ism”. And if you are having a knee-jerk reaction, ask yourself “why”. That is often a clue that your own implicit biases are at work. Identify them, interrupt them and keep it moving.
    

4. Intervene. This is the hardest part for most people. I’ve had instances where I was publicly treated in a way that was discriminatory or harassing or humiliating and I have had people come up to me afterward and say, “I am so sorry that happened to you.” And while that solidarity is always welcomed (because society tells BIPoC that even instances that are clearly biased are somehow not and they are accused of playing the “race card”), it would be more effective if the ally becomes an upstander and intervenes in the incident as it is happening. There is no better interruption for a racist or sexist or bigot than for someone in their “in” group telling them to stop. This harkens back to my comments about Dr. King. When white men in power saw other white men marching with Dr. King in support of civil rights for people of color, they stopped to listen. And it was only with the help of those men that lifechanging legislation was passed.
    

5. Donate. Social justice work does not happen in a vacuum. Donate to groups doing social justice work in your community.
    

Check out some of the articles below on how to be a better ally to marginalized people.

Sources:

https://hbr.org/2020/11/be-a-better-ally

http://www.ywcahbg.org/sites/default/files/manager/10%20Things%20Allies%20Can%20Do.pdf

https://www.themuse.com/advice/what-is-an-ally-7-examples

https://guidetoallyship.com/

 

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

 

05/07/21       Leo Ly v. Universal Prop. & Cas. Ins. Co.
United States District Court, E.D. Pennsylvania
Dismissal of Plaintiff’s “Bad Faith” Claim Against Insurer Which Denied Coverage for a Homeowner’s Claim Based on an Intentional Act (Arson).  The Court Found there to be Sufficient Evidence that the Insurer Reasonably Concluded that the Plaintiff Set the Fire.  Plaintiff’s Motion for Summary Judgment to Dismiss the Coverage Defense and the Insurer’s Counterclaim for Fraud were Denied

Defendant denied Plaintiff's claim under his homeowner's insurance policy, citing an exclusion for loss caused intentionally by the insured, believing that Plaintiff started the fire himself to recover insurance proceeds to aid with his financial distress. Plaintiff sued Defendant for breach of contract and bad faith in violation of 42 Pa. Cons. Stat. § 8371. Defendant asserts a counterclaim for insurance fraud against Plaintiff. Defendant seeks summary judgment on Plaintiff's bad faith claim. Plaintiff seeks summary judgment on the issue of coverage and on Defendant's insurance fraud counterclaim. The Court decided that Defendant had a reasonable basis to conclude that Plaintiff intentionally set the fire, granting its motion for judgment with respect to the bad faith claim and denying plaintiff's motion.

To prevail on a bad faith claim, "the plaintiff 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." "[P]roof of an insurer's motive of self-interest or ill-will, while potentially probative of the second prong, is not a mandatory prerequisite to bad faith recovery under Section 8371." "`Clear and convincing evidence' has been defined as `evidence that is so clear and direct as to permit the trier of fact to reach a clear conviction, without hesitancy, as to the truth of the facts at issue.'"

“[W]hether the insurer had a reasonable basis for denying benefits, is an objective inquiry into whether a reasonable insurer would have denied payment of the claim under the facts and circumstances presented."  "A court should examine the factors that the insurer relied on in evaluating a claim to determine whether the insurer had a reasonable basis for denying benefits."

The Court reviewed documents in the record submitted by the parties and determined that Defendant's conclusion that Plaintiff had intentionally set the fire was not unreasonable. There is substantial evidence in the record that reasonably leads to the conclusion that the fire was intentionally set, and that Plaintiff had both the motive and the opportunity to intentionally set it.  This included:  an arson canine unit "alerted at 3 locations”; the Fire Marshal noted that the fire had "two separate and unconnected areas of origin" and opined that "someone threw something through the window and onto the rear porch"; a criminal investigation into the fire was ongoing; the private origin and cause expert concluded that the fire was intentionally set although chemical test results were negative; no smoke alarms were found in the dwelling; Plaintiff's tax returns showed little to no income; he did not pay his property taxes; Plaintiff had also missed a couple payments on his mortgage just prior to the fire; and his bank records showed that his checking account at times was overdrawn.  The record also contained substantial evidence that Plaintiff had the opportunity to intentionally set his property on fire. Although claiming to be out of town, E-ZPass and bank records reasonably suggest otherwise.

Plaintiff still argued that Defendant acted in bad faith when it disregarded the potentially exculpatory significance of the negative test results and allegedly failed to provide those results to Plaintiff. The Court said that the issue is not whether some evidence in the Defendant's record supported coverage; the issue is whether the Defendant's record as a whole reasonably justified denial of coverage. "It is easy to focus on the details of [the insurer's] claims handling. But we must keep in mind the larger picture."

Defendant's conclusion that Plaintiff had intentionally set the fire was not unreasonable. Because Plaintiff has not shown by clear and convincing evidence that Defendant lacked a reasonable basis to deny the claim, Defendant is entitled to summary judgment in its favor on the bad faith claim.

Plaintiff argues that he is entitled to summary judgment in his favor on the issue of coverage and that Defendant's counterclaim of insurance fraud should be dismissed. As noted above, Defendant's basis for denying coverage was not unreasonable. Plaintiff's motion was denied.

Having determined that it was not unreasonable for Defendant to conclude that Plaintiff had intentionally set his property on fire, the issue of coverage was not appropriate for this Court to decide on summary judgment. Nor is there a basis for dismissing Defendant's counterclaim of insurance fraud at this juncture. These issues are more appropriate for a jury.

 

05/20/21       Odisseas Konstantakopoulos v. Union Mutual Ins. Co.
Appellate Division, First Department
Material Misrepresentation in the Application that the Building was a 3-Unit Rather than a 4-Unit, as well as the Failure to Disclose an Ongoing Eviction Proceeding.  Insurer was not Required to Submit Evidence of its Underwriting Practices with Respect to Applicants with Similar Histories.  The Fact that the Increase in Premium for a Four-Unit Dwelling was Related to Liability Coverage, as Opposed to Property Coverage, was not Relevant to the Determination of Materiality

The First Dept. affirmed the decision of the Supreme Court which had granted defendant's motion for summary judgment declaring that there was no coverage for the subject fire loss under the insurance policy it issued to plaintiff.  Defendant demonstrated that plaintiff's insurance application contained a material misrepresentation, voiding the policy ab initio under Insurance Law § 3105[b][1].  The underwriter's affidavit and excerpts from the underwriting guidelines showed that defendant would not have issued the policy if it had known the true nature of the risk, i.e., a four-unit dwelling as opposed to a three-unit dwelling and an ongoing eviction proceeding. Defendant was not required to submit evidence of its underwriting practices with respect to applicants with similar histories.  The fact that the increase in premium for a four-unit dwelling was related to liability coverage, as opposed to property coverage, is not relevant to the determination of materiality.  Nor is there ambiguity in the phrase "eviction proceedings." Even if plaintiff thought his eviction proceeding did not qualify as an eviction proceeding for purposes of the question asked on the insurance application, a misrepresentation need not be fraudulent to be material. 

 

05/13/21       Ryeco, LLC v. Selective Ins. Co.
United States District Court, E.D. Pennsylvania
No Coverage under Forgery or Alteration Coverage Provision when Hackers Wire-Transferred Money from the Insured’s Account where the Plaintiff had Purchased Forgery or Alteration Coverage for Losses from Forged or Altered Checks, Drafts, Promissory Notes, and Similar Documents Directing Payment of a Sum but had not Purchased Other Available Coverage for Losses Caused by Fraudulent Instructions to Forward Funds or Computer Theft

This case addresses a business seeking coverage under a Forgery or Alteration coverage provision in its insurance policy after hackers accessed its email system to send wire transfer instructions to its bank directing hundreds of thousands of dollars from its bank account to the hackers. The hackers used the plaintiff’s email system and apparently cut and pasted signatures of the plaintiff’s officers from other wire transfer forms. The plaintiff purchased one form of insurance against forgery or alteration which limited coverage to losses from forged or altered checks, drafts, promissory notes, and similar documents directing payment of a sum. The insurer offered other coverage for losses caused by fraudulent instructions to forward funds or computer theft. The plaintiff did not choose to purchase the fraudulent instruction or computer theft coverage. The plaintiff now seeks coverage arguing the hackers forged its officers' names on wire transfer forms which it argues falls under the forgery or alteration coverage. The Court disagreed. The plaintiff purchased coverage for forgery or alteration to a check, draft, promissory note, or similar instruction to pay funds. Each of those documents, and ones like them, can be negotiated and paid on demand by a third party. A wire transfer instruction, like an email, is not negotiable. It is an instruction to send money. The insurer alternatively offered coverage for losses caused by a fraudulent instruction, but the business did not purchase the coverage.  As such, the Court entered summary judgment for the insurer.

 

05/12/21       State Farm Mut. Auto. Ins. Co., v. Ibrahim Fatiha, D.C., et al 
United States District Court, S.D. New York
State Farm Commenced a Suit Against Medical Providers Alleging Common Law Fraud and Unjust Enrichment Due to a Scheme to Submit Fraudulent No-Fault Insurance Charges.  Medical Providers Filed Motions to Dismiss to Preclude the Court from Exercising Diversity Jurisdiction; and Arguing that State Farm's Common Law Fraud and Unjust Enrichment Claims were Barred by the Statutes of Limitations.  State Farm Filed a Motion to Strike Defendants' Answers Based on Default in Discovery

State Farm commenced common law fraud and unjust enrichment claims against Defendants, alleged to have operated a scheme to submit fraudulent no-fault insurance charges. Defendants had failed to provide responses to State Farm’s discovery requests. The Court ordered Defendants to produce discovery responses by a date certain and warned that sanctions could follow if they failed to meet that deadline.  Instead of responding, Defendants filed motions to dismiss for lack of subject matter jurisdiction, for judgment on the pleadings, and to stay discovery.  State Farm filed a motion to strike Defendants' answers and to hold Defendants in default. The Court denied all motions.

Defendants argued that State Farm holds the same citizenship as its New York-based insureds pursuant to 28 U.S.C. § 1332(c)(1)(A) and that this imputed status precludes the Court from exercising diversity jurisdiction; and that State Farm's common law fraud and unjust enrichment claims are barred by the statutes of limitations.

1332(c) provides that "in any direct action against the insurer of a policy or contract of liability insurance, . . . such insurer shall be deemed a citizen of. . . every State and foreign state of which the insured is a citizen." But this is not a direct action lawsuit, or a case in which "an injured party. . . [brought] a tort action directly against an insurer" to bypass litigating against "the alleged tortfeasor insured as a party-defendant."  As such, it cannot be said that State Farm "stands in the shoes of [any] legally responsible insured" in litigating this case on its own behalf. Indeed, this case was brought by State Farm, not against it.

In regard to the Defendants' challenge to the timing of State Farm's claims, dismissing a claim based on the statute of limitations "is appropriate only if [the] complaint clearly shows the claim is out of time." Under New York law, common law unjust enrichment claims "must be commenced within six years" of accruing, and common law fraud claims "must be commenced [within] the greater of six years from the date the cause of action accrued or two years from the time the plaintiff. . . discovered the fraud, or could with reasonable diligence have discovered it." N.Y. Civ. Prac. L. & R. ("C.P.L.R.") § 213(2) and (8). To the extent an unjust enrichment or fraud claim "would not exist but for [a] statute," it is subject to a three-year statute of limitations. C.P.L.R. § 214(2). Here, State Farm alleges that Defendants submitted charges for medically unnecessary services "[b]eginning in 2013, and continuing through the present day." Irrespective of whether a six-year, three-year, or two-year statute of limitations applies, State Farm's claims cover discrete charges that were submitted recently and that fall within the allowable period.  Even if the claims must be narrowed, a judgment on the pleadings disposing of the claims altogether would be inappropriate.

In regard to State Farm’s motion, it requests that the Court, pursuant to its Rule 37(b) authority, strike Defendants' answers and hold them in default.  Under Federal Rule of Civil Procedure 37(b), district courts are empowered to impose a broad array of sanctions for a party's noncompliance with a discovery order. District courts enjoy "wide discretion" in choosing an appropriate sanction, though the Second Circuit has identified four factors that may guide a district court's exercise of its discretion:

(1) the willfulness of the non-compliant party or the reason for noncompliance;

(2) the efficacy of lesser sanctions;

(3) the duration of the period of noncompliance, and

(4) whether the non-compliant party had been warned of the consequences of noncompliance.

Ultimately, "any sanction must be `just'" and "must be specifically related to the particular `claim' which was at issue in the order to provide discovery."  Rule 37(b) expressly contemplates severe sanctions, which may be imposed in "extreme situations," as when a party substantially delays discovery by engaging in "persistent noncompliance with discovery obligations" or by "declin[ing] to participate further in discovery."  At a low-water mark, severe sanctions may be imposed after as few as three months of noncompliance, to the extent that the noncompliant party's conduct is "sufficient to allow the district court to conclude that [it] never intended to comply with [] any of the Court's discovery orders." 

The facts at hand present a close case for whether the severe sanction of default is appropriate. The totality of Defendants' conduct in this case indicates their unwillingness to participate in this litigation.  Instead of producing discovery responses, Defendants have raised thin and borderline frivolous arguments to quash State Farm's subpoenas, challenge State Farm's claims, and challenge the Court's jurisdiction. Still, the Court worries that the severe sanction of default may not yet be warranted.

Not having imposed sanctions previously, and having now denied the motions Defendants used to justify their discovery delays, the Court believes that lesser sanctions may potentially induce Defendants' compliance and streamline discovery to put State Farm in a position similar to the one it would have been in had Defendants complied.  Accordingly, the Court orders Defendants to pay the reasonable expenses, including reasonable attorney's fees, incurred by State Farm in trying to obtain discovery from Defendants. The Court also prohibited Defendants from taking fact discovery in this case, which responds not only to Defendants' discovery misconduct but also to their failure to serve any discovery requests by the deadline set forth in the Scheduling Order. 

 

05/11/21       Unitrin Advantage Ins. Co. v. Andrew J. Dowd, MD
Appellate Division, First Department
The Failure to Show for an EUO was a Breach of a Condition Precedent Voiding Coverage for all PIP Claims Retroactively to the Date of Loss and not to be Determined on a Bill-By-Bill Basis

Plaintiff sent defendant a timely request for an examination under oath (EUO) with respect to a claim for benefits for shoulder surgery performed by defendant on an individual that was a passenger in a vehicle involved in an accident, covered by a no-fault insurance policy issued by plaintiff. Defendant failed to appear and plaintiff denied all claims for benefits made by defendant.

The failure to appear for an EUO that was requested in a timely fashion by the insurer is a breach of a condition precedent to coverage and voids the policy ab initio (see Hertz Vehicles, LLC v Alluri, 171 AD3d 432 [1st Dept 2019]; Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC, 82 AD3d 559, 560 [1st Dept 2011] ["when defendants' assignors failed to appear for the requested IMEs, plaintiff had the right to deny all claims retroactively to the date of loss, regardless of whether the denials were timely issued"]). The coverage defense applies to any claim and is not determined on a bill by bill basis (see PV Holding Corp. v AB Quality Health Supply Corp., 189 AD3d 645, 646 [1st Dept 2020]). The EUO was timely requested as to the second claim for benefits for the shoulder surgery, accordingly, defendant's failure to appear at that EUO voided the policy ab initio as to all claims, and plaintiff's cross motion for summary judgment should have been granted in its entirety.

 

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

 

05/21/21         4415 Third LLC v. Westco Insurance Company
Supreme Court, New York County
Court rejects Insurance Company’s Motion to Dismiss Plaintiff’s Complaint Alleging Bad Faith and Claiming Compensatory Damages

This case arises out of a fire that occurred at a property owned by plaintiff, 4415 Third LLC (“4415”), in the Bronx. Defendant, Wesco Insurance Company (“Wesco”), issued 4415 an insurance policy in connection with the premises, and Wesco claims it paid 4415 the actual cash value of the loss and not the full replacement cost because 4415 did not provide the required proof of repairs to the premises. Wesco also argues that, for 4415 to receive money above-and-beyond the actual cash value of the loss, the cost of repairs had to exceed the actual cash value of the loss.

In its complaint, 4415 claimed that Wesco breached the covenant of good faith and fair dealing by not paying the holdback amount (the difference between the repair costs and the actual cash value), and that it is entitled to seek consequential damages. Wesco moved to dismiss both claims.

The court denied Wesco’s motion on both counts. First, it held that 4415 had a viable bad faith claim, holding that discovery was necessary to determine the facts regarding Wesco’s denial of the holdback amount and whether such facts could support a finding that Wesco’s denial constituted bad faith. Second, the Court held that 4415 had a viable claim for consequential damages. The Court reasoned that, since the instant action concerned whether 4415 properly supported its claim for the holdback amount, discovery was necessary to determine whether Westco was justified in denying the holdback amount (which would render consequential damages inappropriate).

 

05/13/21        National Union Fire Ins. Co. v. Arch Specialty Insurance Co.
Supreme Court, New York County
Court Rejects Defendant’s Motion to Dismiss Declaratory Judgment Complaint of Additional Insureds Seeking Coverage under Defendant’s Policy

Plaintiffs National Union Fire Insurance Company (“National Union”), Clune Construction Company, L.P. (“Clune”), Tishman Speyer Properties, Inc. (“Tishman”), and 405 Lexington Owner, L.L.C. (“405 Lexington”) sought a declaratory judgment declaring their entitlement to insurance coverage from defendants DFL and Arch Specialty Insurance Company (“Arch”) as additional insureds on the policy between DFL and Arch. The coverage dispute arose from an underlying action in which the underlying Plaintiff, Michael Denisco, alleged that he sustained bodily injury on July 30, 2015, while employed by DFL as a construction and demolition employee. The alleged injury occurred at a premise owned by Tishman and 405 Lexington and on which Clune served as contractor. Mr. Denisco sued DFL, Clune, Tishman, and 405 Lexington, but the court in the underlying action granted summary judgment for all defendants, giving collateral estoppel effect to an earlier determination by the Workers’ Compensation Board (“WCB”) which found that Mr. Denisco’s injuries were unrelated to his employment (and were instead the result of his jumping out of his girlfriend’s car during an argument).

The plaintiffs in this action sued Arch for coverage as additional insureds under Arch’s policy with its insured, DFL. The Blanket Additional Insured Endorsement on that policy required that additional insureds, prior to the subject accident, execute a written contract with DFL. DFL and Clune executed such a contract, effective July 7, 2015 (before the underlying accident). However, Schedule F of that contract, which listed Clune, 405 Lexington, and Tishman as additional insureds listed August 21, 2015 (after the underlying accident) as the effective date in its heading. The Court held that there were arguments for either July 7, 2015 or August 21, 2015 as the effective dates but that in a motion to dismiss, plaintiffs must be accorded the benefit of all favorable inferences. So, the “mere circumstance of the August 21, 2015 date at the top of Schedule F” was insufficient to support dismissal of the complaint.

Defendants next argued that Clune, Tishman, and 405 Lexington did not quality as additional insureds on the Arch Policy because DFL’s acts or omissions were not the cause of potential liability to Mr. Denisco (since the WCB case determined that jumping out of a car was the cause of his injury). Here, the Court distinguished the duty to defend from the duty to indemnify. Insurers must defend whenever the allegations within the four corners of the underlying complaint may give rise to coverage. By contrast, the duty to indemnify is determined by the actual basis for the insured’s liability to a third person, as opposed to mere allegations in the pleadings. Here, Mr. Denisco’s allegations that he sustained bodily injury while working for DFL on the Premises were sufficient to trigger the duty to defend.

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