Coverage Pointers - Volume XXIII, No. 1

Volume XXIII, No. 1 (No. 593)
Friday, June 25, 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.

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Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations. 

A monumental issue attached:  Almost 50 pages of coverage summaries from the past two weeks

Back in the day, before e-mail replaced the snail-mail world, our firm published occasional newsletters  when some unusual case came out of the appellate courts.  As email took root, the firm wondered whether an email newsletter, in lieu of a hand-mailed and postage-stamped, written one, could be accepted as an alternative.

As we considered it, we knew we wanted to be an education resource, to point to our subscribers, new and interesting appellate cases.  We would link the cases to our summaries, using web addresses, “url’s” if you will, also known as electronic “pointers”.

So, we created Coverage Pointers, with our small but steady coverage team publishing on a bi-weekly basis.  Our first issue, to about 25 electronic subscribers, was e-mailed on July 8, 1999 and we’ve published bi-weekly ever since, now to thousands of subscribers around the world.

Welcome to Volume XXIII, No. 1, the first issue in our 23rd year of publication. We may be the oldest electronic coverage newsletter in the nation, and we’re proud to have you as a subscriber. A nod to Kevin Merriman, a fine attorney here in Western New York, who was our editor for the first few years.

Thanks to our wonderful writers who, without fail, get their columns in on time for each  and every issue and special thanks to Agnes Wilewicz and Patty Rauh, who provide wonderful editorial oversight and help keep me in line.

This issue gives us cases involving anti-subrogation, “other insurance”, underinsured motorists coverage (SUM) and additional insured issues, some of our favorites and there is so much more.


Risk Transfer Training:

So much of my casualty coverage work, these days, focuses on risk transfer – additional insured questions, contractual hold-harmless agreements and how the interrelationship between them impacts on the ultimate resolution of complex cases.  If you’re interested in a presentation for your shop, let me know.

New York Coverage Protocols Training:

Along with Risk Transfer Training, the most popular request for training programs is a session on the special rules for New York coverage letters.  If you are unfamiliar with Section 3420(d) of the Insurance Law and insure risks in New York, your staff may need this program or face the risk of waiving substantial coverage rights.  Again, reach out.


Empowering our Clients:

We love training opportunities for our clients and friends.  We recently compiled and organized a list of our first party and third party training programs, available by Zoom, Teams or otherwise, to empower your claims staff to use best practices.  We have about 40 casualty programs and 40 first party programs and you can find the complete list here.  You can also speak to us about crafting something special for your company.

Here are the casualty and liability programs and in the next issue, we’ll list the first party programs:

  • A CGL Policy Primer

  • A Homeowner's Liability Policy Primer

  • A No Fault Primer

  • A UM/SUM Primer

  • ADR and How to Get to "Yes"

  • An Auto Liability Policy Primer

  • An EPLI (Employment Practices Liability Insurance ) Primer

  • Applying New York’s No-Fault and Serious Injury Threshold Laws

  • Avoiding Bad Faith and Spotting the Setup Scenario

  • Bad Faith

  • Business Income Coverage

  • Chaos Breeds Resolution: Mediation and the Role of Coverage Counsel in Resolving Chaos

  • Child Victims Act: Insurance Issues

  • Connecticut Insurance

  • Construction Defect Coverage Claims

  • Coverage B - Understanding Personal and Advertising Coverages

  • Cyber & Privacy Claims: Finding the Coverage

  • Fidelity Coverage: Does Direct Still Mean Direct?

  • Good Faith Claims Handling

  • Good Faith, Consequential Damages and Extra-Contractual Liability – the New York Experience

  • Insurance 101 -- An Introduction to the CGL Policy

  • Insured-Selected Counsel: When is it Necessary and How to Avoid and Control?

  • Life after Burlington – How Do We Resolve “Additional Insured“ Issues?

  • Life after Carlson – When is a Policy “Issued or Delivered in New York” to Trigger Draconian Requirements of CPLR 3420(d)(2)?

  • Most Common Mistakes Made in Handling New York Coverage Problems and How to Prevent Them

  • Navigating Liability Risks and the Litigation Process with and for Your Client

  • No Fault – Nuts and Bolts

  • NY Coverage Letters – Nuts & Bolts: How to Create and Write and Timely Send a Disclaimer Letter and NY’s Special Dangers with Reservation of Rights Letters

  • Preventing Bad Faith Claims – Liability Cases

  • Rise of the Robots - The Coming Age of Automation in Automobiles

  • Strategic Approaches to Resolving Insurance Coverage Disputes: Do We Defend and Start a DJ? Do We Sit Back and Wait?

  • The Cooperation Clause - How to Handle

  • The Defend or DJ Dilemma

  • The Examination Under Oath: What is it and How to Prepare.

  • The Ins, Outs and Forgetaboutits of Third-party practice, Indemnity and Anti-subrogation

  • The Primary and Excess Relationship

  • The Serious Injury Threshold

  • Too Many Claimants, Not Enough Limits

  • Vicarious Liability Related to Employers and Automobiles

  • You, Me, and the Oxford Comma in Insurance

  • What You Need to Know, to Get What you Need (and Protect What  You Have)- Exploring Discovery Disputes in Insurance Claims



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. 

  • 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.


    The Major League Debut of Cy Twombly 100 Years Ago, and his More Famous Son:

    Twenty-four year old  Edwin Parker “Cy” Twombly pitched his first game for the White Sox 100 years ago today, on June 25, 1921 and his last of eight appearances less than two months later, on August 17th.  He appeared in seven games and ended up with a Major League record of one win and two losses with a short lifetime ERA of 5.86 in 27.2 innings pitched. In those innings, he gave up 26 hits, 18 earned runs, 25 walks and one home run. In the time before the DH, he batted 10 times, struck out four of them and never was credited with a hit.

    The Burlington Daily News, the Dayton Daily News, the Asbury Park Press and other newspapers around the country announced his hiring in their June 21,1921 editions, indicating that he had just graduated from the Springfield YMCA College.

    Twombly’s debut, 100 years ago, was not a memorable one.  Brought in as a relief pitcher in the sixth inning, he was described in the Chicago Tribune as “wild, hitting one man and passing four others in the last three innings, but he did not give up a hit.”  The Rock Island Argus reported that he pitched a “whale of a ballgame” on July 2 against the St. Lewis Browns, earning a 4 to 3 win and holding the Browns to four hits in eight innings.  That seemed to be his best game, and he was soon sent down to the minors, where he played for another eight years.

    He was Athletic Director of the Washington and Lee University in Lexington and he was so admired by the college that a new swimming pool was named the “Twombly Natatorium” in his honor.  The artist inherited his father’s baseball nickname “Cy”, after the baseball player Cy Young.

    Cy’s son Cy (Edwin Parker “Twombly”) became a well-known painter, sculptor and photographer, exhibiting in galleries throughout the world, including a commission to paint the ceiling of the Louvre.  He left his legacy to a Foundation that bears his name, with assets over $1.5 billion. 

    When the younger Cy Twombly, died at the age of 83, the Guardian in England reported that the “death has ended one of the most distinguished artistic careers of the past half-century. Like a latter-day Ingres, he was an expatriate who lived in Italy, fascinated by the country's cultural heritage. Twombly's response to this stimulus was, however, anything but academic, as he expressed himself with a radical language of highly colored stains and energetic brushwork. His success resulted from the combination of this exciting style with a subtle, original intellect, great self-belief and a measure of charm and good fortune.

    Edwin Parker Twombly Jr was born in Lexington, Virginia. His father was a sports instructor and former baseball player whom Twombly admiringly described as still doing back flips at the age of 40; he was known as "Cy" after the legendary pitcher "Cyclone" Young. Twombly inherited his father's nickname, but not his athleticism.



    As Pride Month and Caribbean Heritage Month wraps up, let’s express gratitude for all the contributions of LGBTQ Americans (Josephine Baker; Billie Jean King; Harvey Milk; Audre Lorde; James Baldwin) and those of Caribbean Heritage (Harry Belafonte; Shirley Chisolm; VP Kamala Harris) have made to our country and our culture. Thank you, thank you, thank you!

    In this CP, I talk about implicit bias in underwriting, particularly underwriting done by artificial intelligence. Wait. What? Machines have no biases, right? Artificial Intelligence cannot possibly have biases. Well, actually, they can, and they do. Turns out that whatever you put in (including the personal biases of the programmer) is what you get out. Read my article to find out what regulatory bodies are doing to fight bias in underwriting.

    Mirna M. Santiago


Isn’t One Spouse Enough in Connecticut?

The Buffalo Commercial
Buffalo, New York
25 Jun 1921


By the Associated Press

            HARTFORD, Conn., June 25.—Residents of other states already possessing a husband or wife no longer can come to Connecticut, contract another marriage and escape a charge of bigamy if they do not cohabit within the state.

            Gov. Lake has signed a bill recently passed by the general assembly making such a marriage bigamous whether the couple lived together inside the state or out.

            Attention recently was called to the loophole in the Connecticut marriage law when a New York Broker and New Jersey church treasurer recently took advantage of it. 


Peiper on Property and Potpourri:

As we enter volume XXIII, I thought it would be interesting to go back through the archives to look at my first column.  It was the May 18, 2007 issue which I believe makes me the second longest running columnist.   At that time, we only had four contributors.  Dan, as he always has, handled appellate level third-party matters.  My dear friend Audrey Seeley wrote on the hot new No Fault Decisions.  We also had the serious injury threshold column which, by the looks of things, was a much busier beat back in those days. 

Since that day in May, I have not missed many issues.  Maybe a trial or two along the way gave me a break, but otherwise I’ve been sitting at a keyboard trying to beat a Thursday deadline since then.  This included reporting on significant changes to the Insurance Law over the years.  The prejudice statute would be passed a few months after my initial column.  It also included me coming home from the hospital the day my son was born in 2009 to send in that issue’s writing.  It has been written in airports from Atlanta to San Francisco, and at a least few times was written on trains between Penn Station in NYC and Thirtieth Street Station in Philadelphia.

My first case, if you are interested, was a good one.  I reported on the Seward Park Housing Corporation case which addressed some great topics such as the collapse exclusion, the rainwater exception to that exclusion and whether that exception required an evaluation on the issue of dominant and efficient cause of loss. The First Department also addressed whether a wrongful denial amounted to a repudiation of all other terms under the first party policy.   The Court ruled, of course, that it was not a repudiation.  Looking back on it, had the ruling come down differently we would have had a far different playing field some 15 years later.  

It’ll be fun 15 years from now to look back how the decisions of today impact (and/or hold up) over the coming years.  I hope to still be here, and hope you’ll still be reading. 
That’s it for now.  Happy Summer.   

Steven E. Peiper

[email protected]


Not Much Changes – Undercounting of Foreign Citizens, 100 Years Ago:

The Buffalo Commercial
Buffalo, New York
25 Jun 1921


California Controller Asks
Senator Johnson to Seek Inquiry

By the Associated Press.

            Sacramento, June 25—A telegram requesting an investigation of federal census figures showing the Japanese population of California to be 71,942 was forwarded to Senator Johnson by State controller Chambers today.

            “The federal census figures on Japanese population in California are extremely incorrect,” the telegram stated. 

            “The Bureau of Vital Statistics has provided by checking up the death list of Japanese that there are at least 109,000 here.  State figures tally with the federal census on every race except Japanese and it appears that approximately thirty-eight thousand have escaped the census.  This evasion is just another attempt to discredit the seriousness of the Oriental issue.”


Wilewicz’ Wide-World of Coverage:

Dear Readers,

Not much new to report from this neck of the woods. Summer is here, school is out (today!), and we have already passed the longest day of the year. While the courts have reopened (mostly) and life is increasingly getting back to “normal”, the Federal Circuit Courts still have not been addressing many interesting coverage decisions in recent weeks. That said, in thinking about what to write to you all this week, I realized that we are overdue for an update on the adventures of our rescue pets, Cleo and Lola.

So, we got Cleo the dog when she was about six years old, and never did find out her breed. She’s a 60-pound golden, short-haired, lab/Shepard maybe. For the last couple of years it has confounded us, and every time I call the groomers to set her appointment and they ask her breed, I say this description and wish I could give them more. We knew that she came from West Virginia, or someplace South, but that was about it. Well, the other day my daughter used a Snapchat feature to “scan” the dog and we got it! She’s an overweight Carolina dog. It’s a breed that I admittedly had never heard of before, but that’s it. Indeed, that second picture on the American Kennel Club’s page is exactly what our dog looks like (plus about 10 pounds). Now, dear readers, y’all know, too.

Tune in next time for the latest on Lola. Until then,

Agnes A. Wilewicz

[email protected]


Can’t Convict a Pretty Woman:

Freeport Journal-Standard
Freeport, Illinois
25 Jun 1921


“Can’t Convict a Pretty Woman,”
Remarks State’s Attorney.

(By United Press Leased Wire)

            Chicago, June 25.—Mrs. Cora C. Orthwein was at liberty today and freed of the charge of slaying Herbert P. Ziegler, Goodyear Tire & Rubber company executive.

            The pretty divorcee was acquitted by a jury last night after a deliberation of one hour.  Three ballots were taken.

            “Public opinion freed me,” said Mrs. Orthwein.

            “You can’t convict a pretty woman,” the state’s attorney stated. 


Barnas on Bad Faith:

Hello again:

It seems like we are finally getting back to normal, and that is most welcome from my perspective.  This week, the Bills announced that they are going to have full capacity crowds in Orchard Park this fall, and the Blue Jays are opening up Sahlen Field to full capacity as well starting with tomorrow night’s game against Baltimore.  It’s nice to be back in crowds again.

In the “better-late-than-never” category, we are finally seeing the UEFA European Championship in soccer, which was supposed to be played last summer.  If you read this column in 2018, you know that I am an England supporter, and the Three Lions are looking pretty good so far having topped Group D.  The reward unfortunately is a date with the second place finisher in Group F, which at the time of this note could be any of Portugal, France, Germany, or Hungary.  I suppose you have to beat the best eventually, but I would have more faith that “it’s coming home” if the first game of the knockout round is not against one of the best teams in the world.

Take a look at my column this week for a nice bad faith decision from the Fourth Circuit applying South Carolina law.  The court concluded that the insurer had not acted in bad faith by rejecting two time limited settlement offers.  The first offer was made before the insurer had a reasonable chance to investigate and evaluate the claims.  The second offer would have required the insurer to forfeit significant rights in subsequent bad faith actions, and the court concluded that the insurer thus had a reasonable basis for declining it.

That’s all for now. 

Brian D. Barnas

[email protected]


Athletics for Girls Questioned – a Century Ago:


Are They Helpful or Harmful?
Read the Answers.

            With school out, track meets and athletic contests over and a host of slim, muscular, fast running and high jumping feminine folk back home, to be given the once over — object matrimony— a volume of criticism of and commendation for athletics for women is pouring forth.

            Some physicians and school folk, viewing the girls just out of college is the future mothers of the race, hold that sports are unwise for them. Others say they are helpful.

            The most acid arguments against them come from England. Here are views of some authorities.

            Eight per cent of the girls I have known who have been trained to become experts at athletics, have been incapacitated for motherhood. A girl normally should have a large store of vital and nervous energy which she can draw upon at the great crises of motherhood, if normally developed. That strength is a deposit account, but if it is used as a current account, as a boy can afford to use it, her children will pay the bill. — Miss Isabel Cowdray, principal of an English high school for girls.

            It stands to reason that high and broad jumping for girls is outrageous in the adolescent period. The chances for harm are more numerous than the health advantages to be derived.—Dr. Caroline Hedger, Chicago.


Off the Mark:

Dear Readers,

The weather in the Metro NYC area has been pretty nice, although the nicest weather always seems to occur during the work week, when stuck behind a desk.  The kids are finishing up their last few days of school and are looking forward to the time off and the variety of camps they will be attending this summer.  I’m looking forward to spending some time relaxing at the beach.

Unfortunately, there were no interesting construction defect cases to report on this edition.  Be sure to check back in two weeks.

Until then …

Brian F. Mark

[email protected]


Object Matrimony:

Arkansas Democrat
Little Rock, Arkansas
25 Jun 1921

REFINED young widow desires the acquaintance of a widower or bachelor, between 30 and 45.  Object matrimony.  Address I-104, care Democrat.


Boron’s Benchmarks:

Civil litigation in the state and federal civil courts that I practice in has begun ever so cautiously to emerge from full-blown pandemic mode into what we expect will become the new normal.  We do not expect the courts will ever 100% return to the old days of holding in-person court conferences to discuss the status of a civil case, or to set scheduling deadlines in civil cases. But we do anticipate a slow return to making in-person oral arguments, at least on dispositive motions, and eventually, there will be more than a token restart of in-person trials of civil cases.  This week, I was notified by the U.S. District Court, Eastern District of New York, that I need to appear in mid-August for in-person oral argument of a summary judgment motion in a subrogation case we are pursuing for an insurer. I very much look forward to presenting my first in-person oral argument inside a courtroom since February 2020!  

For this edition of Boron’s Benchmarks, the Coverage Pointers beat monitoring and reporting on insurance coverage decisions of the high courts of the 49 states not named New York, I offer for your consideration a Supreme Court of Mississippi opinion on a disputed first-party property claim, Mississippi Farm Bureau Casualty Insurance Company vs. Jean M. Hardin, issued June 17, 2021.  The Mississippi Supreme Court ruled that the lower court erred in denying Farm Bureau’s motion for summary judgment.  I encourage you to read the relatively concise opinion which provides a succinct summary of the Court’s analysis of the application of various policy provisions such as the perils insured against provision, the additional collapse coverage provision, and the water damage exclusion provision.  

Have a healthy and happy next two weeks, folks.

Eric T. Boron

[email protected]


Turkey Life Insurance?:

Daily News
New York, New York
25 Jun 1921

Harding’s Turkey Too Fat
to Live Long.

            Crystal Springs, Miss., June 24.—Insurance on a turkey, destined to grace the Thanksgiving table of President Harding, is extra hazardous because the subject is overweight and statistics show the majority of the turkey family will be dead inside of six months.

            So ruled the New York Life Insurance company when H. W. Mason of this city asked or a $500 policy on the boggler he is fattening for the Hardings’ first Thanksgiving in the White House. 


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

This past weekend, the City of Good Neighbors played host to the Thunder on the Buffalo Waterfront Air Show, which had the city abuzz. The storied Blue Angels were present for the spectacle, performing mid-air acrobatics and flying uncomfortably close to one another. Even Buffalo Bills coach Sean McDermott got in on the action. Although I was unable to catch the actual show, I witnessed practice runs on Thursday, from my office window on the 13th Floor of the Liberty Building downtown. Nothing like fighter-jets flying at what seemed to be eye level within arms-reach. Amazing what military pilots are trained to do; for me, you, and the red, white and blue.

Today, the Regulatory Wrap-Up contains a pair of recent climate change actions taken by New York’s DFS. The first includes recommendations made by DFS to the SEC following its request for comment back in March. I have included the questions posed by the SEC and the recommendations from DFS in response. Additionally, DFS recently issued a report regarding the financial risk and exposures for New York domestic insurers arising from a low-carbon transition.

Until next time,

Ryan P. Maxwell

[email protected]


Perhaps Next Time, a Kiss Instead?

New-York Tribune
New York, New York
25 Jun 1921

Doctors Pity Harding
For 1,500 Handshakes

            WASHINGTON, June 24.—President Harding’s task in having shaken hands with more than fifteen hundred persons during his reception to delegates to the American Institute of Homeopathists’ convention, arounds compassion among the doctors at their closing session to-day, and a resolution proposing that Presidents hereafter be relieved of that custom was introduced.

            It was voted down, however, speakers declaring the President should be permitted to attend to his own business. 


CJ on CVA and USDC(NY):

Hello all,

Another two weeks has flown by. This past weekend I celebrated my first Father’s Day. It was a wonderful sunny day here in WNY. My wife, our son, and I visited my parents in the morning, spending our time on the boats and at the pool. That afternoon we went to my in-law’s for dinner and drinks. It was a great way to cap off a fantastic weekend.

In this edition I recap a recent COVID-19 case (yes, those are still coming down the pike). The same reasoning holds true, no physical loss to property means no coverage.

See you in two weeks,

Charles J. Englert, III


Mandatory Auto Insurance Considered  -- 100 Years Ago:

The Ithaca Journal
Ithaca, New York
25 Jun 1921


State Motor Organization Will Insert
Insurance Plank in 1921 Legislative
Program in Effort to Rid Highways
Of Careless Drivers.

* * *

            One of the leading insurance companies dealing in lability insurance recently issued a striking piece of advertising literature showing a facsimile of a “sheriff sale” poster from one of the rural counties of Virginia.  The Virginia motorist who was unfortunate enough to kill a small boy was required to sell his automobile, a large part of his household goods and his general merchandise store and fixtures to satisfy a judgment of $9,000.

            Verdicts for injuries from motor accidents are now running into enormous sums.  Recently a jury awarded $80,000 to a woman for personal injury.

            A number of Ithaca motorists have recently raised the amount of their policy for personal injury.

            It was at one time customary for motorists to take the minimum for personal injuries—$5,000 in case of one accident and $10,000 in case of two.  Now many policies are being written for accident several times those mentioned, some as high as $50,000 and $100,000.


Dishing Out Serious Injury Threshold:

Dear Readers,

Hope everyone had an enjoyable Father’s Day. It’s crazy to think that July is nearly here. Thankfully, the restrictions in New York are also nearly all lifted. I hope that this allows everyone to enjoy some time outdoors and with family this summer, including an Independence Day filled with family, friends, and gratitude.

In the Serious Injury Threshold world, we have one case worthy of reporting, and it is (again) from our own Brian Webb. In Scarincio v. Cerillo the Appellate Court agreed with the Supreme Court decision that the plaintiff failed to come forward with any evidence to establish having sustained a serious injury as a result of the motor vehicle accident. Significantly, this is done by a thorough examination of plaintiff’s medical and no-fault records, IME reports, and meticulous examination of plaintiff during the deposition.

Be well,

Michael J. Dischley

[email protected]  


Yonkers Statesman
Yonkers, New York
25 Jun 1921



            Should married women work?  And if they do, should they be the first ones dismissed in case of retrenchment?

            In other words, should the Government look into the private affairs of its employees and take their family status into consideration or should the question of who shall stay or who shall go be based solely on efficient service?

            That is a question agitating Government departments just now.  On June 30 thousands  of clerks will be dismissed because congress has cut appropriations.

            There are 83,500 civil employees in the service of the Federal Government at Washington alone.  Of that number about 50,000 are women.  In 1916 there were 39,259 civil employees in the District, which grew to a total of 117,760 on Armistice Day.

            The wholesale dismissal is raising the question on why married women should be allowed to continue if they are merely working because they prefer the typewriters to the kitchen stove, while there are not enough positions for the heads of families who need them most. 


Bucci on “B”: 

Hello readers,

I found some federal district court Coverage B cases this issue.  They are interesting and one specifically bears on the issue of how Coverage B works.  Read them both and guess? 

I am very excited about the July 4th holiday.  I plan to get away to the beach for the weekend.  I will be doing some work of course, but that is just the way it is.  Work or no, I plan to thoroughly enjoy myself.  I have not had a chance to take a real trip to a faraway land, or even a state other than the two that surround me here in Connecticut, but I am dying to.  But since I love the summer and the beach, and they are both here, traveling will have to wait for the colder weather, even though I would love some exotic food from a land where it originated.  Of course, I have concerns about getting on a plane as do my traveling companions, but at some point, that will be a thing of the past, and that is what I am waiting for!

I find I always end up talking about the weather or pandemic, while my colleagues bring you great information on the law and trainings and all manner of helpful information.  Oh well, I am who I am.  If you like talking about the weather, you know where to find me. 

Diane L. Bucci


Marry Me Twice ?  Maybe :

The Yonkers Herald
Yonkers, New York
25 Jun 1921



            Chicago, June 25.—Here it is.  A breach of promise suit for failure –not to marry—but to remarry.

            Mary L. Taylor has sued Charles J. Taylor for $25,000 damages alleging he failed to make good a promise to remarry her after they were once divorced.  She charged Taylor had tired of living alone, wooed her a second time and won her promise to wed for the second time.

            She also asked accounting of her husband’s $50,000 estate, which she said, she had largely accrued through her literary efforts.


Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

In this edition, we have an interesting professional liability coverage case from the District of Connecticut. Navarro v. Allied World asks us to ponder the question: when is an Insurance Commissioner not acting “in any capacity”? Apparently, the answer is not as clear as one might think. Read on for the details.

In other news, well, I’ve done it—I've unmasked. Except in places where masks are still required, like where I go for physical therapy, I am sans mask. It seems my fellow Nutmeggers are following suit. Connecticut continues to be among the nation’s leaders in vaccination rate, now with two-thirds of all Connecticut residents vaccinated. The adult vaccination rate, for which I can’t find current numbers, is likely now over 80%, and in my part of Connecticut probably well-over 90%. If for some reason you’ve put off getting the vaccine, be smart and don’t wait. The Delta Variant is spreading quickly and, as we saw in a recent outbreak in the Manatee County, Florida, government building, the vaccine will keep you alive and healthy when the unvaccinated around you become hospitalized and sadly even die.

Be smart and be safe.

Lee S. Siegel

[email protected]       


Railroads Obscure View?:

Daily News
New York, New York
25 Jun 1921

These Awful Railroads

(Special to DAILY NEWS)

            Chicago, June 24.—The Burlington railroad issued an order today that all girl employees must dress modestly; no short dresses or peekaboo waists.


Rauh’s Ramblings:

Hello everyone!

I can’t believe that June is almost over!  It feels like June 1st was just a couple days ago!  Between work and home, I am definitely staying busy over here.  My son starts soccer this Saturday and I can’t wait to watch him play!  Although, the team is a bunch of three- and four-year-old’s, so I’m not sure how much actual soccer will be played as opposed to a bunch of kids running around and screaming!  Either way, Cayden is super excited and can’t wait to get his jersey!

This week, I found a case from the U.S. Court of Appeals, Fifth Circuit.  This case involves a plaintiff who sued her deceased ex-husband’s employer after they denied her claim for his retirement benefits under ERISA.

Until next time!

Patricia A. Rauh

[email protected]       


President Wilson Gains a Law License:

The Evening World
New York, New York
25 Jun 1921


Is Admitted to Practice Law Before
District of Columbia Supreme Bench

            WASHINGTON, June 25.—Woodrow Wilson appeared in person to-day in the chambers of chief Justice McCoy of the District of Columbia Supreme Court to be admitted to the practice of law before that court.

            A special session of the court was called to admit Mr. Wilson.  He was accompanied by his law partner, Bainbridge Colby, former Secretary of State, and by Joseph P. Tumulty, formerly his private secretary.

Editor’s Note – 100 years later, Mayor Guliani has his suspended.


Storm’s SIU Examen:

Hi everyone:

In this edition of The Examen, we will examine the following:

  • Revised DFS Advisory Paragraph Updated Language as of June 9, 2021. 

  • Another pandemic first-party property success story for insurers.

  • In breach of contract action for Insurer’s Fed. R. Civ. P. 12(b)(6) motion to dismiss cause of action for “bad faith” under 42 Pa. Cons. Stat. Ann. § 8371 is denied.

  • In a fire claim the Landlord is held to have an insurable interest in tenant’s improvements.  The “Bad faith” claim against the insurer is dismissed as the ongoing investigation of the claim constituted a reasonable basis for the seven-month delay between claim filing and coverage decision. Although the insurer incorrectly denied coverage, this failed to constitute bad faith.

  • A Court held there to be improper joinder of 53 defendants in 27 different no-fault RICO fraud schemes as the Plaintiff did not assert a right to relief against each arising from the same transaction or occurrence.  The Court retained one group and severed the remainder ordering a separate case be opened for each. 

    I am so honored to have my article published in SIU Today! "Remote Virtual EUOs -- No Need For Bathroom Breaks Anymore! (Remotely Conducted v. In-Person EUOs - Which Are More Effective?)". I hope you find it informative and a little humorous. EUOs sure are a strange animal!  You may read it on our blog or at the publisher’s website

    This week’s encouraging word: “Competing at the highest level is not about winning. It’s about preparation, courage, understanding, and nurturing your people, and heart. Winning is the result.” ~ Joe Torre

    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 D. Storm

    [email protected]


Two Legs -- $42,000:

The Evening World
New York, New York
25 Jun 1921

Appellate Division sustains $42,500
Damages for Boy Losing Legs.

            The Appellate Division of the Supreme Court to-day upheld the verdict of $42,500 in favor of Thomas Cecil Clark, nine years old.  No. 275 West 149th Street, against the Eighth Avenue Railroad Company.  Both his legs were amputated when he was run over by a car a year ago in May. 

            The case was tried before Justice John T. Tierney and a jury.  The decision of the Appellate Division was unanimous.

Editor’s Note – that’s only $565,000 in 2021 dollars.


Heintzman’s Hideout:

Dear Readers:

Summer always reminds me that there are not enough hours in the day. I want to maximize my outside time while the weather is nice, keep progressing in my career, exercise, and enjoy the NBA playoffs. My solution is: wake up early to run along Buffalo’s Outer Harbor (outside time ✓, exercise ✓); head to the office for work; and DVR the NBA games so I can skip through commercials and save time. I’m a 30-second walk from the office, and I get all my meals precooked, so this also helps save time. In somewhat related news, I’m first in my NBA playoff pool (my Hawks in 7 pick really helped), and I’m solidly in the running for the $400 cash prize.

In this edition, a Court keeps the insurer on the hook for paying 100% of its insured settlements in an asbestos exposure case, and an insurer tries and fails to protect itself by using the timely notice requirement against another insured.

Nicholas J. Heintzman


An Eye Isn’t Worth Much:

Elmira, New York
25 Jun 1921

Jury Awards $1,250 Verdict
For The Loss Of Child’s Eye

            John A. Briddon was awarded a verdict of $1,260 by a jury In Supreme Court at 5:35 o'clock yesterday afternoon against Edward H. Bigg. A four year old son of Mr. Briddon lost an eye and suffered other injuries as the result of an automobile accident at Broadway and Franklin street last August. The case was on trial two days before Justice George McCann and a jury. Attorney Michael O'Connor represented the plaintiff and Mandeville, Persouius and Newman the defendant.

Editor’s Note:  That’s only $18,800 in 2021 dollars.


North of the Border: 

We can see the light at the end of the tunnel. As 71% of Albertans aged 12 and over have one dose and almost 30% of that age group are fully vaccinated, almost all of Alberta’s pandemic restrictions will be lifted as of July 1. That will end 16 months of on-again, off-again lockdowns. Saw a sweatshirt that said, “I’m ready for precedented times”. I agree. Not only that, but the Montreal Canadiens also have a shot at the Stanley Cup final. Can life get any better?

Heather Sanderson

[email protected]


Headlines from this week’s issue, attached:

Dan D. Kohane

[email protected]

  • Anti-subrogation Doctrine Does Not Apply Where Excess Policy’s Coverage Does Not Provide Coverage Because of Exclusion

  • Arch’s “Other Insurance Claim” Deemed Untimely and Unavailing
    No SUM Claim Available for Person Who is Not a SUM Insured.
    Uninsured Motorist Coverage:  Where There is a Question of Fact About the Existence or Applicability of Motor Vehicle Coverage for Adverse Vehicle, Court Should Hold Framed Issue Hearing

  • Tenant’s Policy for Landlord, Covering Leased Premises, Provided Additional Insured Coverage for Fall on Public Sidewalk Abutting Property as Sidewalk Critical for Entering and Leaving Property

  • When Insurance Policy Secured by Tenant for Landlord Provides Coverage for  Premises Accident, Landlord is Entitled to a Defense under Policy

  • Six Year Contract Statute of Limitations Governs Uninsured Motorist Lawsuit

  • Assault and Battery Exclusion, which Applied to Exclude Coverage for Man being Pushed Down Steps to his Death, Did Not Necessarily Apply to False Arrest Claim It Looked Like a Duck, and Cited a Duck, but Was Not a Duck


Steven E. Peiper

[email protected]

  • Reasonable Care
  • Vacancy Exclusion Precludes Coverage for Fire Loss


Michael J. Dischley

[email protected]

  • Plaintiff Failed to Produce any Evidence Sufficient to Establish that Plaintiff Sustained a Serious Injury Within the Meaning of Insurance Law § 5102 (d)


Agnes A. Wilewicz

[email protected]

  • Nothing new under the Second Circuit sun.


Brian D. Barnas

[email protected]

  • Insurer did Not Act in Bad Faith by Declining Two Pre-Suit Settlement Offers


Lee S. Siegel

[email protected]

  • Court Holds “In Any Capacity” May not Mean All Capacities


Diane L. Bucci

  • Assault and Molestation Exclusion Does Not Defeat Coverage For Hotel Against Claims of Human Trafficking
  • Bait and Switch is Not an Advertising Injury


Brian F. Mark
[email protected]

  • No interesting construction defect cases this week.


Eric T. Boron

[email protected]

  • Homeowner’s Policy – Lower Court’s Denial of Summary Judgment to Insurer Reversed on Appeal by Supreme Court – No Coverage of Insured’s First-Party Property Damage Claim


Ryan P. Maxwell

[email protected]

Regulatory Wrap-Up

  • DFS Recommends That SEC Establish Useful and Reliable Climate Change Disclosures
  • DFS Issues Report Supporting NY Insurers’ Efforts to Manage their Exposure to Low-Carbon Transition Financial Risks


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

  • Direct Physical Loss Still Means Direct Physical Loss in COVID-19 Business Interruption Claims


Patricia A. Rauh

[email protected]

  • Defendant Did Not Wrongfully Deny Plaintiff of Her Deceased Ex-Husband’s Retirement Benefits.  The Plaintiff Relied on Conclusional Allegations and Unsubstantiated Assertions that May Not be Relied On as Evidence


Mirna. M. Santiago

  • Bias in Underwriting?


Scott D. Storm

[email protected]

  • New language for DFS Advisory Paragraph regarding Title 11 of the NYCRR
  • Another Pandemic First-Party Property Success Story for Insurers
  • In Breach of Contract Action for Underinsured Motorist Coverage, Insurer’s Fed. R. Civ. P. 12(b)(6) Motion to Dismiss Cause of Action for “Bad Faith” under 42 Pa. Cons. Stat. Ann. § 8371 is Denied
  • In this Fire Claim the Landlord is Held to Have an Insurable Interest in Tenant’s Improvements.  The “Bad Faith” Claim Against the Insurer is Dismissed as the Ongoing Investigation of the Claim Constituted a Reasonable Basis for the Seven-Month Delay between Claim Filing and Coverage Decision. Although the Insurer Incorrectly Denied Coverage, this Fails to Constitute Bad Faith
  • A Court Held there to be Improper Joinder of Defendants in 27 Different No-Fault RICO Fraud Schemes as the Plaintiff did not Assert a Right to Relief Against Each Arising from the Same Transaction or Occurrence.  The Court Retained One Group and Severed the Remainder Ordering a Separate Case be Opened for Each


Nicholas J. Heintzman

  • Court Orders Insurer to Fund 100% of Insured’s Asbestos Exposure Settlements because Insurer was the “Real Party in Interest” 
  • Insurance Law § 3420(d)(2)’s “Timely Disclosure” Requirement does not Apply to Protect Insurers from other Insurers


Heather Sanderson

[email protected]

  • Renovation v. Construction: Coverage under Homeowners’ Policies during Renos
  • Update: Whether a Commercial Property Policy Responds to Pure Loss of Use Prosperity Electric v. Aviva Insurance Company


Hey, stick around for another 23. 

Love and kisses (that’s how all coverage letters should be concluded):




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.

Dan D. Kohane

[email protected]

Agnes A. Wilewicz

[email protected]

Patricia A. Rauh

[email protected]


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
Thomas Casella
Brian D. Barnas
Eric T. Boron
Ryan P. Maxwell
Charles J. Englert
Patricia A. Rauh
Nicholas J. Heintzman
Diane F. Bosse
Joel R. Appelbaum


Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley
Scott D. Storm
Eric T. Boron
Brian D. Barnas


Dan D. Kohane
[email protected]

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

Storm’s SIU Examen

Heintzman’s Hideout

North of the Border


Dan D. Kohane
[email protected]

06/22/21       Bosquez v. RXR Realty
Appellate Division, First Department
Anti-subrogation Doctrine Does Not Apply Where Excess Policy’s Coverage Does Not Provide Coverage Because of Exclusion

Bosquez sued Hunter Roberts, RXR Pier 57, Super P57 (“defendants”) alleging Labor Law violations. The defendants then commenced the third-party action against Global, seeking contribution and common-law indemnification from Global, the injured plaintiff's employer.

Global moved to dismiss the' third-party complaint for failure to state a cause of action or, alternatively for summary judgment pursuant to CPLR 3212. Global asserted, among other things, that the common-law indemnity and contribution claims are barred by the anti-subrogation rule because Global is entitled to coverage under the same CCIP GL Tower policies as third-party plaintiffs.

The First Department affirmed the lower court that had found that (1) the anti-subrogation rule barred the third-party complaint only to the extent of the common coverage afforded by the Arch CGL Policy and Corridor Excess Policy; and (2) the anti-subrogation rule did not bar the claims covered under the Lead and High Excess Policies.

Thus, in effect, the court found that once the limits of liability of the Arch GL Policy and AIG Corridor Excess Policy are exhausted, third-party plaintiffs' indemnification and contribution claims could proceed against Global

The two excess policies that the court found are not implicated by the anti-subrogation rule are an umbrella liability policy (the AIG Lead Excess Policy) issued by AIG providing coverage in excess of the limits of a commercial general liability (CGL) policy issued by nonparty Arch and an excess liability policy (the AIG Corridor Express Policy) issued by AIG providing coverage in excess of the Arch CGL policy, and an excess liability policy (the AIG High Excess Policy) issued by Lexington providing coverage in excess of the other policies.

The AIG Lead Excess Policy and the AIG High Excess Policy (together, the AIG Excess Policies) contain an "Employer's Liability Exclusion Endorsement" that provides, "This Insurance does not apply to any liability arising out of Bodily Injury to an employee in the course of employment, where the obligation of any underlying insurer or self-insurance mechanism providing employer's liability coverage for the Insured is by law unlimited." Given the Workers' Compensation/Employer's Liability policy issued by Arch to Global, which provided for unlimited coverage for a worker's "grave injury" suffered at the job site in the scope of his employment (the Arch WCEL Policy), the endorsement in the AIG Excess Policies unambiguously excludes Global, as plaintiff's employer, from coverage under those policies. Accordingly, the anti-subrogation rule is not implicated.

Global argues alternatively that AIG (and by extension, defendants/third-party plaintiffs) should be estopped to disclaim coverage because it failed to do so in a timely manner. The AIG Excess Policies required Global to notify AIG of a claim in a timely manner, which Global failed to do. However, even if Global had given timely notice, AIG was never obligated to disclaim coverage to Global under the AIG Excess Policies, since these policies apply only after all other applicable underlying insurance limits have been exhausted, and those limits will never be exhausted in this case, because the Arch WCEL Policy unambiguously provides unlimited coverage to Global for an employee's grave injury. Since the AIG Excess Policies will never be triggered, AIG had no duty to disclaim coverage under them (Matter of Allcity Ins. Co. [Sioukas], 51 AD2d 525 [1st Dept 1976], affd 41 NY2d 872 [1977]).


06/17/21       McLaughlin v. Arch Insurance Company

Appellate Division, First Department
Arch’s “Other Insurance Claim” Deemed Untimely and Unavailing

Arch Specialty's motion in limine, which raised priority of coverage arguments just before trial, was an untimely dispositive motion, because Arch Specialty had failed to make those arguments in its motion for summary. In any event, the arguments are unavailing since "Other Insurance" disputes are inapplicable to disputes between insurers and because the schedule of underlying insurance listed only the $1 million policy issued by defendant Arch Insurance Company.

Based on the language in Arch Specialty's policy requiring it to defend when either "the 'underlying insurance' does not provide coverage or the limits of 'underlying insurance' have been exhausted," Arch Specialty is further obligated to pay the costs of the underlying defense plus interest. Under the "Supplementary Payments" provision in its policy, Arch Specialty is also required to pay postjudgment interest "where the duty to defend exists."

Based on the assignment of rights between plaintiffs and the defendants in the underlying action, Supreme Court correctly calculated postjudgment interest on the $1,175,000 portion of the judgment attributable to defendants Arch Insurance and Arch Specialty.


06/17/21       Allstate Insurance Company v. Bizounouya

Appellate Division, First Department
No SUM Claim Available for Person Who is Not a SUM Insured.

Bizounouya was a pedestrian who was struck by a car, was not an insured within the meaning of the supplemental uninsured/underinsured motorist (SUM) endorsement of the subject insurance policy and is therefore not entitled to SUM coverage or to demand arbitration under the policy.

In any event, respondent received $250,000 from the tortfeasor, which is more than the SUM coverage, which carried limits of $25,000 per person and $50,000 per occurrence. Consequently, under paragraph 6 of the SUM endorsement, petitioner is entitled to an offset of the $250,000, which would preclude recovery under the policy.


06/16/21       Matter of Global Liberty Insurance Company v. Kaler

Appellate Division, Second Department
Uninsured Motorist Coverage:  Where There is a Question of Fact About the Existence or Applicability of Motor Vehicle Coverage for Adverse Vehicle, Court Should Hold Framed Issue Hearing

This was an application to temporarily stay an uninsured motorists arbitration so as to conduct a hearing on the status of the tortfeasor’s insurance coverage on the day of the accident.

On May 5, 2018, the Singh vehicle, operated by Kaler, was supposed struck by a Lucas Vehicle is which Caesar was the drive “the adverse vehicle”). The Kaler vehicle was insured by Global Liberty. Kaler purportedly made a claim for coverage from Lucas's insurance carrier, Liberty Mutual Liberty Mutual disclaimed coverage on the basis,that at the time of the accident the adverse vehicle was being operated without Lucas's knowledge or permission.

On or about January 9, 2019, Kaler made a demand to Global for uninsured motorist coverage. On January 29, 2019, Global commenced this proceeding, inter alia, to stay arbitration of Kaler's claim for uninsured motorist benefits. Liberty Mutual opposed the petition.

The party seeking a stay of arbitration has the burden of showing the existence of sufficient evidentiary facts to establish a preliminary issue which would justify the stay. 'Then, the burden shifts to the party opposing the stay to rebut the prima facie showing.  Where a triable issue of fact is raised, the Supreme Court, not the arbitrator, must determine it in a framed-issue hearing, and the appropriate procedure under such circumstances is to temporarily stay arbitration pending a determination of the issue.

Here, the Global demonstrated the existence of sufficient evidentiary facts to establish a preliminary issue justifying a temporary stay.  From the police reports, it established the Liberty policy was in place and in opposition, Liberty Mutual raised a question of fact as to whether the adverse vehicle was being driven without the knowledge or permission of the insured at the time of the accident.

So, a framed-issue hearing is necessary to determine whether Liberty Mutual properly disclaimed coverage of the adverse vehicle.


06/16/21       Isidore Margel TrustTrustee v. Mt. Hawley Insurance Co. Appellate Division, Second Department
Tenant’s Policy for Landlord, Covering Leased Premises, Provided Additional Insured Coverage for Fall on Public Sidewalk Abutting Property as Sidewalk Critical for Entering and Leaving Property

Burtman commenced the underlying action against Mitzi Zank Trustee Isidor Margel Trust 12/29/1976 (“owner”) and its lessee, a laundromat (“tenant”), in which she alleged that she sustained injuries when she fell on a sidewalk abutting the Trust’s premises.

Mount Hawley issued a policy to the tenant that contained that an additional insured endorsement on a policy issued providing that the owner was an additional insured for liability "arising out of the ownership, maintenance or use" of that part of the premises leased to the tenant. Inasmuch as Administrative Code of the City of New York § 7-210 imposes liability on owners of commercial property for defective conditions on sidewalks, the plaintiff's potential liability arises from its ownership of the premises leased to the tenant.

Furthermore, the underlying action arises out of the maintenance or use of the leased premises, as the sidewalk was necessarily used for access in and out of the leased premises.


06/16/21       Durant v. State of New York

Appellate Division, Second Department
When Insurance Policy Secured by Tenant for Landlord Provides Coverage for  Premises Accident, Landlord is Entitled to a Defense under Policy

In March 2005, the New York Institute of Technology (“NYIT”) and the State University of New York (“ SUNY”) entered into an agreement whereby NYIT leased five buildings on SUNY's Old Westbury campus in order to house its students. NYIT agreed to be responsible for injuries arising from the use of the facilities, its appurtenances, and the surrounding grounds, and pursuant to e revocable permit, NYIT agreed to be responsible for injuries arising out of or in connection with its students "residing at The College."

In addition, NYIT to provide insurance protection for the benefit of the State of New York with limits of not less than $3 million for bodily injuries arising out of the execution of the agreement and  NYIT obtained a primary general liability insurance policy from United Educators Insurance Company (“United”).

In May 2011, the claimant, a NYIT student, was injured when he stepped into a hole next to a manhole, and in 2014, he commenced this claim against the State to recover damages for personal injuries. In turn, the State commenced a third-party claim against United seeking a judgment declaring that United is obligated to defend and indemnify it for the acts complained of in the main claim.

An insurer's duty to defend its insured arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the policy.An insurer may be relieved of its duty to defend if it demonstrates, as a matter of law, that there is no possible factual or legal basis on which it may be obligated to indemnify its insured under any policy provision.

Here, the Court of Claims properly granted the State's cross motion for summary judgment declaring that United is obligated to defend it in the main claim.


06/11/21       Haggerty v. Allstate Insurance Company
Appellate Division, Fourth Department
Six Year Contract Statute of Limitations Governs Uninsured Motorist Lawsuit

On August 6, 2010, plaintiff, while driving a vehicle owned by her mother, was involved in a motor vehicle accident with another vehicle. The driver of the other vehicle was not its owner, and that vehicle was not current with its registration.

Almost nine years later, plaintiff commenced this action to recover damages under the uninsured motorist endorsement of her mother's insurance policy with defendant, Allstate Insurance Company (Allstate). In its answer, Allstate asserted, inter alia, that the action was time-barred by the six-year statute of limitations for actions to recover damages for breach of contract.

Claims made under the uninsured motorist endorsement of automobile insurance policies are governed by the six-year statute of limitations applicable to contract actions.  The claim accrues either when the accident occurred or when the allegedly offending vehicle thereafter becomes uninsured.

Case dismissed.


06/11/21       O’Shei v. Utica First Insurance Company
Appellate Division, Fourth Department
Assault and Battery Exclusion, which Applied to Exclude Coverage for Man being Pushed Down Steps to his Death, Did Not Necessarily Apply to False Arrest Claim

William Sager, Jr. (“decedent”) sustained fatal injuries when a bar manager at a nightclub shoved him, causing him to fall down an entire flight of stairs. The bar manager ultimately pleaded guilty to manslaughter in the first degree (Penal Law § 125.20 [1]) and was sentenced to 18 years in prison. The nightclub at issue was operated by NHJB, Inc., doing business as Molly's Pub (NHJB), whose sole shareholder was Norman Habib. Plaintiff was an off-duty police officer providing security for the nightclub.

At all relevant times, NHJB and Habib were insured by a policy issued by Utica First, which disclaimed coverage when initially notified about the incident within days of its occurrence. After an action was commenced against plaintiff, NHJB, Habib, and other parties (Sager v City of Buffalo, 151 AD3d 1908 [4th Dept 2017]), plaintiff sought coverage from Utica First, which disclaimed coverage relying on, inter alia, an assault and battery exclusion contained within the policy.

Plaintiff thereafter commenced this declaratory judgment action. NHJB and Habib also commenced an action seeking, among other things, a declaration that Utica First was required to defend and indemnify them in the underlying lawsuit.

In a case we reported on in 2020, the Fourth Department held that NHJB and Habib, were not entitled to a defense under the Utica First policy.

In the instant action, plaintiff, the off duty police officer moved for summary judgment seeking, seeking a defense under the same policy. 

Although the court concluded in the other lawsuit. that the assault and battery exclusion in the policy issued by defendant precluded insurance coverage for NHJB and Habib it did not reach the same result here.

Some of the claims against the officer were not based on the bar manager’s assault.  Among other causes of action, the plaintiff in the underlying action alleged that plaintiff here unlawfully arrested decedent following the bar manager's assault,

There is an issue of fact whether plaintiff is an insured as that term is defined in the policy, i.e., whether, at the time of the incident, he was an employee of the nightclub acting within the scope of his employment.


06/10/21       Gomes v. Vornado 640 Fifth Avenue LLC
Appellate Division, First Department
It Looked Like a Duck, and Cited a Duck, but Was Not a Duck

This was a claim for contractual indemnity, not additional insured coverage.  The indemnity agreement had language similar to that found in additional insured endorsement, but with a significant difference.  This was a motion for summary judgment but a party who was being asked to provide contractual indemnity.  To succeed in that motion, it  had to establish (with emphasis added) that plaintiff's injuries were not "caused in whole or in part by any act or omission of [it] or those employed by it, or working under those employed by it at any level," as required by its subcontract with third-party plaintiff (Shawmut), the general contractor,

With that language, the causation requirement was satisfied by evidence that acts and/or omissions of plaintiff, a Curtis employee, in tripping over a power cord caused his injuries. Shawmut was not required to show that the accident was proximately caused by Curtis's negligence or other fault”

Editor’s Note – Again, this is not a case examining the breadth of additional insured endorsements and does not answer the question as to whether the acts or omissions of the injured plaintiff employed by the named insured, would lead to a finding that the named insured’s acts or omissions caused the injury.


Steven E. Peiper
[email protected]


06/17/21       McAleavey v. Chautauqua Patrons Ins. Co.
Appellate Division, Fourth Department
Reliance Upon Heating System can be Considered Reasonable Care

This claim arises out of a water damage loss that occurred at plaintiff’s seasonal lake home. Both parties acknowledged that the loss was caused by a frozen toilet which, upon thawing, leaked significant amounts of water through the premises.  The toilet froze because heat at the property was not maintained during the months of January and February. 

The parties likewise agreed that the loss was excluded by a provision removing coverage for loss occasioned by frozen plumbing systems.  That said, an exception to the exclusion applied where the insured used “reasonable care to…maintain heat in the building.” 

In reversing the trial court’s decision, the Appellate Division ruled that the term “reasonable care” was ambiguous, and thus was required to be interpreted against the drafter.  In so holding, the Court noted that the premises had a recently installed heating system and that plaintiff routinely visited the location to ensure that heat was at a sufficient level.

The Court does not explain what constitutes “reasonable care,” or whether the insurer’s interpretation was improper.  The decision does indicate that plaintiff failed to visit the premises for a period of approximately 45 days but determined that plaintiff’s interpretation of “reasonable care” included not being on notice of the heat failure.  In so holding, the Court distinguished this case from the current standard in the Third Department which held that failure to inspect the interior of a premises during winter months, when coupled with no other efforts to monitor the heat in the insured structure, was unreasonable as a matter of law.    


06/11/21       Colling Enterprises, LLC v. United Frontier Mut. Ins. Co.
Appellate Division, Fourth Department
Vacancy Exclusion Precludes Coverage for Fire Loss

Plaintiff’s building was damaged by an otherwise covered fire loss.  At the time of the loss, however, the building had been vacant for more than 60 days.  As a result, the policy’s vacancy exclusion applied. 

In rejecting plaintiff’s arguments to the contrary, the Court noted that the policyholder is presumed to know the contents of its policy.  As such, any argument that they were unaware of the limitation to coverage based upon vacancy is not a viable excuse.


Michael J. Dischley
[email protected]

06/17/21       Travis M. Scarincio v. Sarah K. Cerillo
Appellate Division, Third Department
Plaintiff Failed to Produce any Evidence Sufficient to Establish that Plaintiff Sustained a Serious Injury Within the Meaning of Insurance Law § 5102 (d)

This appeal was from an order of the Supreme Court (Muller, J.), entered February 20, 2020, in Warren County, which granted defendant's motion for summary judgment on the ground that plaintiff failed to suffer a serious injury pursuant to Insurance Law § 5102 [d], thereby dismissing the complaint.

The appellate Court found that the defendant submitted plaintiff's deposition testimony and medical records, which noted diagnoses of carpal tunnel syndrome and cervical sprain or strain. Various studies, including a CT scan, MRI and EMG study conducted at different times, revealed no abnormalities. Despite the EMG being negative and plaintiff having full range of motion with his wrist, he underwent a carpal tunnel release. The records do not reveal that plaintiff was subject to any restrictions or limitations regarding his wrist, even before the surgery, and records of a follow-up visit after the surgery indicate that plaintiff reported "much improvement" and represented that he was "rapidly getting better" with only occasional pain. As plaintiff had no noted limitations to his wrist, the diagnosed carpal tunnel syndrome was "not sufficiently significant to permit recovery beyond that authorized by the no-fault law".

With regard to plaintiff’s remaining injury claims, the appellate Court found that, although certain medical providers observed that plaintiff suffered a limited range of motion to his cervical spine, none of the records submitted by defendant contained objective measurements of plaintiff's range of motion or comparison to normal ranges. Further, plaintiff's medical records reveal that his treatment providers never imposed any restrictions on his work or other activities. Plaintiff testified that he had missed approximately 45 days of work since the accident, but clarified that he missed only three days of work immediately after the accident and the remainder of the time missed was partial workdays for medical appointments. Due to his injuries, plaintiff missed approximately 14 days of college classes over two years, which did not affect his ability to graduate on schedule. At his deposition, plaintiff testified that he is no longer able to lift objects over 25 pounds and that he has difficulty with daily activities, such as driving and carrying groceries, as well as leisure activities, including hunting, hiking and kayaking. Given the lack of medical restrictions and his ability to complete his work and school obligations, plaintiff's reported limitations in his leisure activities are not sufficient to satisfy the statutory threshold for the 90/180-day category.

Viewing the evidence in a light most favorable to plaintiff, defendant met her threshold burden of establishing that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d).

In opposition, plaintiff submitted additional records, including records from physical therapy and from medical evaluations performed on behalf of a no-fault insurance carrier. Although the physical therapy records state that plaintiff had reduced range of motion in his neck, it is unclear what diagnostic evaluation was employed to reach that finding. A physician's no-fault evaluation noted plaintiff's specific cervical ranges of motion, as measured in degrees by a bubble inclinometer, but failed to provide or explain a standard functioning range for comparison. Despite recommending that plaintiff could benefit from certain continued treatment, that physician concluded that plaintiff's prognosis was "good," there was no medical necessity for additional physical therapy or diagnostic testing and there were no restrictions on his "ability to work, attend school or participate in all his activities of daily living." A chiropractor's no-fault evaluation reported ranges of motion for plaintiff's cervical and thoracolumbar spine, as measured in degrees by an inclinometer, some of which were seemingly below a typical adult range of motion as compared to standard thresholds. Nonetheless, the chiropractor concluded that plaintiff did not need additional care or diagnostic testing. The chiropractor also found "no objective evidence of disability" and opined that plaintiff "can work without restrictions."

With regard to plaintiff's claim of significant limitation of use, the appellate Court found that plaintiff failed to demonstrate that he sustained more than a minor limitation. The no-fault evaluation records fall short of providing a qualitative or quantitative comparison of plaintiff's range of motion to the normal function, purpose and use of a spine that resulted in plaintiff suffering a disability. Each report separately noted that plaintiff's outlook was promising and that his normal activities were not impeded by his injuries; "absent limitations, there is no serious injury". As such, plaintiff failed to offer the proof necessary to raise a question of fact as to whether he had sustained a serious injury under this category. As plaintiff's own testimony and his medical records reveal that, beginning less than a week following the accident, he was able to perform substantially all of his work and school obligations with no — or, at best, limited — restrictions, his submissions failed to raise a question of fact regarding the 90/180-day category.

Accordingly, the appellate Court found that the Supreme Court properly granted defendant's motion for summary judgment dismissing the complaint.


Agnes A. Wilewicz

[email protected]

Nothing new under the Second Circuit sun.


Brian D. Barnas
[email protected]

06/22/21       Columbia Insurance Company v. Waymer
United States Court of Appeals, Fourth Circuit
Insurer did Not Act in Bad Faith by Declining Two Pre-Suit Settlement Offers

On December 16, 2013, William and Angela Reynolds suffered severe injuries when the car they were driving hit Christopher Waymer’s logging truck . An investigating officer later determined that Waymer had failed to yield the right of way and so was at fault.

Two weeks later, the Reynolds’, still in the hospital, hired attorney Mark Tinsley to represent them in their personal injury claims against Waymer. Tinsley quickly began his investigation, requesting hospital records to substantiate the Reynolds’ injuries. In part because the hospital had a policy of not releasing records until after patient discharge, Tinsley did not receive a first, still-incomplete set of records for Mr. Reynolds until January 27, 2014, and for Mrs. Reynolds until February 5, 2014.

Tinsley began communicating with CIC, Waymer’s insurer, about the claims.  On January 23, 2014, Tinsley made the first of two key settlement demands (the “January Settlement Demand”).  Although he had not yet received any substantiating medical records, he demanded the policy limits of $1 million and imposed a ten day deadline.  The attorney hired by CIC to represent Waymer contacted Tinsley halfway through the ten day deadline and requested authorizations.  However, Tinsley refused to extend the deadline , and the ten day period passed without action by CIC.

In early April 2014, Tinsley provided CIC with records showing medical costs of $407,595.15 for Mr. Reynolds, and $273,638.84 for Mrs. Reynolds. Three weeks later, CIC offered to pay the full $1 million policy limits.  In mid-May, the Reynolds’ rejected the policy-limits offer and responded with a second demand (the “May Settlement Demand”).  Tinsley claimed CIC had violated the duty of good faith and fair dealing when it failed to settle the claims in January.  As a result, it presented CIC with two options. 

Under the first, the parties would skip over any trial on liability or damages, litigating only whether CIC acted in bad faith when it rejected the January Settlement Demand. If the jury found bad faith, CIC would pay the Reynolds $3.5 million; if the jury found no bad faith, then CIC would pay the $1 million policy limits. Under the second option, the parties would litigate the extent of the Reynolds’ injuries as well as the existence of bad faith on CIC’s part. If the jury found CIC liable in bad faith, then CIC would pay whatever the jury found the Reynolds’ damages to be – without any right to appeal that verdict as excessive. If the jury found CIC had not acted in bad faith, then CIC again would owe the $1 million policy limits. Under either option, CIC would have to waive certain defenses regarding the real party in interest and the applicability of any release given by the Reynolds.  CIC was given 15 days.  IT rejected both proposals but reiterated its policy limits offer.

The claims were eventually put into suit.  After Waymer conceded liability, a special a special referee awarded $3.5 million to Mrs. Reynolds and $3 million to Mr. Reynolds. CIC then paid the Reynolds the $1 million in Waymer’s policy.

In the subsequent bad faith action, the Fourth Circuit, applying South Carolina law, concluded that CIC had not acted in bad faith in rejecting the January Settlement Demand and the May Settlement Demand.  The court found that an insurer is entitled to a reasonable time to investigate a claim, and no obligation exists to accept a settlement offer without time for investigation.  While CIC had indications that the accident would cause damages at or in excess of the policy limits in January, it lacked adequate information or opportunity to evaluate the risk of an excess judgment at the time the January Settlement Demand expired.

The court also concluded that CIC did not act in bad faith with respect to the May Settlement Demand.  South Carolina courts had not confronted cases involving settlement proposals with terms that would require an insurer to give up significant rights in future bad faith litigation.  The Fourth Circuit reviewed Florida law on the matter and concluded that a refusal to enter into such an agreement would not constitute bad faith if there was an objectively reasonable basis for refusing to do so.  The court found that CIC had a reasonable basis for refusing the May Settlement Demand.  As such, the bad faith claims were dismissed.


Lee S. Siegel
[email protected]

06/21/21        Trinidad Navarro v. Allied World Surplus Lines Insurance United States District Court, District of Connecticut

Court Holds “In Any Capacity” May not Mean All Capacities

This million dollar battle between defunct insurers will continue, Connecticut federal Judge Kari Dooley ruled in denying the defendant’s motion to dismiss. This case poses the question whether an insurance commissioner, in their role as receiver or liquidator, acts in any government capacity when it brings suit on behalf of a defunct entity. Judge Dooley ruled that it’s not as clear as it seems.

Now, it’s time to get out your pens and pencils so you can follow along. Carrier Solutions Risk Retention Group, Inc., is the assignee of USA Risk Group (West), Inc. CSRRG was a Delaware Insurance Risk Retention Group, established as a captive insurer providing liability insurance to trucking companies that offered self-funded health plans to their employees. CSRRG went belly-up. The Delaware Chancery Court appointed the Delaware Insurance Commissioner as the Receiver in the liquidation with authority to sue and defend on CSRRG's behalf. USA Risk was CSRRG's captive manager, a role which involved assisting CSRRG with the preparation of corporate and insurance regulatory filings and other tasks related to forming and operating a risk retention group under Delaware law. USA Risk was insured under a $3 million claims-made Insurance Agents and Brokers Professional Liability policy issued by Darwin Select Insurance Company. The policy contained a $25,000 sub-limit of liability for “each Claim and in the aggregate for all Governmental Claims under Insuring Agreement B.” Darwin was absorbed by Allied World in 2008.

In August  2010, CSRRG put USA Risk on notice of a potential claim arising from services provided by USA Risk prior to the liquidation, and in May 2012 the Commissioner, in his capacity as Receiver, brought suit against USA Risk in the name of CSRRG, alleging that USA Risk contributed to CSRRG's insolvency. USA Risk tendered the complaint to Allied World. While Allied World accepted the tender in 2012, by 2015 it changed its tune, withdrawing from the defense. Allied World claimed that the suit fell under the policy’s coverage B, and USA Risk was only entitled to the $25,000 sub-limit, which included defense expenses. CSRRG and USA Risk them settled its litigation for $1 million, with USA Risk assigning its rights under the policy to the Commissioner.

The Commissioner commenced this suit against Allied World in Connecticut federal court seeking coverage for the full settlement amount under the policy’s main coverage grant. The Commissioner asserted that “[t]he Underlying Litigation does not constitute a ‘Governmental Claim’ under the Policy,” as “[t]he Receiver of CSRRG is not acting in his capacity as the insurance commissioner nor are the acts of the Receiver those of the Delaware Department of Insurance.”

The policy defines a Governmental Claim as: “a Claim or investigation brought by any federal, state or municipal agency, insurance department, or other governmental or quasi-governmental authority, in any capacity, whether in its own right, on behalf of an individual or entity, or by an individual or entity on the agency's or authority's behalf.” (Emphasis added.) But the policy continues: “A Governmental Claim shall not include any Claim brought by a governmental entity solely in its capacity as a customer or client of the Insured, and seeking only remedies available to a similarly situated private claimant. Such Claims may be covered under Insuring Agreement A of this Policy, if not otherwise excluded under the terms, conditions and exclusions of this Policy.”

Allied World filed a motion to dismiss the coverage action, arguing that the CSRRG action against USA Risk was a Government Claim, as defined by the policy and, therefore, the sub-limit applied. Allied World contended that the Commissioner brought the suit “in any capacity” thus satisfying the definition of Government Claim. It also pointed out that the Commissioner was never a client of USA Risk, so the customer exception was inapplicable. The court was not convinced.

The definition of a Governmental Claim is silent on the question of whether, even if a government official is a “governmental authority,” and includes a government official operating in a private context, the court wrote. That court found persuasive the argument that the underlying litigation was not a Governmental Claim because the Commissioner was not acting in his capacity as a government official but, rather, brought the action as a private receiver on behalf of an insolvent insurer. This position, the court continued, finds support in the law, and is consistent with the nature of a receivership.

Courts have recognized that when an insurance commissioner is appointed under state law as the receiver of an insolvent insurer, the receiver is understood to act on behalf of the insolvent insurer, not on behalf of the state government. For example, the court pointed out, in Dinallo v. DiNapoli, 9 N.Y.3d 94, 97 (2007), the New York Court of Appeals (New York’s highest court) explained that the New York “Superintendent of Insurance serves in two distinct capacities: (1) as supervisor and regulator of New York State's insurance industry as a whole ... and (2) as a court-appointed receiver on behalf of distressed insurers,” which, in the latter role, confers “upon the Superintendent broad fiduciary powers to manage the affairs of distressed domestic insurers and to marshal and disburse their assets.” The Court of Appeals rejected the notion that the assets of a liquidated insurer are held by the Superintendent in his capacity as a state official under New York finance law, observing that “while the Superintendent's role as liquidator is judicial and private, his role as regulator and supervisor is administrative and public.”

Allied World countered that under Delaware law, the Commissioner is the only individual who can be designated a receiver and the Commissioner's initiation of a lawsuit on behalf of the insolvent insurer is an exercise of his governmental role—and, therefore, the claim is brought by a governmental agency “in any capacity.” The argument was unavailing. This argument is beside the point, wrote Judge Dooley. “The fact that the Commissioner is the Receiver by operation of statute does not change the fundamentally private nature of the Underlying Litigation.” The Commissioner, the court concluded, was not acting to advance the Delaware's interests, but sought only to recoup losses on behalf of CSRRG. “Under these circumstances it is not clear that the Commissioner was a “governmental authority” advancing a “Governmental Claim” under the Policy. And it is decidedly not indisputable that he was.” The court denied the motion and while not dispositive of the final outcome, the writing is on the wall.

Allied World’s statute of limitations defense failed in the context of a motion to dismiss. Allied World argued that it denied coverage in 2012 but that the Commissioner failed to bring suit until 2020, running afoul of Connecticut’s six-year statute of limitations for breach of contract. The court observed that the complaint alleged that Allied World withdrew from the defense in 2015, without reference to 2012. These are merely competing allegations at this juncture, the court ruled, and resolution of the dispute requires a factual inquiry beyond the face of the complaint.


BUCCI on “B”
Diane L. Bucci

06/16/21       Starr Indem. & Liab. Co. v. Choice Hotels Int'l, Inc.
United States District Court for the Southern District of New York
Assault and Molestation Exclusion Does Not Defeat Coverage For Hotel Against Claims of Human Trafficking

Choice Hotels International, Inc. (“Choice”) was an additional insured on the policy issued to Quality Inn (the Hotel”) franchise owner, Manibah.  Choice was sued by victim (“BH”) alleging that she suffered brutal incidents of human trafficking that occurred on the premises of the Hotel, a Choice franchise.  BH alleged that she went out with a man, a paying customer at the Hotel, and went back to the Hotel with him afterwards.   While she went in with one man, she was ambushed by him and two other men.  She alleged that through the use of force and violence, she was held captive at the Hotel and forced to engage in sex acts with paying customers, and that, based on the circumstances of her captivity, Choice “knew or should have known” of the trafficking venture and her forced captivity. BH’s details were graphic; she told of days on end being sold, raped, drugged, and starved. 

In addition to a claim for the facilitation of sexual abuse, BH brought a claim under the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008 (the “TVPRA”), 18 U.S.C. § 1595 asserting that Choice “had a statutory obligation not to benefit financially from a venture that they knew, or should have known” was forcibly coercing a person to engage in commercial sex. The statute provides:

An individual who is a victim of a violation of this chapter may bring a civil action against the perpetrator (or whoever knowingly benefits, financially or by receiving anything of value from participation in a venture which that person knew or should have known has engaged in an act in violation of this chapter) in an appropriate district court of the United States and may recover damages and reasonable attorneys fees.

The Coverage B offense of “[f]alse arrest, detention or imprisonment ....” was, at least applicable to the duty to defend.  Starr denied coverage, however, based on its Abuse or Molestation Exclusion that defeated coverage for:

1. The actual or threatened abuse or molestation by anyone of any person while in the care, custody or control of any insured, or

2. The negligent:

a. Employment;

b. Investigation;

c. Supervision;

d. Reporting to the proper authorities, or failure to report; or

e. Retention;

of a person for whom any insured is or ever was legally responsible and whose conduct would be excluded by Paragraph 1. above. 

Starr argued that because BH was a business invitee of a paying customer, the Hotel had a duty of care, and thus BH was under the care, custody, and control the Hotel/Choice. According to the court, Starr’s position conflated the standards of the well-established common law duty of care, with the “care, custody, or control” language in the exclusion. 

The court applied “the principles of ejusdem generis, a rule of construction, that counsels that the meaning of a word in a series of words is [to be] determined by the company it keeps. In accordance with that rule, a series of specific words describing things or concepts of a particular sort are used to explain the meaning of a general one in the same series.” (citations omitted).  The court addressed the meanings of care, custody and control to hold that the exclusion language was not coextensive with a common law duty of care.

Turning to precedent and Blacks Legal Dictionary, the court concluded that care meant, “serious attention,” especially “attention accompanied by caution ... or responsibility.” “Serious attention; heed.”  See, e.g., Valley Forge Ins. Co. v. Field, 670 F.3d 93, 99 (1st Cir. 2012); Black's Law Dictionary (7th ed. 1999).  It relied on Black’s again for the definition of custody and control, as follows:

“[C]ustody” is “[t]he care and control of a thing or person for inspection, preservation, or security,”…“control” is “[t]he direct or indirect power to direct the management and policies of a person or entity ....” Id.

According to the court, the term “care” in the exclusion had to be consistent with the terms custody and control and these terms, considered together, establish that the duty of care is not “care” as in the exclusion but care as in custody and control.  Consequently, held the court, “care” in the exclusion should be afforded a plain and ordinary meaning and not be interpreted as coextensive to a legal duty of care in the absence of language so stating.  The court recognized that the common law duty of care is a well-established, widely understood concept in the law of negligence, and held that if Starr wanted to defeat the duty of care, it would have to so provide in its policy. 

Specifically, the court held that the word “care,” as used in the Abuse or Molestation exclusion “refers to the insured's “charge, supervision, management: responsibility for or attention to safety and well-being,” or to a person given the insured's “serious attention” or “heed.”

Starr argued that the presence on an insured's premises means the person is under the insured’s care custody and control.  The court disagreed, acknowledging that presence may be relevant to care custody or control, but a person may be on an insured's premises and not be in “care, custody or control” of the insured, and, conversely, the person may be off the insured's premises and yet be “in the care, custody or control” whose conduct would be excluded by Paragraph 1. 

Starr next argued that Paragraph 2 excludes coverage arising out of “[t]he negligent: a. Employment; b. Investigation; c. Supervision; d. Reporting to the proper authorities, or failure to report; or e. Retention; of a person for whom any insured is or ever was legally responsible and whose conduct would be excluded by Paragraph 1. above” created a duty on the part of an insured to report the incident.   As expected, the court held that the exclusion did not create an obligation to investigate or report a victim's circumstances, and instead spoke to negligence related to the “conduct” “of a person” under the insured's legal responsibility, such as an employee or volunteer.

After having distinguished the two uses of “care,” the court went on to hold that BH’s complaint did not just involve falling into the care of the Hotel, which may mean that the court did see the argument that BH was in its care.  

However, the court had other reasons to hold that Starr had a duty to defend.  For example, B.H. alleged that the traffickers prevented discovery by prohibiting  against speaking with staff and their seizure of her phone and identification.  She thus could not be in the Hotel’s care given the adopted definition, because the Hotel did not know of her.  But this did not prevent a claim under the TVPRA because it did not require Choice’s knowledge of the acts but only that it should have known.  Thus arguably, the TVPRA did not fall within the exclusion. 

Also, BH alleged that after she was first raped, she escaped, and was then kidnapped by the traffickers while she was walking down the street.  She alleged that she was forced to walk prostitution trails that had no relationship with the Hotel.  Consequently, since she was not always present, she would not be in the care, custody or control of the Hotel at all times in any event, triggering the duty to defend. 

The court noted that even though B.H. did not allege false imprisonment, she did use the term “false imprisonment” to describe her confinement, alleging that “[w]hile victimized by her traffickers, B.H. was subject to repeated instances of rape, physical abuse, verbal abuse, exploitation, psychological torment, kidnapping, and false imprisonment at the Defendant's hotel.” 

The court held that her false imprisonment claims were intertwined with her kidnapping and trafficking. Relying on The Village of Piermont v. Am. Alternative Ins. Corp., 151 F. Supp. 3d 438, 451 (S.D.N.Y. 2015), the court held that false imprisonment does not fit within the definition of abuse or molestation (citing Piermont, holding that the insurer had a duty to defend its insured in an underlying proceeding because “the false imprisonment allegations do not fit under either of the ‘sexual abuse’ or ‘sexual harassment’ definitions.”).  In sum, the court held that the molestation and abuse by a third party unbeknownst to the Hotel could not give rise to the application of the exclusion especially as it pertains to the duty to defend. 

Editor’s Note:  Steve Peiper served as local counsel for the Choice Hotels on this one.


United States District Court for the District of Utah
Bait and Switch is Not an Advertising Injury

Sentinel insured Derma Pen, LLC (“Derma Pen”), the entity that brought suit against 4EverYoung, Ltd. (“4EverYoung”) for claims that are not addressed.  The facts are that the two entities entered into an exclusive distribution agreement (“Agreement”) whereby Derma Pen was to distribute 4EverYoung’s product, a micro-needling device called the “Dermapen.” Under the Agreement, Derma Pen, LLC was granted the exclusive right to distribute 4EverYoung products (such as the Dermapen).  It also owned the United States trademark rights to “Dermapen.”  Derma Pen terminated the Agreement. 

4EverYoung crossclaimed alleging that it advised Derma Pen of its intention and right to exercise its post-termination rights to purchase the United States trademark rights.  It alleged that Derma Pen attempted to avoid the transaction, but 4EverYoung obtained equitable rights to the trademark.  It was alleged that Derma Pen continued to use the trademark to market and sell 4EverYoung’s inventory and new counterfeit products. 

4EverYoung's Counterclaim asserted 11 causes of action: (1) breach of contract; (2) breach of covenant of good faith and fair dealing; (3) common law and statutory fraudulent transfer; (4) unjust enrichment; (5) tortious interference with business relations; (6) conversion; (7) civil conspiracy; (8) trademark infringement; (9) trade name infringement; (10) unfair competition pursuant to 15 U.S.C. § 1125(a); and (11) false designation of origin pursuant to 15 U.S.C. § 1125(a).

The dispute at issue was whether 4EveryYoung’s counterclaim alleged an advertising injury that was covered under the policy under the offense of copying, in your “advertisement”, a person's or organization's “advertising idea” or style of “advertisement”;, which was amended to include advertising on websites.  The court stated that:

To determine whether an insurer has a duty to defend an “advertising injury” claim, the Tenth Circuit Court of Appeals has promulgated a two-part test. First, the complaint must allege a type of conduct specifically listed in the policy's definition of “advertising injury.” And second, there must be a causal connection between the alleged injuries and the insured's advertising activities. The factual allegations of 4EverYoung's Counterclaim are the focus of the inquiry.

The court held that 4EverYoung’s claims did not involve an advertising injury.  Derma Pen argued that the thrust of 4Ever Young’s claim was that Derma Pen misled the public by imitating 4EverYoung’s advertising or its advertising style. 

The court disagreed, holding that 4EverYoung's counterclaim alleged that Derma Pen passed off 4EverYoung's intellectual property and products as Derma Pen's own, and passed off Derma Pen's actions, goods, and services as being performed by, made by, approved by, sponsored by, or affiliated with 4EverYoung. There was no question that 4EverYoung's counterclaim alleged that Derma Pen sold counterfeit products and included blatantly untrue statements in its marketing, such as calling the products 100 % original. 

However, relying in part on Hartford Cas. Ins. v., No. 2:10-CV-01098 BSJ, 2012 WL 965089, at *9 (D. Utah Mar. 20, 2012), court held that the allegations made by 4EverYoung arose out of or were inseparably connected with Derma Pen’s continued use of the trademark in connection with both 4EverYoung inventory and the counterfeit products.  In addition, the court noted that policy excluded  “[t]he design, printed material, information or images contained in, on or upon the packaging or labeling of any goods or products, from the definition of “advertisement,” and separately noted that a product is not an advertisement and copying another product in not an advertisement or an advertising idea. In Hartford, the court held that there was no coverage for a slogan infringement claim because it was “intrinsically and inseparably” tied to a bait and switch scheme.  

After finding that the counterclaim did not allege an advertising injury, the court went on to address exclusions in the alternative, including the Breach of Contract, Intellectual Property, and Domain Name Exclusions and held that they all defeated coverage.  While the Breach of Contract Exclusion has an exception for some advertising injury, the court had already held that 4EverYoung’s allegations did not give rise to an advertising injury,

The Intellectual Property exclusion precluded coverage for injury:

(a) “[a]rising out of any actual or alleged infringement or violation of any intellectual property right, such as copyright, patent, trademark, trade name, trade secret, service mark or other designation of origin or authenticity;” or

(b) “[a]ny injury or damage alleged in any claim or ‘suit’ that also alleges an infringement or violation of any intellectual property right.”

There was no question for the court that this exclusion on its face was applicable, but the court considered the exception for:

[T]his exclusion does not apply if the only allegation in the claim or ‘suit’ involving any intellectual property right is limited to: (1) Infringement, in [the insured's] ‘advertisement’, of: (a) Copyright; (b) Slogan; or (c) Title of any literary or artistic work; or (2) Copying, in [the insured's] ‘advertisement’, a person's or organization's ‘advertising idea’ or style of ‘advertisement’.”

The court found that 4EverYoung alleged more than infringement in Derma Pen's advertisement or copying in Derma Pen's advertisement of 4EverYoung's advertising idea or style of advertisement, thus it was not the only allegation.  Moreover, the infringement exception did not apply to trademark infringement.  As noted, the court had already held that the allegations did not make out an advertising injury even by a broadened endorsement that included advertising in website and internet activities.  Held the court, the claim did not allege advertising injury in connection with websites or internet activities either. 

The court stated that even if the broadened exception applied, coverage would still be defeated by the Domain Name Exclusion, which defeated coverage for “any advertising injury “[a]rising out of the unauthorized use of another's name or product in [Derma Pen's] e-mail address, domain name or metatags, or any other similar tactics to mislead another's potential customers.” According to the court, 4EverYoung’s allegations regarding internet activities arose out of the unauthorized use of “Dermapen,” including in its domain name.  


Brian F. Mark
[email protected]

No interesting construction defect cases this week.


Eric T. Boron
[email protected]

06/17/21       Mississippi Farm Bureau Casualty Ins. Co. vs. Hardin
Supreme Court of Mississippi 
Homeowner’s Policy – Lower Court’s Denial of Summary Judgment to Insurer Reversed on Appeal by Supreme Court – No Coverage of Insured’s First-Party Property Damage Claim

The key background facts are as follows.  Ms. Hardin alleged that in November 2013 she noticed a “sudden collapse” of the flooring in her house and reported this to her home insurer Mississippi Farm Bureau (“Farm Bureau”).  Farm Bureau investigated the loss and determined that only part of the loss would be covered under Ms. Hardin’s homeowner’s policy, offering Ms. Hardin $3,043.35 to cover the damage to the area under the shower in the home. Ms. Hardin did not accept the offer, arguing she was entitled to recover for the “total collapse” of the property and for mold damage. Ms. Hardin sued Farm Bureau, asserting causes of action for specific performance, breach of contract, fraud, misrepresentation, damages, emotional harm and upset, depression, attorneys’ fees, costs of litigation.  Punitive damages were also sought by Ms. Hardin.  The lower court granted summary judgment to Ms. Hardin, and Farm Bureau appealed.

Farm Bureau argued to the Supreme Court of Mississippi that because the damage to Ms. Hardin’s home resulted from the Town of Leakesville’s (such an appropriate name, don’t you think?) filling in of the ditch near Ms. Hardin’s home, the damage did not fall within a “Peril Insured Against” under the policy.  Farm Bureau further maintained that because Ms. Hardin’s home was still standing, the home was not in a state of collapse as defined by the policy and therefore there is no collapse coverage triggered.  Farm Bureau also argued that because the Town’s filling in of the ditch beside Ms. Hardin’s home caused the long-term excess moisture under the home and the resultant mold, the policy’s “Water Damage Exclusion” applies.

The Supreme Court of Mississippi determined that Ms. Hardin’s own deposition testimony evidenced that her property damage was the result of accidental discharge of water that occurred off the resident premises. Under the terms of the policy, the damage is only covered if it is caused by a “Peril Insured Against.” The water damage to Ms. Hardin’s home was not a Peril Insured Against under the policy, and on such a factual basis the trial court’s decision was reversed, and summary judgment was granted to Farm Bureau.

As to Ms. Hardin’s assertion that collapse coverage afforded by her homeowner’s policy should apply, the Supreme Court noted that the policy defines “collapse” as “an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its current intended purpose.” Supreme Court again cited Ms. Hardin’s deposition testimony, this time her testimony admitting her house was still standing, even if it was showing signs of sagging, to determine that collapse coverage was not triggered under the facts of this claim – because there had been no “collapse” of the building.  Finally, Supreme Court also determined the policy’s broad water exclusion applied to bar coverage for Ms. Hardin’s loss.  


Ryan P. Maxwell
[email protected]

Regulatory Wrap-Up

06/14/21       Public Comment to SEC Regarding Climate Change Disclosures
Department of Financial Services
DFS Recommends That SEC Establish Useful and Reliable Climate Change Disclosures

On Monday of last week, New York Department of Financial Services (DFS) Superintendent Linda Lacewell announced the Department’s recommendation that the SEC “establish decision-useful, consistent, comparable, and reliable climate change disclosure requirements, in response to a request for input by Acting SEC Chair Allison Herren Lee,” on March 15, 2021 (available here).

In the letter penned by the Superintendent, Lacewell advises that “DFS has issued proposed Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change (“Guidance”), which is open for public comment until June 23, 2021, following a Circular Letter on Climate Change and Financial Risks for the New York regulated insurance industry dated September 22, 2020. DFS also issued an Industry Letter on Climate Change and Financial Risks dated October 29, 2020 to New York-regulated depository and nondepository institutions.” Recall that DFS is the first and only U.S. financial regulator to set expectations for the management of financial risks from climate change.

According to DFS, “[m]any large DFS regulated entities, especially insurance companies, have communicated to DFS that the lack of such data is a major impediment as they seek to manage their financial risks from climate change.”

The SEC posed a number of questions for consideration and comment:

  1. How can the Commission best regulate, monitor, review, and guide climate change disclosures in order to provide more consistent, comparable, and reliable information for investors while also providing greater clarity to registrants as to what is expected of them? Where and how should such disclosures be provided? Should any such disclosures be included in annual reports, other periodic filings, or otherwise be furnished?

  2. What information related to climate risks can be quantified and measured?How are markets currently using quantified information? Are there specific metrics on which all registrants should report (such as, for example, scopes 1, 2, and 3 greenhouse gas emissions, and greenhouse gas reduction goals)? What quantified and measured information or metrics should be disclosed because it may be material to an investment or voting decision?Should disclosures be tiered or scaled based on the size and/or type of registrant)? If so, how? Should disclosures be phased in over time? If so, how? How are markets evaluating and pricing externalities of contributions to climate change? Do climate change related impacts affect the cost of capital, and if so, how and in what ways? How have registrants or investors analyzed risks and costs associated with climate change? What are registrants doing internally to evaluate or project climate scenarios, and what information from or about such internal evaluations should be disclosed to investors to inform investment and voting decisions? How does the absence or presence of robust carbon markets impact firms’ analysis of the risks and costs associated with climate change?

  3. What are the advantages and disadvantages of permitting investors, registrants, and other industry participants to develop disclosure standards mutually agreed by them? Should those standards satisfy minimum disclosure requirements established by the Commission? How should such a system work? What minimum disclosure requirements should the Commission establish if it were to allow industry-led disclosure standards? What level of granularity should be used to define industries (e.g., two-digit SIC, four-digit SIC, etc.)?

  4. What are the advantages and disadvantages of establishing different climate change reporting standards for different industries, such as the financial sector, oil and gas, transportation, etc.? How should any such industry-focused standards be developed and implemented?

  5. What are the advantages and disadvantages of rules that incorporate or draw on existing frameworks, such as, for example, those developed by the Task Force on Climate-Related Financial Disclosures (TCFD), the Sustainability Accounting Standards Board (SASB), and the Climate Disclosure Standards Board (CDSB)?[7] Are there any specific frameworks that the Commission should consider? If so, which frameworks and why?

  6. How should any disclosure requirements be updated, improved, augmented, or otherwise changed over time? Should the Commission itself carry out these tasks, or should it adopt or identify criteria for identifying other organization(s) to do so? If the latter, what organization(s) should be responsible for doing so, and what role should the Commission play in governance or funding? Should the Commission designate a climate or ESG disclosure standard setter? If so, what should the characteristics of such a standard setter be? Is there an existing climate disclosure standard setter that the Commission should consider?

  7. What is the best approach for requiring climate-related disclosures? For example, should any such disclosures be incorporated into existing rules such as Regulation S-K or Regulation S-X, or should a new regulation devoted entirely to climate risks, opportunities, and impacts be promulgated? Should any such disclosures be filed with or furnished to the Commission?

  8. How, if at all, should registrants disclose their internal governance and oversight of climate-related issues? For example, what are the advantages and disadvantages of requiring disclosure concerning the connection between executive or employee compensation and climate change risks and impacts?

  9. What are the advantages and disadvantages of developing a single set of global standards applicable to companies around the world, including registrants under the Commission’s rules, versus multiple standard setters and standards? If there were to be a single standard setter and set of standards, which one should it be? What are the advantages and disadvantages of establishing a minimum global set of standards as a baseline that individual jurisdictions could build on versus a comprehensive set of standards? If there are multiple standard setters, how can standards be aligned to enhance comparability and reliability? What should be the interaction between any global standard and Commission requirements? If the Commission were to endorse or incorporate a global standard, what are the advantages and disadvantages of having mandatory compliance?

  10. How should disclosures under any such standards be enforced or assessed?For example, what are the advantages and disadvantages of making disclosures subject to audit or another form of assurance? If there is an audit or assurance process or requirement, what organization(s) should perform such tasks? What relationship should the Commission or other existing bodies have to such tasks? What assurance framework should the Commission consider requiring or permitting?

  11. Should the Commission consider other measures to ensure the reliability of climate-related disclosures? Should the Commission, for example, consider whether management’s annual report on internal control over financial reporting and related requirements should be updated to ensure sufficient analysis of controls around climate reporting? Should the Commission consider requiring a certification by the CEO, CFO, or other corporate officer relating to climate disclosures?

  12. What are the advantages and disadvantages of a “comply or explain” framework for climate change that would permit registrants to either comply with, or if they do not comply, explain why they have not complied with the disclosure rules? How should this work? Should “comply or explain” apply to all climate change disclosures or just select ones, and why?

  13. How should the Commission craft rules that elicit meaningful discussion of the registrant’s views on its climate-related risks and opportunities? What are the advantages and disadvantages of requiring disclosed metrics to be accompanied with a sustainability disclosure and analysis section similar to the current Management’s Discussion and Analysis of Financial Condition and Results of Operations?

  14. What climate-related information is available with respect to private companies, and how should the Commission’s rules address private companies’ climate disclosures, such as through exempt offerings, or its oversight of certain investment advisers and funds?

  15. In addition to climate-related disclosure, the staff is evaluating a range of disclosure issues under the heading of environmental, social, and governance, or ESG, matters. Should climate-related requirements be one component of a broader ESG disclosure framework? How should the Commission craft climate-related disclosure requirements that would complement a broader ESG disclosure standard? How do climate-related disclosure issues relate to the broader spectrum of ESG disclosure issues?

In response to the SEC’s request for public input on climate risk disclosures, DFS issued the following recommendations:

  • Require consistent, comparable, and timely disclosures on governance, business strategies, and risk management related to the material risks from climate change that companies face;

  • Take a proportionate approach that reflects each institution’s exposure to climate risks and the nature, scale, and complexity of each institution’s business; and

  • Balance disclosure requirements and regulatory burdens while coordinating with other regulators.


06/10/21       NY Domestic Insurer’s Exposure From Low-Carbon Transition
Department of Financial Services
DFS Issues Report Supporting NY Insurers’ Efforts to Manage their Exposure to Low-Carbon Transition Financial Risks

Two weeks ago, the New York Department of Financial Services (DFS) issued a new report analyzing New York domestic insurers’ exposure to the financial risks arising from society’s transition towards a low-carbon economy.

DFS’ draws attention to the limits of its recently proposed Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change, advising that the impact of climate change on insurers’ investments receives less attention than the impact of climate change on insurers’ liabilities, and low-carbon transition risks are less understood than climate-related physical risks. Accordingly, DFS issued this report “intended to provide insurers with an example of a tool that can help them analyze their transition risks and inform actions to mitigate them.

Among the findings of the report:

  • New York domestic insurers’ investments had meaningful exposure to carbon intensive sectors. The U.S. recently rejoined the Paris Agreement, which seeks to keep global temperature rise in this century to well below 2°C above pre-industrial levels.The five-year forward-looking capital plans of most companies in these sectors in which insurers had invested were not aligned with the Paris Agreement, with the exception of natural gas production, natural gas-fired power generation, and electric vehicle production.In many cases, insurers’ portfolios were less Paris-aligned than market benchmarks.

  • Life insurers generally had greater exposure to carbon intensive sectors than P&C and health insurers. Exposure to high-carbon technologies also varied dramatically among individual insurers.While most insurers had single-digit exposures to the fossil fuel sector as a percentage of their corporate bond and equity portfolios, several P&C insurers and a few life insurers had exposures that were significantly higher.When insurers underinvest in low-carbon technologies, they are exposed to greater transition risks and miss out on many of the opportunities that arise from the low-carbon transition.

In accordance with the report’s findings, DFS outlined investment-related strategies that insurers can consider to mitigate their transition risk exposure, including divestment, investment, exclusion, engagement, and setting climate-related investment conditions. However, DFS makes clear that it does not dictate insurers’ investment activities.


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

06/11/21       Office Solutions Group v. National Fire Ins. Co. of Hartford
United States District Court, Southern District Of New York
Direct Physical Loss Still Means Direct Physical Loss in COVID-19 Business Interruption Claims

Plaintiff specializes in office project management and furniture installation, conducting a majority of its business at its offices in Midtown Manhattan. In June 2019 plaintiff and defendant entered into an insurance agreement. Plaintiff initiated this action seeking a declaratory judgement to affirm that the insurance agreement between it and defendant provides coverage for losses related to the COVID-19 pandemic, defendant then files a motion to dismiss the complaint.

The insurance agreement provided that defendant agreed to indemnify Plaintiff against specified losses at its   office under the “Business Property Coverage” and “Civil Authority Coverage” provisions of the Policy.  The Business Property Coverage includes “direct physical loss of or damage to property” and coverage is further extended for losses caused by the action of civil authority.  The Policy explicitly excludes coverage for certain specified losses, including those caused by microbes, which it defines to include viruses (the “Microbe Exclusion”).

In March 2020 plaintiff closed its Midtown Manhattan office space due to the rapid spread of COVID-19 and the various executive orders issued by New York State Governor Andrew Cuomo. Plaintiff suffered substantial losses from the loss of use of its office space and ultimately laid off thirty-five employees. Plaintiff sought coverage for its losses, which Defendant denied. 

Plaintiff purchased the insurance policy at issue (the “Policy”) from Defendant for the period of June 27, 2019 to June 27, 2020. Plaintiff alleges that the Policy is an all-risk policy, providing coverage for all perils unless explicitly excluded or limited in the Policy and asserts that the Policy includes “property, business personal property, business income and extra expense, contamination coverage, and additional coverages.”

The   Business Property Coverage provisions require “direct physical loss of or damage to” the covered property to trigger coverage:

Personal Property Coverage

The  Insurer  will  pay  for  direct  physical  loss  of  or  damage  to  personal  property  at  a  location directly caused by a covered peril. The most the Insurer will pay for any one occurrence for such loss or damage is the applicable Personal Property  Coverage  Limit  of  Insurance  shown  in  the  Business Property Schedule of Locations at that location . . . .

Business Income Coverage

The Insurer will pay for the actual loss of business income the Named Insured sustains during the period of restoration due to the necessary suspension or delay of operations caused by direct physical loss of or damage to property at a location directly caused by a covered peril . . . . Extra Expense Coverage   

The  Insurer  will  pay  extra  expense  caused  by direct  physical  loss  of  or  damage  to  property at a location directly caused by a covered peril.

The Policy includes Civil Authority Coverage, which provides coverage for lost business income and extra expense for closures caused when civil authorities prohibit access to the covered property:

For up to the number of days shown on the Business Property Schedule of Coverages and Limits, the Insurer will pay, as provided, for:  i.The  actual  loss  of  business  income  the  Named  Insured  sustains  during  the  period of restoration due to the necessary suspension or delay of operations;  ii.the  actual  loss  of  research  and  development  business  income  the  Named  Insured  sustains  during  the  period  of  restoration  due  to  the  necessary  suspension or delay of the research and development projects; and  iii.extra expense, caused  by  action  of  civil  authority  that  prohibits  access  to  the  location  or  reported  unspecified location. Such action must result from a civil authority’s response to direct physical  loss  of  or  damage  to  property  located  away  from  a  location  or  reported  unspecified location. That lost or damaged property must be within five miles of that location or reported unspecified location which sustains a business income or research and development business income loss or where extra expense is incurred. The loss or damage must be directly caused by a covered peril. 

The  Policy  also  includes  an  exclusion  for  “Fungi,  Wet  Rot,  Dry  Rot  and  Microb[e]” (the “Microbe Exclusion”) and defines “microbe” to include “ any . . . virus,”    though the term “virus”   is not further defined; nor does the policy specifically mention coverage in the event of a pandemic:

The Insurer will not pay for loss or damage caused directly or indirectly by or resulting from  the  presence, growth,  proliferation,  spread  or  any  activity  of  fungi,  wet  or  dry  rot, or microbes. However, this exclusion does not apply when fungi, wet or dry rot, or microbes results from fire or lightning.

Microbes means any:

A. non-fungal microorganism;

B. non-fungal, colony-form organism;

C. virus; or

D. bacteria.

Microbe includes any spores, mycotoxins, odors, or any other substances, products, or byproducts produced by, released by, or arising out of the current or past presence of microbes.

Plaintiff alleged that it was entitled to coverage for the losses it suffered during the pandemic because it suffered physical loss or damage from the novel coronavirus, and the Microbe Exclusion does not apply.  Defendant argued that the plain text of the Policy requires that plaintiff is not entitled to coverage and therefore, Plaintiff’s amended complaint must be dismissed.

Defendant’s first basis for dismissal is that plaintiff failed to state a claim under the Business Property Coverage provisions.   Each of the applicable provisions in the Policy only applies when the covered property is physically damaged or altered and does not apply to the loss of use Plaintiff suffered.  Thus, plaintiff’s request for declaratory relief that “the policy provides business income coverage in the event that Coronavirus has caused a loss or damage at the Insured Property” runs contrary to the clear and unambiguous terms of the Business Property Coverage.  Plaintiff argued against the plain meaning of the phrase, instead insisting that the high risk of the COVID-19 virus created a direct physical loss to the covered property by forcing plaintiff to close its doors to the public. Despite the fact that its office suffered   no physical injury, plaintiff argues that its loss of use of the office can be characterized as a “physical loss,” as its inability to use its office as it had before the pandemic “rendered the property substantially unusable and uninhabitable. The court refutes this argument by citing a bevy of New York caselaw which holds that insureds were not entitled to coverage under similar policies unless the covered properties sustained direct physical damage. The court then goes on to cite to the multitude of cases recently deciding this same issue, which directly refute plaintiff’s arguments.

Plaintiff’s argument that it was entitled to Civil Authority Coverage likewise failed. The Civil Authority Coverage expressly stated that defendant will indemnify Plaintiff for losses “caused by action of civil authority that prohibit[ ] access,” and that “[s]uch action must result from a civil authority’s response to direct physical loss of or damage to property located away” from the location and caused by a “covered peril.” Under the clear language of the Policy, in order to be entitled to coverage under the Civil Authority Coverage, plaintiff must show that Governor Cuomo’s orders were issued in response to direct physical loss or damage to neighboring properties. Nowhere did plaintiff argue that the neighboring properties faced physical damage or loss aside from the speculative infection of the COVID-19 virus. Again, the court points to materially identical cases that New York courts have decided over the past year, all ruling that Civil Authority Coverage requires some physical loss.

As the plaintiff failed to prove its entitlement to coverage the court was not required to rule on the applicability of the Microbe Exclusion. However, the court analyzed the exclusion anyway. The court found that the Policy expressly defines “microbes” to include “any . . . virus.” As the operative exclusionary language reads “[t] he Insurer will not pay for loss or damage caused directly or indirectly by or resulting from the presence, growth, proliferation, spread or any activity of fungi, wet or dry rot, or microbes.  However, this exclusion does not apply when fungi, wet or dry rot, or microbes results from fire or lightning,” plaintiff’s contention that the exclusion only applies to “wood/structure damage” is incorrect.

Accordingly, the court granted defendant’s motion and dismissed the complaint.


Patricia A. Rauh

[email protected]

06/17/21       Chetlin v. Exxon Mobil Oil Co.

U.S. Court of Appeals, Fifth Circuit
Defendant Did Not Wrongfully Deny Plaintiff of Her Deceased Ex-Husband’s Retirement Benefits.  The Plaintiff Relied on Conclusional Allegations and Unsubstantiated Assertions that May Not be Relied On as Evidence

Plaintiff, Medora Chetlin (“plaintiff”) filed this suit against Exxon Mobil Oil Corporation (“defendant”) after it denied her claim for her deceased ex-husband’s retirement benefits under the Employee Retirement Income Security Act of 1974 (“ERISA”).  The District Court granted summary judgment in favor of defendant and plaintiff appealed.

Nathan Broussard (“decedent”) was employed by defendant from 1968 to 1982 and was enrolled in the Mobil Oil Retirement Annuity Plan (the “Retirement Plan”).  The plaintiff and the decedent were married for the first six years that decedent worked for defendant, but the couple divorced in 1974.  As a result of the divorce proceeding, plaintiff was awarded a community property interest in the decedent’s Retirement Plan.  When the decedent stopped working for the defendant, the Retirement Plan provided that he would be entitled to a straight life annuity of $241.46 a month after his calculated retirement date of January 1, 2008, plus his total contribution amount of $280.68.  The Retirement Plan further provided that, if the decedent died prior to January 1, 2008, then his designated beneficiary, the plaintiff, would receive his $280.68 contribution plus interest.  The decedent passed away in February of 2007, less than a year before his retirement date.

The defendant informed the plaintiff via letter correspondence in November 2012 that she was eligible for a refund of the decedent’s contribution plus interest.  The plaintiff attempted to obtain additional information regarding the decedent’s contribution, but the defendant never provided her with the requested information.  Instead, in August 2013, the defendant requested that plaintiff complete a form for the contribution refund along with the decedent’s death certificate.  The parties then ceased communicating with each other.

In May 2019, the plaintiff filed suit in state court (Texas) against defendant claiming that she was wrongfully denied the decedent’s retirement benefits.  The case was removed to federal court based on ERISA preemption.  In July 2019, the defendant sent another letter to plaintiff explaining that she was only entitled to a refund of the decedent’s contribution plus interest and denied any payment in excess of that.  Thus, the plaintiff was due a lump sum payment of $3,311.96 as of August 1, 2019.

The defendant’s reasoning was that plaintiff was only entitled to the contribution plus interest because the decedent and plaintiff were divorced at his date of death and there was no Qualified Domestic Relations Order (“QDRO”) in place that would have provided her with a spouse’s benefit, such as an annuity.  The July 2019 correspondence from defendant to plaintiff informed her that she had 60 days to pursue an administrative appeal of the defendant’s determination, which she did not do.  Instead, she filed this lawsuit.

Defendant filed a motion for summary judgment arguing that it was not the proper defendant, that the plaintiff failed to exhaust her administrative remedies, and that the denial of benefits was supported by the record and the terms of the decedent’s Retirement Plan. 

The district court concluded that since it took the defendant 7 years to provide the plaintiff with the information and documents she requested and she had no other way to obtain the information to make a formal claim for benefits, she was excused on equitable grounds for failure to exhaust her administrative remedies.  The court also held that defendant’s determination that plaintiff was limited to a refund of the decedent’s contribution plus interest was supported by the record and the terms of the Retirement Plan.  The court did not decide the issue of whether the defendant was the proper defendant on the basis that it was not the only determinative issue in this case.

The Court of Appeals affirmed the lower court’s ruling.  The Court of Appeals stated that although the plaintiff disagreed with the benefits determination, she failed to present evidence negating its accuracy.  She alleged that the record was “likely” incomplete, but she had ample time to develop the record prior to summary judgment and did not do so.  The defendant had provided plaintiff with a copy of the Retirement Plan and an explanation of the benefits available.  The fact that plaintiff disagreed with the defendant’s calculations is of no consequence and she merely speculated that the defendant did not produce a complete record, without providing any evidence of that.  As the Court stated, “[C]onclusional allegations and unsubstantiated assertions may not be relied on by the nonmoving party.”) citing West v. City of Houston, 960 F.3d 736, 740 (5th Cir. 2020).


Mirna M. Santiago

Bias in Underwriting?

Is there implicit bias in underwriting? Surely not, right? Of all things insurance (adjusting, coverage analysis, etc.) underwriting is the most rational, fact-based area, right? And underwriting these days is being done more and more by computer programs (artificial intelligence using data and algorithms). That’s a good thing, right?


It turns out that there is as much implicit bias in underwriting—computer-based or otherwise—as there is in anything else.

At the dawn of the computer age (before everyone had computers at their desks), kids were taught programming to get them comfortable with the idea of computers. I remember learning GIGO—Garbage In, Garbage Out. Whatever you put into the program is what will come out. It appears that the same principle applies to underwriting—if there is a bias in the foundation of the coverage (or an underwriting program), there will be a bias in the implementation.

I discussed the use of credit ratings/scores by insurance companies and how that could effectuate an inequity against people of color in a past Coverage Pointers (e.g. a report released by the Consumer Federation of America indicating that people with low credit scores—disproportionately women and people of color—were sometimes subjected to rate increases as high as 115% of those with “good” credit). Now we are finding that other purportedly gender- and race-neutral criteria can also have deleterious results. For instance, in 2015, GEICO had to pay $6,000,000 to settle claims that it unlawfully discriminated based on gender, educational attainment and occupation when quoting auto insurance rates online. While the criteria seem neutral, GEICO was accused of targeting women and low-income people for high rates or exclusion from coverage altogether.

As most states mandate all drivers to be insured, "[a]uto insurance … should be rated on driving record, miles driven and other factors clearly related to the risk of driving." So says J. Robert Hunter, Director of Insurance for the Consumer Federation of America.

The fact that disparate impact may result from applying certain “neutral” criteria is something that is well known to trade organizations and regulatory bodies. In fact, “the National Association of Insurance Commissioners (the “NAIC”) and various state insurance regulators have been looking into the issue of discrimination in insurance underwriting, in particular as an increasing amount of underwriting is being conducted by artificial intelligence and algorithms, frequently provided by third-party vendors.”

In 2019, the New York Department of Financial Services (“DFS”) issued a circular letter prohibiting insurers from using external data and algorithms in underwriting that have a disparate impact on protected classes and required insurers to demonstrate that their underwriting models do not produce a disparate impact.

There was some pushback to this circular letter because New York prohibits the collection of demographic data by insurance companies; therefore, how could they demonstrate that their underwriting did not have a disparate impact? However, proxy data (for example, someone’s zip code, due to decades of redlining and continued residential segregation) often substitutes for race. Id.

In New York, DFS is currently mulling requiring insurance company employees and insurance agents and underwriters to take training on the interruption of bias. It certainly cannot hurt, as we are seeing that implicit bias seems to be embedded everywhere!


Scott D. Storm
[email protected]

Revised DFS Advisory Paragraph Updated Language as of June 9, 2021:

Consensus amendments were made June 9, 2021, to various provisions of the N. Y. State Insurance Regulations contained in Title 11 of the NYCRR, among other things implementing new language for the Department of Financial Services advisory paragraph.  The new language is:

Should you wish to take this matter up with the New York State Department of Financial Services, you may file a complaint with the department either on its website at or by writing to the Consumer Assistance Unit, New York State Department of Financial Services, at: One State Street, New York, NY 10004; One Commerce Plaza, Albany, NY 12257; 1399 Franklin Avenue, Garden City, NY 11530; or 535 Washington Street, Suite 305, Buffalo, NY 14203.

You still only need to include it on:

  1. “Any notice rejecting any element of a claim involving personal property”, 11 NYCRR 216.6(h); and

  2. “Any letter of explanation or rejection of any element of a claim” for automobile physical damage, 11 NYCRR 216.7(d)(3)

Other than these two instances, you do not need to include it on any other correspondence.  Many people are overutilizing it, needlessly inviting DFS complaints.  Thank you Ryan Maxwell for keeping us up-to-date on legislative matters in your section of Coverage Pointers, “Ryan’s Capital Roundup”. 


06/11/21       Office Solution Group v. National Fire Ins. Co. of Hartford
United States District Court, Southern District of New York
Another Pandemic First-Party Property Success Story for Insurers

Plaintiff specializes in office project management and furniture installation. In March of 2020, due to the rapid spread of the COVID-19 virus and the subsequent executive orders issued by Gov. Cuomo mandating that non-essential businesses suspend the presence of their in-person employees, Plaintiff shut the doors of its Midtown office space. As the pandemic persisted and both the threat of the virus and the Executive Orders remained in place, Plaintiff suffered substantial losses from the loss of use of its office space and ultimately laid off thirty-five employees. Plaintiff sought coverage for its losses, which Defendant denied.

Defendant moved to dismiss the complaint, arguing that the terms of the Business Property Coverage only apply to losses caused by physical damage, and not to loss of use. Defendant also argues that the terms of the Civil Authority Coverage only apply when access to covered property is prohibited, and the Executive Orders were issued in response to direct physical loss or damage located away from the insured's premises. Finally, Defendant argues that the Microbe Exclusion bars coverage for damage caused by the COVID-19 virus. In response to Defendant's arguments, Plaintiff argued that the loss of use of its office space is considered a physical loss, that the Executive Orders unambiguously prohibit access to the office space and nearby properties, and that the Microbe Exclusion is ambiguous and does not apply.

The language of the policy was held to be unambiguous and to bar Plaintiff from coverage. The Court said that the business property coverage terms of the policy cover direct physical damage or loss, and the civil authority coverage terms of the policy cover losses when civil authorities prohibit entrance onto the covered property due to direct physical damage to neighboring properties. Plaintiff failed to allege that either of those occurred, and instead only alleged loss of use and limited access to the covered property due to the threat of COVID-19. Furthermore, Plaintiff was not entitled to coverage because the policy's microbe exclusion explicitly excluded coverage for damages caused by "any virus," which includes the COVID-19 virus. For these reasons, Defendant's motion to dismiss the amended complaint was granted.


06/10/21       Elizabeth Dougherty, et al. v. American States Ins. Co.
United States District Court, Middle District of Pennsylvania
In Breach of Contract Action for Underinsured Motorist Coverage, Insurer’s Fed. R. Civ. P. 12(b)(6) Motion to Dismiss Cause of Action for “Bad Faith” under 42 Pa. Cons. Stat. Ann. § 8371 is Denied

The Complaint stems from a motor vehicle accident and alleges claims of Breach of Contract and Bad Faith, both arising out of Plaintiff’s underinsured motorist coverage.  Insurer moved under Fed. R. Civ. P. 12(b)(6) to dismiss the “bad faith” claim but was denied. 

Plaintiff alleged that Defendant engaged in the following conduct with respect to Plaintiff’s insurance claim, demonstrating bad faith:

a. Failing to properly investigate Plaintiff's claim upon notification of same;

b. Refusing to pay Plaintiff's claims without conducting a reasonable investigation based upon all available information;

c. Failing to promptly and objectively evaluate Plaintiff's claims;

d. Unreasonably delaying the objective and fair evaluation of Plaintiff's claim;

e. Causing unreasonable delay in all aspects of the handling of Plaintiff's claim;

f. Dilatory and abusive claims handling;

g. Conducting an unfair, unreasonable and dilatory investigation of Plaintiff's claims;

h. Failing to act in good faith to effectuate prompt, fair, and equitable settlement of Plaintiff's claim;

i. Ignoring competent and overwhelming medical evidence substantiating Plaintiff's injuries and resulting disability;

j. Ignoring competent and overwhelming medical evidence that injuries the Plaintiff sustained in the subject motor vehicle have not resolved.

Defendant asserted that Plaintiff has only set forth "conclusory, boilerplate averments" in support of her Bad Faith claim, and these factual allegations are insufficient to raise a plausible bad faith claim.

The standard for bad faith claims under  42 Pa. Cons. Stat. Ann. § 8371 is set forth in Terletsky v. Prudential Property & Cas. Ins. Co., 649 A.2d 680, 688 (1994), defining the term "bad faith" as follows in the insurance context:

"Bad faith" on part of insurer is any frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith.

"[T]o recover under a claim of bad faith, the plaintiff must show that the

defendant did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim."  

Here, Plaintiffs' Complaint contains sufficient factual allegations to raise the right to relief above the speculative level and to state a claim of bad faith.  Plaintiff alleges she was in a vehicle accident which resulted in a number of serious and ongoing injuries and that the tortfeasor's vehicle was insured with a bodily injury limit of $15,000. Drawing all reasonable inferences in favor of the plaintiff, these allegations can plausibly infer that the tortfeasor's insurance was insufficient to fully compensate Plaintiff for her injuries.  Plaintiff further alleged she had a policy issued by Defendant with $250,000 in underinsured motorist coverage. 

Plaintiff had fully complied with all terms, conditions, and duties imposed upon her by the Auto Policy, and she has "continually" provided medical records and reports to Defendant, "outlining her injuries, special damages, medical expenses, as well as evidencing her physical pain and suffering" and has cooperated with Defendant "in every way throughout the life of her claims."  The factual allegations, when taken as true, raise a plausible claim that Defendant "did not have a reasonable basis for denying benefits under the policy and that defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim".  Although sparse with respect to the bad faith claim, the Complaint was said to contain sufficient well-pleaded factual allegations to "nudge" Plaintiff’s claim "across the line from conceivable to plausible." 


06/11/21       Greentree Properties Corp. v. Aspen Specialty Ins. Co.
United States District Court, Eastern District of Pennsylvania

In this Fire Claim the Landlord is Held to Have an Insurable Interest in Tenant’s Improvements.  The “Bad Faith” Claim Against the Insurer is Dismissed as the Ongoing Investigation of the Claim Constituted a Reasonable Basis for the Seven-Month Delay between Claim Filing and Coverage Decision. Although the Insurer Incorrectly Denied Coverage, this Fails to Constitute Bad Faith

Ranlud claims breach of contract and bad faith against Aspen for refusing to cover damages caused by a fire for 1.5 million in improvements to the building made by Ranlud's tenant, The Chevra. Ranlud sought summary judgment, claiming it had an insurable interest in those improvements and that Aspen acted in bad faith.  Aspen cross-moved for summary judgment on bad faith.

The Court ruled that Ranlud had an expectation of benefit from the improvements, granting its motion for summary judgment on insurable interest and granted Aspen's cross-motion for summary judgment because it offered a reasonable basis for its denial of coverage. 

Aspen's policy insured Ranlud "against all risk of direct physical loss or damages to the insured property." Insured property included "all real and business personal property" that Ranlud owned or in which Ranlud "had an insurable interest." Aspen denied coverage "for any loss or damage to [Chevra's] improvements and betterments on the grounds that such improvements and betterments were not owned by [Ranlud] at the time of the loss and also that [Ranlud] did not have an insurable interest in the improvements and betterments.” 

The Lease with Chevra agreed that any improvements completed by Chevra or Ranlud would remain Chevra's property for the Lease Term but would "immediately upon the termination of this Lease become [Ranlud's] property."  A party has an insurable interest when it "derives pecuniary benefit or advantage from preservation or continued existence of property, or will suffer pecuniary loss from its destruction."  "A reasonable expectation of benefit from preservation of property" suffices as an insurable interest. For an insurable interest to arise, the event insured against does not need to subject the insured to loss, because "it is sufficient that it might do so, and that pecuniary injury would be the natural consequence."

Although Ranlud must prove an insurable interest in destroyed property before recovering, the a factfinder generally determines insurable interest. Nevertheless, the Court may resolve the question on summary judgment if there is no genuine issue of material fact.

The Policy and the Lease established that Ranlud had a reasonable expectation of benefit from the improvements' preservation.  The Policy covers all property in which Ranlud had an insurable interest.  The Lease states that Chevra owns the improvements for the Lease Term, but when the Lease terminates, the improvements become Ranlud's property. "The task of interpreting a contract is generally performed by a court rather than a jury. The goal of that task is, of course, to ascertain the intent of the parties as manifested by the language of the written instrument".  Based on the clear and unambiguous language in the Lease that guaranteed Ranlud a reversionary interest in the improvements upon the Lease Term's termination, Ranlud had an expectation of benefit in the improvements.

In regard to the “bad faith” claim, an insurer acts in bad faith if it had no reasonable basis for denying benefits under the policy; and it knew or recklessly disregarded the lack of reasonable basis for denying the claim. Klinger v. State Farm Mut. Ins. Co., 115 F.3d 230, 233 (3d Cir. 1997).  Bad faith does not require fraudulent conduct or ill will. Rather, "any frivolous or unfounded refusal to pay proceeds of a policy" can constitute bad faith.  "Mere negligence or bad judgment" by an insurer fails to establish bad faith.  Bad faith consists of a frivolous or unfounded refusal to pay, lack of investigation into the facts, or a failure to communicate with the insured.  Ranlud must establish bad faith by clear and convincing evidence.  This requires "that the evidence is so clear, direct, weighty and convincing as to enable a clear conviction, without hesitation, about whether or not the defendants acted in bad faith." To overcome a bad faith claim, Aspen merely must present "a reasonable basis" for denying benefits under the policy.  "[U]nder Pennsylvania law, questionable conduct giving the appearance of bad faith is not sufficient to establish a bad faith refusal to provide coverage if the insurer had a reasonable basis for denying the claim". It also may show "it conducted a review or investigation sufficiently thorough to yield a reasonable foundation for its action." 

Ranlud lacks clear and convincing evidence that Aspen investigated and handled the claim in bad faith or denied coverage without a reasonable basis.  Aspen's ongoing investigation of the claim constituted a reasonable basis for the seven-month delay between claim filing and coverage decision. Its delay in denying coverage fails to establish "clear and convincing evidence" by which a reasonable jury could find bad faith. Aspen's delay was supported by a reasonable basis, which may include active engagement in "investigation, valuations, and negotiations." Although Aspen incorrectly denied coverage, that fails to constitute bad faith. Because Pennsylvania courts have held that insurable interest is generally decided by the jury and there was testimony from a witness contradicting Ranlud's expectation of benefit from the improvements, Aspen had sufficient reasonable basis to support its coverage decision.


06/12/21       Allstate Ins. Co. v. Shmuel Baturov, et al

United States District Court, Eastern District of New York
A Court Held there to be Improper Joinder of Defendants in 27 Different No-Fault RICO Fraud Schemes as the Plaintiff did not Assert a Right to Relief Against Each Arising from the Same Transaction or Occurrence.  The Court Retained One Group and Severed the Remainder Ordering a Separate Case be Opened for Each

Plaintiff commenced this action concerning the submission of fraudulent claims under New York's no-fault insurance. The plaintiff asserts 106 claims against 53 defendants alleged to have engaged in 27 different schemes. The suit is against dozens of alleged fraudsters in a single complaint, in which the defendants are alleged to have engaged in separate but similarly implemented fraudulent schemes.  The Court issued an order to show cause why this case should not be dismissed for improper joinder or, alternatively, why it should not dismiss most of the defendants except one group of defendants who worked in concert, without prejudice to refiling against each group of defendants who are alleged to have worked in concert. Plaintiff asserted that the different schemes are logically connected and joinder of these claims and defendants serves judicial efficiency.  The Court disagreed. 

Under Rule 20(a)(2) of the Federal Rules of Civil Procedure, persons may be joined in one action as defendants if: (A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all defendants will arise in the action. It was clear that the second factor is satisfied here. This action contains common questions because defendants are alleged to have engaged in similar schemes.

But the Court held that the plaintiff did not assert a right to relief arising from the same transaction or occurrence.  To determine whether allegations are part of the same "transaction or occurrence," courts "look to the logical relationship between the claims and determine ‘whether the essential facts of the various claims are so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit.'"  "The purpose of Rule 20 is to promote trial convenience and to expedite the resolution of disputes, thereby preventing multiple lawsuits."  "Under the Rules, the impulse is toward entertaining the broadest possible scope of action consistent with fairness to the parties; joinder of claims, parties and remedies is strongly encouraged." Courts interpret the requirements of Rule 20(a) liberally in the interest of promoting judicial economy. Because of this liberal interpretation and district courts' broad discretion in deciding whether to permit joinder, many district courts do not raise the issue of joinder in these actions and at least one case cited by plaintiffs found joinder to be proper when challenged by defendants.

However, this Judge did not believe that defendants in these actions are properly joined under Rule 20(a). he said that this action, like other similar actions, does not assert any claims against all defendants, allege that all defendants worked together, or seek to hold all defendants jointly-and-severally liable. Instead, plaintiffs' claims concern separate RICO enterprises and defendants are alleged to have "engaged in separate, but fundamentally similar schemes." The alleged bad actors operated independently of one another, during different time periods, and with different participants, and the claims thus do not arise out of the same transaction or occurrence or series of transactions or occurrences.

The defendants and claims are "logically connected" only in that they concern insurance fraud, and the Court said that he does not consider that connection to be substantial. A district judge may have discretion to entertain these actions based on allegations that defendants engaged in separate but "similarly implemented" schemes. But the Court said that the toll these actions take on the judicial system and the minimal efficiencies gained caution against that approach.

The Court said that these actions are a drain on the Court's resources.  “These Frankenstein's monster actions also progress much more slowly than they otherwise would”. It is not uncommon for some but not all of the defendants in these no-fault insurance actions to default. District courts generally resolve all claims against non-defaulting defendants before entering a default judgment against defaulting defendants because of the risk of inconsistent judgments. As a result, even if dozens of defendants have defaulted, the appearance of one or two means that the case as a whole remains open — and the claims against the defaulted defendants unadjudicated — for months or years. If plaintiffs simply filed multiple actions, many if not most would be rapidly resolved on default judgment or settlement, leaving a few manageable contested actions.

When the requirements of Rule 20 are not met, Rule 21 affords a district court "broad discretion" in fashioning an appropriate remedy, including the possibility of dropping a party "at any time."  The Court proposed two potential remedies to plaintiff: (i) dismissal of the case as a whole; or (ii) dismissal of most of the defendants except one group without prejudice to refiling against each group of defendants who are alleged to have worked in concert. Because misjoinder of parties is not generally a ground for dismissing an action, the plaintiff was ordered to provide a breakdown of the groups that make up each of the 27 schemes alleged in the complaint. The Court said it will sever and retain one group and instruct the Clerk to open a separate index number for each other group. Plaintiffs must then file an amended complaint in each case limited to that case's respective group.


Nicholas J. Heintzman

06/11/21        Liberty Mut. Ins. Co. v. Jenkins Bros.
New York Supreme Court, New York County
Court Orders Insurer to Fund 100% of Insured’s Asbestos Exposure Settlements because Insurer was the “Real Party in Interest”

In this declaratory judgment action, plaintiff Liberty Mutual Insurance Company (“Liberty”) sued nine individual defendants (“the Defendants”) who had previously brought asbestos exposure claims against a valve manufacturer, Jenkins’ Bros. (“Jenkins’”) When the Defendants sued Jenkins’, it was already bankrupted and involuntarily dissolved. As Jenkins’ insurer, the court ordered Liberty to acceptance service on behalf of Jenkins’ and declared Liberty the “real party in-interest” that was bound to “defend and indemnify” Jenkins’, its insured.

Liberty dutifully appeared for and defended Jenkins’ and routinely negotiated settlements on Jenkins’ behalf. Initially, Liberty funded 100% of Jenkins’ settlements. However, a new Liberty claims manager decided to not fully fund the settlements. The claims manager reasoned that because Liberty canceled the Jenkins’ polices in 1980 and in 1987 Liberty incorporated an asbestos exclusion into its policy, any insurance allocation for the period from 1980-87, the “Orphan Share” period, should not be paid by Liberty. Therefore, Liberty refused to fund any settlement amounts attributed to the Orphan Share period and commenced a declaratory judgment action.

The Court distinguished between two different forms of insurance disbursement: 1) “all sums,” which permits insureds to collect their total liability under any policy in effect during the periods that the damage occurred, up to the policy limits”; and 2) “pro rata allocation,” in which an insurer’s liability is limited to sums incurred by insureds during the policy period only. Liberty argued this Court should adopt a pro rata allocation. Defendants countered that allocation was irrelevant as, given Liberty’s status as the real party-in-interest, it should pay the full amount of the victims’ losses. The Court agreed that Liberty should pay the full amount of the victims’ losses, primarily because Liberty’s course of conduct, established over many years, in settling and paying 100% of the claims was conduct from which Liberty could not freely deviate from. The Court also acknowledged Liberty’s formal status as the real party in interest, but the specific facts regarding Liberty’s course of conduct drove its decision.  

In dictum, the Court addressed Liberty’s allocation argument. It held that pro rata allocations apply only to allocate liability between insureds and insurers—not between insurers and third-party victims—who, like the Defendants here, are uninvolved in the insured’s decisions regarding when and how to purchase insurance. Further, the Court noted that the trigger event to start Liberty’s coverage was the occurrence (the Asbestos exposure) which resulted in the injury, not the injury itself.

Editorial Comment: Although not discussed in the Court’s decision, Liberty sold its asbestos book to Resolute Management Inc., an insurer that specializes in environmental claims. Resolute, in its decision not to pay 100% of the settlements, sharply departed from the claims management approach Liberty used for years. Suffice it to say the Court did not look favorably on the sudden change.


06/09/21        NY Bus Operators Compensation Trust v. American Home
New York Supreme Court, Suffolk County
Insurance Law § 3420(d)(2)’s “Timely Disclosure” Requirement does not Apply to Protect Insurers from other Insurers

Plaintiff, New York Bus Operators Compensation Trust (“NYBOCT”), is an insurance entity formed to provide self-insurance to its members (bus companies) for their statutory workers’ compensation liabilities. NYBOCT obtained an Excess Workers Compensation and Employers Liability Policy from Defendant, American Home Assurance Company (“American”), for losses over $150,000. NYBOCT sought coverage from American for a claim over $150,000, and American disclaimed coverage.

NYBOCT sued and made a summary judgment motion, alleging that American failed to meet the timely-disclaimer requirement imposed by under Insurance Law § 3420(d)(2), which provides that: an insurer intending to disclaim liability under a liability policy “shall give written notice as soon as is reasonably possible of such disclaimer … to the insured.” The Court explained that the statute’s purpose is to protect insureds from the prejudicial effect of an insurer’s belated denial of coverage, but, after reviewing legislative history, the Court held that § 3420(d)(2) did not protect insurers, as insurers are not in the position of vulnerability as insureds. Thus, plaintiff’s summary judgment motion was denied.


Heather Sanderson
Legal Counsel

[email protected]

Renovation v. Construction:
Coverage under Homeowners’ Policies during Renos

In October of 2020, the TD Bank published a study that stated that 37% of Canadians were upgrading their homes to incorporate their new behaviours relating to working from home, incorporating home gyms, the need for home classrooms and liveable outdoor space.

According to a report published by Re/Max Canada in April of 2021, more than half of Canadians renovated their home in 2020 with the intention of living in it, with 29% renovating to enhance their lifestyle for non-essential reasons (aesthetic and/or recreational purposes) and 29% doing so for essential reasons (safety and maintenance).  Only 16% of Canadians said they renovated to increase the market value of their home to sell within in the next one to three years.

Did any of these homeowners consider whether their property remained insured during the renovations? Most homeowners’ policies exclude losses that occur during construction.

Susan Tataryn was confronted with that exclusion and her experience resulted in litigation that reached the Ontario Court of Appeal.

Susan Tataryn practices tax law and tax litigation in Ottawa. Up until 2010, she had a home-based practice. Tataryn’s home was insured under a homeowners’ policy augmented by a business interruption endorsement.

Tataryn decided to renovate two of the three floors of her home. While the renovations were ongoing, she lived on the first floor. In December of 2010 the home was damaged due to some sort of interior plumbing malfunction. This placed the renovations on pause and Tataryn moved out. The insurer made some payments; a dispute arose as to the amount and litigation began. Then in March of 2012, the boiler system malfunctioned. That seemed to be a more extensive loss. The insurer denied coverage for the second loss stating that the policy does not insure loss or damage “occurring while the building is under construction … even if we have given permission”. The words “under construction” were not defined.

The litigation on this second loss, denied due to the “construction” exclusion went to trial using summary procedure. That court held that this exclusion was not applicable. The insurer appealed, arguing in part that these words ought to be construed in the entire context of the homeowners’ policy, as well as the limited risk covered under a homeowner’s policy of insurance, as opposed to the risks covered in a builders’ risk or other construction-oriented insurance policy.

The Ontario Court of Appeal held that that no reviewable error occurred; the first instance court concluded, correctly in our view, that the finding as to whether a property is “under construction” is a question of fact and that in this case, “the extent of the renovations [is] not sufficient to support a finding that the house was ‘under construction’”. The fact that a house is being renovated does not necessarily mean that it is “under construction”. The extent of the renovations in that case is not discussed in the trial judgment or by the appeal court.

Nonetheless, this is a ‘good news’ decision for all of those insureds who have undertaken pandemic renovations.  A new bathroom or kitchen installation may not trigger the “under construction” exclusion in homeowners’ policies.

Click here for the full reasons in Tataryn v. Axa Insurance Canada (now known as Intact Insurance Company of Canada) et al, 2021 ONCA 413 (decision released June 14, 2021).


Whether a Commercial Property Policy Responds to Pure Loss of Use
Prosperity Electric v. Aviva Insurance Company

On June 10, 2021, the British Columbia Court of Appeal released its decision on the appeal from the trial judgment reported in the June 11, 2021 of Coverage Pointers. Mr. Justice Groberman, with Justices Dickson and Marchand concurring, upheld the trial judgment that found that no physical loss or damage had occurred to the disputed items of the stock of Prosperity Electric within the meaning of the commercial property policy issued by Aviva Insurance Company of Canada.

Aviva Insurance Company issued a commercial property policy to Prosperity Electric which rented two floors of a building in Richmond, British Columbia. Its offices and showroom were on the lower floor, while the upper floor was used as a storeroom. In November 2018, a fire broke out in a common hallway adjacent to the rented premises. Prosperity Electric’s premises were impacted by smoke and soot from the fire but were not fire damaged.  Aviva hired a remediation company that cleaned the lower floor. Aviva paid for damaged goods on the first floor. A dispute arose as to whether the goods stored on the second floor were damaged.

The Court of Appeal reviewed the evidence before the trial judge and agreed that there was a basis for the findings at trial that the fire deposited a small amount of chloride anions on the stored lighting fixtures on the second floor. However, the Court of Appeal agreed with the trial court that this deposit is not “physical loss or damage” within the coverage agreement of the Aviva commercial property policy. The chloride anions did not impact the appearance or function of the light fixtures and they could be sold as “new”. Importantly, that Court held that for the insured to bring its alleged loss within the coverage agreement of the policy, the insured must prove that some of its property underwent an alteration that was harmful, in addition to being an alteration in the appearance, shape, colour, or other material dimension. There was no evidence that the deposit of chloride anions was harmful to the stock.

Although Aviva also argued that the contamination exclusion applied to remove the claim from coverage, the Court of Appeal correctly stated that there was no need to discuss the application of the exclusion, as the insured had failed to prove that the claim came within the coverage agreement.

This is an important decision for the pending Canadian COVID-19 class actions as well as in the pending appeal in MDS v. Factory Mutual Insurance Company (FM Global), 2020 ONSC 1924.

Reasons in Prosperity Electric v. Aviva Insurance Company of Canada, 2021 BCCA 237 can be found here.

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