Coverage Pointers - Volume XXIII, No. 10

Volume XXIII, No. 10 (No. 602)
Friday, October 29, 2021
A Biweekly Electronic Newsletter


As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York and Connecticut appellate courts and Canadian appellate courts.  The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.  

In some jurisdictions, newsletters such as this may be considered Attorney Advertising.

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.

You will find back issues of Coverage Pointers on the firm website listed above.

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations. 

Please get vaccinated.  Too many folks are still getting ill.  We just received our Moderna booster tonight.

Now for some of you, this will come as a shock.  If you are reading this letter (and you are, that I am certain), you are NOT reading Coverage Pointers.  The newsletter is attached.  We know that some of you never open the attachments (surely, your choice), but for those who never noticed that this email comes with an attachment, that’s your special gift.  In the office, we call this our “Dear CP cover letter”.  But do note that the full issue is always provided as an attachment.

The summer has ended, for us, and we’ve closed the Canadian property until the spring.  We are hopeful that the spring will lead to fewer necessary COVID PCR tests when we enter that country, but we are appreciative of the fact that the Canadians let us in, three months before the US government allowed Canadians to enter the United States.

This issue has a rich selection of appellate decisions, from New York, Connecticut, and places far and wide.  A special thanks to my friend, David Zizik from Sulloway & Hollis, for two contributions to this week’s issue, a discussion of a very important “inherent diminished value (“IDV”) case from the Massachusetts Supreme Judicial Court and a “100 Years Ago” submission.

There’s an interesting Second Department case in my column where a liability insurer was held potentially liable in tort for allegedly mishandling the remediation of an oil spill as well undertaken by an independent contractor. In addition, we see a Second Department case following a trend to expand the coverage provided by additional insured endorsements.


Just a Snapshot:

Steve’s property column discusses an “ELF” endorsement claim, which is surely beyond my pay grade. Mike Dischley’s serious injury column finds a seventeen-month treatment gap, precluding a physician from relating symptoms to an accident.  More non-NY bad faith cases reviewed in Brian Barnas’ submission. Lee discusses a recent Connecticut Court of Appeals case in the UM/UIM area and Scott Storm’s missives continue to amaze me.  And there is plenty 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 interested in company training, let me know.


New York Coverage Protocol Training:

Another very popular program is one designed to remind, refresh or instruct claims professionals who handle New York insureds, claims and policies, on the special nuances (and traps) that are part of the New York coverage experience.  Does your staff need it?   If so, let us know.  If you don’t know whether you need it, you probably do!



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

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

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

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

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

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


Peiper on Property and Potpourri:

We often have opportunities to speak on emerging issues in the insurance world at a number of trade and industry groups from around the country.   And, while those engagements are always rewarding, our most recent presentation was particularly interesting.  Just Last night, Diane, Dan, and myself joined forces to provide a presentation on insurance and risk management for the Community-Based Real Estate Development Training Group here in Buffalo.

The Group works to assist redevelopment of the city’s more underserved areas by providing training to residents of those communities with an entrepreneurial spirt.  The result is local driven development for those communities by community members.  A great program, no doubt, which is already seeing some results.  Diane and Dan spoke on risk assessment and managing risk through contracts and appropriate liability coverages.  My focus was on managing direct risk through property, business income and like.  We met some remarkable people through the process, and will look forward to charting their successes in the coming months and years. 

As for the column this week, we review an interesting case involving an ELF endorsement.  The endorsement, or what it covers, frankly is not the interesting issue.  The Appellate Division’s decision, however, is one of those ones you’ll want to keep handy for quick reference in the future.  In its decision, the Court rejects the conclusion that just because a specific coverage is extended by endorsement does not categorically mean that policy does not provide coverage elsewhere.  Stated differently, even though the risk appears to be picked up by an endorsement the smart movant still needs to demonstrate exactly why the primary policy forms do not extend coverage.  I good reminder of that rule, and a case that is surely worth the read. 

That’s it for this week.  Happy Halloween to all. 

Steven E. Peiper
[email protected]


Coverage Case Decided for the Insurer – 100 Years Ago:

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
29 Oct 1921

Auto insurance case non-suited.

            A jury before Justice Pierce in supreme court yesterday afternoon returned a verdict of no cause of action brought by John Curto and Leonardo Rinallo to compel the Home Insurance company of New York and Howard B. Smith, Inc., to pay $3,800 insurance on their Stuts car that was reported stolen last fall. The machine was recovered later in a barn near Sandusky, O., and the defense produced witness who said it was stored there by one of the plaintiffs after having been damaged.


Wilewicz’ Wide-World of Coverage:

Dear Readers,

As many of you know, I’m involved in a number of committees in the ABA’s Tort Trial & Insurance Practice section. To that end, last week we held our annual leadership conference in Dallas to discuss the near year of events and activities. Alas, I attended virtually, like many others, but it did get me to start thinking about travel again. In non-pandemic times, the ABA was host to numerous events throughout the year and around the country, boasting stellar programming and networking opportunities throughout. As we dig out from months of home-bound activities, I am looking forward to getting back out there soon enough.

So, coming up, the Insurance Coverage Litigation Committee is anticipating an in-person return to the Arizona Biltmore in February next year. That’s just a few short months away at this point, but the CLEs, meetings, and events are lining up and look to be fantastic, as always. The brochures are not out yet (I will post them here when they are!), but if you are interested in attending, or just learning more about TIPS or the ICLC, give me a buzz.

Now, this week in the Wide World, Franco Mirolo again writes for our column. Discussing Safeco v. Palazzolo out of the Eighth Circuit Court of Appeals, he addresses the issue of ownership in the context of insurance language. There, the question was whether the policy used the term “owned motorcycle” to exclude coverage for any insured occupying or operating an owned motorcycle. While the insured argued that this term was ambiguous, the court found that there was only one reasonable interpretation – a motorcycle owned by any insured. Take a look at the attached, which contains the full summary and a link to the original case.

Until next time!

Agnes A. Wilewicz

[email protected]


Texas Member of Congress – Facing Expulsion – Apologies for “Obscenity”: 

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
29 Oct 1921


Blanton asks colleagues in house to forgive him for error.


Resolution offered to investigate conditions at the public printing office.

By the Associated Press.

            Washington, D.C., Oct. 28. —An apology to the house, which attempted yesterday to expel him, was made today by Representative Thomas L. Blanton, Democrat, of Texas in a letter to Speaker Gillett, read to his colleagues and warmly applauded—especially by Republicans.

            The Texan, occupying the same seat from which he arose to defend himself against the charge that he had had printed in the Congressional Record an obscene affidavit relating to a conversation between two printers, took no part in the brief discussion proceeding the presentation of his apology.

            The letter was sent to the speaker and laid before the house by Representative Walsh, Republican, Massachusetts, acting in the former’s absence. It read:

Text of apology.

“I am involved in no issue now before the house, hence what I now say is not a sacrifice of any principle.

            “When I expressed a wish to being able to place before the country the record expunged, I was misunderstood by my colleagues, who believed that I would circulate the objectionable language. My intention was not to do this, but to circulate the expunged record with all the objectionable words and abbreviations contained in the employee’s affidavit eliminated and circulated, only to show to the country the honest, bona fide purpose of my [sic].

            “I realize that the judgment of no human is infallible. I bow to the collective judgment of my colleagues against none of whom I harbor malice, and offer this, my apology, to the house for what my colleagues in their decision determined was an error.”

Editor’s Note:  I am not sure what he put in the record, but Rep. Thomas Blanton of Texas, remarks let to a 237-0 censure resolution using language "so indecent, obscene, vulgar and vile as to render it unmailable had it been contained in any other than an official publication." He was not expelled.


Barnas on Bad Faith:

Hello again:

October is winding down and the holiday season is approaching quickly.  I spent this past weekend down in Blacksburg with a friend and my cousin and caught a Syracuse Virginia Tech football game (okay let’s be honest I went down there for the game).  Blacksburg was a cool college town to visit and has an excellent gameday atmosphere.  I had a great time with my cousin and friend, and Syracuse got a thrilling last-minute come from behind win.  Could not have asked for much more out of the weekend.

As we get closer to December, I’d like to remind you that DRI’s 2021 Insurance Coverage and Practice Symposium is coming up in just over a month.  The program is on December 9th and 10th at the Sheraton New York Times Square Hotel in Manhattan.  Early registration is open through November 8th.  I have not been to New York City since March of 2020, and I am really looking forward to getting back there alongside friends and colleagues.  I hope you will consider signing up and attending.  Feel free to give me a call or send an email if you have questions about the program.

My column features an excellent bad faith decision under Florida law from the Eleventh Circuit.  The court clearly identified the case as a bad faith setup and decided the case accordingly.  There is some really nice language in the decision.  Check it out if you are so inclined.

That’s all for now. 

Brian D. Barnas

[email protected]


No Jail Time for Employer Failing to Provide Workers Compensation Coverage:

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
29 Oct 1921


            New York, Oct. 28 (A.P.). —As employer cannot be imprisoned for failing to take out insurance for his employees under the workmen’s compensation act, the appellate division of the supreme court of Brooklyn ruled today.

            The decision related to the appeal of Albert E. Donnelly, who had no insurance to protect Frank Keighley, a painter employed by him, when he fell from a ladder and broke his ankle. Donnelly’s sentence was withheld pending he appellate division’s decision.


Off the Mark:

Dear Readers,

Halloween is here and the holidays are just around the corner.  My kids are excited that Halloween fell on a weekend this year and are looking forward to spending the whole with friends and day trick-or-treating.  That said, my oldest, a procrastinator, still hasn’t picked out a costume yet.  As for the holidays, we have been advised that our annual Thanksgiving trip to New Jersey has been cancelled again this year.  Although we were looking forward to seeing family, we really enjoyed our solo Thanksgiving last year.  We finally had leftovers. 

Kyle Ruffner assisted again with this edition of “Off the Mark,” which brings you a recent construction defect case from the United States District Court for the Eastern District of Michigan, Southern Division.  In Indian Harbor Ins. Co. v. Rohrscheib Sons Caissons, Inc., the Court examined common law contribution and indemnification counterclaims asserted by the insured’s subcontractor against the carrier, ultimately dismissing same.

Happy Halloween everyone.

Brian F. Mark

[email protected]


Thanks to David Zizik from Sulloway and Hollis, PLLC for this News Clipping:

Newport Mercury
Newport, Rhode Island
29 Oct 1921


            It has been noted in cities where unemployed men have resorted, that many of them are not willing to take up the heavier tasks of manual labor.  The man who takes that attitude gives the impression that he is not very anxious to work, and the public may not have much sympathy for him.  Still there are many men who have always worked indoors, who would be physically unable to work in the fields or dig in the dirt. 

            It is an unfortunate thing that the indoor worker loses the physical ability to do active forms of manual labor.  The strong and vigorous mechanic, who in times of dull times in the factories, is willing to take hold at any kind of a job, has a resource that will tide him over many periods of business depression.  He commands warm respect for his willingness to take hold of anything.  It is exceedingly desirable that people should so far as possible, retain this ability to do hard work.  It keeps them young, and it promotes good physical condition.

            A great many offices and indoor workers would be better off if they would make more effort to perform manual tasks.  Those who make it their habit to mow their own lawns, who dig in their gardens and the like, not merely save considerable expense, and raise some valuable food products, but they have kept themselves from physical decay. 

            The businessman who feels that he must turn over to some laborer the hard work about his place, may save a few minutes of his valuable day.  But he is giving up the habit of physical activity that is worth more to him than the little time he has saved.

            Man was made to labor with his hands in the open air.  Those who entirely give up the habit drift away from the life that nature intended for them.  Sooner or later, they pay a penalty therefor.


Boron’s Benchmarks:

I am writing this cover note to you on October 27, 2021.  On this date 82 years ago, one of my all-time favorite comedic actors, John Cleese, co-founder of the British Monty Python comedy troupe and co-writer and star of the British sitcom “Fawlty Towers”, was born.  Happy Birthday John Cleese and thank you for giving me a ton of belly laughs over the years!

And now for something completely different...for this edition of Boron’s Benchmarks, we offer for your consideration in Coverage Pointers our write-up of a Supreme Court of Vermont opinion issued October 15, 2021, affirming summary judgment for the insurer. We’ve also provided a handy link to the original case as posted to the Supreme Court of Vermont’s web page.  The issue analyzed and decided on appeal by the Vermont Supreme Court was whether an injured party qualified as an “insured person” per the terms of the underinsured motorist benefits provided by the tortfeasor owner’s auto insurance policy.  All credit for the excellent write-up of the case goes to its author, Hannah Cominsky.  Thank you, Hannah.   

Have a healthy and happy next two weeks, folks.

Eric T. Boron

[email protected]


Huge Wrongful Death Verdict by 1921 Standards:

The News and Observer
Raleigh, North Carolina
29 Oct 1921


Awarded Heavy Damages for Death of Husband at Sawmill

            A jury in Wake County Superior court yesterday returned a verdict of $10,000 against P.H. Mangum, the amount being awarded to Mrs. Naomi B. Harris as compensatory damages for the death of her husband, J.C. Harris, who was killed on January 6, 1920, by the explosion of a boiler at a sawmill owned by the defendant.

            In charging the jury, Judge W. M. Bond held that to recover it was necessary for the defendant to prove that at the time of the accident the defendant was employed at the mill, as alleged in the complaint. On this point there was sharp conflict in the testimony, all the employees of the mill and one of the plaintiff’s witnesses testifying that the defendant was not working at the mill on the day of the accident but was merely warming himself while waiting to borrow a saw. The plaintiff testified that her husband told her when he left home that he was going to the mill to work and was supported by other members of the family. There was also evidence to the effect that the defendant had admitted the employment, this conversation being denied by Mr. Mangum.


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

My kids are officially “chase each other around the house and giggle incessantly while doing it” years old. And I’m for it. Nothing quite like watching your youngest tail your oldest with that childish fervor for life in the moment. Play time—something we all may have lost out on long ago (for some, very long ago), but that we can all remember, relate to, and relive vicariously on occasion through our young ones. A moment of pure joy, realized. Ah, to be young again…says the boy in his thirties.

In this edition of Ryan’s Capital Roundup, it was slim pickings. However, I have provided commentary on a bill recently delivered to the governor that would require the inclusion of cost estimates for sprinkler systems in construction contracts for certain residential, new builds. In my editorial to what could become law, the risk manager in me threw caution to the wind and, well, looked up statutory and regulatory provisions in New York’s insurance space to tackle the tough questions. “Ryan: What does this have to do with insurance?” Data points, my dear Watson. Data points are important, and this may just facilitate one more tool for New York’s insurance regulators to collect cost-saving information for consumers. 

Until next time,

Ryan P. Maxwell

[email protected]


More Modest Wrongful Death Verdict:

The Buffalo Enquirer
Buffalo, New York
29 Oct 1921


            Mary Westrup was awarded a verdict of $3,000 against the Erie Railroad Co. for the death of her husband, Henry, a flagman, who was killed by a train at the William Street crossing in August 1920.


CJ on CVA and USDC(NY):

Hello all,

I’m happy to report that, despite some early rain showers, Charlie’s first birthday party went off without a hitch! It is hard to believe that a year ago my wife and I were just beginning our journey as parents and now it feels like we’re old pros. It also looks like Charlie is about to take his first independent steps any day now, which means we are one step closer to getting him on snow skis!

We return to the District Courts this week with a decision from the not often heard from Northern District of New York. In our case for this week, Covington Specialty Insurance Company seeks to relieve itself from the defense of its insured related to an underlying state court action based upon an Absolute Auto Exclusion, notably the insured is not alleged to have been driving, operating, unloading, or unloading an auto at the time of the accident giving rise to the underlying state court action. How did the Court apply the exclusion? Read on to find out …

See you in two weeks,

Charles J. Englert, III

[email protected]       


Only One Stop in Flight to KC from NYC:

Buffalo Courier
Buffalo, New York
29 Oct 1921


            Kansas City, Mo., Oct. 28—Flying from New York to Kansas City, a distance of approximately 1,500 miles, with only one stop, was the feat of three five-passenger monoplanes which arrived here late yesterday bringing a party to attend the national convention of the American Legion next week. The flyers included Augustus Post, president of the Aero Club of America.

            According to the pilots the machines left their home airport on Long Island Wednesday at 9:30 o’clock in the morning in a pouring rain. They flew to Dayton, Ohio in five and one-half hours. Leaving Dayton yesterday morning they arrived at the legion flying field here shortly before dusk.


Dishing Out Serious Injury Threshold:

Dear Readers,

Happy Halloween everyone. October is already over and the cold weather is finally starting to come in. I hope everyone can enjoy the fall festivities and enjoy Halloween with friends and family.

In the Serious Injury Threshold world, we have a case that deals with a 17-month gap in treatment, which precludes plaintiff from establishing a serious injury within the meaning of Insurance Law § 5102(d).

Be well,

Michael J. Dischley
[email protected]  


Ahh, Cupid, 100 Years Ago:

The Salina Sun
Salina, Kansas
29 Oct. 1921

Cupid Gives Father Time a Hard Race

CHICAGO.—Father Time and Cupid ran a race at the club meeting of widows and widowers. Two hundred men and women, ranging from forty to seventy-five years of age, were young once more. The gathering, which was held in Washington park, was the result of the hard work of Miss Marceline Stokes, a social worker, and object-matrimony.

            Miss Stokes imposed but one condition on those who joined the Widows and Widowers’ club—they had to affirm that they fulfilled their marriage vows and lived with their chose mate until “death did them part.” Members of the club joined because they were weary of spending their last days unloved and lonesome.

            “Yes,” said Miss Stokes, “the club has been a success. Already eight marriages have resulted from our little gatherings and many more are in the offing.” The founder has asked social agencies in other cities to establish similar clubs.

            “We try to have our meetings once every week,” she said, “usually Sunday afternoon; and how they look forward to them; Many have regular ‘dates’ in the park. Lovers’ quarrels and petty jealousies are not at all unusual. Love is the same, I believe, whether it’s engendered in the heart of a sixteen or sixty-year-old.

            “One old boy, nearly seventy, was a regular attendant at our meetings. He was the favorite with all the women and broke up many a happy little affair. All went well until an irate little woman appeared on the scene and shouted: “’Here you are, Erza, posing as a widower when you’re my husband!’”


Bucci on “B”: 

Hello friends,

Thanks to all that checked in this week.  I loved hearing from you.  Now don’t be jealous but I’m headed up to Salem, Massachusetts, to see all the ghosts and goblins (and burning witches) for Halloween, probably my favorite holiday.  I usually stay home, decorate the house, and then eat all the candy that I bought for all the kids that I just knew were coming to trick or treat.  Then I would run to CVS to get more candy, having eaten it all.  Oh well.  I understand there is like a week of Halloween and I’ll have the whole weekend, if we want…who knows given the rain, but I’ll take my trusty Halloween candy just in case some kids want it…like me. 

Dan, Steve and I spoke about insurance coverage last night for enterprising young people, mostly in real estate, for the WNY Local Initiatives Support Corporation.  I was so impressed by what people have done to grow their business.  I would say a satisfying endeavor for everyone if I may be so bold.  Thanks Dan. 

Diane L. Bucci

[email protected]


Husband Forgives Wife for Trying to Kill Him:

The Marshall News Messenger
Marshall, Texas
29 Oct 1921


Bride of Eight Months Forgiven by Intended Victim, Who Also Furnished Bail.

            Philadelphia. —Mrs. Edna Murphy, nineteen years old, a bride of eight months, has been indicted by the grand jury on a charge of “feloniously soliciting Charles Colliton to secure someone to shoot and kill her husband, George Murphy.”

            Mrs. Murphy, it is alleged, paid $75 to a supposed gunman named “Paddy the Thug,” impersonated by William Belshaw, head of the Philadelphia police “murder squad,” instructing him to shoot her husband. The young wife wanted to collect her husband’s insurance and elope with another man.

            Subsequent to Mrs. Murphy’s arrest, her husband forgave her and furnished $3,000 bail, under which she was freed.


Editor’s Note:  We did find that Mr. Murphy died on October 13, 1928, seven years later, of a gunshot wound. It was ruled a homicide.  I am not sure who killed him as I could not find an article.


Lee’s Connecticut Chronicles:

Greetings from the Nutmeg State.  Interesting UM/UIM case for your enjoyment.  Happy Halloween.

Lee S. Siegel

[email protected]       


Trying to Stop Lynching in 1921:

The Dallas Express
Dallas, Texas
29 Oct 1921


            At last, an anti-lynching bill has been introduced in Congress and favorably reported by the House Judiciary Committee.

            Its author is Representative Dyer of Missouri. And it provides that any member of a mob, defined as an “assembly of five or more persons acting in concert for the purpose of depriving any person of his life without authority of law,” she be imprisoned for life or for not less than five years and that State and municipal officials, who through neglect of duty fail to prevent lynching, shall be imprisoned for not more than five years, or fined not more than $5,000. Federal District Courts would have jurisdiction. Any county in which a person was lynched would be required to forfeit $10,000 to the family of the victim.

            The favorable report on this bill seems to mean that at last representatives of the people of the United States are beginning to realize that if the institutions of law and orderly government are to be saved, the mob and the spirit of riot must be curbed. And well may they.

            What the final fate of this bill will be cannot yet be determined. It may not pass. But its failure of passage will only go far toward guaranteeing the ultimate disintegration of the national entity which all nations now call great.

Editor’s Note:  Dyer unsuccessfully re-introduced the bill in 1920, but it got a boost in late 1921 when Harding endorsed it in his Birmingham speech.  Harding went to Birmingham just four months after the May 31-June 1 racial violence in Tulsa, Oklahoma, which saw white mobs attack black residents and business and led to the deaths of nearly forty African Americans.  On January 26, 1922, the U.S. House of Representatives successfully passed the Dyer bill, sending it to the Senate.  But it failed in the Senate as southerners filibustered it, arguing that that blacks were disproportionately responsible for crime and out-of-wedlock births and required more welfare and social assistance than other minority groups.  In other words, stronger social controls—like lynching—were necessary to keep African Americans in line.  Dyer introduced his bill before Congress in 1923 and again in 1924, but southerners continued to block it.


Rauh’s Ramblings:

Hi all,

Happy almost Halloween!  I’m hoping the weather is decent on Sunday because my son is so excited about trick-or-treating in his adorable little ghost costume.  I usually don’t dress up, but this year I think I’ll throw on a witch hat and call it a day!

After a long search, I didn’t come across any notable cases this week in the life insurance or environmental coverage areas.  Maybe I will have better luck in two weeks.

Have a spooky weekend!

Patricia A. Rauh

[email protected]       



Times Union
Brooklyn, New York
29 Oct 1921


            Two youths were fined $2 each for crap playing in Jamaica by Magistrate Miller, in the Jamaica Police court yesterday.  One said he is Mark Schwartz, of New Paltz, N.Y.  The other was Louis Letteroll, of 111 Brown Avenue, Jamaica.

            “Letteroll ought to be a good name for a crap player,” commented the Magistrate.


Storm’s SIU Examen:

Hi Everyone:

I have seven cases for you this week to make up for missing the last issue due to some pressing legal work:

  • Federal District Court Judge cites to Seinfeld and The Simpsons in his ruling.

  • When insurer commenced an action against four groups of medical providers alleging fraud and RICO claims, asserting that common questions of law and fact justified joinder of these claims to serve judicial efficiency, the court dismissed all the defendants except one group who worked in concert, without prejudice to refiling individually against each group of defendants dismissed from the action.

  • Defendant’s motion to dismiss a complaint seeking coverage for an alleged “Wrongful Act” was granted on a directors, officers, and company liability policy based upon application of a "Prior Acts Exclusion” but the plaintiff was also granted leave to amend the complaint to allege facts supporting a "reasonable expectations" doctrine argument.

  • In a matter of first impression, the Superior Court in PA held that under the plain language of § 1738(c) of the Motor Vehicle Financial Responsibility Law the removal of a vehicle from an insurance policy providing non-stacked UIM coverage for three vehicles does not constitute a "purchase" of coverage as contemplated by the statute requiring the insured be provided the opportunity to waive the stacked limits of coverage at the time of removal.

  • Claims dismissed against Geico alleging breach of contract, unjust enrichment, and violations of N.Y. General Business Law §§ 349 and 350 stemming from Geico's alleged unfair profiting on premium because of decreased accidents during the COVID-19 pandemic. 

  • Liability coverage denial was untimely as notice was not provided to the injured party as required by Ins. Law § 3420(d)(2).  Where the injured party brought a direct action against the liability insurer after obtaining a judgment against the insured and it remaining unsatisfied for 30 days, a question of fact existed whether a confession of judgment and stipulation not to collect on it was void for collusion. 

  • Insurer’s motion to dismiss granted in 1st-party property claim based on exclusion for freezing, thawing, pressure or weight of water or ice to a foundation.  No “bad faith” existed simply due to the adjuster only spending 10 minutes at the loss site.

I am very happy to have received a favorable decision on a motion to dismiss due to the plaintiff/insured having breached the 2-year contractual suit limitation condition, including dismissal of claims for “bad faith”, General Business Law § 349 and attorneys’ fees.  Please read about it here posted to LinkedIn:

This week’s encouraging word: “Our chief want is someone who will inspire us to be what we know we could be”.  ~ Ralph Waldo Emerson 

Talk to you soon,

Scott D. Storm

[email protected]


Huge Personal Injury Verdict in 1921:

The Buffalo Times
Buffalo, New York
29 Oct 1921

Girl Attacked in Auto
Awarded Large Verdict

            NEW YORK, Oct. 29.—Miss Rosalind Green, 16, a stenographer employed by the Long Island Railroad Company, received a verdict for $15,000 damages against Dr. Harry Schneider of Jamaica.  The girl lives in Jamaica, with her mother, Mrs. Mildred Kotcher.  She had sued for $50,000.

            Miss Green accused Dr. Schneider of attacking her after she had gone with him in his automobile for a ride on the outskirts of Jamaica.  She testified that two young men, Ernest Pearson, and Albert Helmet, heard her screams and beat the physician.

            The physician denied her charges, saying the girl became ill while riding with him, and that he was attending her when attacked by Pearson and Helmet. He asserted he was the victim of a conspiracy.  Justice Kapper and a jury in the Queens Supreme court heard the testimony. 


Heintzman’s Hideout:

Dear Readers,

It’s been a rainy and dour October here in Buffalo. I (strangely) enjoy depressing weather, and I have absolutely embraced the gloomy atmosphere by watching a slew of horror movies. One of my favorites has been Rob Zombie’s Halloween II, which I think is straight-up better than John Carpenter’s original Halloween. In my last column, I also wrote that I was reading the Iliad, and I’m pleased to report that I’m nearly finished with it!

Just one case this week – New York County Court vacates an arbitration award and, finding for a livery insurer, denies coverage for an automobile accident where the insured was driving a rental vehicle not covered under the insurer’s policy.

All the best,

Nicholas J. Heintzman

[email protected]


Gender Selection before Birth?:

New-York Tribune
New York, New York
29 Oct 1921

Sex Choice Before Birth
Possible, Scientist Says

Pre-arrangement in Butterflies
Applicable to Humans,
Berlin Savant Announces

Special Cable to The Tribune
Copyright, 1921, New York Tribune Inc.

            BERLIN, Oct. 28. —Science will soon be able to prearrange the sex of children, Professor Richard Goldschmidt, of the Kaiser Wilhelm Institute of Technology, said to-day in a lecture delivered at that institution. He explained that experiments he has been carrying on have proved conclusively that sex can now be decided in advance in the case of butterflies, and he is sure that the same principle involved will be applicable to mankind. The professor's technical justifications for his theory are highly complicated.


North of the Border: 

We spent this past weekend in Canmore with daily hikes into the mountains. We saw some mountain sheep and an osprey but, other than that, the only other wildlife was our friends’ two dogs. Exhilarating to see the peaks covered in fresh snow that we encountered at about 7,500 feet. Back in Calgary, our first snow storm of the season is set to hit tomorrow. And so it begins.

My column, North of the Border, discusses an interesting appeal level decision on the interpretation of the contractual liability exclusion in a liability policy.

Heather Sanderson

[email protected]


Headlines from this week’s issue, attached:

Dan D. Kohane
[email protected]

  • Carrier had Duty to Defend When there was a Possibility that Some Damage Claims Fell within the Policy Period

  • Carrier’s Disclaimer Upheld and Action Against Defense Counsel Properly Dismissed

  • Duty to Defend Under Additional Insured Endorsement Based on Allegations in Complaint and Third-Party Complaint.

  • Carrier Held Potentially Liable for Remediation Work Undertaken by Independent Contractor

  • Pleadings and Bills of Particulars in Underlying Action Supported Claim for Additional Insured Status

    Steven E. Peiper
    [email protected]


  • Endorsement Granting a Limited Extension of Coverage Cannot be Read to Define the Other Grants of Coverage

  • Broker Fails to Establish the Application of Insurer’s Cited Exclusion in Attempting to Demonstrate its E&O was not a Proximate Cause of the Loss


Michael J. Dischley
[email protected]

  • Plaintiff’s 17 Month Gap in Treatment Precluded Plaintiff Expert from Causally Relating Symptoms to Accident


Agnes A. Wilewicz

[email protected]

  • Eighth Circuit Affirms District Court’s Grant of Summary Judgment and Holds that the Term “Owned Motorcycle” in an Automobile Liability Policy Means a Motorcycle Owned by “Any Insured”

  • Summary Order - Reversal of District Court – Commercial Excess Insurance – Priority of Response Required As Between Competing Policies


Brian D. Barnas
[email protected]

  • Attempted Bad Faith Setup Unsuccessful; Claim based on Purportedly Overbroad Release Dismissed


Lee S. Siegel

[email protected]

  • UM/UIM Limits Offset by WC and Dram Shop Recoveries, No Recovery for PTSD


OFF THE MARK (featuring Kyle Ruffner)
Brian F. Mark
[email protected]

  • U.S. District Court Dismisses Contribution and Indemnity Counterclaims Asserted Against Insurer.


BORON’S BENCHMARKS (featuring Hannah Cominsky)
Eric T. Boron

[email protected]

  • Summary Judgment for Auto Insurer Affirmed – Plaintiff Was Not Occupying or Operating Car When Struck by Another Vehicle While Walking Back to Car from Convenience Store


Diane L. Bucci

[email protected]

  • Not Exactly “Coverage B” But Involving the Invasion of Privacy


Ryan P. Maxwell

[email protected]

Legislative List

  • Bill Delivered to Governor Would Require Fire Sprinkler Cost Estimate in Contracts for New Home Construction


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

[email protected]

  • Without Limiting Language, the Absolute Auto Exclusion at Issue is Unambiguous


Patricia A. Rauh

[email protected]

  • No cases to report this week – see you on November 11th.


Scott D. Storm

[email protected]

  • Federal District Court Judge Cites to Seinfeld and The Simpsons in his Ruling

  • RICO Claims Against No Fault Providers Dismissed Without Prejudice

  • Defendant’s Motion to Dismiss a Complaint Seeking Coverage for an Alleged “Wrongful Act” was Granted on a Directors, Officers, and Company Liability Policy Based Upon Application of a "Prior Acts Exclusion” but Plaintiff was also Granted Leave to Amend the Complaint to Allege Facts Supporting a "Reasonable Expectations" Doctrine Argument

  • In a Matter of First Impression, the Superior Court Held that Under the Plain Language of § 1738(C) of the Motor Vehicle Financial Responsibility Law the Removal of a Vehicle from an Insurance Policy Providing Non-Stacked UIM Coverage for Three Vehicles Does Not Constitute a "Purchase" of Coverage as Contemplated by the Statute Requiring the Insured be Provided the Opportunity to Waive the Stacked Limits of Coverage at the Time of Removal

  • Claims Dismissed against Geico Alleging Breach of Contract, Unjust Enrichment, and Violations of N.Y. General Business Law §§ 349 and 350 Stemming from Geico's Alleged Unfair Profiting on Premium Because of Decreased Accidents During the COVID-19 Pandemic

  • Liability Coverage Denial was Untimely as Notice was not Provided to the Injured Party as Required by Ins. Law § 3420(D)(2).  A Question of Fact Existed Whether a Confession of Judgment and Stipulation not to Collect on it was Void for Collusion where the Injured Party Brought a Direct Action Against the Liability Insurer after Obtaining a Judgment Against the Insured and it is Remaining Unsatisfied for 30 Days
  • Insurer’s Motion to Dismiss Granted in 1st-Party Property Claim Based on Exclusion for Freezing, Thawing, Pressure or Weight of Water or Ice to a Foundation.  No “Bad Faith” Existed Simply Due to the Adjuster Only Spending 10 Minutes at the Loss Site


Nicholas J. Heintzman

[email protected]

  • Court Vacates Arbitration Award and finds for Livery Insurer, Denying Coverage for Automobile Accident where Insured was Driving a Rental Vehicle that was not Contracted for under the Livery Insurer’s Policy


Heather Sanderson

[email protected]

  • The Contractual Liability Exclusion in a Liability Policy is Alive and Well


Best wishes from our house to yours. Please stay healthy.




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
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]
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]

10/28/21       New York Marine & Gen. Ins. Co. v. Eastman Cooke & Assoc. Appellate Division, First Department
Carrier had Duty to Defend When there was a Possibility that Some Damage Claims Fell within the Policy Period

This is an insurance coverage declaratory judgment action relating to an underlying property damage action.  A commercial tenant (“tenant”) alleges property damage and other injuries due to prolonged construction work in a different commercial unit of the property where the business was located.

The tenant sued the building owner, which had contracted with Eastman to perform renovations. Eastman obtained a commercial general liability insurance policy (CGL) from Marine, requiring Marine to indemnify it for damages for, among other things, property damage and to provide a defense in actions asserting such claims covered by the Marine policy. The property owner filed third-party claims against defendant Eastman, and Marine commenced this action seeking a declaration that it has no duty to defend and indemnify Eastman.

Marine has a duty to defend Eastman in the underlying action because there is a reasonable possibility that coverage is implicated under the policy that plaintiff issued. Indeed, Marine does not seriously contest that the CGL policy here covering damage to property applies where the complaint alleges that the damage from the occurrence caused a constructive eviction and breach of quiet enjoyment that resulted in damages in addition to the physical losses; and "property damage" in the policy is defined to include "all resulting loss of the use" of the property. Marine argued that it has no indemnification/defense obligation because the underlying complaint's claims for constructive eviction/breach of quiet enjoyment do not seek any damages that arose during the Marine policy period, given the pleading admission that plaintiffs were reimbursed for damages during the relevant time frame by another insurer.

However, the court found that Marine did not show that the underlying claims do not seek any damages related to the relevant time period or that the insurance payments from other insurers resolved any and all damages from that period.  Instead, the evidence shows that such claims were asserted and are being pursued and that the payments covered only a certain part of the damages sought, leaving a reasonable possibility that some unreimbursed damages may be found to fall within the Marine policy.

10/26/21       Ruiz v. 829 Realty LLC
Appellate Division, First Department
Carrier’s Disclaimer Upheld and Action Against Defense Counsel Properly Dismissed

Contrary to 829 Realty, LLC's contentions, the documentary evidence submitted by Acceptance Indemnity Insurance Co. (Acceptance), 829 Realty's insurer, utterly refuted 829 Realty's allegations that disclaimer of coverage in the main personal injury action was improper. The complaint in the main action, which was properly considered by the motion court, alleged that on January 25, 2018, plaintiff "fell from a height" at the premises owned by 829 Realty, while working for defendant Arsh Gen Construction Corp., which was hired by 829 Realty. Those allegations do not suggest a reasonable possibility of coverage considering the relevant contractor's exception, which excluded coverage for claims premised on personal injury sustained by an employee of an independent contractor while working on behalf of an insured, or on the job site but not working for an insured

The third-party complaint and the affidavit from 829 Realty's member did not raise an issue of fact as to whether Acceptance had actual knowledge of facts establishing a reasonable possibility of coverage, because neither directly countered plaintiff's factual allegations that he was working for a contractor at the premises when his accident occurred.

829 Realty's arguments regarding the dismissal of its claims as against its former counsel in the main action, are not persuasive because a client may not evade the pleading requirements applicable to a legal malpractice cause of action by framing allegations, which sound in malpractice, in terms of breach of fiduciary duty or breach of contract.

10/26/21       Wilcox Development Corp. v. HDI Global Insurance Company Appellate Division, First Department
Duty to Defend Under Additional Insured Endorsement Based on Allegations in Complaint and Third-Party Complaint

Not a lot of detail provided here.  As the allegations of the complaint and third-party complaint in the underlying action suggest a reasonable possibility of coverage, defendant has a duty to defend Wilcox, an additional insured the fact that Wilcox might ultimately be found liable solely for its own independent negligent acts and/or omissions, which would not be covered under the additional insured provision, does not negate defendant's duty to defend it.  

10/20/21       Bennett v. State Farm Fire and Casualty Company
Appellate Division, Second Department
Carrier Held Potentially Liable for Remediation Work Undertaken by Independent Contractor
These related actions arise from an oil contamination incident that occurred in May 2011 on property owned by the Bennetts. At the time of the incident, the Bennetts had an insurance policy with State Farm.  State Farm provided coverage pursuant to a third-party liability provision in the policy to the extent of remediating the property as directed by the New York State Department of Environmental Conservation (hereinafter the DEC). State Farm engaged H2M, as an environmental consultant, inter alia, to oversee the work of Milro Associates, Inc. (hereinafter Milro), the remediation contractor hired by the plaintiffs at State Farm's expense.

In 2014, the Bennetts Action No. 3 to recover damages relating to the remediation process. The Bennetts asserted that State Farm and its agent H2M supervised the remediation work at the property, and that State Farm, H2M, and Milro caused additional damage to the property beyond the damage incurred in the initial oil contamination incident.

To hold a defendant liable in common-law negligence, a plaintiff must demonstrate (1) a duty owed by the defendant to the plaintiff, (2) a breach of that duty, and (3) that the breach constituted a proximate cause of the injury. " To constitute gross negligence, a party's conduct must smack of intentional wrongdoing or evince a reckless indifference to the rights of others

Generally, liability in negligence is premised on the defendant's own fault, not the wrongdoing of another. However, under the doctrine of vicarious liability, liability for another person's wrongdoing is imputed to the defendant

In most cases, a party who retains an independent contractor is not liable for the independent contractor's negligent acts The primary justification for this rule is that 'one who employs an independent contractor has no right to control the way the work is to be done and, thus, the risk of loss is more sensibly placed on the contractor.

There are various exceptions to the general rule against vicarious liability for the acts of an independent contractor.  These exceptions fall into three basic categories: "negligence of the employer in selecting, instructing or supervising the contractor; employment for work that is especially or 'inherently' dangerous; and, finally, instances in which the employer is under a specific nondelegable duty". There are no clearly defined criteria for identifying duties that are nondelegable.

Here, State Farm contended, in effect, that it demonstrated its prima facie entitlement to judgment as a matter of law dismissing the amended complaint and all cross claims insofar as asserted against it in Action No. 3 by submitting evidence demonstrating that it was not vicariously liable for the alleged negligence of Milro, since it did not supervise, direct, or control Milro's work, and that it was not vicariously liable for the alleged negligence of H2M, since H2M was an independent contractor and the plaintiffs failed to establish an exception to the general rule that a party is not responsible for the negligent acts of its independent contractors. Moreover, State Farm contends that, even if it was vicariously liable for H2M's alleged negligence, H2M was not vicariously liable for Milro's alleged negligence since H2M did not supervise, direct, or control Milro.

However, State Farm failed to eliminate triable issues of fact, inter alia, as to whether State Farm, through H2M, improperly sought to the limit the scope of the investigation and remediation of the plaintiffs' property, whether State Farm retained final approval regarding any "recommendation" made by H2M, and whether H2M supervised, directed, and controlled the remediation and the work of Milro.

Moreover, even if State Farm had demonstrated that H2M was an independent contractor, it failed to demonstrate that it was not negligent in selecting, instructing, or supervising H2M, and/or that the services rendered by H2M were not accepted by the plaintiffs after assurance that they were being supplied by State Farm.

Accordingly, State Farm failed to demonstrate its prima facie entitlement to judgment as a matter of law dismissing the amended complaint and all cross claims insofar as asserted against it in Action No. 3.

10/20/21      Long Island Rail Road v. New York Marine & General Ins. Co.
Appellate Division, Second Department
Pleadings and Bills of Particulars in Underlying Action Supported Claim for Additional Insured Status

Long Island Rail Road Company (“LIRR”), sued Nouveau Elevator Industries, Inc. (“Nouveau”), a company with which LIRR had a written agreement to provide escalator repair, maintenance, and attendant services at various LIRR facilities, and New York Marine and General Insurance Company (hereinafter NY Marine), Nouveau’s liability insurer. LIRR sought a declaration that NY Marine was obligated to defend and indemnify it in an action entitled Morrison v Long Island Railroad (“underlying action”), and to reimburse it for all attorneys' fees it already incurred therein.

In the underlying action, Morrison alleged that, in January 2015, she was injured by an escalator at the LIRR Babylon Station. LIRR alleged that it was an additional insured under an insurance policy that NY Marine had issued to Nouveau.

When determining whether a third party is an additional insured under an insurance policy, a court must ascertain the intention of the parties to the policy, as determined from within the four corners of the policy itself. Here, an endorsement to the insurance policy at issue provided that additional insureds included "[a]ny person or organization for whom [Nouveau was] performing operations when [Nouveau] and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on [the] policy." LIRR's entitlement to defense and indemnification under that insurance policy depends on whether there was a written agreement between Nouveau and LIRR requiring that LIRR be an additional insured.

LIRR established its entitlement to judgment as a matter of law declaring that NY Marine is obligated to indemnify it in the underlying action by demonstrating that it was an additional insured under the insurance policy provided by NY Marine to Nouveau. LIRR submitted, inter alia, the request for proposal, the notice of award to Nouveau, the notice to proceed, and a certificate of insurance including LIRR as an additional insured under Nouveau's insurance policy. In opposition, NY Marine failed to raise a triable issue of fact as to whether LIRR was an additional insured.

Here, the scope of the insurance policy covered "liability for 'bodily injury' or 'property damage' caused, in whole or in part, by [Nouveau] at the location designated." In support of its cross motion, LIRR submitted, inter alia, the amended complaint and the bill of particulars in the underlying action which allege, among other things, that the injuries sustained by the plaintiff in that action were caused by a defective escalator at an LIRR facility. That amended complaint and the bill of particulars also include allegations as to the negligent operation and maintenance of the escalator


McGilloway vs. Safety Insurance Company
(Massachusetts Supreme Judicial Court-No. 13053; October 19, 2021)

Many thanks for the opportunity to make another contribution to Hurwitz & Fine's Coverage Pointers, which IMHO is the best publication of its kind issued by any law firm in the country.  Kudos to Dan and his H&F Team! [Bolding added by editor, ha!]

In the interests of full disclosure, I have a personal interest in the “IDV” issue.  At about 3:00 a.m. on March 15, 2014, my car was parked on the street, across from our home on College Hill in Providence, Rhode Island.  We were at home, fast asleep, when a drunk driver crashed into my car head on, causing considerable damage.  It was a frightening scene.  Thank God no one was hurt. 

The driver’s auto liability carrier paid for the cost of repairs and, reimbursed me for the decrease in the market value of the car as compared with its market value immediately before the crash.  That difference in value is commonly called “inherent diminished value” (IDV).

In Given v. Commerce Ins. Co., 440 Mass. 207 (2003), the Massachusetts Supreme Judicial Court (SJC) (Massachusetts’ highest level appellate court) addressed IDV under the sixth edition of the standard Massachusetts auto policy, promulgated in January 1993.  The pertinent language of that policy provided that the insurer "will pay for any direct and accidental damage to [the claimant's] auto caused by a collision." The SJC found that under that policy’s pertinent language insurer are not obligated to pay IDV damages.

On October 19, 2021, the SJC issued its decision in McGilloway vs. Safety Insurance Company (SJC No. 13053), which addressed IDV under the 2008 edition of the standard Massachusetts automobile insurance policy.  The 2008 policy provides that the carrier “will pay damages to someone else whose auto or other property is damaged in an accident. The damages we will pay are the amounts that person is legally entitled to collect for property damage through a court judgment or settlement.”  The SJC decided that under the 2008 policy automobile insurers are obligated to pay IDV damages.  The Court reasoned:

Because the plain language of part 4 of the [2008] standard policy does not limit recovery to merely repair or replacement costs, such recovery must compensate a claimant for any loss of value the claimant incurred as a result of a collision, offset by the increase in value that may occur from repairs to the vehicle. In short, if a third-party claimant's vehicle suffers IDV even after it is fully repaired, then under part 4 of the standard policy, the insurer may be liable to the claimant for IDV damages so that he or she may be "made whole" once again.

But, of course, the devil (as always) is in the details. The SJC also stated: 

We do not, however, suggest that every automobile that is involved in a collision and is subsequently repaired has suffered an IDV.  Rather, and as other jurisdictions have held, individualized proof is required to demonstrate that a given automobile has sustained some form of diminution in value due to a collision or vehicular accident, even after repairs are made.  Specifically, a plaintiff must establish (1) that his or her vehicle has suffered IDV damages, and (2) the amount of IDV damages at issue.  Here, a material dispute still exists regarding whether any of the plaintiffs' vehicles have suffered IDV due to a collision and, if so, whether and in what amount such damage can be quantified; as just stated, each plaintiff has the burden of proof on these issues.

The SJC remanded the case to the trial court for further proceedings.

But McGilloway has not necessarily put the IDV issue to rest under the law of the Commonwealth.

In 2016, a new edition of the standard Massachusetts auto policy was issued. It contains language that is significantly different from the 2008 edition that the SJC addressed in McGilloway:

The amount we will pay does not include compensation for physical damage to, or towing or recovery of, your auto or other auto used by you or a household member with the consent of the owner, or any decreased value or intangible loss claimed to result from the property damage unless otherwise required by law.

Emphasis supplied. 

Because the 2016 policy was not before the Court in McGilloway, how the IDV issue would have been decided under that policy’s language was not addressed.  Based upon similar facts, one might think the SJC would have reached the opposite conclusion. 

But what does “unless otherwise required by law” mean?  Why was that language added to the 2016 policy?  Is it a challenge to the SJC’s ruling in McGilloway?  Is it the Massachusetts Insurance Commissioner’s invitation to the state legislature to establish the “required law” concerning whether a Massachusetts auto insurer is obligated to pay IDV?  Or does it mean something else? 

Stay tuned.  As always, the devil is in the details.

David W. Zizik, Esq.
Insurance and Reinsurance Group
Sulloway & Hollis, P.L.L.C.
Direct: 781-320-5401

[email protected]


Steven E. Peiper

[email protected]

10/20/21       Mulle v. Lexington Ins. Co.
Appellate Division, Second Department
Endorsement Granting a Limited Extension of Coverage Cannot be Read to Define the Other Grants of Coverage

Plaintiff’s property allegedly sustained damage when heating oil leaked into the lawn of the premises.  The tank from whence the oil came was originally located on a neighbor’s premises but was displaced during the flood waters of Superstorm Sandy.  Plaintiff, in turn, submitted a claim for coverage to his property insurer, Lexington. 

Lexington appears to have denied the claim based on the pollution exclusion.  In addition, the policy was endorsed to provide a limited extension of coverage for property damage caused by the “escape of liquid fuel from a fuel system on property owned by an insured. (“ELF Endorsement”).   When Lexington concluded that the fuel leaked from the neighbor’s premises, it notified the insured that coverage could not be extended under the endorsement.

At the conclusion of discovery, both parties moved for summary judgment. Lexington argued that the ELF endorsement, by its terms, did not apply to the loss.  Given the ELF’s inclusion in the policy, the Lexington concluded that there was no coverage otherwise available for fuel oil leaks.  In essence, if fuel oil leaks were covered there would have been no need for the ELF endorsement to have been appended to the policy. 

The Second Department rejected this contention outright.  As an initial matter, the ELF endorsement was not an exclusion.  It was merely a coverage grant meant to extend potential coverage.  As such, its wording could not be read to conclude that the policy excluded coverage elsewhere. 

Lexington also argued that the pollution exclusion applied to bar coverage that was otherwise not extended by the ELF endorsement.  The Court also rejected this argument on the basis that it found a question of fact as to whether an exception for “malicious mischief” applied. 

On the flip side, however, the Court also refused to grant plaintiff’s motion on the basis that yet additional unresolved questions of fact existed. 

10/26/21       Shedler & Cohen, LLP v. AON/Albert G. Ruben Ins. Servs.
Appellate Division, First Department
Broker Fails to Establish the Application of Insurer’s Cited Exclusion in Attempting to Demonstrate its E&O was not a Proximate Cause of the Loss

Plaintiff was sued by its client for malpractice. When the claim was tendered to plaintiff’s errors and omissions carrier, coverage was denied by application of several exclusions.  In response, plaintiff sued its broker alleging that AON, in effect, did not procure an appropriate insurance policy. 

AON moved for summary judgment on the basis that the claim was excluded by operation of a commingling provision, and, as such, any malpractice alleged against it could not have been a proximate cause for the loss of coverage.  The Appellate Division denied the application because here the E&O carrier identified several reasons why coverage was denied; among them was the comingling exclusion referenced by AON’s motion.

 Because AON, in effect, stands in the shoes of the denying insurer, it was required to establish that the commingling exclusion applied to bar all coverage.  On the Record before the Court, it was unclear whether there was commingling or whether it was the only cause of liability against the broker.


Michael J. Dischley

[email protected]

10/21/21       Duane R. Blake v. Ricardo A. Sanchez
Appellate Division, First Department
Plaintiff’s 17-Month Gap in Treatment Precluded Plaintiff Expert from Causally Relating Symptoms to Accident

This appeal was from an Order of the Supreme Court, Bronx County (John R. Higgitt, J.), entered on or about July 2, 2020, which granted defendant Ricardo A. Sanchez's motion and defendants Calvin Williams and Gardener Industries, Inc.'s cross motion for summary judgment dismissing the complaint based on plaintiff's inability to demonstrate that he sustained a serious injury to his cervical spine within the meaning of Insurance Law § 5102(d).

The Appellate Court found that defendants established prima facie that plaintiff did not sustain a serious injury to his cervical spine. Defendants submitted the report of their radiologist, who opined that the MRI of plaintiff's cervical spine revealed conditions that were degenerative and not causally related to the accident, and the report of their orthopedist, who found that plaintiff had normal range of motion.

In opposition, the Appellate Court found that plaintiff failed to provide any admissible medical evidence concerning his condition contemporaneous to the accident sufficient to raise an issue of fact as to causation. Although plaintiff's expert found range of motion limitations in plaintiff's cervical spine, he did not examine plaintiff until approximately 17 months after the accident, which is insufficient to reliably connect his current symptoms to the accident.

As such, the decision was unanimously affirmed, without costs.


WILEWICZ’S WIDE WORLD of COVERAGE (featuring Franco Mirolo)
Agnes A. Wilewicz

[email protected]

10/18/21       Safeco Ins. Co. of Illinois v. Joseph Palazzolo
United States Court of Appeals, Eighth Circuit
Eighth Circuit Affirms District Court’s Grant of Summary Judgment and Holds that the Term “Owned Motorcycle” in an Automobile Liability Policy Means a Motorcycle Owned by “Any Insured”

Safeco Insurance Company of Illinois issued an automobile liability policy to Joseph and Nancy Palazzolo that excluded uninsured motorists’ coverage for bodily injury sustained by any insured while occupying or operating an owned motorcycle. Lauren Palazzolo, the insureds’ daughter, was killed by an uninsured driver while riding her motorcycle. The Palazzolo’s claimed that Lauren qualified for uninsured motorist coverage. They argued that the term “owned motorcycle” was ambiguous and thus the exclusion did not apply. According to the Palazzolo’s, the term could mean a motorcycle owned by a named insured, a motorcycle owned by the injured party, or a motorcycle owned by anyone at all. Safeco, to the contrary, argued that the term referred to a motorcycle owned by any insured.

The Court analyzed the term under different perspectives. First, under the plain language of the policy, the Court said that “owned motorcycle” in isolation was ambiguous. Nevertheless, because the exclusion included the term “any insured,” an ordinary reader could interpret “any insured” to modify “owned motorcycle,” and thus the term “owned motorcycle” would mean a motorcycle owned by any insured. Second, when interpreting the term in context with the rest of the policy, the Court said that the policy consistently referred to the named insureds as “you,” thus if the term “owned motorcycle” was meant to refer to a motorcycle owned by a named insured, the term would have been “a motorcycle you own.” Third, based on the intent of the parties, the Court said that considering the context of the insurance industry, it was clear that Safeco intended to exclude this type of accident. Because motorcycles are more likely to be involved in an accident, insurers usually offer separate motorcycle insurance policies at a higher premium. Lastly, the Court said that “owned motorcycle” could not refer to a motorcycle owned by anyone at all because all motorcycles have some owner. Yet, the Court added that even assuming this was the correct interpretation, the Palazzolo’s would still not be benefited. After all, Lauren’s motorcycle was owned by Lauren.

According to the Court, the only reasonable interpretation of “owned motorcycle” is a motorcycle owned by “any insured.” Therefore, the Court affirmed the district court’s decision granting summary judgment in favor of Safeco.

10/05/21       Century Surety Company v. Admiral Ins. Co. et al
United States Court of Appeals, Second Circuit
Summary Order - Reversal of District Court – Commercial Excess Insurance – Priority of Response Required As Between Competing Policies

A three-judge panel of the Second Circuit, applying New York law to consolidated declaratory judgment actions commenced in 2017 by Century Surety Company (“Century”) and Admiral Insurance Company (“Admiral”), unanimously held in a Summary Order on October 5, 2021 that the indemnity agreement set forth within an underlying trade contract governs the priority of coverage for an additional insured, rather than the “Other Insurance” provision of the insurance policy.  Rulings by Summary Order do not have precedential effect. 

The liability insurance coverage dispute between Century, its insured Rukh Enterprises, Inc. (“Rukh”), the Long Island Rail Road (LIRR) and Metropolitan Transit Authority (“MTA”) and their insurer Admiral arises from a work accident that occurred on September 13, 2013 on MTA property during a lead paint removal and repainting project on the Cypress Bridge in Queens, New York (the “Bridge”) contracted for by the LIRR (the “Project”).  The LIRR contracted with Rukh to perform lead paint removal and repainting of the Bridge (the “Rukh-LIRR Contract”)). Rukh, in turn, subcontracted lead paint blasting to East Coast Painting & Maintenance (“East Coast”) (the “Rukh-East Coast Subcontract”).  The September 13, 2013 accident gave rise to the injured employee of Rukh’s subcontractor East Coast suing Rukh and the LIRR in state court (the “Underlying Action”).  Rukh, the LIRR and East Coast entered into a settlement agreement in late December 2019 for the purpose of resolving the Underlying Action.  Admiral and two other insurers contributed to the settlement.  Century did not contribute to the settlement.

Rukh was required by the Rukh-LIRR Contract to procure liability insurance covering the project.  Rukh obtained two policies:  (1) a primary policy from [non-party] Arch Specialty Insurance Co. (“Arch”); and (2) the Century Commercial Excess Liability Policy at issue. The Century Commercial Excess Liability Policy issued to Rukh makes no specific reference to the LIRR, the LIRR’s policies, the Rukh-LIRR Contract, or the Project. Rukh is the sole named insured on the Century Commercial Excess Liability Policy.

Coverage in the Underlying Action implicated four separate insurance policies:

(1) a Harleysville Preferred Insurance Company policy issued to Rukh’s subcontractor East Coast (the “Harleysville Policy”);

(2) a primary commercial general liability policy issued by Arch Insurance Company to Rukh  (the “Arch Policy”);

(3) the Century Commercial Excess Policy issued to Rukh providing commercial excess liability coverage over the Arch Policy (the “Century Excess Policy”); and

(4) the Admiral railroad protective liability policy issued to the LIRR (the “Admiral Policy”).

Century moved the District Court for summary judgment against Rukh, the LIRR, and Admiral, and the LIRR cross-moved for summary judgment.  District Court granted Century summary judgment in part, with respect to the priority of coverage issue, holding that the Century Excess Policy terms was a “true excess policy” not required to respond until all other available policies had responded to their limits.  District Court denied Century’s motion seeking a declaration that the Century policy’s Independent Contractors Exclusion applies to bar coverage in any event.  A date was scheduled for trial of the Independent Contractors Exclusion issue.  Thereafter, upon being advised of the settlement of the Underlying Action, District Court granted Century a declaratory judgment ruling Century was not obligated to provide coverage for the (now settled) Underlying Action and closed the case.

The MTA, LIRR, and Admiral appealed District Court’s grant of the declaratory judgment to Century to the Second Circuit. 

The three-judge panel’s Summary Order issued October 5, 2021 summarized its view of the principal issue on appeal, as follows: 

“[w]hich relevant contractual term governs – the indemnity agreement in the underlying trade contract between Rukh and LIRR or the “Other Insurance” provision in the Century Surety policy.  On the one hand, if the indemnity agreement controls, then Century Surety must pay into the settlement amount and exhaust its policy limits before Admiral pursuant to Rukh’s obligation to indemnify LIRR.  On the other, if the “Other Insurance” provision in the Century Surety policy controls, then Admiral must pay into the settlement amount and exhaust its policy limits before Century Surety because the Century Surety policy would be excess to any other applicable insurance policy, including the Admiral policy.”

Admiral did not argue in its appeal that District Court incorrectly determined Century’s policy to be a “true excess policy”.  Rather Admiral contended on appeal that the underlying trade agreement’s indemnity provision controlled the analysis of the priority of coverage issue.  The Second Circuit agreed with Admiral’s argument. 

The Second Circuit’s Summary Order stated that the three-judge panel did not believe that New York’s highest court, the Court of Appeals, had ever resolved the above-noted “principal issue on appeal”.  The three-judge panel stated its task on this appeal was to “predict how the New York Court of Appeals would rule on this question of insurance law”.  The Summary Order states that Century’s reliance upon a 1985 New York Court of Appeals decision is not persuasive since the three-judge panel finds that case “inapposite to the circumstances present here”, given it is a priority of coverage case involving auto insurers.     

Looking to decisions of New York appellate cases, the three-judge panel found two cases decided by the New York Appellate Division, First Department in 2010 and 2019, respectively, as being “instructive”   - Indemnity Ins. Co. of North America vs. St. Paul Mercury Ins. Co (“Indemnity”),  74 A.D.3d 21 (1st Dept 2010) and Arch Ins. Co. vs. Nationwide (“Arch”), 175 A.D.3d 437 (1st Dept 2019).  Those cases held that it is the trade contract’s indemnity agreement that controls the priority of coverage issue analysis under New York law, rather than the “Other Insurance” provisions of the policies at issue.  

The three-judge panel’s Summary Order distinguished a slightly earlier decided (third) New York Appellate Division, First Department case from 2008 - Bovis Lend Lease LMB, Inc. vs. Great American Ins. Co. (“Bovis”), 53 A.D.3d 140 (1st Dept 2008) - that had held the extent of coverage analysis is controlled by the relevant insurance policy terms ,and not by the terms of the underlying trade contract. The Summary Order characterizes Bovis as “unpersuasive” since it was decided earlier in time.  The three-judge panel recognized that the earlier Bovis “suggests a conclusion contrary to that which we reach today” but considered the more recent Indemnity and Arch cases “as more probative of how the New York Court of Appeals would decide the issue”.  The Summary Order acknowledges that neither Indemnity nor Arch expressly mentioned Bovis.   The Summary Order further advises the three-judge panel’s decision on this appeal finds additional support for its reasoning in various Circuit courts (the 4th, 5th, and 8th Circuits) that, “although not analyzing New York law, have also come to this same conclusion”. 

However, we note that the Summary Order neither cites, discusses nor acknowledges the State National Ins Co v Mt. Hawley Ins Co., 2021 WL 1193208 (E.D.N.Y., March 29, 2021) decision issued earlier this year where the U.S. District Court Eastern District of New York opined on the priority of coverage issue by ruling "requirements in the Subcontract cannot change the relative priority of coverage between the Mt. Hawley Policy and the SNIC Policy...when a subcontractor procures insurance required under a subcontract, but that insurance does not provide the level of insurance required by the subcontract, the terms of the insurance policy, not the subcontract, control the insurer's obligations."  [[citing and quoting Bovis...“An insurance policy is a contract between the insurer and the insured.  Thus, the extent of coverage (including a given policy’s priority vis-à-vis other policies) is controlled by the relevant policy terms, not by the terms of the underlying trade contract that required the named insured to purchase coverage.”]


Brian D. Barnas

[email protected]

09/20/21       Pelaez v. Government Employees Insurance Company
United States Court of Appeals, Eleventh Circuit
Attempted Bad Faith Setup Unsuccessful; Claim based on Purportedly Overbroad Release Dismissed

On April 13, 2012, Michael Conlon was driving his mother's car to the high school prom when he turned into a median and in front of John Pelaez who was on a motorcycle.  The motorcycle hit Conlon's car with such force that it spun the car 180 degrees, and the impact injured Pelaez seriously enough that he was airlifted to the hospital. Geico had issued Conlon's mother a policy covering her car and Conlon as an additional driver.

Geico’s initial investigation suggested that Pelaez had likely been speeding and was contributorily negligent.  However, within days, Geico discovered that Conlon failed to yield the right of way, and Pelaez did not appear to be speeding.  Within eleven days of the crash Geico tendered the $50,000 bodily injury policy limits to Pelaez’s attorney and requested to inspect the damaged motorcycle so it could make an offer on the property damage claim.  By April 26, 2012, Geico had delivered a settlement package to Pelaez’s counsel that contained a release and invited Pelaez to contact Geico to discuss any changes.  Geico continued its efforts to inspect the motorcycle.

On May 4, 2012, Pelaez’s counsel rejected the settlement offer.  His letter of rejection stated that Geico’s form release was trying to take advantage of the Pelaez family by asking for release of all claims and did not explicitly contain a reservation for property damage.  Geico responded to the rejection letter two days after receipt explaining that it had been unable to inspect the motorcycle to determine the extent of the damage.  Geico also advised that it kept property damage and bodily injury claims separate, and it reiterated that it had only sent a proposed release and invited counsel to send any additional language or changes.

Pelaez sued Conlon and his mother in state court, and Geico defended its insureds.  The property damage claim settled for $7,283.06.  A judgment of $14,900,000 was entered against the Conlons, with the stipulation that Pelaez would only seek satisfaction from insurance proceeds.  This included any claims for bad faith or extra-contractual damages.

Pelaez and Conlon then brought a bad faith lawsuit against Geico.  Geico removed to federal court.  The district court granted summary judgment in Geico’s favor on the bad faith claim.

The Eleventh Circuit affirmed.  It reasoned that a bad faith analysis requires consideration of the totality of the circumstances.  Geico worked quickly and diligently in this case to investigate the incident and offer its bodily injury limits.  While an overbroad release may be the basis of a bad faith claim, Geico’s release in this case made clear that it was only a proposed release.  It did not require strict adherence to the release or require a specific type of release to settle.  Rather, Geico invited Pelaez’s attorney to make changes and suggestions to the release.

The court observed that Pelaez’s attorney was motivated not to settle the case for the policy limits from the start.  The court stated that “Pelaez's attorney declined the offer to cure any problem with the release because he had higher goals to pursue.”  While Pelaez’s attorney claimed that the case was pursued to help prevent other people from being taken advantage of by “predatory insurance practices,” the court noted that Pelaez had incentive to pursue the case because “a $14,900,000 judgment is bigger than a $50,000 settlement.”  While the Claimant’s actions are not the focus of a bad faith analysis, the court discussed them because they demonstrated how, in the totality of the circumstances, the failure to settle the lawsuit did not result from the bad faith of Geico.


Lee S. Siegel
[email protected]

10/19/21       Menard v. State
Connecticut Court of Appeals
UM/UIM Limits Offset by WC and Dram Shop Recoveries, No Recovery for PTSD

The Court of Appeals recently revisited some important UM/UIM basics in reversing recoveries for two Connecticut State Troopers following a car wreck. The appellate court held that worker’s compensation payments are a set-off to UM/UIM damages, that the failure to reduce damages by a Dram Shop recovery amounted to a double recovery, and that alleged PTSD damages are not collectible under a UM/UIM claim.

Troopers Menard and Connolly responded to a suspected intoxicated driver along I-84 in Hartford, just before 2 am on a Saturday morning. Connolly pulled the driver over along the west bound Sisson Avenue off ramp (which is four lanes wide for the unacquainted). Connolly parked his cruiser directly behind the suspect, in the far-right lane. Menard, also responding, drove up to the scene and parked his cruiser behind Connolly’s. A third trooper responded—it must have been a quiet night of crime fighting in Hartford—parking behind and to the left of the other cruisers. Connolly and Menard alighted from their vehicles, approaching the occupants of the suspect vehicle. Another vehicle, driven by nonparty William Bowers, struck the third cruiser from behind, propelling it forward toward Connolly and Menard. “Menard attempted to jump clear of the cruiser, tumbled in the air, and came down on his head between [the third cruiser] and the stopped vehicle. Connolly pushed himself away from the cruiser, using his right arm against the hood of the cruiser.” All three troopers were taken to Hartford Hospital.

The troopers brought an action against the State of Connecticut seeking underinsured motorist benefits, pursuant to the police union’s collectively bargained agreement with the State. They claimed that their injuries from the accident exceeded the combined insurance available from the tortfeasor’s liability insurer and their own personal auto insurance. The State contended that the troopers had been fully compensated if it was entitled to set offs for worker’s compensation and Dram Shop liability recoveries (turns out Bowers was drunk).

Following a seven-day bench trial, the Superior Court held that the accident was the sole negligence of drunk-driver-Bowers, the State owed UM benefits, that the troopers were not entitled to PTSD damages, that workers compensation payments were a set-off, but that the Dram Shop recoveries were not. Both sides appealed

The Appellate Court affirmed that the troopers were not entitled to PTSD damages as part of an underinsured motorist claim. In declining to award the plaintiffs PTSD-related damages, the court determined that the terms of Connecticut General Statute § 38a-336 [the UM/UIM statute] are plain and unambiguous, although the court observed that the statute did not define “‘bodily injury.’” Relying on decisions by the Connecticut Supreme Court supporting the proposition that “emotional distress, without accompanying physical harm, does not constitute a ‘bodily injury,’” the court concluded that the State's coverage, which coincided with § 38a-336, did not encompass the plaintiffs’ PTSD claims. The plaintiffs asserted that the PTSD that they developed was accompanied by physical manifestations, but the State countered that the PTSD allegedly developed by the plaintiffs was a purely psychological injury.

The court concluded that, “Here ... the plaintiffs’ PTSD claims are not a result of their personal injuries. Rather, they are premised on having gone through a life-threatening accident and having to reexperience similar work-related scenarios on a regular basis. Thus, there is no underinsured motorist coverage for these aspects of their claims since they do not constitute ‘damages because of bodily injury’ [under the statute].”

The Appellate Court also held that the State’s UM/UIM coverage may provide for the reduction of limits to the extent that damages have been “(B) paid or are payable under any workers’ compensation law ....” Accordingly, as the statute permits a WC set-off, the State was allowed to reduce the troopers’ damages by received WC benefits.

Finally, the Appellate Court reversed the trial court, finding that the troopers’ Dram Shop recoveries were a set-off to UM benefits in order toa void a double recovery.  The question before the court was whether a claimant's damages can be reduced by the sum of a dram shop payment to prevent a double recovery as proscribed by common law. “[T]he rules precluding double recovery is a simple and time-honored maxim that [a] plaintiff may be compensated only once for his just damages for the same injury. ... Connecticut courts consistently have upheld and endorsed the principle that a litigant may recover just damages for the same loss only once. The social policy behind this concept is that it is a waste of society's economic resources to do more than compensate an injured party for a loss and, therefore, that the judicial machinery should not be engaged in shifting a loss in order to create such an economic waste.” (Internal quotation marks omitted.) Mahon v. B.V. Unitron Mfg., Inc., 284 Conn. 645, 663, 935 A.2d 1004 (2007).

The Appellate Court, therefore, held that the Superior Court committed error in declining to reduce underinsured motorist damages by the sum of the Dram Shop recoveries.


OFF the MARK (featuring Kyle Ruffner)
Brian F. Mark
[email protected]

10/13/21       Indian Harbor Ins. Co. v. Rohrscheib Sons Caissons, Inc.
United States District Court for the Eastern District of Michigan, Southern Division
U.S. District Court Dismisses Contribution and Indemnity Counterclaims Asserted Against Insurer

This declaratory-judgment action arises out of an underlying construction defect action related to the construction of a parking structure.  General Motors contracted with Walbridge Aldinger Company (“Walbridge”) to build a parking structure, and Walbridge subcontracted with Rohrscheib Sons Caisson, Inc. (“Rohrscheib”) to install piers for the structure. 

Walbridge was insured under a Subcontractor Default Insurance Policy issued by Indian Harbor Insurance Company (“Indian Harbor”), which provides that Indian Harbor would indemnify Walbridge for loss resulting from a Default of Performance by subcontractors.

Walbridge informed Rohrscheib of the defects in the piers and, pursuant to the policy, Indian Harbor paid over 10 million dollars to repair the damage caused by the defects. 

Indian Harbor then filed suit to recover the payments made to complete Rohrscheib’s work.  Rohrscheib counterclaimed, alleging it was entitled to contribution under Michigan’s Joint Tortfeasor Contribution Act and common law indemnification. 

Under Michigan law, a defendant acting pursuant to a contract is liable in tort only if it owed a duty to the plaintiff that is separate and distinct from the defendant’s contractual obligations.  Rohrscheib argued its duty to perform in a workman like manner and provide piers free from defect was separate and distinct from the contract.  The Court disagreed, holding that the entire purpose of the contract was to provide piers in a workman like manner that were free from defects.  As such, Rohrscheib’s contribution claim was dismissed. 

Rohrscheib also argued it was entitled to common law indemnification, because it was only passively negligent, which would hold Indian Harbor liable for Walbridge’s primary negligence.  However, the Court noted that Walbridge was not a party to the suit and held that the posture of the case did not allow for common-law indemnification because there was no primary plaintiff. Therefore, the Court granted Indian Harbor’s motion to dismiss Rohrscheib’s counterclaim for failure to state a claim.


BORON’S BENCHMARKS (featuring Hannah Cominsky)
Eric T. Boron

[email protected]


10/15/21       Progressive Northern Ins. Co. vs. McGrath
Supreme Court of Vermont
Summary Judgment for Auto Insurer Affirmed – Plaintiff Was Not Occupying or Operating Car When Struck by Another Vehicle While Walking Back to Car from Convenience Store

This case arises from an incident where an underinsured motorist struck the Defendant as he and the owner of the vehicle were leaving a gas station convenience store and walking back towards the car. The defendant-driver and owner-passenger were about thirty to forty feet away from the car when they were hit. They were intending to re-enter the car and continue with their journey. The issue on appeal was whether the Defendant qualified as an “insured person” in terms of the underinsured motorist benefits provided by the owner’s auto insurance carrier. The policy provided coverage for “damages that an insured person is legally entitled to recover from the owner or operator of . . . an underinsured motor vehicle” because of injuries the insured person sustained in an accident with said underinsured motor vehicle. To be an “insured person” you must be either (1) a named insured; (2) any person operating a covered vehicle with the permission of a named insured; or (3) any person occupying, but not operating, a covered vehicle.

It was clear that the Defendant was not a named insured, so the question remained- was he either operating or occupying the car? The trial court agreed with Progressive’s reasons to deny coverage and found that the Defendant was not operating or occupying the car under the terms of the policy. The defendant argued on appeal that the trial court interpreted “operating” too narrowly, as these days people can do things that are incidental to the operation of a car like unlocking or remotely starting a car from a distance. Defendant also encouraged the Court to adopt a multi-factor test to determine if he was “occupying” the vehicle.

The Court did not find evidence to support that Defendant was operating the car remotely. The stipulated facts only showed that he had the intention to unlock the vehicle remotely but was not actually doing it at the time he was hit. Because “occupying” is defined in the policy as “in, on, entering or exiting,” the Court then looked to whether the Defendant was “entering” the car at the time of the accident. The Court noted that while the dictionary definition of entering covers the point where a person crosses the threshold of the car to enter it, it also covers a broader scope of conduct leading up to that point. While Defendant argued for a four-part test requiring: a causal connection between the injury and the use of the vehicle; geographic proximity of the injured person to the vehicle; the injured person to be vehicle-oriented rather than highway or sidewalk-oriented; and the injured person be engaged in a transaction essential to the use of the vehicle; the Court declined to adopt any specific test.

The Court examined two factually similar cases in making its determination. In one case, the defendant was within ten feet of the vehicle and beginning to turn to enter it when she was struck. She was determined to be engaged in the boarding process and thus entering the vehicle. In the other case, the Defendant was intending to get in a vehicle eight feet away but was on the other side of traffic and had not started crossing the road. The court found the mere intent to get in the vehicle insufficient because she was “not engaged in the completion of acts reasonably expected from one actually getting in a vehicle under similar conditions.” Highlighting the importance of facts in these types of decisions, the Court recognized the existence of the limit to which a person can reasonably be said to be “entering” a vehicle, and that Defendant’s case clearly fell outside it. Considering that Defendant was done pumping gas, had left the pump to go get coffee, and was struck while still thirty to forty feet away, the Court found he was no more entering the car than he was merely approaching it, and his intent to enter the car eventually fell outside of the policy’s definition of “occupying.”


BUCCI on “B”
Diane L. Bucci

[email protected]

10/19/21       Twin City Fire Insurance Co. v. Vonachen Services, Inc.
United States District Court, Central District, Illinois
Not Exactly “Coverage B” But Involving the Invasion of Privacy

The insured, Vonachen, was sued in two class action lawsuits and accused of violating the Illinois Biometric Information Privacy Act, which governs how biometric information can be collected, stored, and released to third parties.  BIPA provides a private right of action for individuals to seek injunctive relief and statutory or actual damages. 

Vonachen allegedly required its employees to sign in and out of work with by fingerprints that was authenticated by a biometric tracking system.  The class plaintiffs alleged Vonachen captured, collected, stored, used and/or disclosed those fingerprints to third parties without warning employees of its purpose and without being warned and without permission.  Both actions alleged that the violations of BIPA was an invasion of their privacy. 

Twin City issued Directors, Officers, and Entity insurance and Employment Practices insurance to Vonachen, who argued that they both covered the invasion of privacy claims.

The D&O part’s Insuring Agreement stated, “the Insurer shall pay Loss on behalf of an Insured Entity… for a Wrongful Act.  Exclusionary language included, “(A) The Insurer shall not pay Loss under Insuring Agreement (C) in connection with any Claim based upon, arising from, or in any way related to any actual or alleged:

* * *

(2) employment-related Wrongful Act;

* * *

(4) false arrest or imprisonment, abuse of process, malicious prosecution, defamation (including libel and slander), invasion of privacy, trespass, nuisance or wrongful entry or eviction, assault, battery, or loss of consortium.

The Employment Practices part provided coverage for an Employment Practices Wrongful Act.  It defined an “Employment Practices Wrongful Act” to include:

(5) breach of any oral, written, or implied employment contract, including, without limitation, any obligation arising from a personnel manual, employee handbook, or policy statement.

(6) employment-related defamation (including libel and slander) or misrepresentation.

“Employee Data Privacy Wrongful Act” included “failure to notify any Employee or applicant for employment with the Insured Entity of any actual or potential unauthorized access to or use of Private Employment Information of any Employee or applicant for employment with the Insured Entity if such notice was required by state or federal regulation or statute.

Twin City did not dispute that the allegations fit within the D&O insuring agreement but argued that the insured v. insured exclusion and/or the invasion of privacy exclusion defeated coverage.  The insured v. insured exclusion had an exception for whistleblower suits.    Twin City argued that the class action suits as whistleblower suits, but the court rightly noted that the putative class plaintiffs may fit within the exception.

However, the exclusion for invasion of privacy defeated coverage under the D&O part rendering the point moot.  Vonachen argued that BIPA violations were not invasion of privacy claims under Illinois law if the violations are procedural. “Absurd” stated the court, given numerous cases holding that a violation can make out a claim for invasion of privacy.  The court continued in this vein to discuss the broad interpretation of phrases in the exclusion such as “arising out of” and the like.  Given the breadth of the exclusion, the court determined that it applied to all the claims.

Turning to the EPL policy, the court was asked to determine, through extrinsic evidence, whether a company handbook provision could constitute or create an “oral, written, or implied employment contract, including, without limitation, any obligation arising from a personnel manual, employee handbook; or policy statement, which would be a covered wrongful employment practice.  

Vonachen had an employee handbook. The question was whether the handbook constituted an employment contract.  The other question was whether the handbook, extrinsic evidence, could be considered to answer the first question.  The court found it necessary to consider the extrinsic handbook. Having done so, the court explained that the broad interpretation of “arising out of” used in the definition of wrongful acts would arguably trigger coverage.   

The parties appeared to agree that the breach of contract exclusion could defeat indemnity, but not defense coverage. 


Ryan P. Maxwell
[email protected]

Legislative List

10/22/21       Bill Delivered To Governor Would Require Fire Sprinkler Cost Estimate In Contracts For New Home Construction
New York State Assembly
If Signed, New Law Would Require All New Private, One- and Two-Family Home Construction Contractors to Estimate Fire Sprinkler Installation

Last Friday, a Bill (S. 1383 / same as A. 0711) was delivered to the Governor that, if made law, would require all new private, one-family, and two-family home construction contracts to include a cost estimate for installation of a fire sprinkler system.

According to the Sponsor Memorandum, the purpose of the bill is “[t]o increase the safety of newly-constructed homes by providing buyers the data with which to make a decision regarding installation of a fire sprinkler system.”

Specifically, if this bill becomes law, New York’s General Business Law would be amended to add a new Section 759-a, which would require all private, one-family, and two-family home construction contract estimates to include an estimated cost for the installation of a fire sprinkler system in the home. Although falling short of mandated installation of sprinklers in new build homes—which has been discussed—the hope is that by providing buyers with more information, many homebuyers and builders may opt to install one, providing greater safety, peace of mind, and market value all at the same time.

If passed, this bill would apply to home construction contracts on or after September 1 of next year.

Maxwell Minute: Slim pickings this week, but this bill is intriguing to the risk manager in me. Curious, I looked at where this potential law would fit in the general, regulatory scheme for homeowners’ insurance products, given its intrinsic value in reducing risk to an insurance pool overall. Here’s what I found.

New York Insurance Law § 2346(1) provides:

  1. The superintendent may provide for a reduction in the rates of fire insurance premiums or the fire insurance component of homeowners insurance premiums applicable to residential real property equipped with . . . approved sprinkler systems . . ., should a statistically valid study of insurer experience indicate an actuarially significant decrease in losses in the aforementioned circumstances. The reductions provided for shall be proportionally related to the actuarially calculable decrease in losses in the aforementioned circumstances.

The New York Insurance Regulations are devoid of any mention of the term “sprinkler” whatsoever. Accordingly, there does not appear to be any broad, regulatory reduction of premiums for the installation of approved sprinkler systems by homeowners.

This bill, if passed, may help facilitate the completion of the “statistically valid study of insurer experience” required under Ins. Law §2346(1), prior to any broad rulemaking by the superintendent. This bill certainly would increase the volume of data available to insurers and regulators in assessing insurer experience with residential home sprinkler systems and loss control.


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

09/21/21       Covington Specialty Insurance Co. v. Potter et al.
United States District Court, Northern District of New York
Without Limiting Language, the Absolute Auto Exclusion at Issue is Unambiguous

Covington Specialty Insurance Co. (“Plaintiff” or “Covington”) initiated this action seeking a declaratory judgment asserting plaintiff has no obligation to defend or indemnify Francis Potter, Antoinette Potter, and Indian Lookout (the “Indian Lookout Defendants”) in an underlying state court personal injury action based on five exclusions found within the Covington policy issued to the Indian Lookout Defendants.

Plaintiff issued Policy Number VBA624383 00 to Defendants Francis and Antoinette Potter (d/b/a as Indian Lookout County Club), for the policy period July 11, 2018, to July 11, 2019 (the “Policy”). The Policy was a CGL Policy issued with the standard ISO language. The Policy included the “Absolute Aircraft and Auto Exclusion” which replaced the standard “Aircraft, Auto Or Watercraft” exclusion. The Absolut Aircraft and Auto Exclusion provides:

g. Aircraft, Auto Or Watercraft

“Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft. Use includes operation and “loading or unloading.” This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training, or monitoring of others by the insured, if the “occurrence” which caused the “bodily injury” or “property damage” involved the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft.

This action arises out of an underlying personal injury action (the “State Action”). The State action alleges that Defendant Indian Lookout is the owner (and entity in control) of premises at 1142 Batter Street, Pattersonville, New York, where an annual event known as the “Harley Rendezvous” is held, and the underlying plaintiffs allege that they were injured when a motorist failed to yield the right of way as the underlying plaintiffs tried to enter the Harely Rendezvous event. The underlying action further alleges that the Indian Lookout Defendants are jointly and severally liable with Harley Rendezvous as they failed to have anyone directing traffic on Batter Street at the entries and exits to the event. Covington denied coverage to the Indian Lookout Defendants for the underlying action by letter dated December 23, 2019, on multiple grounds, including, inter alia, the “Absolute Auto and Aircraft Exclusion.” On May 23, 2020, Covington was notified that the underlying plaintiff had moved for default against the Indian Lookout Defendants. Covington appointed counsel un the underlying action to opposes the default motion, subject to the continuing disclaimer of coverage, and reiterating all grounds of the disclaimer. Covington’s appointed counsel successfully opposed the motion, and it now seeks to withdraw from the defense of the Indian Lookout Defendants in the underlying action.

Plaintiff argued that summary judgment should be granted because the Absolute Aircraft and Auto Exclusion in the Policy relieves Plaintiff from having to cover the injuries alleged in the Underlying Action. Specifically Plaintiff argued that the Exclusion excludes coverage for “bodily injury . . . arising out of or resulting from the ownership, maintenance, use or entrustment to others of any aircraft, auto or watercraft,” and thus excludes the injuries in the Underlying action, which were caused by an accident between a motorcycle and a car and that this exclusion applies whether or not the insured themselves owned, operated, or were responsible for the vehicle at issue. In opposing Plaintiff’s motion the defendants argued that: (1) the Absolute Auto Exclusion is ambiguous (and is in fact “virtually identical” to the provision that was found to be ambiguous in Essex Ins. Co.), and interpreting it in the way that Plaintiff suggests would defeat the Indian Lookout Defendants’ reasonable expectations of coverage; (2) even if applicable, the Absolute Auto Exclusion does not bar coverage for all of the allegations because the Indian Lookout Defendants’ alleged marketing and organizing of the event was an “occurrence” under the policy and the complaint in the Underlying Action asserts claims of negligence against the Indian Lookout Defendants that go beyond the auto accident and Auto Exclusion; and (3) the cases relied on by Plaintiff in support of its motion are distinguishable and/or not binding on this Court because they involve exclusions with different language or application of the law of other states. On reply Plaintiff argued that the facts of Essex Ins. Co are different from the current action in that Essex Ins. Co. involved a vehicle accident because of a condition on an insured’s property (as opposed to as a result of vehicle-related conduct itself) and the language of the relevant exclusion was also different. Plaintiff further argued that Indian Lookout’s argument that reading the exclusion as Plaintiff suggests would deprive the Indian Lookout Defendants of the ability to obtain any coverage for such accidents (under any policy) is belied by the fact that Defendants Timothy and Antoinette Potter do in fact have other insurance for the Harley Rendezvous event specifically and are indeed being provided a defense under that other policy.

Defendants’ opposition primarily relied upon New York Appellate Division’s decision in Essex Ins. Co. to support their argument that the Absolute Auto Exclusion is ambiguous. In Essex Ins. Co., the relevant exclusion provided:

[t]his insurance does not apply to ‘bodily injury,’ ‘property damage,’ ‘personal injury,’ ‘advertising injury,’ or any injury, loss, or damages, including consequential injury, loss, or damage, arising out of, caused by, or contributed to a. by ownership, non-ownership, maintenance, use, or entrustment to others of any ‘auto,’ aircraft, watercraft, snowmobile, all-terrain vehicle (ATV), or motorcycle. Use includes operation and ‘loading’ and ‘unloading.’

Essex Ins. Co., 82 A.D.3d at 1327

The Appellate Division, Third Department, found this exclusion to be ambiguous as to whether it should apply to third parties using a vehicle, and injured by a condition on the insured’s property. The defendants failed to note in their opposition that the exclusion in that case could have been made unambiguous as to application by--rather than removing the “of the insured” specification from the GCL provision--instead adding words such as “or any other person” (as was done in other exclusions within the same paragraph of the policy) to make clear that the exclusion “extend[s] beyond acts of the insured to include all others.” Essex Ins. Co., 82 A.D.3d at 1329. Further, the District Court found that other New York courts have found that language similar in nature to the Absolute Auto Exclusion was unambiguous. For example, in DMP Contracting Corp. v. Essex Ins. Co., the Appellate Division, First Department, found that an exclusion foreclosing “‘bodily injury’ . . . arising out of, caused by or contributed to by the ownership, non-ownership, maintenance, use or entrustment to others of any ‘auto’” was unambiguous in excluding coverage for bodily injury “whether or not it is the insured who owned, maintained, used or entrusted to others the subject automobile” because the plain meaning of the language of the provision “focuses on the connection between a vehicle and the injury, not between a vehicle and the insured.” DMP Contracting Corp. v. Essex Ins. Co., 76 A.D.3d 844, 846 (N.Y. App. Div. 1st Dep’t 2010). Likewise, courts within the Second Circuit have found the exclusion at issue to be unambiguous. n US Specialty Ins. Co. v. LeBeau, Inc., 847 F. Supp. 2d 500 (W.D.N.Y. 2012), the Western District of New York found that an auto exclusion was unambiguous in excluding coverage for personal injuries arising out of the use of any automobile, including by third parties, because “an ordinary businessperson could not have reasonably believed otherwise.” LeBeau, Inc., 847 F. Supp. 2d at 504. The exclusion in question stated that “[b]odily injury . . . arising out of the ownership, maintenance, use or entrustment to others of any auto” was excluded from coverage. LeBeau, Inc., 847 F. Supp. 2d at 503.

The Court in the instant matter found that the Absolute Auto Exclusion in question was not akin to the exclusion at issue in Essex Ins. Co. In Essex Ins. Co. the Third Department found it significant that those other subdivisions of the same exclusion paragraph used language such as “any insured or any other person” to “make clear that those exclusions extend beyond acts of the insured to include all others,” and that the failure of the relevant exclusion to use similar clarifying language rendered that portion of the exclusion ambiguous. Essex Ins. Co., 82 A.D.3d at 1329. Here, there has been no indication that the Policy in question contains clarifying language in any other part of the policy which would make the lack of such language in the exclusion at issue inconsistent with the whole of the policy.

The Court, after finding that the Absolute Auto Exclusion unambiguous, the Court looks to the exclusions plain meaning in determining whether it applies. The Court found that the claims asserted against those Defendants are indeed all covered by the exclusion, because the injuries alleged in this case all arise out of a traffic accident between a motorcycle and a car; whether or not the traffic patterns the Indian Lookout Defendants and Defendants Harley Rendezvous allegedly caused through negligence in failing to provide sufficient traffic control at their event were a contributing factor to that accident, it is axiomatic that the accident in question could not have occurred without the involvement of persons operating vehicles, and thus it is the accident itself that gives rise to liability. Accordingly, the Court granted Plaintiff’s motion for summary judgment.


Patricia A. Rauh

[email protected]

No cases to report this week – see you on November 11th!

Scott D. Storm

[email protected]

09/03/21       Beutler v. United of Omaha Life Ins. Co.
United States District Court, E.D. Pennsylvania
Federal District Court Judge Cites to Seinfeld and The Simpsons in his Ruling
It’s not often that a federal judge cites to Seinfeld or The Simpsons in making a ruling, let alone in the same decision.  However, District Court Judge Joshua D. Wolson did.  There is rarely a life scenario that I cannot compare to a Seinfeld episode, apparently that is the case for this judge also.  Although judicial decisions are a sober matter, it appears the Judge included some lightness to reduce the sting in rebuking the attorney. 

The decision begins by saying, "[A] rule is a rule, and let's face it, without rules, there's chaos." Seinfeld: The Big Salad (NBC television broadcast Sept. 29, 1994).  Plaintiff's counsel had disregarded the Court's rules on two occasions: filing an opposition to a motion to dismiss after the deadline to do so; and the opposition was single-spaced, even though the Court's Policies and Procedures require double-spacing.  Because the filing was late, the Court issued an Order to Show Cause why the Court should not strike the opposition, directing Plaintiff to file a memorandum that complied with Judge Wolson's Policies and Procedures (i.e., double-spaced). But Plaintiff's counsel then filed a response that was again single-spaced. Judge Wolson then quipped that “Plaintiff's counsel, it seems, takes direction from the Court about as well as Homer Simpson takes direction from the FBI's witness protection program. (See The Simpsons: Cape Feare (Fox television broadcast Oct. 7, 1993).)”

The Court rightfully explained that it has its rules for a reason. Some rules help ensure a level playing field. Others help the Court do its job. And while parties are always free to ask the Court for relief from a rule that imposes a burden, they are not free to disregard the Court's rules, let alone specific directives that the Court puts in its orders. No doubt, some might think that this transgression was minor and does not warrant the Court's attention. But that's a double-edged sword because the burden of compliance was also minor. Plaintiff's counsel just had to change a setting on her word processor, nothing more. And her violation was not something about which she can claim to have been unaware—it would have been obvious on the screen in front of her as she finalized her draft. The Court said that it will not permit parties before it to choose the rules with which they comply and the rules that they ignore.

That said, since the court found the nature of the transgression to be minor, it required only a minor punishment. The Court therefore struck the non-compliant response and directed Plaintiff's counsel to file a compliant version before the deadline.  And the Judge directed Plaintiff's counsel to include an addendum that: (a) explained why Plaintiff's counsel did not comply with the Court's rules the first time and (b) certified that, since receiving this Memorandum, Plaintiff's counsel has re-reviewed the Court's Policies and Procedures and will comply with them going forward.

Perhaps defense counsel here was Kramer’s attorney, Jackie Chiles?!  “It’s outrageous, egregious, preposterous.” 


09/14/21       GEICO, et al. v. Macias, M.D., et al  
United States District Court, E.D. New York
RICO Claims Against No Fault Providers Dismissed Without Prejudice

Plaintiffs' action arises from a familiar set of facts: auto accident insurance companies assert allegations surrounding the submission of fraudulent policy claims under N.Y.'s no-fault insurance scheme. These cases are a staple of insurance fraud litigation in this district. Plaintiffs routinely join many alleged fraudsters in a single complaint, in which the defendants are alleged to have engaged in separate but similarly implemented fraudulent schemes. As the Court has done in the past, it 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. In responding, plaintiffs assert that the defendants are properly joined as there are common questions of law and fact and that joinder of these claims serves judicial efficiency.

Pursuant to Fed. R. Civ. P. 20(a)(2), 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. The second factor is clearly satisfied here. This action contains common questions because defendants are alleged to have engaged in similar schemes. This is especially true as here where the schemes principally surround billing for two highly specialized diagnostic tests.

However, "[j]oinder under Rule 20 requires, in addition to a common question of law or fact, that the plaintiffs assert a right to relief arising from the same transaction or occurrence" or joint and several liability. Plaintiffs acknowledged that they do not assert any right to relief that would hold all defendants jointly or severally liable. Therefore, the Court looked to whether these allegations are part of the same "transaction or occurrence." Here, 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.'" Moreover, "the overlap in questions of law or fact must be ‘substantial' in order for joinder to be appropriate." 

Although "joinder of claims, parties and remedies is strongly encouraged," under Rule 20, district courts have discretion in deciding whether to permit joinder.  Nevertheless, the toll these actions take on the judicial system and the minimal efficiencies gained caution against that approach.

In the instant case, aside from a single declaratory judgment claim, plaintiffs do not assert any claims against all defendants or allege that defendants worked together. In fact, plaintiffs explicitly acknowledge that they are asserting "separate fraud and RICO claims against the four groups of [d]efendants." These four groups operated independently of one another, at different time periods at the clinic locations, and with largely different participants.

Plaintiffs contend that their complaint's allegations "strongly indicate an interconnectedness among the [d]efendants" and that their conduct gives "rise to the inference that the fraud described in the [c]omplaint is interrelated." In support of such interconnectedness, plaintiffs point out that defendants "performed the same highly specialized neurological testing," "received referrals from certain of the same medical practitioners," and that certain of defendants' submissions to GEICO "contained substantially identical language." However, even with these contentions, as plaintiffs indicate, such interconnectedness is still just that — an inference. The claims here do not necessarily or readily appear "logically connected" and thus do not arise out of the same transaction or occurrence or series of transactions or occurrences.

In the past, the Court proposed two remedies to plaintiff: (i) dismissal of the case, without prejudice to refiling against each separate group of defendants; or (ii) dismissal of most of the defendants except one group, without prejudice to refiling separate cases against each of the other groups of defendants.  Based upon this, the plaintiffs broke up defendants into three separate groups. While, in their motion, plaintiffs recognize that there are "essentially four groups of [d]efendants," plaintiffs suggest joining two groups because of "significantly similar, overlapping and interconnected fraudulent conduct." Plaintiffs cited numerous further points of connection among this subgroup of defendants, including that the two providers employed the same independent contractor as a reading neurologist. Therefore, the Court believed that adopting the plaintiffs' proposed breakdown best served the purpose of promoting judicial economy.

The Court therefore directed new cases be opened respectively.  Within 20 days of the opening of the new cases, plaintiffs in this case and in each new case were to: (a) file a complaint (or, in the instant case, an amended complaint), limited to the plaintiffs and defendants named in each action; (2) pay the filing fee and request issuance of summonses in each action. The commencement date of the new cases was deemed to be the commencement date of this action for all purposes except as to Fed. R. Civ. P. 4(m). As to that rule, the commencement date shall be deemed to be the date on which the Clerk opens the new actions.

09/30/21       Jeffers Farms, Inc. v. Liberty Insurance Underwriters Inc.
United States District Court, E.D. Pennsylvania
Defendant’s Motion to Dismiss a Complaint Seeking Coverage for an Alleged “Wrongful Act” was Granted on a Directors, Officers, and Company Liability Policy Based Upon Application of a "Prior Acts Exclusion” but Plaintiff was also Granted Leave to Amend the Complaint to Allege Facts Supporting a "Reasonable Expectations" Doctrine Argument

Defendant motion to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) was granted and Plaintiff was granted leave to amend its complaint. Defendant issued Plaintiff a policy providing directors, officers, and company liability coverage for the period of February 18, 2017, to February 18, 2018, renewed for the period of February 18, 2018, to February 18, 2019.

On June 1, 2018, the underlying lawsuit was filed against Plaintiff on behalf of the Estate of Hogarty in the Court of Common Pleas. The complaint in the Underlying Action alleged that Jeffers Farms failed to issue certain shares of stock as required by an amendment to the Jeffers Farms bylaws. Plaintiffs in the Underlying Action then filed an amended complaint, adding allegations that Plaintiff, through its officers and directors over the years, have engaged in misrepresentation and fraud to prevent the transfer of the stock. 

After the Underlying Action was filed, Plaintiff allegedly sought coverage under the policy.  Defendant denied coverage. Plaintiff alleges that Defendant breached the parties' insurance contract and acted in bad faith in violation of 42 Pa.C.S.A. § 8371. 

Defendant argued that any losses resulting from the claims made against Plaintiff in the Underlying Action were excluded from coverage under the "Prior Acts Exclusion” which provided:

“The Insurer shall not be liable under any Insuring Clause in this Coverage Part for Loss on account of any Claim made against any Insured . . . based upon, arising out of, or attributable to any Wrongful Act taking place in whole or in part prior to 02/18/2016”.

The relevant insuring clause in the Policies stated: “The Insurer shall pay on behalf of the Company Loss which the Company becomes legally obligated to pay by reason of any Claim first made against the Company during the Policy Period . . . for any Wrongful Acts by the Company taking place prior to the end of the Policy Period”.  That insuring clause, then, uses the phrase "Wrongful Acts" to refer to the factual basis of the "Claims" made against the insured. Accordingly, it is only when Plaintiff is alleged to have committed a "Wrongful Act"—i.e., the factual basis for a "Claim" against it—that insurance coverage is potentially triggered. However, pursuant to the "Prior Acts Exclusion," coverage will not be triggered for a claim based on a "Wrongful Act" that took place, in whole or in part, prior to February 18, 2016.

As the Underlying Action is based on alleged acts and omissions that took place beginning in 1961, Defendant argues that the "Prior Acts Exclusion" precludes coverage for losses stemming from the claims in that case.  Plaintiff alleged that not only has it not been found to have committed a Wrongful Act as defined by the Policy, but there is also no evidence that Plaintiff has committed a Wrongful Act.  But the Court said that those observations are not relevant to the question at hand. Plaintiff did not contest that the alleged omissions at issue in the Underlying Action began back in 1961.  Plaintiff's Complaint in this case acknowledged that the operative complaint in the Underlying Action "allege[s] ‘wrongful acts' as defined by the Policy." The exclusion clearly applied and the fact that Plaintiff has not yet been found legally liable for the conduct alleged in the Underlying Action was irrelevant to the analysis. Because the exclusion applies, there is no duty to defend, and Defendant's Motion to Dismiss Plaintiff's breach of contract claim was therefore granted. 

In its Response to the Motion, Plaintiff urged the Court to apply PA’s "reasonable expectations" doctrine which states that the reasonable expectations of the insured are the focal point of the insurance transaction regardless of the ambiguity, or lack thereof, inherent in each set of documents. It is intended to protect against the inherent danger, created by the nature of the insurance industry, that an insurer will agree to certain coverage when receiving the insured's application, and then unilaterally change those terms when it later issues a policy."  "Although ‘in most cases, the language of the insurance policy will provide the best indication of the content of the parties' reasonable expectations,' the courts must nevertheless ‘examine the totality of the insurance transaction involved to ascertain the reasonable expectations of the insured.'" 

The Court said that here Plaintiff's Complaint was devoid of any information regarding the transaction in which it purchased the Policy from Defendant, whether the insurance contract it was ultimately issued differed from what it bargained for, or what specific conduct on Defendants' part created an expectation that the claims at issue in the Underlying Action would be covered under the Policy. Accordingly, Plaintiff's invocation of this doctrine was not enough to overcome the plain language of the policy exclusion.  However, when "a complaint is subject to a Rule 12(b)(6) dismissal, the Court should permit a curative amendment unless it would be futile or inequitable."  Accordingly, the Court granted Plaintiff "leave to amend its Complaint to include allegations about its reasonable expectations about the Policies' coverage." 

09/24/21       Robert Franks, et al. v. State Farm Mut. Automobile Ins. Co.
Superior Court of Pennsylvania
In a Matter of First Impression, the Superior Court Held that Under the Plain Language of § 1738(C) of the Motor Vehicle Financial Responsibility Law the Removal of a Vehicle from an Insurance Policy Providing Non-Stacked UIM Coverage for Three Vehicles Does Not Constitute a "Purchase" of Coverage as Contemplated by the Statute Requiring the Insured be Provided the Opportunity to Waive the Stacked Limits of Coverage at the Time of Removal

The Franks applied for automobile coverage with State Farm for two vehicles, a 2002 Nissan Xterra and a 1999 Ford Taurus, executing a form rejecting stacked UIM that fully complied with the form prescribed by § 1738(d)(2) of the Motor Vehicle Financial Responsibility Laws ("MVFRL"). State Farm then issued the policy with non-stacked UIM coverage limits of $100,000/$300,000.

Subsequently, a third vehicle, a 2012 Nissan Altima, was added to the policy. Upon adding the third vehicle, the Franks executed a second rejection of stacked limits of UIM coverage. Later at the request of the Franks, the 1999 Ford Taurus was deleted from the policy, reducing the total number of vehicles insured under the policy from 3 to 2. When the 1999 Ford Taurus was deleted from the policy, the Franks did not request, and State Farm did not make any changes to the coverages for the 2002 Nissan Xterra and 2012 Nissan Altima which continued to be insured under the policy.

The deletion of the 1999 Ford Taurus from the policy resulted in a credit being applied to the payment plan and did not change any of the coverages on the 2002 Nissan Xterra and 2012 Nissan Altima.  From the time that the 1999 Ford Taurus was deleted from the policy through the time of the accident, the total premium that State Farm charged, and the Franks paid for the policy was approximately $250.00 lower every six months than it had been when there were three vehicles insured under the policy.  The Franks replaced the 2002 Nissan Xterra on the policy with a 2013 Nissan Frontier, the vehicle that was involved in the accident. From then on, the policy continuously insured two vehicles, and the declarations page of the policy provided non-stacked UIM coverage.

After the number of vehicles insured under the policy was reduced from three (3) to two (2), the Franks were never provided with and did not sign another form rejecting stacked UIM coverage. From the time of the inception of the policy through the time of the accident, the Franks were not charged a premium for stacked UIM coverage. The Franks were charged and paid a lower premium for non-stacked UIM coverage.

Robert Franks sustained injuries in a motor vehicle accident that was caused by the negligence of the driver of the other vehicle. The Franks asserted a claim for UIM benefits under the policy. State Farm paid UIM benefits in the amount of $100,000.

The Franks filed a declaratory judgment action, seeking a declaration that State Farm was obligated to pay them an additional $100,000 in UIM benefits claiming there was no valid waiver of stacked UIM coverage in effect at the time of the accident. The parties proceeded to a stipulated non-jury trial.  The court entered an order granting declaratory judgment in favor of State Farm.  On appeal from Court of Common Pleas, the Superior Court affirmed. 

This case presented a matter of first impression: whether the removal of a vehicle from an auto policy providing non-stacked UIM coverage for three vehicles constitutes the "purchase" of coverage as contemplated by section 1738(c) of the MVFRL, such that the insured must be provided the opportunity to waive the stacked limits of coverage at the time of removal. Section 1738 of the MVFRL governs the stacking of uninsured motorist UM and UIM benefits and the option to waive such coverage.  The Court could find no reported case in which a party has claimed section 1738 requires the execution of a new stacking waiver upon removal of a vehicle from a multi-vehicle policy.

The vast majority of Pennsylvania case law on stacking involves the addition of vehicles to an existing policy, and whether doing so constitutes the "purchase" of insurance requiring the insurer to provide a new stacking rejection form. The seminal line of cases involving that issue is commonly referred to as "the Sackett Trilogy”.  Sackett, I held that the addition of a new vehicle to an existing multi-vehicle policy constitutes a "purchase" under the plain language of section 1738(c), requiring an insurer to provide its insured an opportunity to waive the increased stacked UM/UIM limit.

In Sackett II the Supreme Court considered the impact of Sacket I on after-acquired vehicle clauses.  While reaffirming the result in Sackett I, the Court modified its holding to clarify that the extension of coverage under an after-acquired-vehicle provision to a vehicle added to a pre-existing multi-vehicle policy is not a new purchase of coverage for purposes of section 1738(c), except where coverage under such a provision is expressly made finite by the terms of the policy.  Following Sackett II, the case was remanded to the trial court to determine whether the Sacketts' after-acquired vehicle clause was finite or continuous in nature. The trial court concluded that the policy contained a "finite" clause, requiring new stacking rejection forms with the addition of each new vehicle, and, in Sacket III, this Court agreed.

This Court then had occasion to apply the Sackett line of cases several times in the ensuing years. However, each of those cases has involved the application of section 1738 when a vehicle on a multi-vehicle policy was replaced by another vehicle, or when a vehicle was added to a multi-vehicle policy. In one of those cases the Supreme Court determined that an increase in the limits of UIM coverage on a multi-vehicle policy constitutes a "purchase" under section 1738(c), thus requiring an insurer to obtain a new waiver of stacking rights. In considering the issue, the Court focused its attention on the common and approved usages of the word "purchase." The Court looked first to Black's Law Dictionary, which defines the term as "[t]he act or an instance of buying."  The Court then observed that, "[i]n common usage, ‘to buy' means to acquire or obtain something from paying for it." Id. Accordingly, the Court concluded that "the term ‘purchase' requires two things: (1) the acquisition of something; and (2) payment…In order to satisfy the first, the insured must obtain something that she does not already possess.

Applying this rationale to the instant matter, it is clear that the Franks did not effectuate a "purchase" of coverage within the plain meaning of section 1738(c). When the Franks deleted the 1999 Ford Taurus from their policy, they did not "obtain something" that they did not "already possess."  To the contrary, they eliminated a portion of their existing coverage. Nor did the Franks make a payment of any sort. In fact, they received a credit from State Farm and their annual premiums were reduced. Accordingly, it is clear that the deletion of a vehicle from a policy does not result in a "purchase" as contemplated by section 1738(c).

As such, the proposition that a new stacking waiver is required whenever there is any change in the potential amount of stacked coverage is misplaced. In Shipp, this Court held that a new waiver of stacked coverage was not required when an insured replaced one vehicle on his policy with another vehicle, since the insured's UM/UIM coverage remained the same. And in Smith  this court held that an increase in unrelated liability limits does not require new waiver of UM/UIM benefits, and concluded that "the matter of importance in all of [those] cases, as well as in section 1738, pertains only to the UM/UIM policy coverage, whether it has changed, and whether a new waiver of stacked coverage is required."  However, in Shipp, the Court was not confronted with a situation—as here—in which stacked UM/UIM coverage decreased. Thus, to the extent that the foregoing language may be read to suggest that any change in stacked coverage—either an increase or a decrease—requires a new stacking waiver, it must be considered dicta and was hereby disapproved. Indeed, had the legislature intended to require a new waiver every time a named insured changes uninsured or underinsured motorist coverage for more than one vehicle under a policy, it could have simply replaced the word "purchasing" with "changing" in section 1738(c). It did not do so.

10/08/21       Grossman, et al. v. GEICO Cas. Co.  
United States District Court, S.D. New York
Claims Dismissed against Geico Alleging Breach of Contract, Unjust Enrichment, and Violations of N.Y. General Business Law §§ 349 and 350 Stemming from Geico's Alleged Unfair Profiting on Premium Because of Decreased Accidents During the COVID-19 Pandemic

Plaintiffs on behalf of themselves and all others similarly situated brought this action against Geico alleging breach of contract, unjust enrichment, and violations of N.Y. General Business Law §§ 349 and 350 stemming from Geico's alleged unfair profiting because of the COVID-19 pandemic.  On 9/13/21 the Court granted Geico's letter-motion to dismiss the complaint largely based on the filed-rate doctrine.  This doctrine generally forbids a regulated entity from charging a rate other than one approved by the regulatory authority. Now before the Court is Plaintiffs' motion for reconsideration of the Order which was denied. 

Plaintiffs allege that in response to the COVID-19 pandemic, and due to the associated stay-at-home orders instituted in N.Y. and other states, the number of miles driven by the general public decreased dramatically after mid-March 2020. As a result of the decrease in the number of miles driven, automobile accidents decreased dramatically. Plaintiffs allege that because of this the premiums charged by auto-insurance companies over this period were "unconscionably excessive."

Plaintiffs allege that Geico was aware of the excessive premiums it charged and, as a result, announced the "Geico Giveback" program. In its promotional materials, Geico acknowledged its increased savings in costs and expenses and advertised that it was "passing these savings" on to the consumers. To do so, the Geico Giveback program offered a 15% credit to new customers and existing customers who renewed their policies during the applicable time period. The rate charged by Geico, when factoring in the 15% credit, was approved by the N.Y. Dept. of Fin. Services, as are all insurance rates under New York law.  Nonetheless, Plaintiffs argued that the Geico Giveback program is inadequate to compensate consumers for the excessive premiums charged.

On 4/1/21 Plaintiffs filed this suit against Geico.  On 07/12/21 Defendants moved the Court for a premotion conference to obtain guidance on its anticipated motion to dismiss, which the Court treated as a motion to dismiss under Fed. R. Civ. P. 12(b)(6). On 9/13/21 the Court granted the motion to dismiss.

Plaintiffs argue that the Court erred in its Order by: (1) applying the filed-rate doctrine to this action; and (2) misinterpreting the basis for their claims under N.Y. GBL §§ 349 and 350.

Reconsideration is "an extraordinary remedy to be employed sparingly."  As the Second Circuit has explained, the standard for granting a motion to reconsider "is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court."  "The major grounds justifying reconsideration are ‘an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.'"  "[A] motion to reconsider should not be granted where the moving party seeks solely to relitigate an issue already decided." 

After reviewing Plaintiffs' Motion, the Court said it is not persuaded reconsideration is warranted, and, therefore, denied the Motion.  Plaintiffs argued the Court erred in applying the filed-rate doctrine to dismiss their claims. But in doing so, Plaintiffs pointed to no "intervening change in controlling law" nor did they explain how the Court committed a "clear error." Instead, the Motion seeks to relitigate a legal issue that the Court already decided in Geico's favor.

The Court said that nonetheless, even if it were to decline to apply the filed-rate doctrine, it would still dismiss Plaintiffs' claims. Plaintiffs argue Geico breached the parties' contract by not returning the "substantial windfall" retained by Geico due to the COVID-19 pandemic. But Plaintiffs admit explicitly that Geico "had discretion to" adjust premiums during the policy. Nowhere in Plaintiffs' allegations is a requirement to do so. In other words, Plaintiffs have not identified a contractual term that Geico has plausibly breached. Thus, even if the filed-rate doctrine were not to apply the result would have been the same. 

Regarding the NY GBL Sections 349 and 350 claims, the Plaintiffs alleged that the Court "misinterpreted" their arguments.  In the Order, the Court noted that Geico's advertisements offered a 15% reduction in premiums for consumers that were renewing certain policies. That 15% reduced rate is exactly what Plaintiffs alleged Geico charged. The Court said that Plaintiffs do not dispute this point, and with good reason -- it is difficult to imagine what is misleading about this fact.

Instead, Plaintiffs responded that the misleading portion of the advertisement was that Geico represented it was "passing these savings" realized by the pandemic on to the consumer. Under Plaintiffs' argument, Geico was apparently required to pass an almost exact accounting of the savings realized back to the consumer in the form of premium reductions. But, as the Court already held, the fact that this 15% premium reduction did not match the amount saved by Geico due to the dramatic decrease in driving caused by the COVID-19 pandemic, or that it was not applied across the board to all consumers who had an existing policy with GEICO, does not render the advertising misleading. Plaintiffs were fully aware of the charged rate, that rate was approved by NYDFS, and Plaintiffs were free to accept Geico's offer or seek an alternative provider in the insurance marketplace. Therefore, Plaintiffs had no claim under NY GBL Sections 349 and 350.

In other words, the entire advertisement made clear the rate Geico was charging, and thus no reasonable consumer would interpret "pass these savings" as a promise to discount premiums by the exact amount Geico saved due to the pandemic. Plaintiffs provided no compelling argument why this conclusion was in error. Accordingly, reconsideration was also denied as to the NY GBL Section 349 and 350 claims.

09/28/21       Bahnuk v. Countryway Ins. Co.
Supreme Court, Broome County
Liability Coverage Denial was Untimely as Notice was not Provided to the Injured Party as Required by Ins. Law § 3420(D)(2).  A Question of Fact Existed Whether a Confession of Judgment and Stipulation not to Collect on it was Void for Collusion where the Injured Party Brought a Direct Action Against the Liability Insurer after Obtaining a Judgment Against the Insured and it is Remaining Unsatisfied for 30 Days

Bahnuk filed a motion seeking summary judgment alleging that Countryway failed to properly disclaim coverage pursuant to Ins. Law § 3420(d)(2), and that he obtained a judgment against Countryway's insured, for which Countryway is now responsible. Countryway opposed the motion and filed a cross-motion.

Bahnuk was working as a paramedic and sustained injuries while responding to a call at a premises owned by Williams, who had a homeowner's policy with Countryway.  Bahnuk sued Williams in Supreme Court in Broome County for his injuries and Countryway denied defense and indemnity coverage because Williams was not living at the premises and, therefore, it was not a "residence premises"; and she was renting the premises to another person, and there was no coverage for incidents arising out of a business on the property.  Williams defended the action herself and ultimately signed a Confession of Judgment to Bahnuk for $100,000 together with a stipulation that Bahnuk would not seek to collect on the judgment against Williams while his claim against Countryway was pending, and that he would file a satisfaction of judgment at the conclusion of the direct action against the insurance carrier.

Bahnuk filed this case alleging that he has a direct cause of action under Insurance Law § 3420(a)(2), which permits an injured party to bring a direct action against an insurer after that injured party has obtained a judgment against the insured which remains unsatisfied for at least 30 days. He further claims that Countryway is precluded from raising any defenses because it did not provide him with a valid disclaimer.

Countryway claims the Judgment in the underlying action was obtained by collusion to make Countryway ultimately pay the judgment whereby Williams agreed to accept liability but would never have to pay the amount. Instead, Bahnuk would attempt to collect through the insurance carrier. Countryway also argue that it properly disclaimed coverage.  Further, Countryway contends that the evidence supports its disclaimer because the evidence shows Williams did not reside at the Tremont Avenue premises and the amount of the property rental would exclude it from coverage.

The Court held that Bahnuk has made a prima facie showing of entitlement to summary judgment under Insurance Law § 3420(a)(2) and that Countryway is precluded from relying on any exclusions from coverage. Countryway's disclaimer was not based on a "lack of inclusion" but was based on an "exclusion" from coverage. Accordingly, a timely disclaimer was required pursuant to Insurance Law § 3420(d). 

When an insurer disclaims liability, it is required to provide written notice to the insured and injured person under Ins. Law § 3420(d)(2).  Countryway did not initially provide the disclaimer to the injured party.  The letter did not explain how or why the residence was not an "insured location" and did not make any mention of a specific exclusion in the policy.  The denial letter did not explain how or why the loss was excluded, nor did it make any reference to any facts to justify exclusion other than "based upon the circumstances of the loss." As the Court of Appeals has observed, the failure of the insurance company to provide specifics as to the reason for a denial "could prejudice the claimant's ability to ultimately obtain recovery."  The disclaimer lacked the required high degree of specificity.  The injured party is not entitled to any lesser specificity than the insured. 

The Court concluded that Countryway did not provide sufficient notice of its disclaimer to the injured party.  Countryway chose not to defend Williams in the underlying action instead of providing a defense with a reservation of rights. An insurance carrier's duty to defend is broader than the duty to indemnify and the if the insurance carrier declines to defend, it does so at its own peril that the results of the underlying action may not be as favorable as the carrier would like.

The burden shifted to Countryway to submit proof in admissible form to create a triable issue of fact. Countryway attempts to do that first by questioning the validity of the underlying Confession of Judgment and second, by arguing it issued a proper disclaimer of coverage.

Where a judgment was the product of collusion and "offends ... a sense of justice and propriety [it] cannot be condoned."  Countryway pointed to multiple circumstances that it claims prove the underlying judgment was the product of collusion. There was no meaningful discovery or motion practice in the underlying action and save for a few settlements conference (several of which were not even attended by Williams or her attorney), there was little activity in the litigation. In addition, the Confession of Judgment was for $100,000, the exact amount of Countryway's insurance policy. The settlement stipulation provided that Bahnuk would file a Satisfaction of Judgment when the action against Countryway was concluded, and that Bahnuk would not attempt to enforce the judgment during the pendency of the current action. In effect, it removed any financial risk to Williams.

The Court concluded that Countryway raised a triable issue of fact with respect to the validity of the underlying judgment. Facts exist which call into question whether the Confession of Judgment was executed in order to shift the potential liability from Williams to Countryway. The current action against the insurance carrier must be based on a valid and enforceable judgment. The circumstances in this case show there is some possibility that settlement in the underlying matter may have been reached to pass liability from the insured to the insurance carrier. Therefore, Plaintiff's motion for summary judgment was denied because there is a question of fact concerning the bona fides of the underlying judgment. However, the evidence supplied by Countryway does not establish there was collusion as a matter of law. 

In effect, all settlements have a degree of "collusion" in that both sides agree to the terms. Not all settlements offend notions of fairness and justice. Even though Countryway points to circumstances it claims constitute irregularities calling into question the settlement, Countryway has proffered no independent evidence as to the true value of the underlying claim. In order to substantiate its position, Countryway had to produce some evidence that the amount or terms of the judgment is not reasonable.  The Court also concluded that Countryway failed to properly disclaim and could not use those exclusions to escape responsibility.

09/30/21       Levine and Liebeler v. State Farm Fire and Cas. Co. 
United States District Court, W.D. Pennsylvania
Insurer’s Motion to Dismiss Granted in 1st-Party Property Claim Based on Exclusion for Freezing, Thawing, Pressure or Weight of Water or Ice to a Foundation.  No “Bad Faith” Existed Simply Due to the Adjuster Only Spending 10 Minutes at the Loss Site

Plaintiffs noticed significant structural damage to one of the walls in the basement, including that it was swelling, cracked, and bowing inward.  State Farm denied coverage attributing the damages to "hydraulic pressure, ground movement, latent defect, and possible sink hole damage, that is causing your foundation walls to crack, bow, lean and move inward into your basement".  

Plaintiffs aver that at the same time they initiated their claim with State Farm, they also initiated a mine subsidence claim under an insuring agreement issued by the Pennsylvania Department of Environmental Protection ("PA DEP"). 

While the PA DEP determined that the damage to the house was not caused by a sinkhole or mine subsidence, several other causes for the damage were possible, including causes covered under the Policy.  The PA DEP report indicated that the damage to the house "may have resulted from excess water striking the exterior of the foundation wall and freezing, causing expansion and inward movement of the wall," and that such damage "may have resulted from the fact that the damaged wall was pushed far enough inward that the ground behind the wall caused a depression behind the exterior wall," which Plaintiffs allege is a covered loss under the Policy. Plaintiffs conclude that the damage to the house basement wall "resulted from water striking the foundation walls of the basement above the ground during periods of excess rainfall," which they assert is a covered loss under the Policy.

Plaintiffs filed a Complaint alleging breach of contract and statutory bad faith. State Farm filed its Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) which was granted.  The policy provided:

In SECTION I ("YOUR PROPERTY") of the Policy at issue here, the LOSSES NOT INSURED sub-section provides as follows:

1. We do not insure for any loss to the property described in Coverage A [(the Dwelling)] which consists of, or is directly and immediately caused by, one or more of the perils listed in items a. through n. below, regardless of whether the loss occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:


c. freezing, thawing, pressure or weight of water or ice, whether driven by wind or not, to a swimming pool, hot tub, or spa, including their filtration and circulation systems, fence, pavement, patio, foundation, retaining wall, bulkhead, pier, wharf or dock;


  1. settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundation, walls, floors, roofs, or ceilings . . ..

The Court found that the Plaintiffs' alleged losses clearly occurred because of "freezing, thawing, pressure or weight of water or ice . . . to a . . . foundation," as set forth in Item 1.c.  Plaintiffs argued that Item 1.c does not include the losses that they allege because the word "foundation" as used therein refers to that of "a swimming pool, hot tub or spa," rather than to the "foundation" of the insured dwelling.  The Court disagreed.  The plain language of Item 1.c clearly indicates that "a swimming pool, hot tub or spa" is among the listed objects (including a "foundation") which, if "freezing, thawing, pressure or weight of water or ice" to such objects causes a loss to the insured dwelling, such loss is not covered by the Policy (while the phrase "including their filtration and circulation systems" is merely a subordinate clause referring back to the items "swimming pool, hot tub or spa"). Therefore, upon review of the plain language of Item 1.c of the LOSSES NOT INSURED sub-section of SECTION 1, it is clear that the Policy does not cover Plaintiff's alleged losses.

State Farm also argued that Plaintiffs' alleged losses are excluded from coverage under Item 1.l of the LOSSES NOT INSURED sub-section of SECTION 1, which refers to any loss to the insured dwelling consisting of, or occurring because of, "settling . . . bulging, or expansion of . . . foundation, walls, [etc.]."  Plaintiffs argued that the language used in Item 1.l is ambiguous and that the Court should therefore construe it in their favor.

In determining whether an insurance policy provision is ambiguous, a court "must examine the questionable term or language in the context of the entire policy and decide whether the contract is `reasonably susceptible of different constructions and capable of being understood in more than one sense.'"  "Where there is only one reasonable interpretation of a contract, that interpretation controls because ‘[s]traightforward language in an insurance policy should be given its natural meaning.'"  Moreover, "Courts should not . . . distort the meaning of the language or strain to find an ambiguity." 

Plaintiffs alleged that the "swelling, crack[ing], and bowing inward" of the wall alleged in their Amended Complaint is quite different in meaning from the "settling, cracking, shrinking, bulging, or expansion" of a wall or foundation that is listed as an exclusion in Item 1.l.  However, the Court said that they have provided no persuasive support for their contention, nor does the Court see a material difference in the plain meaning of the two phrases.  Furthermore, given the clear, simple language of the policy, and because straightforward policy language should be given its natural meaning, the Court found that it would be inappropriate to torture such language to create an ambiguity in order to construe coverage for Plaintiffs here. Therefore, the Court said that, upon review of the plain language of Item 1.l of the LOSSES NOT INSURED sub-section of SECTION I, it is clear that the policy does not cover the losses alleged by Plaintiffs in their Amended Complaint.

Furthermore, to the extent that Plaintiffs wished to argue that they should be awarded damages based on the Policy's "Collapse" provision, that provision's language clearly did not provide coverage for the loss. Specifically, the COVERAGES sub-section of SECTION I provides that certain ADDITIONAL COVERAGES are subject to all the terms, provisions, exclusions, and conditions of the Policy, and include:

11. Collapse. We insure only for direct physical loss to covered property involving the sudden, entire collapse of a building or any part of a building.

Collapse means actually fallen down or fallen into pieces. It does not include settling, cracking, shrinking, bulging, expansion, sagging or bowing.

Since Plaintiffs do not allege that the house fell down or fell into pieces, there is no coverage available here under that subsection of the policy for any loss based on its "collapse." Furthermore, to the extent Plaintiffs argue that they are entitled to an award of damages because the risk of "imminent collapse" is covered under the Policy, the Court disagreed. Plaintiffs argued, in essence, that the "imminent collapse" that had not yet occurred to their house should be characterized as a "resulting loss" from their damaged foundation wall. However, the Policy does not expressly insure against such risks, but insures only for "direct physical loss to covered property."

State Farm was not providing "illusory coverage" for collapse as the policy does provide coverage for "collapse" in limited circumstances, just not in the circumstances that are presented here. For example, a collapse caused by the weight of contents, equipment, animals or people, or the weight of ice or snow collecting on a roof is a covered loss under the Policy.

To recover in a bad faith action, the plaintiff must present clear and convincing evidence: (1) that the insurer did not have a reasonable basis for denying benefits under the policy; and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis.  In considering bad faith claims, "district courts have required more than `conclusory' or `bare bones' allegations that an insurance company acted in bad faith by listing a number of generalized accusations without sufficient factual support." Additionally, a bad faith claim "is generally an independent cause of action separate from the contract claim." Thus, "`[r]esolution of a coverage claim on the merits in favor of the insurer requires dismissal of a bad faith claim premised on the denial of coverage, because under the circumstances the insurer necessarily has a reasonable basis for denying benefits.'" 

Therefore, to the extent that Plaintiffs' bad faith claim is based on State Farm's denial of coverage under the policy, the dismissal of Count I for the reasons discussed required the dismissal.  However, to the extent that Plaintiffs' bad faith claim is based on State Farm's alleged failure to conduct an adequate investigation, Plaintiffs failed to assert sufficient factual allegations in their Amended Complaint to support such a cognizable bad faith claim. Plaintiffs' averments that State Farm "den[ied] Plaintiffs' Claim without a reasonable basis" and "with knowledge and/or with a reckless disregard of said denial's lack of a reasonable basis including State Farm's inadequate evaluation and investigation of the Claim," and that State Farm "frivolously refus[ed] to pay" based on the unreasonably denied claim grounded in an inadequate investigation, are nothing more than conclusory statements containing no assertions of fact. The allegations of the Amended Complaint to which Plaintiffs cite in support of that argument simply aver (in various ways) that the adjuster spent approximately ten minutes of his visit to the house observing and examining the house, during which time he did not conduct testing or take measurements.

Although the duration of an adjuster's inspection might be relevant to a claim of bad faith, it does not itself demonstrate bad faith.  Also, since Plaintiffs allege that the damage at issue was "visible to the naked eye from the interior of the basement and was not obstructed or concealed from view," it is not clear that the adjuster’s visual inspection of the wall was unreasonable under the circumstances that Plaintiffs describe. Thus, Plaintiffs had not pled sufficient facts to support a cognizable claim of bad faith.


Nicholas J. Heintzman

[email protected]

07/29/21       Matter of Hereford Ins. Co. v. Corona Med. PC
Civil Court of the City of New York, New York County
Court Vacates Arbitration Award and finds for Livery Insurer, Denying Coverage for Automobile Accident where Insured was Driving a Rental Vehicle that was not Contracted for under the Livery Insurer’s Policy

Assignor of no-fault benefits was injured in a motor vehicle accident while operating a rental car owned by AutoTeam, Inc. (“AutoTeam”) and insured by Unitrin Preferred Insurance Company (“Unitrin”). Assignor maintained a business insurance policy through Hereford Insurance Company (“Hereford”), a livery insurer. Assignor submitted his claim to Hereford, and Hereford denied coverage on the grounds that the rental vehicle was not an insured vehicle under the Hereford policy.

Assignor then submitted the claim to MVAIC who also denied coverage because AutoTeam had a policy which covered the vehicle. The parties submitted to arbitration to resolve the coverage dispute, and an Arbitrator issued a finding that 1) MVAIC was not liable as alternative insurance policies (the Hereford and Unitrin policies) existed; and 2) Hereford should be responsible for payment, since it was the first insurer to have notice of the claim.  

The Court granted Hereford’s motion to vacate the arbitration award. It found that Hereford’s policy clearly indicates on its face that it only covered the automobile owned by Assignor, and therefore provided no coverage for Assignor when he drove a rental vehicle in the accident. Given the complete lack of evidence of coverage under the Hereford policy, the Court vacated the award.


Heather Sanderson

[email protected]

09/10/21       Panasonic Eco Solutions Canada Inc. v. XL Specialty Insurance Company, 2021 ONCA 612
Ontario Court of Appeal
The Contractual Liability Exclusion in a Liability Policy is Alive and Well

On September 10, 2021, the Ontario Court of Appeal released a valuable decision on the scope and purpose of a contractual liability exclusion in a professional liability policy.  The exclusion was in the typical form that excludes contractual liability claims unless the insured would have had the liability in the absence of the contract.

The insured in this case failed to achieve substantial completion of the installation of roof mounted solar electricity generating systems by an agreed upon date.  The installation contract with the client contained a liquidated damages clause for failure to meet the deadline. The client sued for those damages (in addition to other claims all of which arose from the failure to meet the deadline).  At trial, it was determined that as the failure to meet substantial completion could have been due to negligence, the exception to the exclusion applied and the insurer had to defend. The insurer appealed.

The Court of Appeal held that the purpose of the exclusion was clear: The insurer will be responsible for the losses caused by the insured’s negligent performance of its professional obligations; but the insurer will not indemnify the insured against breach for any extra obligations it undertakes in a contract. In this case, the delay was an insured act or omission in the performance of professional obligations. However, by agreeing to pay liquidated damages as the sole consequence of that delay, the insured contracted out of its insurance coverage.  The court stated:

“The exclusion excludes coverage for liability arising from breach of contract, and the exception does not apply because the obligation to pay liquidated damages is purely contractual and does not otherwise arise. Furthermore, … [as] … liquidated damages are … [the client’s] … sole remedy, there is no way to read … [the client’s] ... pleading to claim any other or additional remedy for the delay… A liquidated damages clause, such as this one, demonstrates the fairness of the contractual exclusion and exception clause of the insuring agreement, when it is interpreted in accordance with the reasonable expectations of the parties to that agreement … An insured is free to make whatever promises it wishes when it contracts to perform services, for example for remedies for its breach … But it could not bind its insurer to that bargain. The insurer is only obligated to cover liability that the insured would have had without the contract.”

The trial judge and the Court of Appeal agreed that an allegation of a failure to make payments according to the terms of a Proceeds Agreement was held to be a pure and simple debt claim that was within the contractual liability exclusion. The facts giving rise to the agreement may have been a covered claim, but the agreement translated those facts into an excluded contractual claim. A claim of negligent misrepresentation and unjust enrichment was based solely upon the insured’s failure to pay under the Proceeds Agreement and was similarly excluded.

The client further claimed that the insured was unjustly enriched at the client’s expense due to a failure to pay the Pay Proceeds Agreement. The trial judge and the Court of Appeal agreed that this equitable claim is not covered as the coverage was triggered by “professional loss” which was defined to not include equitable claims. The trial judge had this to say (at 2020 ONSC 1502, para. 36):

Moreover, the whole purpose of insurance is to provide protection against fortuitous risk. The nature of the unjust enrichment claim here is not one that arises because of fortuitous risk that … [the insured] … has incurred. Instead it arises out of conscious, intentional, deliberate conduct to deprive … [the client] … of a sum of money that … [the client] … alleges it is entitled to.  In this light, the claim for unjust enrichment is a substitute for a contract claim in the event that the elements of contract are not made out.  That does not, however, turn it into a claim on account of a fortuitous risk.

The Court of Appeal did not specifically comment on this point.

Colin Empke and Anthony Gatensby of Blaney McMurtry, members of Canadian Defence Lawyers, acted throughout for the successful insurer, XL Specialty Insurance Company.

© Hurwitz & Fine, P. C. 2021
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