Coverage Pointers - Volume XXIII, No. 12

Volume XXIII, No. 12 (No. 606)
Friday, November 26, 2021
A Biweekly Electronic Newsletter

Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, New York 14202
Phone: 716-849-8900
Fax: 716-855-0874

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© Hurwitz & Fine, P. C. 2021
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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. 

Happy Thanksgiving to friends near and far.  Owning a crystal ball (or perhaps it is a snow globe), we are sending out Friday’s issue on Wednesday, knowing that the courts are closed and you have all the cases you need to enjoy with your pecan pie..  We wish you the joy of family and friends.

We offer you a turkey in this week’s edition, a court determining that $735/hour is presumed to be reasonable for defense fees when an insurer wrongfully denied coverage.  The “presumed to be reasonable” approach has not been used in state court cases before this one and relies upon federal District Court decisions at the trial level.  See the East Ramapo decision in Brian’s column (which also discusses bad faith claims leveled in that court case.

 

Upcoming CLE – I’m speaking at the DRI ICPS in NYC:

I am always honored to be invited to speak at the DRI Insurance Coverage and Practice Symposium.  This year’s program is being held, live, at the Sheraton New York Times Square Hotel on December 9-10.   Click here to register:

This year, I’ll be on the dais, talking about:

Sex Abuse Claims
Analyzing coverage for child victim sex abuse cases can be challenging. Because many states have revival statutes, old policies are triggered. This session will detail strategies to streamline the identification of policies at issue and will address related allocation issues

 

Newsletters:      

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

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

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

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

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

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

  Peiper on Property and Potpourri:

  Owing to the old adage “one man’s trash is another man’s treasure,” we are pleased to report and offer commentary on the Fourth Department’s recent decision in Prusik v. Liberty Mutual.  In that case, the insured/homeowner made a claim for theft coverage under his policy when a property maintenance company admittedly threw out all of the interior furnishings under the (apparently) mistaken impression they had little to no value.  The Court’s analysis focused on the reasonable intent of an ordinary policyholder and concluded a third-party’s decision to discard an item is not what most people would think of when defining the term “theft.”  

  There are good lessons of policy interpretation in play here.  The first of which is the important concept that what the insured thinks to be reasonable is not the test.  The “reasonable person” standard controls the interpretation of undefined policy terms, and here the Court noted that an ”ordinary policyholder of reasonable intelligence” would not conclude the circumstances giving rise to this claim qualified as theft.   

  Note, of course, policyholders will often pivot to an ambiguity argument when confronted with a disputed term.  Surely, not all words in an insurance policy are subject to a formal definition.  That said, however, just because an insured proffers a different interpretation does not necessary mean that the term must be afforded broad construction.  On the contrary, the standard for most language is that it must be viewed (and thus interpreted) as an ordinary policyholder in the same situation.    

  The only exception to this rule of construction occurs when a dispute arises over exclusionary language.   In those instances, NY courts are instructed to take a narrower view. Thus, if a policyholder offers a reasonable interpretation of policy language, and the court recognizes the interpretation as “reasonable,” the language is deemed ambiguous and must be construed against the insurer.  Note the slight difference here.  With inclusion language, and other policy provisions, interpretation is directed in the light of the ordinary policyholder.  With exclusions, however, the focus turns on the interpretation proffered by the actual policyholder.  

  That’s it for this week.  We’re in Central Pennsylvania enjoying the Thanksgiving Holiday with the Peiper side of the family.  My twelve-year-old son (who started playing football this year) found my old football wristband with old high school plays on it.  That sparked a fun dose of nostalgia last night.  He was asking me about plays that were listed on the card and comparing them to what he learned earlier this Fall.  I’m not sure if I was impressed about what I remembered or depressed about how deep I had to dig into my memory to recall it.   

  Either way, this is tangible proof that at one point I took a few snaps under center.  Here’s hoping he doesn’t dig up any old photos from junior high, or even more embarrassing, old photos of old girlfriends.  Hairspray anyone!    

  Anyway, we have much to be grateful for this year and will count all of those at the table tomorrow.  Happy Thanksgiving to You and Yours and Go Bills!  

  Steve
  Steven E. Peiper
  [email protected]

   

  One Hundred Years Ago, $7000 Verdict, one the Largest Ever in Canada:

  The Buffalo Enquirer
  Buffalo, New York
  26 Nov 1921

  CYCLING PARSON GETS BIG DAMAGE VERDICT

  (Special Telegram to The Enquirer)

              St. Catherines, Ont., Nov. 26.—The Rev. Solomon Cleaver, L.L.D., former pastor of St. Paul Street Methodist church, here has been awarded $7,000 damages against the Standard Paving company for injuries. Dr. Cleaver, who is pastor of a Belleville, Ont., Methodist church, in October, last year, was riding a bicycle across the lawn of the parsonage when hi front wheel dropped into an excavation which the company had sunk in the parsonage property as a test hole and had left unprotected. He fell and was badly injured.

              This is one of the biggest personal damage verdicts ever given in Canada.

   

  Wilewicz’ Wide-World of Coverage (featuring Franco Mirolo):

  Happy Thanksgiving! As I’ve previously reported, my household doesn’t do much for this holiday. Rather, we focus our energies on the six weeks of Christmas (yes, the day after Thanksgiving and through January). That said, this year we prepped a turkey early, and last night I baked a modest 8-ish pound bird. We had mashed potatoes and cranberries and roasted Brussel sprouts. We did this because this year my daughter requested that we “do something different” and shake things up after the year+ that we have all had. So, we will be having a turkey feast for most of the week, but we will then be ordering Chinese food on Thursday. Why not.

  This week in the Wide World of Coverage, once more Franco Mirolo assists in the preparation of your summary of a recent Circuit Court decision. He writes: “In Liberty Mutual v. Penn National, Penn National refused to treat Liberty’s insured as an additional insured after a construction accident. Liberty defended and indemnified its insured, and then sought reimbursement from Penn National. Both the district and circuit courts agreed that Penn National should have defended and indemnified Liberty’s insured. More specifically, both courts said that the underlying complaint alleged sufficient facts to trigger the duty to defend, and that because apportionment was almost impossible to determine, the duty to indemnify followed the duty to defend. Thus, Liberty was entitled to reimbursement from Penn National.”

  Please wish Franco good luck. He will be spending Thanksgiving downstate with friends and their family and will be experimenting in the kitchen. He will try to make some pumpkin ice cream!

  Until next time,

  Agnes
  Agnes A. Wilewicz
  [email protected]

   

  Loss of Leg - $12,000 Verdict:

  New-York Tribune
  New York, New York
  26 Nov 1921

  $12,000 for Loss of Leg

  Former Militia Guard Wins Verdict from Railroad

              FREEHOLD, N.J., Nov 25.—Ernest H. Drake, of Plainfield, N.J., to-day was awarded $12,000 by a jury here before Circuit Judge Cutler for the loss of his left leg on June 18, 1917. Drake, at that time a member of the State Militia, was guarding a railroad bridge at Red Bank, N.J., when he was run down by a train.

              At a previous trial Drake was awarded $13,500, but the verdict was set aside, and a new trial ordered by the Supreme Court. The railroad contended that Drake was asleep at the time of the accident, which occurred in early morning.

   

  Barnas on Bad Faith:

  Hello again:

  Happy Thanksgiving to everyone out there.  For the second time in three years, the Bills are playing in one of the Thanksgiving games.  This time it is the nightcap in New Orleans.  This presents some challenges.  Typically, by that time on Thanksgiving night, I will have long since slipped into a food coma.  That’s not going to be an option this year, so an early nap might be needed after dinner.  Although, if the Bills play like they did last week it may be impossible to stay awake into the second half no matter what.

  Speaking of being thankful, I am sure that counsel hired by the insured was thankful for the decision of the Second Department in the East Ramapo Central School District Case in my column.  On the bad faith side, the court reversed the lower court’s decision dismissing a cause of action based on the implied covenant of good faith and fair dealing.  However, this is not the most notable thing about the decision.  The insured claimed that it had incurred $1.7 million in attorneys’ fees defending the underlying action.  After granting summary judgment on the breach of contract claim to the insured, the court below reduced the amount of fees to $500,000, finding that $400 per hour was reasonable for all attorney time.

  The Second Department vacated the decision of the court below to reduce the attorneys’ fees award.  In so doing, it relied upon federal case law for the proposition that an insured’s attorneys’ fees are “presumptively reasonable” when determining damages for breach of the duty to defend.  The court also relied upon two federal court decisions where it was determined that the fees charged by the insured’s counsel in those matters were “reasonable” at $735 per hour.  The court even noted that the fees in this case had been discounted from the normally “very high billable rates” charged.  The case will now go back to the trial court for a new hearing on the attorneys’ fees issue and further proceedings on the bad faith claim.

  Brian
  Brian D. Barnas
  [email protected]

 

Loss of Eye = $45,000 Verdict

The Brooklyn Citizen
Brooklyn, New York
26 Nov 1921

$45,000 VERDICT UPHELD BY COURT

Seventeen-Year-Old Boy, Struck by Elevator, Lost an Eye and Suffered Other Injuries.

            Christmas will be full of joy for seventeen-year-old Reginald Rowe, of No. 154 Fourth avenue. He learned to-day from his attorney, Gilbert D. Steiner, of No. 299 Broadway, Manhattan, that the Appellate Division of the Supreme Court across the river had affirmed a verdict of $45,000 for personal injuries, awarded him a year ago.

            Through his widowed mother, Mrs. Anna Rowe, the boy brought suit for $50,000 against the J.J. Little and Ives Company, of Manhattan, for injuries received when struck by a freight elevator on the defendant’s premises two years ago. As a result of the accident, Reginald lost his right leg and suffered a fracture of the nose and other injuries.

            At the trial of the action last December, Reginald was awarded $40,000 and his mother, $5,000 for the loss of his services. He has been the sole support of his mother and a fourteen-year-old sister.

            Lawyer Steiner handled the case both at the trial and on appeal. The verdict is said to be the largest that has ever been awarded in any court in this country for a head injury.

 

Off the Mark (featuring Kyle Ruffner):

Dear Readers,

Although we decided to switch things up this year and cook steaks instead of the traditional turkey, our plans have already been changed.  After a phone call from mom, we will now be joining my parents for a traditional Thanksgiving dinner.  So much for an alternative Thanksgiving.  That said, I’m not complaining because now I don’t have to cook.  Win-win.

Unfortunately, the Courts were quiet this week and there are no newsworthy cases to report on.

Wishing a very Happy Thanksgiving to all of our devoted readers and their families.

Brian
Brian F. Mark
[email protected]

 

Student Expelled and Awarded $5000:

 

The Standard Union
Brooklyn, New York
26 Nov 1921

COURT UPHOLDS SCHOOL IN PUPIL’S EXPULSION

The Appellate Division to-day reversed a $5,000 verdict awarded to John R. Taylor, a lawyer of Port Washington, against Charles Alexan der Robinson and John Calvin Bucher, who conduct a military school at Peekskill. for alleged discrimination against the plaintiff's son, Melville F. Taylor, who was expelled from the school in 1919.

The expulsion came after young Taylor and all the other commissioned officers of the school had re-signed after the privilege of studying in their rooms had been discontinued. All the others who resigned, with the exception of Taylor, were later reinstated. His father claimed discrimination against Melville. The court said that, once the boy was expelled, he was in the same position as though he never had been a student at the school, and the authorities could take him back or not, as they liked.

 

Boron’s Benchmarks (featuring Hannah Cominsky):

Happy Thanksgiving to all!  I have much to be thankful for, and I am sure you do too.  I am thankful for my amazing colleagues here at Hurwitz & Fine, especially the group of insurance coverage attorneys here who inspire and challenge me and are great friends to boot!

I am also thankful for the case write-up prepared by our very own Hannah Cominsky for this edition of Boron’s Benchmarks.  We offer for your consideration an interesting decision in favor of the insurer out of the U.S. District Court for the Eastern District of Wisconsin issued November 16, 2021 in Lancer Insurance Company vs. Personalized Coaches Inc., The Court analyzed both a Commercial General Liability policy and a Business Auto Liability policy in determining Lancer owed no coverage to any party concerning a serious accident involving an out-of-service bus unexpectedly rolling forward while being repaired by a father and son, killing the son and injuring the father in connection with the unfortunate incident.  We thank our friend Jim Harinski, Associate General Counsel at Lancer Insurance Company, for bringing this decision to our attention.  The case write-up you will find in Coverage Pointers is Hannah Cominsky’s thoughtful presentation.   

Have a healthy and happy and thankful next two weeks, folks.

Eric
Eric T. Boron
[email protected]

 

Fined $2.00 and Sent Home:

The Buffalo Times
Buffalo, New York
26 Nov 1921

Next Time Will Plead Guilty, He Says

OLEAN, Nov. 26.--"After that. judge, I guess I will plead guilty," Harry Townsend, 44 years old, of Erie, Pa., told Judge Dennis Keating.

Arraigned in police court yesterday. Townsend. in searching around for an alibi, told that he came to Olean to spend Decoration Day and intended to return home afterward.

"Last Decoration Day, or next?" queried the judge.

"Thanksgiving was what I mean, judge."

“Two dollars and you may return home," the judge notified him. Townsend had $10, the remainder of a $90 roll, he said.

 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

Happy Thanksgiving! I’m thankful for my family, who fill my life with an abundance of joyful memories. I’m thankful for my friends, whom I may not see as often these days, but have made a lasting impression on who I have become and will become. I’m thankful to my colleagues and mentors, who fit into both of the above categories while celebrating and sharing in my successes, and supporting me through my professional growth and development, win, lose, or draw. I celebrate you this Thanksgiving and wish you all the best.

A blast from the past this week, I have shuffled through the Filings Cabinet to find some lessons learned in a recent Commercial Umbrella and Excess form filing disapproval at the hands of DFS. In addition to a quick discussion of the permissible definition of “pollutants,” and a hiatus on the filing of mold and other organism exclusions, I tackle DFS’ stated position with respect to anti-stacking language (NOTE: DFS has taken a stance against these provisions entirely). Although I discuss one filing in particular, DFS’ stance against anti-stacking provisions appeared in multiple recent filing disapprovals.

Until next time,

Ryan
Ryan P. Maxwell
[email protected]

 

Football Injuries, before Helmets:

The Buffalo Times
Buffalo, New York
26 Nov 1921

FOOTBALL TOLL DURING 1921 10 VICTIMS

Fatality List Three Less Than Preceding Year.

By Associated Press.

CHICAGO, Nov- 26.-- Football claimed ten victims during the 1921 season which closed with Thanksgiving Day games, according to reports to the Associated Press today.

The death list was three less than 1920 and three above the toll of two years ago. Ten lives were lost as the result of games. in 1918; 12 in 1917, 18 in 1916, and 15 in 1915.

As in former years, the majority of youths killed were members of high school teams. The figures apparently uphold the contention of football experts that proper training and physical condition greatly minimize the danger of the game, for only one of the players killed was a member of a college eleven. One was a semi-professional player; a member of a naval team and the remainder was high school or sandlot players who did not receive the intensified training and physical inspection given in colleges. With one exception none of the victims were more than 20 years old.

 

CJ on CVA and USDC(NY):

Hello all,

It is hard to believe that Thanksgiving is here, and the end of 2021 is right around the corner. I for one am looking forward to enjoying far too much pumpkin pie over the long weekend. My wife works on Thanksgiving this year, which means that I will be enjoying two days of back-to-back Thanksgiving dinners, Thursday with my family and Friday with hers. Hopefully the Bills will serve up an interesting game on Thursday night. Heck, I’ll settle for more than one touchdown. I hope that you and yours have a happy, healthy, and safe Thanksgiving!

The District Courts were quiet again, save for a COVID business interruption decision out of the EDNY, which sadly, presented no new or interesting insurance issues. I will be watching an interesting case making its way through the SDNY involving a fine art exhibition, a German insurance broker, and four European insurers. Hopefully we will hear more on that soon. For this issue I bring a decision from the Appellate Division, First Department in civil sex abuse case, while not a CVA case, the issues presented here will likely come up in future CVA decisions.

See you in two weeks,

CJ
Charles J. Englert, III
[email protected]       

 

Hirohito Ascends to Japanese Throne:

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
26 Nov 1921

JAPANESE NAME HIROHITO AS NEW REGENT OF JAPAN

Illness of Emperor Yoshihito causes imperial action; Japs in U.S. not surprised.

SELECTION WAS FORECAST

Hirohito is only twenty years old and has accomplished much in Japan.

Washington, D. C., Nov. 25—Official notification of the appointment of the crown prince of Japan to the regency was received today by the Japanese delegation to the Washington conference from the minister for foreign affairs at Tokyo.

In making the announcement Prince Tokugawa, who Is president of the house of peers, as well as a delegate to the conference, said the change in the imperial court would not, in his opinion, affect in any way Japan’s policy at the conference, nor would it have any effect upon the general policy of Japan as a state.

He explained that the regency had been established because of the illness of the emperor and that it had actually been carried out with the full assent of the emperor upon the advice of the privy council and the cabinet.

           

Dishing Out Serious Injury Threshold:

Dear Readers,

Happy and Healthy Thanksgiving to all. I hope everyone is able to enjoy time with their families and be and hopefully be able to celebrate in person to a greater extent than last year. Nonetheless, despite all of the difficulties of 2021, we all have a lot to be thankful for. 

In the Serious Injury Threshold world, we have a case where defendants argument as to a gap in treatment was unavailing as plaintiff did not cease all treatment during that time, which precluded defense argument that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

Be well,

Michael
Michael J. Dischley
[email protected]  

 

Difference between Character and Reputation:

Worcester Democrat and the Ledger-Enterprise
Pocomoke City, Maryland
26 Nov 1921

HOW DO YOU SAY IT?

By C.N. Lurie

Common Errors in English and How to Avoid Them

“CHARACTER” AND “REPUTATION”

AVOID the common error of confounding these two words, for there is a clear and sharp distinction in their meanings. You character is what you are, in your moral nature, your abilities, etc.; your reputation is what your friends, your neighbors, the world, thinks of you. Your reputation may be ruined by a false accusation, but your character cannot be injured by anyone but yourself.

Abbot says, “Character is what a person is; reputation is in the minds of others. Character is injured by temptations and wrongdoings, reputation by slanders and libels. Character endures through defamation in every form but perishes where there is a voluntary transgression; reputation may last through numerous transgressions, but be destroyed by a single, and even an unfounded, association or aspiration.”

 

Bucci on “B”: 

Hello everyone.  I’m sure you are all looking forward to the Holiday on Thursday and don’t forget to thank the indigenous people for giving.  Does anyone know what fowl was really eaten during the meal that we give thanks for?   I’m not a turkey fan but I’m certainly not eating the meats they ate for sure.  

No good Coverage B decisions this issue.  Courts have been quiet.  Work is certainly not quiet though.  We love getting insurance coverage claims.  Is that weird?  Mr. Dan Kohane has the energy of a teenager.  Makes me tired just thinking about it.

Well, that’s all for now.  I have to go brine my turkey so I can pretend I’m a decent cook. 

Diane
Diane L. Bucci
[email protected]

 

Worcester Democrat and the Ledger-Enterprise
Pocomoke City, Maryland
26 Nov 1921

Clews Left Behind by Oregon Dentist Brought About His Arrest.

BOASTS ARE FUTLE

Convicted of Killing Rancher, Then Exchanging Identity with Victim, Doctor Brumfield May Be Sentenced to Hang.

Roseburg, Ore. —Dr. R. M. Brumfield has been found guilty of murder in the first degree in connection with the death of Dennis Russell. In Oregon the penalty for first degree murder is death by hanging. The verdict brought to a close one of the strangest murder cases in the West. Brumfield, a dentist, known to have been an avid reader of lurid crime and detective tales, is alleged to have boasted that he could commit a “perfect” crime, leaving no clews.

But, having now been found guilty, Brumfield undoubtedly realizes the fallacy of his belief in his criminal ability. He did leave clews, and they brought about his arrest and conviction. Brumfield disappeared the night of July 13, when Russell was murdered. He was captured August 12, while working on a ranch near Calgary, Canada, under the assumed name of Norman Whitney.

Lingerie Led to Arrest.

It was the Roseburg dentist's strange desire to obtain possession of a box of women's lingerie which led to his arrest. It had been learned Brumfield shipped the dainty garments to Seattle on the afternoon preceding the murder, addressing the parcel to "Mrs. Norman Whitney.”

The authorities had no idea Brumfield himself would venture to recover the box but hoped it might eventually put them on his trail; but while safely hidden on the Canadian ranch, with the chances all in his favor of being able to maintain his new identity indefinitely, Brumfield betrayed himself by writing to the Seattle express office for the parcel of underwear.

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Sending you warm-emphasis on the warm-Thanksgiving wishes from sunny Florida. I’m here with my son and dog visiting family for the holiday. Sadly, my daughter had class this week and could not join us. Instead, we had Thanksgiving in the City last weekend—which meant a Broadway musical and cheesecake at Juniors. I am very thankful to have been able to spend the holiday this year with my family near and far (and I’m also thankful to Jonathon Taylor and Austin Ekeler for returning me back to fantasy football relevance---some of you will totally get this).

My Connecticut partner, Diane Bucci, volunteered to guest write the Connecticut Chronicles column this week in my absence, so my thanks to her. I, on the other hand, guest wrote a column for Dan, reporting on the New York Court of Appeals very recent decision in JP Morgan, finding that a disgorgement payment issued to the SEC was an insurable compensatory loss.

Be thankful, smart, and keep keeping safe.

Lee
Lee S. Siegel
[email protected]       

 

Better Wed than Dead :

The Buffalo Enquirer
Buffalo, New York
26 Nov 1921

Many Women Say They Are Wives of Dead Men

(Special Telegram to The Enquirer.)

Asheville, N. C., Nov. 26. One hundred deserted women are claiming to be the widows of K. L. Carson, he of seven aliases, who died in the Montrose sanatorium, in Weaverville.

J. S. Styles, attorney for Dr. J. M. Crawford, who was appointed administrator for the deceased, needs another clerk to attend to his mail, since news of the demise of the "man of mystery" became public property.

Women from Maine to California have written their claims to widowhood through Carson's death. Every mail brings in more letters. "When the mail comes in from Europe next week I expect another avalanche," said Attorney Styles.

Carson died at the sanatorium of a lingering disease. Before the end he told attendants at the hospital that he had lived in a score of states and had married many women. J. R. Harrison, W. M. Brown, and Jack Wilson were some of the names under which he lived and married.

After publication that Carson, self-styled mystery man with wives in every port, had confessed portions of his former life, the story, apparently, was copied by all the deserted wives of the United States, besides parts of Mexico and the West Indies.

 

Rauh’s Ramblings:

            Hello everyone!

This has been an extremely busy week and I’m sure I am not the only one who feels that way.  I will be hosting Thanksgiving at my house this year for the first time, so I have been running around like crazy all week trying to get everything ready, while also trying to finish as much work as possible given the shortened work week.  Unfortunately, I do not have a case to report this week, but I will be back in two weeks with one to report!  I wish you all a very Happy Thanksgiving!  Go Bills!

Until Next Time,

Patty
Patricia A. Rauh
[email protected]       

 

A Musical Shave:

The Buffalo Enquirer
Buffalo, New York
26 Nov 1921

MUSIC WITH THE SHAVE

LONDON reports that James Edwards has installed an orchestra in his barber shop. What they start in London may eventually land over here.

If American barbers adopt the London innovation, they must not fail to observe that the Londoner "permits nothing but quiet, soothing music to be played."

For that as for everything else there is a reason. The reason for quiet music, if any, in a barber shop is discoverable by imagining the liabilities incident to a barber keeping time to lively music with scissors or blade.

Better no music, patrons will agree, than music that will get into the fingers of the barbers while engaged in delicate operations in which a slip means a lost ear, a sliced nose or a severed jugular.

 

Storm’s SIU Examen:

Happy Thanksgiving everyone:

Four interesting cases this week:

• Homeowners Policy Void from Policy Inception Due to Material Misrepresentations in the Application as to Whether the Property Was Owner Occupied.

   

• Insurer did not Breach the Contract by Declaring the Vehicle a Total Loss Rather Than repairing it. The Insurer’s “Bad Faith” Expert was permitted to Testify, Having been Found to be Qualified and His Testimony was Reliable and Relevant, but He was Limited from Providing any Legal Opinion. 

   

• Breach of Contract Claim Not Covered under CGL Policy as Not an Occurrence Given That the Allegations are Grounded in Faulty Workmanship.

   

• State Farm Granted Default Judgment Against Medical Providers in PIP Claims Due to Insured’s Failure to Attend an EUO and Passenger’s Failure to Execute the EUO Transcript. 

 

Michael Dischley and I had the pleasure last week of presenting a training seminar for an insurer on evaluating and litigating claims involving an insured’s failure to reasonably maintain heat.  If this may be of benefit to you and your team, please let us know.  We will be pleased to present it to your claims professionals also. 

Very pleased to report an important first-party property coverage success. The Supreme Court agreed with me denying an insured’s petition to compel appraisal of a matching issue. One side of the insured’s house was damaged by hail. The insureds sought appraisal arguing that the non-damaged siding on the remaining sides of the house should be replaced because the new siding will not perfectly match. The court confirmed this is an issue of coverage not amenable to the appraisal process under Ins. Law § 3408 -- it is not merely an issue of the “extent of the loss or damage and the amount of the loss”. The coverage issues involved necessitate the analysis of policy language, including: “direct physical loss”; “replacement cost of that part of the building damaged with material of like kind and quality and for like use”; exclusions for “wear and tear”, “deterioration” and “inherent vice”; and “loss to a pair or set”. Hopefully, this will redirect New York courts in the right direction which had been headed down the wrong path on this issue. Very thoughtful and well-written decision by the Court. If you would like to read it, please let me know and I will forward it to you.

This week’s encouraging word: “I will win! Why? Because I have faith, courage and enthusiasm!”.  The Company Men

Talk to you soon,

Scott
Scott D. Storm
[email protected]

 

What About Women’s Lives:

Star-Gazette
Elmira, New York
26 Nov 1921

MARRIED MEN

With life insurance to protect your wife and family, should be further protected by a WILL, naming this bank as executor.

Costs no more than an individual executor and is perpetual.

The Merchants National Bank

The Merchants National Bank Bldg.,

W. Water St.

Elmira N.Y.

 

Heintzman’s Hideout:

Thanksgiving is here, and I cannot wait for some time to indulge in college basketball tournaments and catch up on my recreational reading (almost done with the Iliad—next up, the Odyssey). I hope everyone has a wonderful Thanksgiving and gets to spend time with loved ones.

Two no-fault cases this week involving big mistakes by insureds. In the first, a no-fault benefits insured loses his benefits when his insurer realizes that he made material misrepresentations regarding his residency. In the second, a no-fault benefits insured loses his benefits after failing to appear for scheduled independent medical exams (IMEs).

Nick
Nicholas J. Heintzman
[email protected]

 

Vile Names Not Welcome:

Daily News
New York, New York
26 Nov 1921

Wealthy Husband Called Her Vile Names, She Says

Extreme cruelty and inhuman treatment is charged by Mrs. Mabel Norwalk, 740 Riverside Drive, in her suit for separation on file in the Supreme Court against her husband, Albert B. Norwalk, vice-president of a motor corporation capitalized at $10,000,000.

In the presence of her eleven-year-old daughter, Marjorie, her husband called her vile names and struck her, Mrs. Norwalk alleges in the complaint.

 

North of the Border: 

My dear CP:

This is a rare week where the coverage news is the news. Great swaths of southern British Columbia (generally referred to as the Lower Mainland), flooded as a result of once-in-a-century torrential rain. My column discusses this epic event and its coverage consequences.

Heather Sanderson
SANDERSON LAW
Legal Counsel
[email protected]

 

Headlines from this week’s issue, attached:

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

• Disgorgement Paid to SEC Deemed Covered Loss (Lee S. Siegel, guest columnist)

• A Certificate of Insurance Does Not Prove a Policy was Issued

• Additional Insured Endorsement Provided Coverage for All Jobs

• Even though Additional Insured had an Obligation to Provide Timely Notice to Insurer and Did Not, and Even though Injured Party have an Obligation to Provide Timely Notice to Insurer and Did Not, Timely Notice by the Named Insured Excused Injured Party from Obligation to Give Notice of Claim Against Additional Insured

• An Insurer has Twenty Days to Move to Stay a SUM Arbitration.  It’s Really that Simple

 

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

• Maintenance Company’s Decision to Discard Policyholder’s Personal Property Does Not Constitute Theft 

 

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

• Defendant Allegations of Plaintiff’s “Gap in Treatment” did not include Therapeutic Treatment, Which Plaintiff Continued, Thereby Prohibiting a Finding of Lack of Serious Injury

 

WILEWICZ’S WIDE WORLD OF COVERAGE (featuring Franco Mirolo)
Agnes A. Wilewicz
[email protected]

• Third Circuit Affirms District Court’s Grant of Summary Judgment and Holds that Insurer Must Reimburse Another Carrier for the Costs of Defending and Indemnifying Insured

 

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

• Thousands Flee: $1.7 Million in Attorneys’ Fees Charged by Defense Counsel Hired by the Insured after Denial of Coverage “Presumptively Reasonable”

 

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

• No insurance related decisions from the great state of Connecticut.

 

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

• No construction defect cases to report on this week.

 

BORON’S BENCHMARKS (featuring Hannah Cominsky)
Eric T. Boron
[email protected]

• No Coverage for Injuries Sustained from the Maintenance and Repair of an Out of Service Bus Not in Operation for Almost a Year

 

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

• Nothing on Coverage B today.  I hope you all have an exceptional Thanksgiving. 

 

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

From The Filings Cabinet

• DFS Advises as To Stance on Permissible Definition of “Pollutant,” Anti-Stacking Provisions, and Mold or Similar Organism Exclusions

 

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

• A Judicial Confirmation that a Disclaimer of Coverage Was Proper Does Not Render Questions of the Purported Insured’s Liability Moot

 

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

• Nothing to report this week – check back on in two weeks!

 

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

• Homeowners Policy Void from Policy Inception Due to Material Misrepresentations in the Application as to Whether the Property Was Owner Occupied
• Insurer did not Breach the Contract by Declaring the Vehicle a Total Loss Rather Than repairing it. The Insurer’s “Bad Faith” Expert was permitted to Testify, Having been Found to be Qualified and His Testimony was Reliable and Relevant, but He was Limited from Providing any Legal Opinion
• Breach of Contract Claim Not Covered under CGL Policy as Not an Occurrence Given That the Allegations are Grounded in Faulty Workmanship
• State Farm Granted Default Judgment Against Medical Providers in PIP Claims Due to Insured’s Failure to Attend an EUO and Passenger’s Failure to Execute the EUO Transcript

 

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

• A No-Fault Benefits Insured Loses His Benefits When His Insurer Realizes That He Made Material Misrepresentations Regarding His Residency
• A No-Fault Benefits Insured Loses His Benefits After Failing to Appear for Scheduled Independent Medical Exams (IMEs)

 

NORTH OF THE BORDER
Heather Sanderson
[email protected]

• British Columbia Flooding

Prayers for our friends in British Columbia.  Peace to all of you on this wonderful Thanksgiving holiday.

 

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

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]

ASSISTANT EDITOR
Patricia A. Rauh
[email protected]

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

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

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Diane L. Bucci

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

Franco Mirolo (Admission Pending)

Kyle A. Ruffner (Admission Pending)

 

FIRE, FIRST PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Scott D. Storm

Eric T. Boron

Brian D. Barnas

 

NO-FAULT/UM/SUM TEAM
Dan D. Kohane
[email protected]

 

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]

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

 

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

11/23/21       J.P. Morgan Securities Inc. v. Vigilant Ins. Co.
[Lee S. Siegel, Guest Columnist]
New York Court of Appeals
Disgorgement Paid to SEC Deemed Covered Loss

New York’s high court, in a 6-1 ruling, held that the payment of tens of millions of dollars in penalties to the SEC was insurable “loss” under a management liability policy. Resolving another in a long line of insurance disputes stemming from Bear Stearns’ questionable investment practices, this time the Court of Appeals found for the investment company, holding that $140 million of its $160 million disgorgement payment to the SEC was not an excluded penalty payment.

Bear Stearns, in 2003, again came under the scrutiny of the SEC, this time for facilitating late trading and deceptive market timing practices by its customers in the purchase and sale of shares of mutual funds. Although Bear Stearns disputed the proposed charges, it settled with the SEC. Pursuant to the settlement agreement, the SEC censured Bear Stearns. Among other agreed "findings," the settlement stated that Bear Stearns "facilitated late trading" and "the deceptive market timing activity" of certain clients.

Bear Stearns agreed to disgorge $160 million and pay $90 million for "civil money penalties." Both payments were deposited in an SEC "Fair Fund" to compensate mutual fund investors harmed by the improper practices. Further, "[t]o preserve the deterrent effect of the civil penalty," the settlement order directed that the $90 million payment—but not the disgorgement payment—was ineligible to offset any sums owed by Bear Stearns to private litigants injured by the trading practices. Bear Stearns was also required to treat the $90 million payment as a penalty for tax purposes.

Coverage for the disgorgement payment turned on whether it represented compensatory damages, or a penalty imposed by law. Bear Stearns argued that the disgorgement was derived from estimates of client gain and investor harm and, therefore, the insurers failed to meet their burden of establishing that the payment was not a covered loss because it was a "penalty imposed by law." The Supreme Court found the payment covered but the Appellate Division reversed.

Here, the insurance program covered "loss" that Bear Stearns became liable to pay for civil proceedings or governmental investigations, defining "loss" in part as the payment of damages—including compensatory and punitive damages ("where insurable by law")—but not "fines or penalties imposed by law." [Punitive damages are not insurable under New York law.] The Insurers agreed to pay all "loss" for any wrongful act, which encompassed any actual or alleged act, error, omission, misstatement, neglect, or breach of duty by Bear Stearns and its employees while providing services as a securities broker and dealer. The policies defined "loss" to include compensatory damages, punitive damages where insurable by law, multiplied damages, judgments, settlements, costs, and expenses resulting from any claim and, further, "loss" expressly encompassed "costs, charges and expenses or other damages incurred in connection with any investigation by any governmental body."

However, an exception in the definition of "loss" provided that "loss" shall not include "fines or penalties imposed by law." This language is at the heart of the dispute. The Court of Appeals framed the question as whether the Insurers demonstrated that a reasonable insured purchasing this wrongful act policy would have understood the phrase "penalties imposed by law" to preclude coverage for the SEC disgorgement payment.

The phrase "penalties imposed by law" is not defined. However, the term "penalty" is commonly understood to reference a monetary sanction designed to address a public wrong that is sought for purposes of deterrence and punishment rather than to compensate injured parties for their loss. The Court wrote that, "The word penalty . . . does not apply to actual damages but, rather, exacts sums from a wrongdoer that "exceed the injured party's actual damages."….In other words, a penalty is distinct from a compensatory remedy and a penalty is not measured by the losses caused by the wrongdoing.” The Court, in 1994, previously determined that, where a sanction has both compensatory and punitive components, it should not be characterized as punitive in the context of interpreting insurance policies. Zurich Ins. Co. v Shearson Lehman Hutton. 84 N.Y.2d 309, 312-313 (1994).

With that in mind, the Court held that since the disgorgement amount was determined by a calculation of harm caused by Bear Stearns, and the monies deposited into a victims’ fund, the carriers did not meet their burden of proof that the payment was purely a penalty.

Judge Rivera authored an impassioned and lengthy dissent. “The majority erroneously concludes that the disgorgement amount constitutes the SEC's estimate of harm, which it demanded to compensate victims and, therefore, cannot be a penalty imposed on Bear Stearns (majority op at 12-13). This analysis is belied by the record below, which makes clear that SEC disgorgement of ill-gotten gains is not a compensatory form of relief authorized by federal securities law and that the SEC's primary goal here was to prosecute Bear Stearns for a public wrong, not to make unknown shareholder victims whole. The majority's conclusion that the disgorged funds are recoverable from the insurers is contrary to the insurance policy language and undermines both federal regulation of illegal conduct in the securities market and the SEC's efforts to discourage future violations. I dissent.” While well-reasoned, the dissent failed to persuade any other judge.

11/23/21       Pawlicki v. 200 Park, L.P.
Appellate Division, First Department
A Certificate of Insurance Does Not Prove a Policy was Issued
Pawlicki was a carpenter employed by Humboldt, was injured on a job when he stepped on a grille covering an opening in the floor. The grille was unsecured by screws, despite the presence of preexisting screw holes, and was covered by construction paper, believed to have been placed for dust protection. Plaintiff's foot slipped down into the exposed opening when the grille caved in.

On the insurance issues, one of the parties moved to dismiss a cross claim for breach of contract alleging that it failed to provide required insurance under the contract.  All it submitted to “prove” insurance was a Certificate/  The court denied the motion to dismiss, is merely evidence of a contract, rather than conclusive proof that coverage was procured

11/16/21       The Fiedler Companies v. New York Marine & General Ins. Co.
Appellate Division, First Department
Additional Insured Endorsement Provided Coverage for All Jobs

The additional insured endorsement to the New York Marine policy issued to plaintiff's subcontractor, defendant Cercone Exterior Restoration Corp., says in plain language that coverage is provided to "[a]ny person or organization for whom you are performing operations when you 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 your policy."

Although the stand-alone agreement between plaintiff and Cercone setting forth subcontractors' insurance requirements does not name a particular job, the language of the agreement, as well as the testimony, makes clear that the agreement was intended to apply to all jobs for which plaintiff hired Cercone, including the job at issue.

In addition, Cercone's president testified that he signed the stand-alone agreement on April 23, 2013 and submitted the agreement to his insurance broker and that, a few days later, the broker generated the certificate of insurance, which made reference to several liability policies maintained by Cercone, including the New York Marine policy. The certificate states, "The Fiedler Companies, Inc. [plaintiff] and all its subsidiaries are included as additional insured [sic] as respects their interest for [sic] jobs being performed by named insured. Re: all operations/all locations." While the certificate of insurance confers no coverage, it provides additional evidence showing that the stand-alone agreement required that plaintiff be named as an additional insured on the New York Marine policy.

11/12/21       Carlson v. American International Group, Inc.
Appellate Division, Fourth Department

Even though Additional Insured had an Obligation to Provide Timely Notice to Insurer and Did Not, and Even though Injured Party has an Obligation to Provide Timely Notice to Insurer and Did Not, Timely Notice by the Named Insured Excused Injured Party from Obligation to Give Notice of Claim Against Additional Insured

This is a strange one.  It’s a two-cups of coffee read.

This was a “Direct Action” brought by a judgment creditor against insurers. Carlson secured a judgment against MVP Delivery and Logistics, Inc. (“MVP”) and a fellow named Porter.  

It is claimed that to carriers, American Alternative Insurance Company (“AAIC”) and National Union Fire Insurance Company of Pittsburgh (“National Union”) were responsible for paying the judgments under policies with claims that tMVP and Porter were insured thereunder.

National Union had denied coverage based on late notice.  It issued policies to DHL Worldwide Express (“DHL”) and National Union conceded that DHL gave timely notice to National Union.   Rather, National Union contends that MVP and Porter, purported additional insureds under the policies, failed to give National Union timely notice under the policies.

The additional insureds had a duty to give timely notice of the occurrence to the carrier., their failure to do so does not preclude recovery by plaintiff against National Union under the circumstances of this case. As the injured party, plaintiff has the right to bring an action against defendants to collect on the judgment and an independent right to provide notice to the insurer.

The court found that plaintiff also failed to give timely notice of the occurrence to National Union. However, the court held that, it is only in the event of noncompliance by both the insured and the injured claimant that the insurer may validly disclaim against the injured part. Here, since DGL gave timely notice of the accident to National Union, plaintiff was not required to give notice of the accident to National Union before seeking to collect on the judgment pursuant to section 3420 (a) (2).

However, with respect to AAIC, it did not receive timely notice from anyone so its late notice defense was upheld.

The policies provided that National Union would pay post-judgment interest on any suits against the insured which it defended. Contrary to plaintiff's contention, the language in the policies does not conflict with 11 NYCRR 60-1.1 (b), which states that the requirement to pay interest is "subject to the policy terms" inasmuch as National Union had notice of the underlying action and the opportunity to defend MVP and Porter, the court concluded that the court properly determined that National Union was required to pay post-judgment interest.

11/12/21       State Farm Insurance v. Calvello
Appellate Division, Fourth Department
An Insurer has Twenty Days to Move to Stay a SUM Arbitration.  It’s Really that Simple

After sustaining injury in an automobile collision, the insured served on State Farm  a notice of intention to arbitrate the parties' dispute over supplemental uninsured motorist benefits. That triggered the carrier’s obligation to make a motion to stay arbitration to conduct discovery.  It did not make the motion until the 20 days had expired.

When the motion was made, the parties agreed to adjourn the motion while some discovery went forward. State Farm wanted more discovery and the insured declined.  State Farm went back to court to have its motion heard.

The Fourth Department held that State Farm should have made its motion within 20 days, having not done so, it cannot compel discovery or otherwise stay the arbitration from going forward.  There was no evidence presented that suggested that arbitration was not the chosen method of claim resolution.

 

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

11/12/21       Prusik v. Liberty Mut. Ins. Group, Inc.  
Appellate Division, Fourth Department  
Maintenance Company’s Decision to Discard Policyholder’s Personal Property Does Not Constitute Theft 

This claim has its origins in a foreclosure action which resulted in Geddes acquiring the property.  At that time, Geddes retained a property maintenance company to secure the premises, and remove any damaged and vandalized property.  As part of the impetus for the Geddes requests, we are advised that the property had been vandalized several times between the time Prusik was removed and the property was fully secured.  

In any event, the maintenance company hired to complete these tasks reported there were no personal effects in the house that had any value.  Accordingly, all items were removed and discarded into the trash.  Plaintiff, however, disagreed.  He argued that the home still contained clothes, computers, furniture, beds, dishes, etc. all of which retained some value.  

Against this backdrop, plaintiff made a claim for coverage under his homeowner’s policy with Liberty Mutual.  Plaintiff claimed the items were lost as a result of theft, and that such a cause of loss is a covered peril under the terms of the policy.  Liberty Mutual denied the claim on the basis that the loss did not involve “theft” as that term is understood.  Indeed, there is no evidence that the items thrown out were stolen by anyone.   

In holding for Liberty Mutual, the Appellate Division agreed that when viewed in the light of “an average policyholder with ordinary intelligence,” the maintenance company’s decision to discard personal items at the house could not qualify as “theft.”  The act of cleaning out the property did not constitute theft because, as the Court described it, they did not “steal or take anything.”   

Nevertheless, Liberty Mutual was not granted complete relief in this case.  Because its motion failed to establish that plaintiff did not lose items that were stolen during the course of the several break-ins at the premises, a question of fact exists if some of the lost items triggered theft coverage for events wholly unrelated to Geddes and/or its retained maintenance company.   

 

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

11/21/21 – Hollenbeck v, Berry
Appellate Division, Fourth Department
Defendant Allegations of Plaintiff’s “Gap in Treatment” did not include Therapeutic Treatment, Which Plaintiff Continued, Thereby Prohibiting a Finding of Lack of Serious Injury

This appeal from an order of the Supreme Court, Allegany County (Thomas P. Brown, A.J.), entered May 13, 2020. The order, among other things, denied in part the motion of defendants for summary judgment.

Plaintiff commenced this action seeking to recover damages for injuries he allegedly sustained after the vehicle he was driving was struck by a vehicle driven by defendant Brian R. Barry. Defendants appeal from an order that, inter alia, denied their motion insofar as it sought summary judgment dismissing the complaint on the ground that plaintiff did not suffer a serious injury within the meaning of Insurance Law § 5102 (d) under the permanent consequential limitation of use and significant limitation of use categories.

Contrary to defendants' contention, the Appellate Court concluded that Supreme Court properly denied their motion with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury. Even assuming, arguendo, that defendants met their initial burden on the motion by submitting a report from a physician who conducted an independent medical examination of plaintiff, the Appellate Court concluded that plaintiff raised a triable issue of fact with respect to both of those categories by submitting, among other things, the conflicting expert affidavit of his treating physician.

The Appellate Court rejected defendants' further contention that they were entitled to summary judgment based on an alleged one-year gap in plaintiff's treatment. Summary judgment may be appropriate “'even where there is objective medical proof of a serious injury, when additional contributory factors interrupt the chain of causation between the accident and the claimed injury—such as a gap in treatment, an intervening medical problem or a preexisting condition'”. In this case, however, "the record fails to establish that plaintiff in fact ceased all therapeutic treatment" during the purported gap.

Therefore, the Supreme Court Order so appealed from was unanimously affirmed without costs.

 

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

11/18/21       Liberty Mut. Ins. Co. v. Penn Nat’l Mut. Cas. Ins. Co.
United States Court of Appeals, Third Circuit
Third Circuit Affirms District Court’s Grant of Summary Judgment and Holds that Insurer Must Reimburse Another Carrier for the Costs of Defending and Indemnifying Insured

Liberty issued a general liability policy to Cost Company (“Cost”), a masonry subcontractor at a construction site in New Kensington, Pennsylvania. Cost further subcontracted with Pittsburgh Flexicore Co. (“Flexicore”), Penn National’s insured, for the supply of construction materials. The contract between Cost and Flexicore provided that Flexicore was “solely responsible for the health and safety of its employees . . . and other persons on and adjacent to the Work Site.” The agreement further required Flexicore to obtain general liability insurance and name Cost as an additional insured, and provided that it would indemnify Cost against any claims resulting from Flexicore’s acts, failure to act, omissions, negligence or fault. During construction, a large concrete panel supplied by Flexicore collapsed and killed Mr. Gonzalez, a construction worker. Ms. Ramirez, Gonzalez’s widow, brough a wrongful death and survival action against Cost and Flexicore, among other defendants. Cost asked Penn National to defend and indemnify it, but Penn National denied the request because the subcontractor agreement did not clearly state that Flexicore agreed to indemnify Cost for its own negligence and that any additional insured status terminated when Flexicore’s operations for Cost were completed. Liberty defended Cost and eventually settled the claims against its insured. Liberty then sought reimbursement from Penn National, which gave rise to this litigation.

Both parties moved for summary judgment on the issues of duty to indemnify and duty to defend. The district court granted Liberty’s motion and denied Penn National’s. The district court said that Cost was an additional insured under Penn National’s policy and thus Penn National had a duty to defend Cost. With respect to the duty to indemnify, the district court said that the underlying litigation involved multiple claims, multiple parties, multiple insurers, and a settlement, which precluded a determination on the facts of the case relative to liability and its apportionment. The district court said that in such cases, the duty to indemnify follows the duty to defend.

On appeal, the Circuit Court addressed each duty. The third circuit first addressed the duty to defend. The court noted that Flexicore’s policy with Penn National designated as an additional insured “any organization(s) with whom [Flexicore] is required in a written contract . . . to name as an additional insured for the ‘products-completed operations hazard’, but only with respect to liability for ‘bodily injury’ . . . caused, in whole or in part, by ‘[Flexicore’s] work.’” The court found that Penn National had a duty to defend Cost because (1) the subcontract agreement named Cost as an additional insured, (2) the amended complaint in the underlying litigation alleged that Gonzalez’s bodily injury was caused, at least in part, by Flexicore’s work, and (3) the policy’s products-completed operations hazard covered such work. The court then turned to the duty to indemnify and said that “where the coverage suit raises factual disputes about coverage that would have also been addressed in the settled underlying litigation, such disputes cannot be resolved in the coverage action . . . [and] the duty to defend itself triggers the duty to indemnify.” Accordingly, the third circuit held that the district court did not err in finding that Penn National also had a duty to indemnify.

The Third Circuit affirmed the district court’s order granting summary judgment. Therefore, Penn National was required to reimburse Liberty for the costs of defending and indemnifying Cost.

 

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

11/17/21       East Ramapo Central School District v. NYSIR
Appellate Division, Second Department
Thousands Flee: $1.7 Million in Attorneys’ Fees Charged by Defense Counsel Hired by the Insured after Denial of Coverage “Presumptively Reasonable”

NYSIR issued a School Board Legal Liability Policy to East Ramapo CSD (the “District”).  While the policy was in effect, a class action was filed against the District and its current and former board members, alleging various constitutional violations.  The District denied coverage under the policy.

The District commenced a lawsuit seeking damages for breach of contract and breach of the implied covenant of fair dealing.  The trial court granted NYSIR’s motion to dismiss the cause of action for breach of the implied covenant of good faith and fair dealing.  However, the District’s motion for summary judgment on breach of contract was granted.  The District sought $1,710,118.27 in damages on the breach of contract action, which included attorneys’ fees, which NYSIR argues were not reasonable.  The trial court awarded only $500,000 in attorneys’ fees plus interest and disbursements.  The District appealed.

The Second Department reversed the lower court’s decision dismissing the good faith and fair dealing cause of action.  The complaint alleged that NYSIR failed to investigate in good faith, denied coverage based upon a manufactured assertion, and denied coverage where no reasonable insurer would have done so.  Accepting these allegations as true, the Second Department concluded that the District had stated a claim.  The court found that the trial court had improperly focused on whether the District had shown bad faith rather than focusing on whether a cause of action had been stated.  The Second Department also concluded that the allegations in the good faith and fair dealing cause of action were not duplicative of the breach of contract claims.

The court also vacated the lower court’s ruling on attorneys’ fees.  The court stated in determining damages for breach of an insurer’s duty to defend the “attorney’s fees paid by the insured are presumed to be reasonable and the burden shifts to the insurer to establish that the fees are unreasonable.”  The Second Department found that the court below treated the attorneys’ fees incurred by the District as if they were presented via an application for attorneys’ fees rather than as presumptively reasonable.

The Second Department concluded that the court below improperly reduced the hourly rates charged by the District’s attorneys to $400 per hour.  The court noted that the law firms hired by the District were both multinational firms that generally command very high billable rates, and they had “discounted” their ordinary rates for the defense of the underlying action.  The court also relied upon two federal court actions where it was determined that an hourly rate of $735 was reasonable for lead counsel for one of the law firms involved in the defense of the District.  Accordingly, the case was remitted to the trial court for a new determination on damages and for further proceedings on the covenant of good faith and fair dealing.

 

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

No insurance related decisions from the great state of Connecticut.

 

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

No construction defect cases to report on this week.

 

BORON’S BENCHMARKS (featuring Hannah Cominsky)
Eric T. Boron
[email protected]

11/16/21       Lancer Ins. Company v. Personalized Coaches Inc, et al.
United States District Court, Eastern District of Wisconsin
No Coverage for Injuries Sustained from the Maintenance and Repair of an Out of Service Bus Not in Operation for Almost a Year

The injuries at issue in this case arose from the maintenance and repair of an out of service bus owned by Personalized. Personalized’s employee, Christopher J. Koleno, and his son (not employed by personalized), Christopher A. Koleno, were working on the bus when it rolled forward, injuring the father and killing the son. Lancer insured Personalized through two policies, a Commercial General Liability policy and a Business Auto Liability Policy. Lancer commenced this action seeking a declaration that it did not owe coverage to Personalized or the Koleno defendants for any claims arising from the incident. The Eastern District of Wisconsin agreed with Lancer and granted its motion for summary judgment.

The Court first considered coverage under the CGL policy which provided coverage for sums the insured is legally obligated to pay as a result of bodily injury or property damage. The CGL policy also included medical payments coverage for medical expenses arising from bodily injury caused by accidents on the insured’s premises or because of the insured’s operations. Defendants agreed that the auto exclusion under the bodily injury and property damage provisions barred coverage. However, the Koleno defendants argued that the medical payments provision provided coverage for the son who was not an employee of Personalized, and thus did not fall under the Co-Employee/Volunteer Worker nor the Workers’ Compensation exclusions. The Court noted that while that may be, the medical payments provision expressly incorporates all the exclusions under the bodily injury and property damage provisions, thus barring coverage under the auto exclusion as well as an exclusion for claims by a child of an employee who suffers bodily injury in the course of their employment.

The Court then analyzed coverage under the auto policy. While defendants conceded that the out of service bus was not listed as a covered auto under the policy, they argued for coverage under two different endorsements. The first being MCS-90B endorsement, which provided coverage for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Section 18 of the Bus Regulatory Reform Act of 1982. The Court recognized this federal statute only regulates interstate commerce and agreed with Lancer that because the bus was incapable of interstate commerce or travel and was not engaged in such at the time of the accident, the endorsement cannot apply to grant coverage.

The defendants then argued for coverage under the Form F Uniform Motor Carrier Bodily Injury and Property Damage Liability Insurance Endorsement. Form F defers to state law when providing coverage for automobile bodily injury and property damage liability. The Court notes that Wisconsin State Law requires motor carriers to be covered by an insurance policy that will pay for damages recoverable against the owner or operator because of the negligent operation of any vehicle, regardless of if it is listed in the policy. The Court then engaged in an analysis of what constitutes “operation” and decided that “operation” must involve the use of highways or activities inherent in the operation of a vehicle such as the loading and unloading of passengers and property. Because the maintenance and repair of the bus that led to these injuries could not be characterized as inherent in the operation of a vehicle, the Court interpreted Form F to bar coverage and accordingly granted Lancer’s motion for summary judgment.  

 

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

Nothing on Coverage B today.  I hope you all have an exceptional Thanksgiving. 

 

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

From The Filings Cabinet
11/12/21       Commercial Umbrella and Excess Form Filing Disapproved
Department of Financial Services

DFS Advises As To Stance On Permissible Definition of “Pollutant,” Anti-Stacking Provisions, and Mold or Similar Organism Exclusions

In a recent form and rate filing disapproval, DFS took the opportunity to lay out its position with respect to a few key issues appearing withing proposed Commercial Umbrella and Excess Forms.

First, DFS advised that “with respect to definition of pollutants - please be advised that this Department does not permit the definition of ‘Pollutant’ to be broader than the industry-standard definition.” DFS represented that ISO’s CGL form should serve as an example of acceptable language. Pursuant to ISO’s CG 00 01 12 07, “’Pollutants’ mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.” In rejecting the filing, DFS, understandably, found the following definition overly broad:

"Pollutant" means:

1. any substance or material that is a solid liquid, gaseous, thermal, or radioactive irritant or contaminant, including but not limited to acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Waste includes substances or materials to be disposed of as well as recycled, reclaimed, or reconditioned. Such substances and materials include, but are not limited to:

2. diesel, gasoline, propane, and other fuels, kerosene and other fuel oils petroleum distillates, and any other petroleum-derived products; lubrication oils, adjuvant oils, crop oils; brake and other hydraulic fluids; methanol and other antifreeze additives; exhaust gases; ethylene dichloride, hexylene glycol, mineral spirits and other solvents; perchloroethylene (PERC) and other dry cleaning chemicals; chlorofluorocarbons; adhesives; and pesticides, insecticides, fungicides, fertilizer, animal or bird waste, and sewage; and

3. all substances and materials listed or described by one or more of the following references, including any amendment s thereto: the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); the Priority List Of Hazardous Substances (1997 and all subsequent editions) developed by the Agency For Toxic Substances And Disease Registry; and/or the U.S. Environmental Protection Agency EMCI Chemical References Complete Index.

4. definition of "pollutant" applies whether or not the substance, material, particle, field, or sound serves any purpose with respect

   • the ownership, maintenance, or use of:

5. an "insured premises" or operations that are necessary or incidental to an "insured premises"; or

6. a "motorized vehicle" or watercraft; or

   • a farm or business operation, premises, site, or location.

 

Next, DFS took issue with the carrier’s anti-stacking provision, which indicated that in the event an occurrence is covered by more than one policy issued by the captioned company or an affiliated company, only the highest limit of liability among all policies will apply to the claim. In rejecting the provision, DFS asked the carrier to

Kindly note that it is our position that when the insured pays a premium for insurance coverage, the insured is entitled to receive the coverage limits which the particular policy or policies affords. In the event he purchases coverage for more than one policy, then each policy provides the limits of coverage purchased and payment should not be restricted. Further, this provision discriminates against your own insureds by providing them with less coverage than if they had purchased each of their policies from different insurers instead of just from your company or an affiliated company. Therefore, the company’s rates could be construed as excessive.

As an additional reason for disapproval, DFS cited the filing’s inclusion of a “MOLD OR BACTERIA EXCLUSION” form. DFS indicated that “the Department is continuing to review the various issues surrounding mold and similar organisms exclusions. In the meantime, this endorsement should be withdrawn from this submission.” DFS’ moratorium on “similar organism” exclusions likely has root in the viral COVID-19 pandemic.

Maxwell’s Minute: DFS’ position on the anti-stacking provision seems odd to me. DFS characterizes the issue as one in which rates charged appear excessive, should a carrier be permitted to rely upon an anti-stacking provision, and further indicates that if an insured switched carriers from one policy to the next, it would be entitled to two limits instead of one, resulting in discrimination against the carrier’s own insured for renewing. Respectfully, I would suggest that the insurance company, by issuing a package policy, does not intend to “stack” the limits of each standalone coverage for any one claim that happens to potentially trigger two independent covers. Package policies often account for DFS’ premium concern by offering discounted rates while packaging (think “home and auto” bundle). Although an insured might be entitled to “two limits” if it had shifted one coverage to a separate carrier, that insured is likely paying full premium for each. The insured (and potential judgment-creditor) should not be permitted a windfall simply because an occurrence was artfully plead to trigger multiple coverage parts. One limit per claim per customer is a perfectly reasonable term to include in a policy. Otherwise, insurers will likely either require additional premium to be charged and/or exclude coverage from certain coverage parts where multiple coverage parts are triggered.

 

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

11/16/21       A.M. v. Holy Resurrection Greek Church of Brookville
Appellate Division, First Department
A Judicial Confirmation that a Disclaimer of Coverage Was Proper Does Not Render Questions of the Purported Insured’s Liability Moot

Plaintiff filed this action seeking recovery for injury resulting from sexual assault allegedly perpetrated by the son of co-defendant Father Demetrios Kehagias. The case was dismissed against co defendants Holy Resurrection Greek Orthodox Church of Brookville, the Greek Orthodox Archdiocese of America, and Archbishop Demetrios Trakatellis. During the course of During the course of the proceedings, Kehagias filed a voluntary Chapter 7 bankruptcy petition, which stayed the action as against him, however the Bankruptcy Court granted plaintiff relief from the stay, allowing plaintiff to prosecute the action to determine liability and damages against Kehagias. The Bankruptcy Court also allowed plaintiffs to collect any settlement or judgment against Kehagias which would come solely from the proceeds of insurance.

Kehagias evoked res judicata, collateral estoppel, and law of the case, and argued that the complaint should be dismissed against him in light of the court finding, in a prior appeal, that he was not acting in furtherance of Church or Archdiocese business and within the scope of his employment at the time of the incident. Kehagias further argues that by absolving the other defendants of vicarious liability for the alleged sexual assault, this Court determined, as a matter of law, that the insurance carriers for the Church and Archdiocese have no contractual obligation to defend and indemnify him, and thus, that the complaint should be dismissed as against him.

The Court disagreed with Kehagias. Holding that the ability in tort of the Church and Archdiocese, on the one hand, and whether their insurance carriers properly disclaimed coverage of Kehagias, on the other, are separate issues. Further, the Court held that Issues of insurance coverage do not give rise to collateral estoppel or res judicata to bar this action, which is a tort action sounding in negligence and that the issue of insurance coverage was not yet ripe, since there has been no judgment entered against Kahagias, nor has there been a judicial determination regarding the propriety of the insurers' disclaimers of coverage.

 

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

Nothing to report this week – check back on in two weeks!

 

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

11/10/21       Thandi v. Otsego Mut. Fire Ins. Co.
Appellate Division of the Supreme Court of New York, Second Department.
Homeowners Policy Void from Policy Inception Due to Material Misrepresentations in the Application as to Whether the Property Was Owner Occupied

Otsego’s cross motion for summary judgment dismissing the complaint and on its counterclaim for a judgment declaring the policy is void ab initio is granted. 

In January 2015, the plaintiff owned property in New Hyde Park and entered into a contract to purchase property in Floral Park. The closing on the Floral Park property was scheduled for March 25, 2015. On March 24, 2015, the plaintiff submitted an application for a homeowners' insurance policy for the Floral Park property listing it as an owner-occupied residence as of April 5, 2015, and containing a representation that the plaintiff did not own, occupy, or rent any other property. Otsego issued a homeowners' policy for the Floral Park property effective March 24, 2015.

Following the closing on the Floral Park property, the plaintiff continued to reside at New Hyde Park while performing renovations at the Floral Park property. On April 15, 2015, the Floral Park property was "severely damaged" due to a fire with the plaintiff submitting a claim to the defendant. On June 1, 2015, the defendant notified the plaintiff that it was denying the claim due to misrepresentations in the application, including the plaintiff's failure to disclose that he owned a separate residence and that he was not occupying the Floral Park property as his primary residence.

The plaintiff commenced the instant action to recover damages for breach of the insurance policy. In its answer, the defendant asserted a counterclaim for a judgment declaring that the policy is void ab initio based upon material misrepresentations in the plaintiff's application. The plaintiff averred, among other things, that he only decided to perform renovations at the Floral Park property after the closing and planned to move into the Floral Park property on or before May 1, 2015.

Otsego submitted, among other things, an affidavit from its corporate secretary, Terry Gras, who averred that the defendant is only willing to insure owner-occupied property, with limited exceptions for seasonal or secondary homes. Gras stated that in the rare instance when the defendant insures a seasonal or secondary home, it does not permit "all risk" coverage as in the subject policy and requires an endorsement limiting liability for mold remediation which was not included in the policy. Gras stated that if the plaintiff had disclosed in his application that the Floral Park property would not be owner-occupied as the plaintiff's primary residence until an unknown future date, then the defendant "could not have issued the same policy to Plaintiff."

The Supreme Court denied both plaintiff's motions for summary judgment.   The Appellate Division reversed in favor of Otsego voiding the policy ab initio. 

"[T]o establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented". "To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application". "Even innocent misrepresentations, if material, are sufficient to allow an insurer to defeat recovery under the insurance contract".  

Here, the defendant established its prima facie entitlement to judgment as a matter of law by submitting evidence demonstrating that the plaintiff's application contained misrepresentations that the Floral Park property would be owner-occupied as of April 5, 2015, and that the plaintiff did not own, occupy, or rent any other residence, and that it would not have issued the same policy if the plaintiff's application had disclosed that the insured property would not be occupied by the plaintiff as his primary residence until an unspecified future date. Although Gras acknowledged at his deposition that the defendant submitted a request for information, without cancelling the policy, after learning from an inspection conducted on April 7, 2015, that the Floral Park property was undergoing renovations and might be vacant, such testimony did not contradict Gras' assertion in his affidavit that the defendant would not have issued the same policy in the first instance if the plaintiff had made accurate representations in his application. In opposition to the defendant's prima facie showing, the plaintiff failed to raise a triable issue of fact.

11/9/21         Ke v. Liberty Mut. Ins. Co.
United States District Court, Eastern District of Pennsylvania
Insurer did not Breach the Contract by Declaring the Vehicle a Total Loss Rather Than repairing it. The Insurer’s “Bad Faith” Expert was permitted to Testify, Having been Found to be Qualified and His Testimony was Reliable and Relevant, but He was Limited From Providing any Legal Opinion
The Court started by saying, “Not every broken thing is worth the cost to fix it.”  Ke’s vehicle was a total loss in a car accident.  Nevertheless, he demanded that Liberty Mutual pay to repair it. When it did not, Ke sued claiming that Liberty Mutual had tricked him into buying insurance, violated the policy, and handled his claim in bad faith.  The Court held that no reasonable juror could find that Liberty Mutual did any of those things, thus, granting its motion for summary judgment.  Before doing so, it granted Ke’s Daubert motion to limit the permitted testimony of Liberty Mutual's “bad faith” expert.

Ke sues for breach of contract and unjust enrichment, He also accuses Liberty Mutual of handling his claim in bad faith and engaging in unfair trade practices, for which he seeks damages under 42 Pa. Cons. Stat. § 8371 and Pennsylvania's Unfair Trade Practices and Consumer Protection Law, 73 Pa. Stat. §§ 201-1 et seq.  Also, Ke moves to exclude the expert report of Kevin M. Quinley, Liberty Mutual's expert in "insurance handling."

To show that it handled Ke's claim in good faith, Liberty Mutual offers an expert report from Kevin M. Quinley, an expert in insurance claims who would testify that Liberty Mutual handled Ke's claim in line "with ... industry norms, customs, and practices." Ke moves to exclude this report. He does not contest that Quinley is qualified, given that Mr. Quinley has over 40 years of experience in insurance claims and so has "specialized knowledge." Yet Ke does object that Mr. Quinley's testimony is unreliable and irrelevant.

Based upon the policy's plain language, the Court held that Liberty Mutual had the option to pay the "actual cash value" of the van or "the amount necessary to repair or replace" it. By offering Ke the value of his van rather than repairing it, Liberty Mutual did not breach the contract.  The Court also held that: Ke could not sustain a claim for unjust enrichment; no reasonable juror could find that Liberty engaged in unfair trade practices; no reasonable juror could find that Liberty acted in bad faith; Liberty did not need to investigate the accident further; Liberty did not arbitrarily refuse to accept quotes for different vans; Liberty sufficiently communicated with Ke; and Liberty did not negotiate in bad faith. 

However, the most interesting part of the case is how the Court ruled with respect to Liberty’s “bad faith” expert.  Because Quinley is qualified and his testimony on the issue is reliable and relevant, the Court said it will allow his opinion that Liberty Mutual followed industry practices in handling Ke's claim. But the Court excluded other portions of Quinley's report, for they are legal conclusions that will not "help the [jury] understand the evidence." Fed. R. Evid. 702(a).  In particular, the Court would not admit his opinions on how the insurance contract should be interpreted. 

To aid their case, parties may introduce expert testimony, so long as the expert is qualified and his testimony is "relevant" and "reliable."  In particular, the expert's "scientific, technical, or other specialized knowledge" must be of a type that is expected to help the jury "understand the evidence." Fed, R. Evid. 702(a), And his/her testimony must not only be "based on sufficient facts" and "reliable principles and methods," but must have also "reliably applied the principles and methods to the facts of the case." The party offering the expert bears the burden of proof and must show admissibility by a preponderance of the evidence. 

The Court found Quinley’s testimony reliable.  In forming his opinion, Quinley used what he describes as a qualitative methodology: he compared Liberty Mutual's actions here to what he has seen happen with other insurance claims over the past four decades to decide if Liberty Mutual followed industry standards.  Ke objects that this is not a "scientific methodology" arguing the methodology has no testable hypothesis or known error rate.  But experts need not be scientists or mathematicians. The Rules of Evidence permit experts with "scientific, technical, or other specialized knowledge." Fed. R. Evid. 702(a).  There are many different kinds of experts, and many different kinds of expertise. For experts like this, "whose expertise is based purely on experience, not experiments or tests, courts focus on two factors: (1) Is the methodology commonly used? (2) Is the opinion is based on sufficient "professional studies or personal experience"? 

Quinley's methodology is how experts typically testify about industry customs and practices. Drawing on their "specialized observations," they compare and contrast industry practices to the facts before them.  Quinley relied on his 40-plus years of "actual insurance industry experience" in forming his opinion that Liberty Mutual followed "industry standards." 

Though the Rules of Evidence favor scientific or technical expert reports that rest on a "technique or theory [that] has been subject to peer review and publication," the Rules do not require that the report itself be peer reviewed. Fed. R. Evid. 702 note.  In other words, Quinley did not have to have another insurance expert check his report for it to be reliable.

The Court found Quinley’s testimony relevant.  Ke insists that Quinley's opinion is "largely irrelevant" because it does not resolve all the claims in the case. But expert testimony need not decide the entire case or even an entire issue out of many to be admissible. Expert testimony is relevant if it provides a mere stepping stone for the jury's decision on an issue. See Fed. R. Evid. 401.  Quinley's report does just that. He opines that Liberty Mutual followed industry practice in handling Ke's claim. And following industry standards can be evidence that an insurer acted in good faith, and vice versa. 

The Court held that Quinley’s testimony may not provide legal opinions.  Because Quinley is qualified and his testimony on the issue is reliable and relevant, the Court will allow his opinion that Liberty Mutual followed industry practices in handling Ke's claim. But the Court excludes other portions of Mr. Quinley's report, for they are legal conclusions that will not "help the jury understand the evidence." Fed. R. Evid. 702(a).  In particular, the Court will not admit his opinions on how the insurance contract should be interpreted. Nor will the Court admit his opinions that Liberty Mutual acted in good faith. For instance, Quinley opines that Liberty Mutual "conducted a reasonable claim investigation" and that it "reasonably and promptly communicated with" Ke. 

These are legal opinions. Though experts can testify to the "ultimate factual issues to be decided by the trier of fact," they cannot "render a legal opinion" as to "whether a defendant complied with its legal duties."  Not only are such legal opinions not helpful, but they impermissibly usurp the roles of the Court and the jury. Fed. R. Evid. 702(a). 

Ke claims that the Court should throw out the entire Quinley report because Quinley failed to submit "a statement of the compensation he was paid." Fed. R. Civ. P, 26(a)(2)(B)(vi). Yet Quinley explained in his report that he charges $375 an hour to prepare the report and $425 an hour to testify. His hourly rates are enough "to permit full inquiry into" any "potential ... bias" from compensation, especially because Ke could have deposed Quinley and asked him additional questions about his compensation.

11/3/21         Atain Ins. Co. v. Basement Waterproofing Specialists, Inc.
United States District Court, Eastern District of Pennsylvania
Breach of Contract Claim Not Covered under CGL Policy as Not an Occurrence Given That the Allegations are Grounded in Faulty Workmanship
The Court granted Atain Insurance Company’s motion for summary judgment in this motion for summary judgment that it does not owe a duty to defend or indemnify its insured Basement Waterproofing Specialists, Inc. in the underlying state court action arising out of injuries allegedly sustained by one of Basement, Inc.'s customers after it installed a new French drain system in his home.

The plaintiff in the underlying state court action owns a single-family home in New Jersey, and in March 2020, Budman hired Basement, Inc. to perform work on his property. Before March 2020, the property had a French drain system, which "generally worked satisfactorily"; however, during heavy rainstorms, "minimal water would accumulate around one of the front walls, and water would enter the basement." At the time, that front wall had a small crack in it and no bowing. Budman and Basement, Inc. entered into agreement for Basement, Inc. to install a new French drain system, reinforce the wall with rebar, and repair the crack in the wall. The evening Basement Waterproofing finished the job there was a rainstorm.  The next day, Budman inspected the property and discovered "flooding around the front wall as well as three other walls."  "In addition, there was extensive fracturing and bowing on the front wall that [Basement, Inc.] represented it reinforced and repaired."

Budman reached out to Basement, Inc., and Basement, Inc. sent an engineer, Wynfred Sibley, to investigate. Sibley informed Budman "that a French drain system would not be sufficient to prevent the water issues affecting the Property, and that the work should have been performed on the outside of the Property." Budman claims that Basement, Inc.'s owner would not allow him to review Sibley's report and believes that the property is now in danger of collapse.

On August 18, 2020, Budman filed the underlying action in state court against Basement, Inc., asserting claims for breach of contract (Count I), negligence (Count II), consumer fraud violations (Count III), common law fraud (Count IV), breach of the covenant of good faith and fair dealing (Count V), and a declaratory judgment (Count VI). Budman seeks damages in excess of $100,000.

Basement, Inc. demanded that Atain, its insurer, provide it with coverage for the Budman action.  Atain denied Basement, Inc.'s claim.  Atain filed this lawsuit seeking a declaration that it is not required to defend or indemnify Basement, Inc. against Budman's claims in the underlying state court action. Atain filed the instant motion for judgment on the pleadings arguing that it has no obligation to defend or indemnify Basement, Inc. because the damage to the Budman property is not an "occurrence" within the meaning of the policy.

First, Budman brings a breach of contract claim against Basement, Inc. "Breach of contract claims are not covered under commercial general liability insurance policies. General liability policies are intended to protect insureds from accidental injuries, not damages arising out of contractual disputes."  The Court finds that the breach of contract claim is not an occurrence given that the allegations are grounded in faulty workmanship. Accordingly, the breach of contract claim is not covered by the policy.

Second, Budman brings a negligence claim against Basement, Inc. alleging that Basement, Inc. had a duty to provide its professional services within a certain standard of care, and that Basement, Inc. deviated from that standard, resulting in damages to the property, including flooding and extensive fracturing and bowing of the front wall. Although Count II is framed as a negligence claim, the allegations sound in contract, as Budman essentially alleges that Basement, Inc. failed to provide the services that it had contracted to provide.  In addition, Atain argues that Budman's assertion that Basement, Inc. acted negligently when professionally servicing his home boils down to a claim for faulty workmanship, which does not constitute an occurrence. The court agrees.

Close review of Budman's allegations shows that he is essentially asserting claims for Basement, Inc.'s faulty workmanship. The allegations in the underlying complaint—namely, that Basement, Inc. was negligent in its assessment of what type of work needed to be completed and in installing the French drain system, repairing the crack in the wall, and reinforcing the wall—do "not support a determination that any damage was caused by an ‘occurrence.'"  "Any damages to Basement, Inc.'s own work product based on Basement, Inc.'s alleged negligence are claims of damage based on faulty workmanship." Thus, they were not caused by an "accident" and are foreclosed from constituting an "occurrence" under Basement, Inc.'s insurance policy with Atain.

Basement, Inc. argues that this case is distinguishable from other faulty workmanship cases because the damages went beyond the work that Basement, Inc. completed. Basement, Inc. thus attempts to isolate or partition off the pieces of property it touched (i.e., its own work product) from the remainder of the property affected. But it is of no moment whether the damage occurred to the insured's own work product or to other property; what matters is whether the damage to the other property was a foreseeable result of its work.

Here, Budman alleges that Basement, Inc. assessed the property and determined that installing a French drain system, repairing the crack in one of the front walls, and reinforcing that wall would alleviate the water issues.

Budman also alleges that the work would affect the property's foundation. Further, Budman alleges that as a result of Basement, Inc.'s "inactions and actions," the property has a nonfunctioning draining system and increased water problems, resulting in structural issues to the property, including the fracturing and bowing of the front wall. A foreseeable consequence of failure to properly install the French drain system and repair and reinforce the wall is increased water issues, and a foreseeable consequence of increased water issues is structural damage to the property. Accordingly, Count II is not a covered occurrence under the policy.

Next, in Counts III and IV, Budman asserts statutory and common law fraud claims. Because fraud is an intentional act, these claims are also not covered occurrences. 

Last, Budman's breach of the covenant of good faith and fair dealing claim (Count V) is based on Basement, Inc.'s breach of its contract with Budman and therefore is not covered for the same reasons discussed above.

For these reasons, the Court holds that none of the allegations in the underlying complaint trigger coverage under the insurance policy and Atain does not owe Basement, Inc. a defense. And because we find that there is no duty to defend, there necessarily can be no duty to indemnify. Because we find that Budman's allegations do not amount to an "occurrence," we need not consider Atain's arguments that even if there was an occurrence, several different policy exclusions bar coverage.

10/25/21       State Farm Mut. Auto. Ins. Co. v. Center for Rehab., et al.
Supreme Court, New York County
State Farm Granted Default Judgment Against Medical Providers in PIP Claims Due to Insured’s Failure to Attend an EUO and Passenger’s Failure to Execute the EUO Transcript

In this declaratory judgment action State Farm moves pursuant to CPLR R. 3215 for leave to enter a default judgment against certain defendants declaring that it is not obligated to pay no-fault benefits to or on behalf of the claimant defendants in connection with injuries that they allegedly sustained or to reimburse the non-answering medical defendants for treatment they rendered or equipment and supplies they provided for those injuries. The motion is granted.

The claimant defendants asserted that they were injured in a motor vehicle accident on August 19, 2019, and that they thereafter obtained medical treatment or medical supplies from the non-answering medical defendants, among others. The non-answering medical defendants sought payment, as assignees of the claimant defendants, for no-fault benefits under insurance policy issued to Bailey, as the owner of the subject vehicle. 7 days after its receipt of Palmer's NF-2 form, State Farm transmitted a demand to Bailey, in her capacity as the insured, that she appear for an examination under oath to give testimony relevant to the claim. After making a record of her failure to appear on that date, State Farm, transmitted a follow-up letter to Bailey informing her that she had failed to appear and that it would permit her to cure. She did not appear on that date either and State Farm made a record of her default in appearing.

On the first business day following the lapse of 10 days subsequent to its receipt of the NF-2 form, State Farm transmitted a demand to Palmer's attorneys that he appear for an EUO.  State Farm agreed to adjourn Palmer's EUO twice.  State Farm transmitted copies of the Palmer's EUO transcript to his attorneys and requested that Palmer sign a copy of the transcript under oath and return it. State Farm's attorney noted therein that applicable no-fault regulations provided that "[u]pon request by the Company, the eligible injured person or that person's assignee or representative shall: ... as may reasonably be required submit to examinations under oath by any person named by the Company and subscribe the same, and cautioned Palmer's attorney that "[s]hould you fail to return this subscribed transcript, our client reserves the right to rescind all coverage." Specifically, State Farm's attorney explained that, pursuant to an amendment to 11 NYCRR 65-3.8(b),

An insurer or self-insurer may issue a denial if, more than 120 calendar days after the initial request for verification, the applicant has not submitted all such verification under the applicants control or possession or written proof providing reasonable justification for the failure to comply. If a signed transcript is not returned within 120 days of this request, our client reserves the right to deny coverage for failure to provide an executed transcript within the allotted time period.

State Farm's attorney transmitted a follow-up letter to Palmer's attorneys, reminding them that Palmer had yet to return an executed transcript of his EUO, and again cautioning them that his failure to do so within the requisite 120-day time period could result in a denial of coverage. According to the State Farm's attorney, Palmer did not return the executed EUO transcript by that date.

The affirmation of State Farm's attorney established that the non-answering medical defendants failed to answer the complaint, timely move with respect to the complaint, or appear in the action.  With respect to the proof of the facts constituting the claim, "CPLR 3215 does not contemplate that default judgments are to be rubber-stamped once jurisdiction and a failure to appear have been shown. Some proof of liability is also required to satisfy the court as to the prima facie validity of the uncontested cause of action.  The standard of proof is not stringent, amounting only to some firsthand confirmation of the facts"

Stated another way, while the "quantum of proof necessary to support an application for a default judgment is not exacting ... some firsthand confirmation of the facts forming the basis of the claim must be proffered". In other words, the proof submitted must establish a prima facie case.

"Where a valid cause of action is not stated, the party moving for judgment is not entitled to the requested relief, even on default". In moving for leave to enter a default judgment, the plaintiff must "state a viable cause of action". In evaluating whether the plaintiff has fulfilled this obligation, the defendant, as the defaulting party, is "deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them". The court, however, must still reach the legal conclusion that those factual allegations establish a prima facie case.  

Proof that the plaintiff has submitted "enough facts to enable [the] court to determine that a viable" cause of action exists may be established by an affidavit of a party or someone with knowledge, authenticated documentary proof, or by complaint verified by the plaintiff that sufficiently details the facts and the basis for the defendant's liability (see CPLR 105[u]).  "[A]n insurer must affirmatively establish that it complied with claim procedures in order to obtain a judgment declaring that no coverage exists based on the failure of a claimant to appear for a medical examination" or an EUO. 

The Appellate Division, First Department, has explained that, for a no-fault insurer to establish its prima facie entitlement to judgment as a matter of law in a declaratory judgment action on the ground that a defendant failed to appear for an EUO, it must show that it mailed its initial request for verification to the claimant or his or her health care providers within 10 days of receipt of the NF-2 benefits claim form submitted by the claimant (see 11 NYCRR 65-3.5[a]), and mailed an additional request for verification within 15 days of receipt of the patient's response to the initial request for verification (see 11 NYCRR 65-3.5[b]).  The demand for an IME or EUO constitutes a request for an additional verification (see 11 NYCRR 65-3.5[d]) and, as such, is subject to the requirement that any such request be mailed by an insurer or its agent within 15 days of receipt of the patient's or provider's response to the initial verification request, unless the insurer demonstrates that the IME or EUO was sought prior to the filing of claims by any medical provider. 

State Farm established that it timely demanded Bailey to appear for an EUO, that she failed to appear on the date noticed for the EUO, that it timely gave her an opportunity to cure her default in appearing, but that she failed to do so. Although Palmer timely appeared for and submitted to an EUO, he did not timely provide proof of verification subsequent to his EUO. The court notes that the 120-day deadline for a claimant's submission of proof of verification, as set forth in 11 NYCRR 65-3.8(b)(3) and cited by State Farm in its letters to Palmer's attorneys, expressly provides that "[t]his subdivision shall not apply to a[n] ... examination under oath request." The court construes this provision to exclude only the EUO request itself from the 120-day deadline, and not to any documentary proof of verification thereafter requested, such as a signed verification of the transcript. Hence, Palmer failed to comply with the requirement that he submit the signed transcript within 120 days of receiving State Farm's request that he do so. In any event, where, as here, the insured herself fails to appear for an EUO, coverage may be vitiated with respect to all of the claimants who made claims for benefits. 

 

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

11/10/21       State Farm Fire & Cas. Co. v. Autorx, LLC
Supreme Court, New York County
A No-Fault Benefits Insured Loses His Benefits When His Insurer Realizes That He Made Material Misrepresentations Regarding His Residency

In this declaratory judgment action, the plaintiff insurer, State Farm, moved for leave to enter a default judgement against the defendant no-fault benefits assignor and assignees declaring that State Farm was not obligated to pay the defendant’s no-fault benefits.

State Farm argued that it was not obligated to pay the benefits because the assignor made material misrepresentations in his initial application for the subject insurance policy with respect to where the insured vehicle was typically garaged and maintained in order to lower the cost of obtaining the policy, thus vitiating the coverage.

The Court dismissed the default action against one defendant, New York City Fire Department EMS (FDNY EMS). Since FDNY EMS was an agency of the City of New York, service was only proper if made upon an individual/organization authorized to receive service on behalf of the City of New York. Here, State Farm’s service on a private billing firm, which processed ambulance services rendered by FDNY EMS, was insufficient process.

Turning to the other defaulting parties, the Court deemed all factual allegations contained in State Farm’s complaint to be true and examined whether State Farm had a prima facie case of material misrepresentation. When the assignor first applied for insurance with State Farm, he represented that he resided in and garaged his vehicle in Lake Peekskill, New York. However, he really resided at and garaged his vehicle in Queens County, New York where insurance premiums were higher than in Lake Peekskill.

An affidavit from a State Farm claims specialist established that, inter alia: the subject collision occurred in Queens County; all the assignor’s no-fault benefit forms had a Queens County address; a video searched revealed that all sightings of his insured vehicle were in Queens County—not Lake Peekskill; and there was no evidence the assignor lived in Peekskill Lake at the time of the subject policy. At his own EUO, the assignor testified that he resided exclusively in Queens County since 2013, he had not lived in Peekskill Lake in 12 years. The assignor also admitted that he listed the Peekskill Lake address to get cheaper insurance. Thus, taking State Farm’s evidence as true, the Court held there was a prima facie case of material misrepresentation and granted State Farm a declaratory judgment against the remaining defendants.

11/10/21       American Tr. Ins. Co. v. Newman
A No-Fault Benefits Insured Loses His Benefits After Failing to Appear for Scheduled Independent Medical Exams (IMEs)

In this no-fault benefits action, Plaintiff insurance company brought a declaratory judgment action against the assignor and assignees of no-fault benefits on the grounds that the assignor was ineligible for no-fault benefits. Some of the Defendants answered Plaintiff’s complaint and some did not. Plaintiff sought default judgment against the non‑answering Defendants and summary judgment against the answering Defendants. Plaintiff argued that the assignor was ineligible for benefits because he failed to appear for two IMEs. Under the Plaintiff’s insurance policy, attending scheduled IMEs was a condition precedent to receiving insurance coverage. Thus, the Court granted both Plaintiff’s default and summary judgment motions on the grounds that the assignor was ineligible for benefits.

 

NORTH OF THE BORDER
Heather Sanderson
[email protected]

British Columbia Flooding
Dates of Loss:       November 14-16, 2021

On Sunday, November 14, 2021, in the middle of the Remembrance Day weekend, it began to rain in British Columbia. Torrents of rain fell in in a part the country used to rain events. But this was epic. By Sunday afternoon, landslides from the summer’s burn scars and slopes that had been logged blocked highways and rail lines. Into Sunday evening and in the early morning hours of Monday, November 15, the rivers and creeks throughout the southern mainland and Vancouver Island broke their banks causing highway and rail washouts and inundating farmland, towns, and small cities. By the end of the day on Monday, the Trans-Canada Highway, Highways 5, 3, 7 and 99 were closed due to landslides and washouts. As I write this, just over a week from the rain event, parts of those highways are opening to essential traffic thanks to monumental repair effort.

At least five people died in one of those highway landslides. Both the CN Rail and Canadian Pacific mainlines experienced washouts and are expected to open by November 25.

Merritt, a town of 7,000 was fully evacuated when the sewage treatment failed. Most of Princeton, B.C. was also evacuated. The town of Hope was flooded and completely isolated.  The Port of Vancouver found itself without highway or rail links to the rest of the country. Tragically, the Sumas Prairie, between Abbotsford and Chilliwack, one of Canada’s most important agricultural area, flooded. Thousands of cattle, chickens, pigs could not be rescued and drowned.

What happened? Climate scientists say that an atmospheric river, unleashed its moisture. This atmospheric river was an extremely long narrow band of very moist air that originated in the tropics and was carried up to the Canadian west coast. It slammed into the Coastal Mountain Range of southwest British Columbia and channeled between the two mountain ranges that create the Fraser River Valley. The vapour laden air of this atmospheric river cooled when it encountered the mountains and the vapour fell as torrential rain. The rain that was produced eclipsed all records. It rained continuously over the most populous area of the province for over 24 hours. Nothing like it has ever occurred. I haven’t read definitive reports on how much rain fell, but climate scientists suggest that this atmospheric river carried enough water vapour to fill the Amazon River.

B.C. had its second worst wildfire summer season in 2021, with more than 1,600 fires charring nearly 8,700 square kilometers, mainly in the southern part of the province. Only 2017 saw more forest lands burned.  Soils in forested landscapes are hydrophobic after severe fires. The water-repelling layer is typically found at or a few centimetres below the ground surface and is commonly covered by a layer of burned soil or ash.

Many areas burned during the 2021 wildfires, such as around Merritt, were deluged by rain the weekend of Nov. 13. It is possible that runoff from the land that burned was greater and more rapid because of the soil’s hydrophobicity (yes, that’s a word).  In addition, all that rain collided with decades long land management practices that some say operated oblivious to flood risk. Chief among them is the practice of building in flood plains and haphazard application of logging practices.

Climate scientists have been warning that the heating of the atmosphere will produce extreme weather events.  Consistent with predictions made by atmospheric scientists, unprecedented weather events will become the norm. British Columbia is experiencing the ‘new climate normal’ having experienced the North American heat dome of the summer of 2021; forest fires caused by extreme heat during the summer of 2021 and now this rain event.

The Canadian property and casualty insurance industry is front and centre in the monumental task of rebuilding what once was.

Canada does not have a national flood program. There is private insurance available to cover flood risk, but its seldom available for property located on a flood plain. There is inconsistency in flood mapping in the country and therefore inconsistency in the availability of flood insurance. Where it is available, it is stand-alone cover or endorsed onto commercial and personal lines property policies.

As a result, most commercial, homeowner and tenant policies exclude flooding (usually defined as “…the rising of, the breaking out or the overflow of, any body of water or watercourse, whether natural or man-made…”) where flooding is a cause, or the singular cause of damage. ALE due to a mass evacuation event precipitated by flooding is also generally excluded. Some policies, subject to specific limits and deductibles, cover water damage when the water escapes from a public watermain following or during a flood event and sewer backup, however caused.  In the commercial context, if the policy excludes flood, then business interruption coverage is not available.

Commercial contingent and dependent business interruption coverage due to a flood event is available, but only if the insured in issue is covered for flood. Therefore, a business able to obtain flood coverage (as it is not located in a flood plain) and chose to buy it (even though the insured property does not carry a direct flood risk), may have a claim for business interruption due to supply chain disruption.

Vehicles are generally insured for damage caused by landslide risk but, generally, buildings and homes aren’t covered.  Unlike flood, damage caused by landslide is not available.

The Government of British Columbia has a disaster assistance program that offers compensation to a maximum of $300,000 per each accepted claim, but it is only available for uninsurable losses – not uninsured losses. The program will not consider damage caused by surface water flooding that enters property at ground level (whether flood insurance was available to that claimant or not), or damage caused by sewer or watermain backup. But if the property in issue was in the path of a landslide, then the program may consider the claim.

And it may not be over:  A less severe atmospheric river is expected to land on the British Columbia coast this week.

The November 14-16 weather event has upended lives and livelihoods.  It will be difficult to recover. I fear that many won’t.