Coverage Pointers - Volume XXIII, No. 13

Volume XXIII, No. 13 (No. 607)
Friday, December 10, 2021
A Biweekly Electronic Newsletter

 

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

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

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

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

 

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations. 

By the way, we handle situations, not only in New York, but also Connecticut, New Jersey, Massachusetts and can help in other civilized jurisdictions.

Greetings from the DRI Insurance Coverage and Practice Symposium. Today, Friday, I am presenting on the method and means to establish the existence, or disprove the existence, of lost policies in the context of Child Victims Act cases.  Looking forward to seeing about 400+ in the audience.  Interested in the topic?  Let me know.

A quiet week for coverage decisions.  One in my column caused me to chuckle.  Insured claimed that she lied at her own deposition on her residence, because her lawyer told her it would help her case, on a residence issue.  Court didn’t buy it. There is also a decision, reminding plaintiffs who wish to file a SUM (underinsured motorist claim), that they better not settle with a tortfeasor without securing the SUM carrier’s consent (or give the SUM carrier the opportunity to advance the funds), or coverage may well be lost.

For No Fault aficionados, CJ covers a very interesting federal decision challenging the proper calculation of First Party Benefits under the No Fault Statute.  If anyone wishes to discuss the decision in detail, reach out. It deals with a question of how Basic Economic Loss is calculated.

And, for those who read this cover letter because you love the 100 Years Ago stories, I do try to pick some that have a connection to current events.  The last story, down below, demonstrates that anti-vaxers have been around for at least 100 years.

 

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:

  We start this week with a belated Happy Hanukkah wishes to all who celebrated.

  We also offer a special thank you to the 200+ folks who joined us on PLRB’s most recent webcast earlier this week.  We first presented on the nuances of the various work product exclusions at the Regional Seminar in September.  Although I doubt it was due to popular demand, we were asked to repeat the presentation as part of the webinar series and were happy to do so.   Not only did we have a nice sign up, but it also looks as if most of you stayed on throughout the whole 75-minute presentation.  Thanks for your (presumed) attention, or at least tricking us into thinking you were still actively listening.

  If there any questions out there about work product exclusions which were not answered by the presentation, or you simply have one you want to kick around, please feel free to drop me a note.  The claims, and the resulting coverage disputes, are often quite interesting in this area of the insurance world.

  Before we close this week, a final, quick word on the weather of Upstate New York.  Despite what you’ve read or heard, yesterday (12/8/21) marked the first real measurable snowfall for the metro-Buffalo area and points north of the City.  The reality is the more snow in December, the better the skiing is in January.  So, at this point, we say bring it on.

  That’s it for this week. See you on Christmas Eve.    

  Steve
  Steven E. Peiper
  [email protected]

   

  Contemplating Salary Caps – 100 Years Ago Today:

  The Buffalo Enquirer
  Buffalo, New York
  10 Dec 1921

  SOME BASEBALL QUESTIONS.

  IF THE NEWS COLUMNS, have it right, John McGraw has bought Third Baseman Groh for $100,000, throwing in Outfielder Burns and Catcher Gonzales, and has bought First Baseman James O'Connell of the San Francisco team for $75,000.

  Deals like these suggest that baseball championships follow the longest purse.

  Would it add to the sportsmanship of baseball if club managements were held to a limit within the means of all the teams? If a salary limit and a limit on the number of players carried, why not a limit on the amount that may be expended in buying players?

  Would not that make championships more dependent on ability in finding, developing, and handling players and less on ability to buy stars of the game? Does not the use of the supreme ability to buy detract from sportsmanship lessen interest in the game?

  Should not baseball be less a buying game and altogether a discovering, developing, and handling game on the part of the managers? 

   

  Wilewicz’ Wide-World of Coverage:

  It’s the most wonderful time of the year! Christmas is finally on the horizon, and there’s snow on the ground in Upstate New York. It does not get any better than that. I know people dread winter and cold and snow, but for someone who, as a kid, used to daydream about a month-long snow day, I won’t complain. There’s just something magical about the season and the lights and spirit.

  Now, this week in the Wide World of Coverage, once more, Franco Mirolo brings us a couple of write-ups:

  First, in Pagan v. Jackson Nat. Life Ins. Co., the Second Circuit affirmed the district court’s decision holding that a widow and her daughter are not beneficiaries of a life insurance policy when the deceased has not complied with the requirements of the policy to change beneficiaries and has not satisfied the requirements of the substantial compliance doctrine.

  Second, in Blue Ash Auto Body, Inc. v. State Farm Mut. Auto. Ins. Co., the Sixth Circuit affirmed the district court's summary judgment dismissing claims by an assignee of rights against State Farm for breach of contract and unjust enrichment because State Farm’s insurance policies did not permit assignment and because State Farm did not benefit from the assignee’s work.

  We are finally seeing some snow! And I could not be happier about it. As I write this, I am drinking hot chocolate and thinking about when I can get my snowboard waxed to hit the slopes. Stay safe! ~Franco

  Until next time!

  Franco
  Franco A. Mirolo
  [email protected]
  (Admission Pending)

  Agnes
  Agnes A. Wilewicz
  [email protected]

   

  She was Dying to Prove She was Not Dead:

  The Buffalo Enquirer
  Buffalo, New York
  10 Dec 1921

  WOMAN DENIES SHE IS DEAD AS RECORD SHOWS

  (Special Telegram to The Enquirer)

  Bridgeton, N. J., Dec. 6. --"Am I dead and buried or am I alive?" enquired Mrs. Minnie Craner seeking to have City Clerk Carry make rectification of a death certificate filed by her husband, Joseph Craner, formerly a glass worker here and manager of the baseball team. The certificate purported to be that of the death of Mrs. Minnie Craner, wife of Joseph Craner, whose residence was given as No. 3001 Lee street, Philadelphia, and who had died here recently.

  "She is not his wife," said Mrs. Minnie Craner, who has been parted from her husband several years. "We were married in 1900 and he has never had a divorce, because I would not give him one. Who can this woman with whom he has been living be? I am his wife, and I don't think I am the one who is dead. He has within a few days sent word asking me to come back to him. but I would rather go to the almshouse.”

   

  Barnas on Bad Faith:

  Just a brief note from me this week.  I have a case from the Southern District of Florida in my column today, but it applies New York bad faith law.  The decision is a little bit confusing to me at least.  The court cites the Pavia standard, which would appear to apply to a third-party bad faith case like the underlying action discussed in the decision.  However, the court goes on to discuss the decisions in Bi-Economy and Panasia, as well as New York University, which concern first party bad faith.  Ultimately, the court decides to dismiss the bad faith claim.  Drop me a note if you would like a link to the decision, as it appears to only be available online behind a paywall at this time.

  Brian
  Brian D. Barnas
  [email protected]

 

Emma Goldman – American Anarchist:

New-York Tribune
New York, New York
10 Dec 1921

Emma Goldman Leaves Russia And Is Planning Return to U.S.

RIGA, Latvia, Dec. 9 (By The Associated Press). —Emma Goldman, who was deported to Russia from the United States in December 1919, as a result of her alleged anarchistic activities, has left Moscow, it was learned here to-day. She is in Riga, with the intention of seeking permission to return to the United States.

Miss Goldman is staying in an apartment in the building occupied by the Bolshevik Consulate, where confirmation was given to-night that she was here. It was said there that she was out for the evening.

News that she was in Riga was first obtained through the police, who had registered a woman by that name who arrived a few days ago from Moscow, having a Latvian transit vise permitting her to remain in the country until December 17. At the American Consulate here it was said she had not applied for a vise to go to the United States.

According to Soviet officials here, Miss Goldman probably had little difficulty in obtaining permission to leave Russia, as they said her anarchistic beliefs strongly clashed with the communistic program. Americans who saw her recently in Russia said she was anxious to return to the United States.

Since her arrival in Russia, she has been employed in assisting in the compilation of a history of the Russian revolution. Her attitude is said to have aroused the suspicion of Soviet officials, but she and Alexander Berkman, who was deported with her, were permitted to circulate freely on the condition that they would not speak or conduct agitation on behalf of the anarchists.

From The Tribune's Washington Bureau

WASHINGTON, Dec. 9. —Emma Goldman is forever banished from the United States, and she will not be admitted legally by the government, officials of the immigration service of the Department of Labor declared to-day in commenting on the dispatch from Riga.

Miss Goldman was deported under the act excluding all radicals and persons who advocate the overthrow of the government. Her deportation carried with it the additional penalty of not being permitted to return to American shores. If she secretly reaches here, she will be liable to imprisonment upon her identification and apprehension. 

Editor’s Note:  She was not allowed to enter the US until 1933, when she visited for a speaking tour -- only about drama and her autobiography.  After two months her visa expired and she left again, only to return to be buried in Forest Park, Illinois.

 

Off the Mark:

Dear Readers,

Thanksgiving at my parents went well.  It was a very small group, with only my sister and my adorable four-year-old niece joining us.  Should be about the same for Christmas.  Part of what makes the holiday season so special is being around friends and family.  Hope everyone is having a peaceful and safe holiday season.

Although I did not find any interesting cases to report on this week, I do want to give a shout out to my mother who turns 70 tomorrow.  She is an amazing mom and Grammy.  She was a science teacher who now spends her time traveling, cooking, and spoiling her grandkids.

Happy Birthday, Mom!

Brian
Brian F. Mark
[email protected]

 

A Slug to the Chin Restores Hearing:

The Buffalo Enquirer
Buffalo, New York
10 Dec 1921

UPPER CUT TO CHIN RESTORES HIS HEARING

(Special Telegram to The Enquirer.)

Fremont, Dec. 6. —During a boxing match at Gibsonburg, H. M. Johnson, Gibsonburg merchant, received an upper cut to the chin from his opponent. The sudden jar brought back hearing to his left ear. Johnson has been deaf in his left ear for more than thirty years.

 

Boron’s Benchmarks:

          Hello Loyal Readers,

It is my pleasure to pen my first introductory note to you all, as Eric is on a well-deserved vacation this week. After a beautiful eight days of celebrating Hanukkah, I got to switch gears to utter disappointment and watch the Bills lose 14-10 to the wind this past Monday. Here’s to hoping for a better end of the season and a win against Tampa Bay next week!

Today’s Boron’s Benchmarks will feature a dramatic case from the Supreme Court of Maine regarding personal auto liability policy exclusions for uninsured motorists based on a reasonable belief, or lack thereof, that one is entitled to use a vehicle.

See you in two weeks,

Hannah
Hannah E. Cominsky
[email protected]

Eric
Eric T. Boron
[email protected]

 

Two Hours of Blissful Marriage:

The Buffalo Enquirer
Buffalo, New York
10 Dec 1921

WEDDED LIFE BRIEF

(Special Telegram to The Enquirer.)

Los Angeles, Dec. 10.—H. N. Shepard and Karlene Shepard lived together but two hours following their wedding in Santa Ana on Oct. 7, 1916, according to a divorce complaint filed here. The complaint states Mrs. Shepard assumed her maiden name of Karlene Carmen and associated with other men. Mr. Shepard says he secured a room adjoining that of his wife in a hotel, that she refused to return to him and entertained young men in her room. She was subsequently ordered from the hotel, the complaint states.

 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

It’s the most wonderful time of the year. As is our tradition, the Maxwells took a trip to our local Christmas tree farm to play lumberjack. The boys were bundled up, loaded up, and shipped off to Buffalo’s south towns. Sunday morning was the perfect day, with the muddy paths still frozen to add an extra layer of protection to the upholstery on my car seats. With our youngest pulling watch, I made short work of the first half of the trunk, while my youngest made work short, taking a just a few pulls of the saw himself (or at least touching the saw for a few seconds). After my wife took a swing, I finished the job—TIMBER! Sitting out my open window on the ride to the top of the hill to hold the tree in place, the tree sat still on the roof just long enough to have it wrapped and tied atop my roof rack. Timbits for the boys, a breakfast sandwich for me, we commenced our trek to the homestead. Half-way through, my son realized my breakfast sandwich should actually be his and who was I to say no. I still had my coffee (and a box of Timbits).

A wonderful adventure on a Sunday morning. Fond memories.

In this edition of the Legislative List, NYMIR has been authorized to return outstanding subscriber operating reserve balances to help combat municipal shortfalls on account of the COVID-19 pandemic.

Until next time,

Ryan
Ryan P. Maxwell
[email protected]

 

Prohibition Still Strong in the US – 100 Years Ago:

The Buffalo Times
Buffalo, New York
10 Dec 1921

Plan Big Drive on Bootleggers

Chief Prohibition Agent Yellowly Confers with Cristel Here and It Is Reported Local Force Will be Doubled to War on Violators of Volstead Act.

Plans for a big-pre-holiday clean-up of liquor violators here were prepared Saturday, when E.C. Yellowly, chief prohibition agent for New York State, arrived in Buffalo for a conference with T.F. Cristel, chief agent in Buffalo.

Chief Yellowley came to Buffalo from New York City Saturday, and according to information received at the Federal Building, the local force will be more than doubled in order to wage the war against bootleggers and violators of the Volstead act. While Yellowly and Cristel both refused to comment on the situation as their conference was carried on with the utmost secrecy, it was learned from a reliable source that one of the biggest dry offensives ever started, since the enactment of the dry laws, was planned.

It is believed that 50 dry agents will be in Buffalo within a week and that they will remain her until after the first of the year.

Immediately upon arriving at the federal building Mr. Yellowly and Chief Cristel locked themselves in the private office in the latter’s headquarters and conducted a meeting which lasted over an hour and a half. Chief Yellowly then went into U.S. District Attorney Lockwood’s office, presumably to gain the latter’s co-operation in the big drive.

 

CJ on CVA and USDC(NY):

Hello all,

It has been a very busy two weeks for the Englerts. After a long, frustrating, and seemingly never-ending search, we have decided to build a new home for our growing family. Should everything go to plan, by July I will be writing my columns from an actual home office, and not just a small corner of our basement! For those of you traveling to New York this week for the DRI ICPS, be sure to stop by Dan’s presentation Friday morning discussing the challenges and strategies of handling revied sex abuse claims.

This week’s offering comes from the Southern District of New York and discusses New York’s No-Fault Statute. The case also serves as a reminder of the high bar a plaintiff must meet to plead a valid claim that an insured violated General Business Law § 349. Remember, if you cannot prove a separate and distinct claim arising from an insurer’s deceptive and consumer-oriented practices, you cannot claim that insurer violated GBL § 349.

See you in two weeks,

CJ
Charles J. Englert, III
[email protected]      

 

Vamps to be Jailed?

The Buffalo Times
Buffalo, New York
10 Dec 1921

Court will send “Vamps” to Prison

Judge Would Turn Domestic Triangle Into Old-Fashioned Right Angle.

CHICAGO. —Chicago housewives are asked to notify the court of domestic relations if there are “vamps” hanging around their doorsteps trying to steal their husbands.

All those reporting to Judge Adams may have the satisfaction of seeing their rivals sent to prison or fined, the court announced.

Judge Adams delivered this decree after hearing a case in which Mrs. Emma Muelhauser, 45 years old, is alleged to have “vamped” Frank Victinhoff, 54, from his wife of 23 years. Victinhoff is a grandfather.

Witnesses told how Mrs. Muelhauser kissed him on the street, under arclights, and anywhere convenient, secrecy no object.

After threatening to send Mrs. Muelhauser to jail for a year if she so much as spoke of Victinhoff, the court said:

“There is no female so low as a home wrecker.

“I am going to bring every affinity and home wrecker reported to me into this court on subpoenas. When they get here, if they aren’t willing to listen to a little common sense and stop their home wrecking, I am either going to fine them or send them to jail.

Too many homes are going under before these ‘other men’ and ‘other women.’ It has got to stop, and I am going to start right now making this domestic triangle thing a good old fashioned right angle.”

 

Dishing Out Serious Injury Threshold:

          On a long-overdue vacation. See you in two weeks!

          Michael
           Michael J. Dischley
           [email protected]  

 

Prohibition Impacts New Year’s Celebrations:

The Nebraska State Journal
Lincoln, Nebraska
10 Dec 1921

DRY NEW YEAR’S SCHEDULED

Prohibition Director Rohrer Asks Governor for All Available Agents on January 1.

OMAHA, Dec. 9. —It looks like a dry dreary new year’s for Omaha.

U.S. Rohrer, prohibition office for Nebraska, today wired Governor McKelvie asking that all state law enforcement officers under command of State Sheriff Gus Hyers be sent here on new year’s eve to help enforce the eighteenth amendment. Rohrer declared he will make the Sahara desert look like the Atlantic ocean in comparison to the metropolis’ dryness on that evening.

He said he had evidence that leading hotels and cafes were planning to put on old time new year’s eve celebrations and that he intended to see that no “hooch” was guzzled in public places or elsewhere. Rohrer declared any hotel or café which allowed drinking “from the hip” or otherwise could, on conviction, be closed down for a year and that he intends to see that the law in enforced.

 

Bucci on “B”: 

          Nothing analyzing a Coverage B issue in this issue. 

Diane
Diane L. Bucci
[email protected]

 

Toast with Water?

The Coffeyville Daily Journal
Coffeyville, Kansas
10 Dec 1921

WATER ON NEW YEAR’S EVE

Broadway to Usher in 1922 with River Cocktails.

New York, Dec. 10—Water, the most despised liquid refreshment in Broadway’s restaurants and cabarets will be the only available stimulant for high jinks along the once gay thoroughfares on New Year’s Eve, if prohibition agents have their way.

“Broadway, perhaps for the first time in its career, will see a dry New Year’s Eve, a federal agent declared. “We are serving notice on the proprietors of restaurants and cabarets that 1922 will have to be ushered in with nothing stronger than water.”

 

Lee’s Connecticut Chronicles:

We returned to Connecticut, begrudgingly, from Florida. They keep it much   warmer and sunnier down there. I really appreciate that, especially this time of    year. Saw my first flakes of the season, but nothing has stuck yet. It’ll come; it           always does.

Today, I’m sitting in our Long Island office, as we are getting ready to party. It’s   been a long, hard year. Go out, celebrate, enjoy, and have a great holiday                  season. But, please, be safe and keep keeping smart.

Lee
Lee S. Siegel
[email protected]      

 

A New Year’s Insurance Policy:

The Voice of the People
Birmingham, Alabama
10 Dec 1921

Here It Is

and with a happy New Year and hoping you won’t ever become sick. If you do, though, you’ll get every penny you’re insured or. It’s a bright idea to take out

A New Year’s Policy

in this substantial sick and death benefit company of ours. You’ll enjoy New Year’s Day better and be at ease in your mind. Why not do it today? You’d better.

Better call and see us, or drop us a postal card, and we will call at your residence.

Bell Phone Main 3943
The Union Central Relief Association
BIRMINGHAM, ALA.

 

Rauh’s Ramblings:

          Hello Readers!

I hope everyone is having an enjoyable week.  Today was the first significant snowfall of the season in Buffalo, and I am not looking forward to shoveling and brushing the snow off my car in the mornings!  Hopefully, it will be a somewhat mild winter and the snow will be minimal, but I am not too optimistic about that.

In my column this week, I found a case from the Eighth Circuit involving an alleged ERISA violation and a discussion about whether the district court erred in granting summary judgment to the plaintiff.  Check it out for more details!

Until Next Time…Stay Warm!

Patty
Patricia A. Rauh
[email protected]     

 

Liar, Liar, Pants on Fire:

Buffalo Courier
Buffalo, New York
10 Dec 1921

VERDICT AGAINST GEORGE A. RAY
OUTCOME OF $500 LOAN ON RING

Judge Peter Maul in city court yesterday awarded the Prudential Loan Society, Linc., a verdict of $585.95 against George A. Ray, No. 35 Richmond avenue. The suit was to recover $500 loaned Mrs. Ray on a diamond ring she had pawned, which Ray recovered through a replevin action.

In 1914, according to evidence in the suit, Mrs. Ray was declared incompetent to handle her own affairs and the court appointed her husband trustee.

In 1919, Ray gave his wife a diamond ring, which she had until 1920. Then she took the ring to the Prudential Co. and obtained a loan of $200. Later, she raised the loan to $400 and a few days later another hundred dollars.

When her husband learned what she had done with the ring, he started action against the Prudential. Basing his claim on the fact that money had been advanced on a ring offered by one whom the courts had declared incompetent, he obtained a court order directing the ring be returned to the trustee. The other was obeyed, but the Prudential society immediately instituted a civil action against Ray.

The decision yesterday awards the concern the amount of the loans, with costs and interest.

 

Storm’s SIU Examen:

Happy Holidays everyone:

Last Friday I had the privilege of speaking at Pennsylvania Auto Crime Investigator’s Association (PACIA) in Philadelphia on “Prying Open the Sometimes-Elusive Door of Motive in Fraud Cases.”  Great organization, exceptional investigators.  If this topic sounds of value to your organization or company, please let us know.  We would be pleased to present it to your claims professionals also.   

Six interesting cases this week:

• 91-Day Delay in Reporting 1^st-Party Property Claim is Unreasonable as a Matter of Law but Insurer’s Motion to Dismiss is Denied Nevertheless as the Insureds Alleged, They Had Not Received the Policy and a Question of Fact Exists Whether the Insurer Abandoned the Defense by Engaging in a 20-Month Investigation Before Denying Coverage.  

• No Duty to Defend or Indemnify as the Premises did not Qualify as a Covered "Residence Premises" or "Insured Location".

• Question of Fact Whether Homeowner Policy's Additional Coverage for Collapse Applies.

• Coverage Denial Based Upon Rate Evasion Affirmed in Default Motion Precluding Coverage to Insured and Medical Providers.

• Court Affirms 1^st-Party Property Coverage Denial for Resulting Damages from Broken Downspout: to the Interior Because they Were Due to "Continuous Exposure of Water from the Downspout"; and Deterioration, Rot and Mold Inside the Soffit Under the Gutter.

• Insurers Failed to Present Sufficient Evidence to Support Their Claims of Fraud, Unjust Enrichment and Aiding and Abetting Against Medical Providers Claiming They Had Created an Unlawful Business Structure Under Which Doctors Prescribed Topical Compound Pain Creams to Patients Who had Been Injured at Work or in Automobile Accidents.

This week’s encouraging word: “If I cannot do great things, I can do small things in a great way.”  Martin Luther King, Jr.

Talk to you soon,

Scott
Scott D. Storm
[email protected]

 

Smallpox Epidemic Subsiding:

Springfield Leader and Press
Springfield, Missouri
10 Dec 1921

SMALLPOX EPIDEMIC DANGER SUBSIDING IN KANSAS CITY

Enforcement of Order Requiring All Travelers to Be Vaccinated to Be Postponed From December 15 to December 22—Health Officers to Guard All Depots.

KANSAS CITY. Dec. 10—The danger of the smallpox situation in Kansas City has subsided. Dr. J. P. Leake, of the United States public health service, announced in a statement given out before leaving for Washington today. Dr. Leake commended the city for its almost universal vaccination, stating that it probably had the best vaccinated population of any city of its size in the country.

For a week there has been steady decline in the number of smallpox cases and Dr. Leake asserted that another smallpox epidemic of such serious proportions is unlikely again for 30 years.

Children who stayed away from school rather than be vaccinated, will be permitted to return to their classes Monday, it was announced today.

 

Heintzman’s Hideout:

These past few weeks have been the busiest of my young career. I’ve had many summary judgment motions, depositions, and negotiations, and most of them have been completely new experiences for me. Although it has been a little challenging, I am rapidly developing my lawyering skills, and I’m enjoying the increased responsibility. I’d be lying, however, if I said I wasn’t looking forward to a little relaxation time over Christmas.

Two cases this week:  in the first, a designated beneficiary under a life insurance policy challenges an insurer’s failure to pay the full policy on a host of contract theories, and, in the second, a no-fault benefits insurer moves to dismiss an assignee’s claim for benefits on timeliness and fee schedule grounds.

Nick
Nicholas J. Heintzman
[email protected]

 

Anti-Vaxers – 1921 Edition:

The Omaha Daily News
Omaha, Nebraska
10 Dec 1921

THREATS OF EPIDEMICS TAKE JOY OUT OF LIFE

Smallpox Scare Bobs Up as Diphtheria in City Wanes,
Shun Vaccination.

With the Diphtheria scare on the wane, the only thing worrying our people with their plans for a Merry Christmas is the Smallpox scare, which has bobbed up to take its place.

The United States Constitution guarantees us LIFE, LIBERTY AND THE PURSUIT OF HAPPINESS, but these objectives are difficult to obtain when medical doctors are constantly threatening us with epidemics, and getting the people excited, like waving a red flag in the face of a bull.

CHIROPRACTIC patients who have learned to get well and keep well by means of CHIROPRACTIC spinal adjustments will not be frightened into vaccination for smallpox or serumization of any kind.

The introduction of a filthy poison into the body is an insult to nature.

If you are Interested in knowing your legal rights in protecting your body or the bodies of your children from the assault of vaccination, call at the office of Dr. Leo W. Edwards, Chiropractor, 306 South 24th Street, or write to the American Medical Liberty League, 69 East Van Buren Street, Chicago, Ill.

Do not forget that your constitutional rights cannot be overthrown according to the ideas of any doctor.

 

North of the Border: 

While I have had my head down dealing with personal lines and commercial lines claims from the CAT losses in British Columbia, we have been steadily marching towards our second pandemic Christmas. This year we will be able to celebrate with our immediate family that includes our 19-month-old grandson who will be joined by a sibling in June. We are very excited. Yes, I’m looking forward to Christmas. This time, a real Christmas. 

My column talks about two seminal events. Firstly, there is a note about the flooding in British Columbia. Secondly, there is a brief article on the enactment of new privacy legislation in Québec.  Under this legislation, the Province of Québec becomes the first jurisdiction in North America to emulate the GDPR, which has implications for American businesses holding the personal private information of Quebec residents and by extension, their liability insurers.

Heather
Heather Sanderson
[email protected]

 

Headlines from this week’s issue, attached:

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

• “I am a Perjurer Defense” Unsuccessful to Establish Coverage

• When Insured Settled Tort Claim with Auto Tortfeasor without Seeking SUM Carrier’s Consent, Insured Lost Right to SUM Benefits

• Landlord Secures Additional Insured Coverage When Underlying Plaintiff Falls Through a Cellar Door Used by Tenant at the Premises

 

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

• Choice of Law/Venue Clauses Voided Pursuant to Washington Law

 

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

• On vacation. See you in two weeks!

 

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

• Second Circuit Affirms District Court’s Judgment and Holds that a Change in the Beneficiary of a Life Insurance Policy is Not Valid Under the Substantial Compliance Doctrine if the Deceased Abandoned His Intentions to Change the Beneficiary

• Sixth Circuit Affirms District Court’s Grant of Summary Judgment in Favor of Defendant and Denies Plaintiff’s Claim of Rights as an Assignee of an Insurance Policy when the Policy Explicitly Provided Assignment Without Consent of the Carrier

 

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

• Bad Faith Claim Dismissed based on Allegations that the Insurers Engaged in Independent Tortious Conduct

 

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

• Ambiguity in Declarations is Question of Fact

 

OFF the MARK
Brian F. Mark
[email protected]

• No interesting construction defect cases this week.  Check back in two weeks.

 

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

• Bonnie & Clyde’s Reasonable Belief Regarding Permissive Use of Stolen Car

 

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

• Nothing analyzing a Coverage B issue in this issue. 

 

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

• New Law Authorizes Return Of Subscribing Member Operating Reserve Balances to Municipal Insurance Reciprocal Members

 

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

• When Calculating “First Party Benefits” the 20% Deduction on Wages Does not Apply When the Claimant’s Wages are Above the Statutory Maximum

 

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

• The District Court’s Error in Adjudicating the Parties’ Motions for Summary Judgment as if it Were Ruling in a Bench Trial was Harmless and the District Court’s Finding that Plaintiff Lacks Sedentary-Work Capacity was not Clearly Erroneous in ERISA Action

 

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

• 91-Day Delay in Reporting 1^st-Party Property Claim is Unreasonable as a Matter of Law but Insurer’s Motion to Dismiss is Denied Nevertheless as the Insureds Alleged They Had Not Received the Policy and a Question of Fact Exists Whether the Insurer Abandoned the Defense by Engaging in a 20-Month Investigation Before Denying Coverage 

• No Duty to Defend or Indemnify as the Premises did not Qualify as a Covered "Residence Premises" or "Insured Location"

• Question of Fact Whether Homeowner Policy's Additional Coverage for Collapse Applies

• Coverage Denial Based Upon Rate Evasion Affirmed in Default Motion Precluding Coverage to Insured and Medical Providers

• Court Affirms 1^st-Party Property Coverage Denial for Resulting Damages from Broken Downspout: to the Interior Because they Were Due to "Continuous Exposure of Water from the Downspout"; and Deterioration, Rot and Mold Inside the Soffit Under the Gutter

• Insurers Failed to Present Sufficient Evidence to Support Their Claims of Fraud, Unjust Enrichment and Aiding and Abetting Against Medical Providers Claiming They Had Created an Unlawful Business Structure Under Which Doctors Prescribed Topical Compound Pain Creams to Patients Who had Been Injured at Work or in Automobile Accidents

 

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

• Designated Beneficiary under a Life Insurance Policy Challenges Insurer’s Failure to Pay Full Policy on a Variety of Contract Grounds

• No-Fault Benefits Insurer Moves to Dismiss an Assignee’s Claim for Benefits on Timeliness and Fee Schedule Grounds

 

NORTH of the BORDER
Heather Sanderson
[email protected]

• The Atmospheric Rain Event of November 14-16, 2021, could be Canada’s Costliest Natural Disaster – Ever

• Privacy Regulation:  With the Enactment of Bill 64, Québec becomes the most GDPR-like Jurisdiction in North America

 

That’s all for this issue.  Thanks for your loyalty and readership.  One more issue this year, right before Santa’s arrival.

Dan

 

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

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]

ASSISTANT EDITOR
Patricia A. Rauh
[email protected]

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

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

Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Diane L. Bucci
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)
Hannah E. Cominsky

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]

Alice A. Trueman

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]

12/06/21       Mountain Valley Indemnity Company v. Hylton
Appellate Division, First Department
“I am a Perjurer Defense” Unsuccessful to Establish Coverage

Homeowner’s carrier was granted summary judgment below on issues of defense and indemnity, It established that it properly disclaimed coverage for the underlying action by submitting evidence that, on the date of the loss, insured did not live at the premises that were to be covered under the policy. Although she gave a sworn statement to the claims adjuster that she did live at the premises, she testified under oath at the deposition in the underlying action that she lived elsewhere at the time of the accident, and her deposition testimony was corroborated by her driver's license.

As a result, the premises did not qualify as a covered "residence premises" or "insured location" as defined by the policy.

She later asserted in an affidavit that she had committed perjury at the deposition because her attorney told her that lying would help her defense. However, she offered no evidence to support her assertion of residence, and, particularly in light of the address on her driver's license, her affidavit is insufficient to defeat the insurer’s motion.

12/01/21       Travelers Personal Insurance Company v. Hanophy-Ryan
Appellate Division, Second Department
When Insured Settled Tort Claim with Auto Tortfeasor without Seeking SUM Carrier’s Consent, Insured Lost Right to SUM Benefits

On October 3, 2017, Christina Hanophy-Ryan (“Christina”) allegedly was injured in an automobile accident. She had Supplementary Uninsured/Underinsured Motorist coverage (“SUM”) issued by Travelers. By letter dated December 21, 2017, Christina notified Travelers of her intention to pursue a claim for SUM benefits. By letter dated January 2, 2018, the appellant notified Travelers that she had commenced an action to recover damages for personal injuries, and again expressed her intention to pursue a claim for SUM benefits.

By letter dated November 14, 2018, the Christina advised Travelers that she had settled the action for $25,000, which was the limit of the other driver's insurance policy. By letter dated November 30, 2018, Travelers disclaimed coverage on the ground that the appellant had signed a release of her claims against the other driver without its written consent. Thereafter, the appellant demanded arbitration of her claim for SUM benefits. Travelers then commenced this proceeding pursuant to CPLR article 75 to permanently stay arbitration of the appellant's claim for SUM benefits. In an order dated March 27, 2019, the Supreme Court granted the petition.

Under the conditions of coverage, Christina was required to secure Travelers’ consent to issue a release.  Having not done so, she has forfeited her SUM benefits.

Editor’s note:  The right decision.

11/30/21       71 Lafayette Avenue LLC v. New York Marine and General Ins.
Appellate Division, First Department
Landlord Secures Additional Insured Coverage When Underlying Plaintiff Falls Through a Cellar Door Used by Tenant at the Premises

71 Lafayette established prima facie that NY Marine has a duty to indemnify Lafayette as an additional insured in the underlying action. The underlying personal injury action alleges that the plaintiff was injured when he fell through a cellar door which was used by the tenant at the leased premises. The additional insured provision provides plaintiff landlord Lafayette coverage for claims of bodily injury "arising out of the ownership, maintenance or use of that part of the premises leased to" the subject tenant.

Contrary to defendant's contention, the outside staircase that was used by Lafayette's tenant for access in and out of its space was, by implication, part of the premises leased to the tenant. The accident also arose out of the tenant's "use" of the leased premises, as the injured person was traversing the staircase door to deliver items for the tenant's business when the accident occurred.

 

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

12/02/21       N. Am. Elite Ins. Co. v. Space Needle, LLC
Appellate Division, First Department
Choice of Law/Venue Clauses Voided Pursuant to Washington Law

In 2019, the operators of Seattle’s famed Space Needle procured a property policy with plaintiff.  That policy, although issued and delivered in Washington, specified that New York law would govern any dispute.  In addition, the policy contained a forum selection clause also declaring that any dispute would be exclusive to the jurisdiction of New York courts. 

Space Needle submitted a claim for coverage related to business losses associated with COVID 19 closures of the property pursuant to Washington State order.  In support of its claim, Space Needle argued that Washington law should apply to the dispute regardless of the choice of law/choice of forum clauses clearly incorporated into the policy.  Plaintiff, in response, filed the instant lawsuit in New York County Supreme Court seeking a ruling that New York law applied to the dispute.   Thereafter, plaintiff presented an application for a preliminary injunction which sought to memorialize that a New York court, applying New York law, would preside over the dispute. 

The trial court denied the application, and that ruling was affirmed by the Appellate Division.  Simply stated, Washington code specifically precludes the application of forum selection and/or choice of law provisions which divest Washington courts/law from an ability to oversee the dispute.  Here, because the policy was issued in Washington, to a Washington corporation, covering a risk completely in Washington, the Appellate Division agreed that Washington statutory law applied to, in effect, override the contractual provisions in the policy.   

 

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

On vacation. See you in two weeks!

 

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

11/24/21       Pagan v. Jackson Nat. Life Ins. Co.
United States Court of Appeals, Second Circuit
Second Circuit Affirms District Court’s Judgment and Holds that a Change in the Beneficiary of a Life Insurance Policy is Not Valid Under the Substantial Compliance Doctrine if the Deceased Abandoned His Intentions to Change the Beneficiary

Jackson National Life Insurance Company issued a life insurance policy to Adalberto Osorio.  At issue was whether Mr. Osorio legally changed the beneficiaries of the policy from Mayra Lozada (his ex-wife) and Tara Osorio (his eldest daughter) to Emelin Pagan (his second wife) and Natalie Osorio (his and his second wife’s youngest daughter).  Under Connecticut law, a change of the beneficiary of a life insurance policy must comply with the policy requirements. 

There is an exemption, however, under the substantial compliance doctrine.  Under that doctrine, “a policyholder who does not strictly comply with a policy’s requirements is deemed to have changed beneficiaries if he (1) ‘clearly intended to change the beneficiary and to designate the new beneficiary’ and (2) took ‘substantial affirmative action to effectuate the change in the beneficiary.’”  If the policyholder abandons his intentions to change the beneficiary, he cannot rely on the substantial compliance doctrine.

Here, Mr. Osorio did not strictly comply with the policy requirements to change the beneficiaries.  Furthermore, he could not rely on the substantial compliance doctrine because his subsequent actions indicated that he abandoned the intention to change the original beneficiaries.  For instance, Mr. Osorio never sought to correct the deficiencies in the form he submitted to the carrier and told Natalie Osorio that the policy remained in her mother’s and sister’s names.  Therefore, the beneficiaries of the life insurance policy were Mayra Lozada and Tara Osorio.

12/03/21       Blue Ash Auto Body, Inc. v. State Farm Mut. Auto. Ins. Co.
United States Court of Appeals, Sixth Circuit
Sixth Circuit Affirms District Court’s Grant of Summary Judgment in Favor of Defendant and Denies Plaintiff’s Claim of Rights as an Assignee of an Insurance Policy when the Policy Explicitly Provided Assignment Without Consent of the Carrier

Blue Ash Auto Body, Inc. (“Blue Ash”) operates an auto-repair shop.  Instead of charging its customers for their repairs, it makes them sign an assignment of the customers’ rights to their insurance proceeds.  Blue Ash repaired vehicles that were insured by State Farm Mut. Auto. Ins. Co. (“State Farm”) and obtained an assignment of rights from its customers.  State Farm’s policy contracts contained an anti-assignment provision, which stated that “No assignment of benefits or other transfer of rights is binding upon us unless approved by us.” (emphasis in original).  After Blue Ash repaired the vehicles, State Farm disagreed as to the reasonable cost of repairs.  Thereafter, Blue Ash sued State Farm for breach of contract and unjust enrichment.

Applying Ohio law, the Court affirmed the district court's decision.  While assignment of contracts is generally permitted in Ohio, assignments are not valid when there is clear contractual language prohibiting assignment.  Because the policy contracts issued by State Farm explicitly prohibited assignments without its consent, the Court said that summary judgment dismissing the breach of contract claim was correct.  With respect to the unjust enrichment claim, the Court affirmed the dismissal because State Farm did not benefit from Blue Ash’s work.

 

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

11/29/21       Davis v. Great Northern Insurance Company
United States District Court, Southern District of Florida
Bad Faith Claim Dismissed based on Allegations that the Insurers Engaged in Independent Tortious Conduct

Plaintiff owned and resided in The Tides at Bridgeside Square Condominium.  Plaintiff is an assignee of Akam, a property management company, that was insured by multiple Chubb entities.  Plaintiff previously sustained damage from water leaking into her unit, causing the formation of mold.  Plaintiff commenced a lawsuit against the Chubb insurers alleging breach of contract and bad faith for their failure to defend and indemnify Akam from Plaintiff’s claim and suit.

Plaintiff and Chubb had settled the underlying lawsuit, which included an assignment to Plaintiff of all Akam’s claims against Chubb related to the coverage denial and refusal to defend.  Plaintiff alleged that she was entitled to recover the full amount of the underlying judgment of $14,500,000 based on bad faith.  Chubb moved to dismiss the bad faith claim.

Although the case was venued in Florida, New York law applied to the dispute.  The court rejected Chubb’s argument that a bad faith claim was not cognizable under New York law.  While the court cited the Pavia standard, it also cited New York law regarding bad faith as a result of violation of the contractual implied covenant of good faith and fair dealing, which permits recovery of consequential damages.  Punitive or extra-contractual damages, on the other hand, require pleading the insurer’s egregious conduct separate and apart from its failure to fulfill its contractual obligations.  The court found that Plaintiff had failed to satisfy the pleading burden for punitive or extra-contractual damages and dismissed the bad faith claim.  In so doing, it noted that Plaintiff could still pursue consequential damages in the breach of contract cause of action.

 

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

12/02/21       Parker v. ACE American Ins. Co.
United States District Court, District of Connecticut
Ambiguity in Declarations is Question of Fact

The District Court, interpreting Connecticut law, concluded that an ambiguity as to the limits of UM/UIM coverage was a question of fact and not policy interpretation. Accordingly, the court did not, upon finding the presence of the ambiguity, automatically construe it against the carrier.

Here, Parker was (and may still be) an employee of Ryder Truck Rental, LT. Parker was injured in a motor vehicle accident by an underinsured motorist, in the course and scope of his employment for Ryder, while occupying a Ryder truck. ACE provided liability insurance to Ryder in many states (probably all of them), including Connecticut. In Connecticut, an auto liability policy must provide UM/UIM coverage for vehicles registered or principally garaged within the state. The UM/UIM coverage is presumptively equal to the liability limits. However, Connecticut law allows an insured to opt for either up to double the liability limits or a lesser amount, but not less than the statutory minimum limits of $25,000/$50,000.

The Ryder policy’s declarations page showed a UM/UIM limit of $1 million for Connecticut. ACE said no so fast, claiming a computer glitch failed to follow Ryder’s coverage election of the statutory minimum.

The undisputed evidence, the court found included that Rosa Rodriguez, a Senior Risk Manager for Ryder, completed a questionnaire and coverage selection/rejection forms in different states for uninsured motorist coverage, underinsured motorist coverage, and personal injury protection coverage. Rodriguez entered Ryder's coverage selections into the “Chubb Accelerator,” which is Chubb's proprietary web-based tool to assist insureds in documenting their coverage selections and for e-signing state specific coverage selections/rejection forms. Importantly, Rodriguez checked boxes on the Questionnaire indicating that Ryder rejected uninsured and underinsured coverage if permitted by state law or that it would carry the minimum amount of coverage when required by state law.

Chubb’s on-line tool incorrectly auto-populated coverage limits on the Connecticut Uninsured/Underinsured Motorists Coverage Selection Informed Consent Form. The form offers three optional coverage levels and corresponding premiums: Double BI Limit, BI Limit, and Minimum Limit. The “Minimum Limit” box is checked with a premium of $7,721. However, the box “Other” is filled in with $1 million listed with also a premium of $7,721. Rodriguez electronically signed the disclosure form, containing checked boxes to both minimum limits and a $1 million limit.

ACE argued that the Form is ambiguous because it reflects both a minimum limit and $1 million limit, caused by a software glitch which was contrary to Ryder's coverage election and the premium paid. Parker argued that the declarations was unambiguous but that in any event the ambiguity must be construed against ACE.

The court easily did away with Parker’s argument that the coverage limit was unambiguously $1 million. “It is inconceivable,” the court wrote, “that both answers could be correct and intended by either party to the insurance contract. The Court concludes that the Informed Consent form is ambiguous insofar as it concerns the amount of coverage purchased.”

Having found an ambiguity, the case came down to whether to resolve the ambiguity on the uncontested facts or construe it against the insurer and in favor of Parker. The court opted for the former, relying on a 2012 Appellate Court decision. In that case, the determination of which coverage was purchased was a matter of historical fact, rather than interpretation of language in the insurance policy. Therefore, the canon of contra proferentem does not automatically apply. “... [R]ather [it]warrants an inquiry into the circumstances of the purchase of the policy to determine which variety of uninsured/underinsured motorist coverage the plaintiff opted to purchase so that the intentions of the parties may be discovered and put into effect.” Fiallo v. Allstate Ins. Co., 138 Conn. App. 339 (2012). Under Fiallo, a court looks to extrinsic evidence to determine the amount of coverage an insured intended to purchase.

Here, since the facts were uncontested that Ryder intended to purchase the minimum limits. “Accordingly, the Court concludes that there is no genuine issue of material fact that Ryder and ACE intended to bind coverage for the statutory minimum coverage limits for uninsured and underinsured motorists permitted by law in Connecticut., which is $25,000 per person/$50,000 per accident. Gen. Stat. § 14-112(a); Conn. Gen. Stat. § 38a-336(a)(1)(D). Since Mr. Parker has recovered more than this sum from the tortfeasor, he is not an underinsured motorist. Conn. Gen. Stat. § 38a–336 (d); Frantz, 245 Conn. at 742.”

 

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

No interesting construction defect cases this week.  Check back in two weeks.

 

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

11/16/21       Concord General Mut. Ins. Co. v. Estate of Collette J. Boure
Maine Supreme Judicial Court
Bonnie & Clyde’s Reasonable Belief Regarding Permissive Use of Stolen Car

After two teenagers, Collette Boure and Alexander Meyers, were arrested in connection with a missing boat, a court order prohibited any contact between them. Perhaps to nobody’s surprise, they refused to comply. Rather, they decided to steal a relative’s car, destroy their phones, and flee the state. After being on the run for two weeks, the pair found themselves pursued by police in Oklahoma with Meyers driving and Boure in the passenger seat. As he tried to evade the blockade of police cars in front of him, he lost control of the vehicle and crashed. Boure unfortunately succumbed to her injuries two days later.

Boure’s Estate sought uninsured motorist coverage from personal auto policies issued to her father by Concord General and to Meyers’s great aunt by 21^st Century. Both insurers denied coverage. Concord subsequently brought a declaratory judgment action against the Estate, which then counterclaimed against Concord and brought a separate action against 21^st Century. The Estate then appealed from the grants of summary judgment in the insurer’s favor. The Supreme Court of Maine dismissed the Estate’s appeal against Concord as untimely and continued to consider the appeal against 21^st Century.

21^st Century denied coverage based on a policy exclusion that prohibits uninsured motorist coverage for “bodily injury sustained by an insured . . . [u]sing a vehicle without a reasonable belief that that insured is entitled to do so.” The Estate argued that the exclusion did not apply because (1) the deceased was occupying the vehicle as a passenger rather than “using” the vehicle within the meaning of the policy, and (2) genuine issues of fact remained as to whether she had a reasonable belief regarding her permissive use of the vehicle.

The Court distinguished between the policy’s choice of the word “use” rather than “operate” and concluded that although the policy did not define the term, an average person would conclude that occupying the vehicle is included in the definition of its use. As to the Estate’s reasonable belief argument, the court considered the circumstances surrounding the accident. The Court noted the court order prohibiting contact between the pair; the fact that they were minors without driver’s licenses; the breaking and entering into Meyers’s great aunt’s home to steal her spare keys; the subsequent lying in wait for the aunt to return with the car; the actual grand theft auto; as well as the destruction of their phones and fleeing the state to avoid detection. The Court concluded that there was no possible objective reasonable belief that either party was entitled to be a passenger in that car and justly affirmed the grant of summary judgment to 21^st Century.

 

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

Nothing analyzing a Coverage B issue in this issue. 

 

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

 

Legislative List
12/01/21       Return of Operating Reserve Balances to NYMIR Members
New York State Governor
New Law Authorizes Return Of Subscribing Member Operating Reserve Balances to Municipal Insurance Reciprocal Members

Governor Kathy Hochul has signed Chapter 649 of the Laws of 2021, which implements a new amendment to Insurance Law §6109(a)(3) allowing municipal reciprocal insurers to authorize the return of any outstanding subscriber operating reserve balance. This bill according to the Sponsor Memorandum, this bill was passed “[a]t a time when the impacts of COVID-19 and related events have dramatically impacted municipal revenue streams and put local government budgets under great financial stress . . . .”

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

In signing this bill into law, Governor Hochul advised that she agrees with the intent of the bill, but entered into an agreement with the legislature for a slight modification, per her Approval Memorandum:

“To ensure a lender identifies a point of contact for a borrower in an efficient manner, I have reached agreement with the Legislature on a technical modification to ensure that prior to returning subscriber operating reserve balances, municipal insurers must demonstrate that they will retain sufficient surplus to support their obligations.

This law took effect immediately.

 

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

12/02/21       Jose Manrique v. State Farm Mutual Automobile Ins. Co.
United States District Court, Southern District of New York
When Calculating “First Party Benefits” the 20% Deduction on Wages Does Not Apply When the Claimant’s Wages are Above the Statutory Maximum

Plaintiff brought a putative class action lawsuit against Defendant, seeking damages as well as declaratory and injunctive relief for Defendant’s alleged violations of the New York Insurance Law and New York General Business Law as well as breach of contract with respect to automobile insurance policies Defendant issued. Defendant moved to dismiss the complaint in lieu of answering.

Plaintiff was a passenger in a motor vehicle belonging to Suzanne S. Carlson (“Carlson”), whose vehicle was covered under a motor vehicle insurance policy issued by Defendant. Carlson’s policy provides “Basic and Optional No-Fault Personal Injury Protection Benefits pursuant to” applicable New York State law. (Id.) “Basics” and “Optional” benefits provide coverage of $50,000 and $25,000, respectively, totaling $75,000 of coverage. Plaintiff was injured while riding in Carlson’s vehicle and then applied to Defendant for First Party Benefits under Carlson’s policy. Pursuant to Carlson’s policy, Defendant paid Plaintiff $49,214.90 in medical benefits, $14,444.08 in wage benefits over a five-month period, as well as $4,420.00 in New York State Disability benefits and $2,648 in Social Security benefits, which Defendant credited. In total Plaintiff received $70,726.98 in First Party Benefits.

New York’s No-Fault Statute require automobile insurance companies to provide insureds with coverage of up to $50,000 in so-called “Basic Economic Loss”. “Basic Economic Loss” includes “(1) [a]ll necessary expenses incurred for” medical care and professional health services as well as “(2) [l]oss of earnings from work which the person 6 would have performed had he not been injured.” N.Y. Ins. Law §§5102(a)(1)-(2). The earnings portion of Basic Economic Loss is limited by statute to “two thousand dollars per month for not more than three years from the date of the accident causing the injury.” The coverage insurers must provide is distinct from the amount insurers pay out to insureds. This latter figure, called “First Party Benefits,” is calculated by deducting from Basic Economic Loss: (1) 20% of lost earnings, and (2) any government disability benefits received as a result of the accident precipitating an insurance payout.

Plaintiff argues that, because his wages exceeded $2,000 per month, Defendant was capped at crediting Plaintiff’s no-fault coverage at $2,000. Defendant argues that the statute’s text affords insurers the right to apply a 20% deduction to Basic Economic Loss in addition to capping lost wages. When first interpreting this question, the New York Court of Appeal held that if an individual’s earnings exceed the statutory maximum, such an individual is entitled to the statutory maximum, due to the outer net limit imposed by the No-Fault Statute.

Defendant argued that this first impression by the Court of Appeals only applies to the amount paid as lost wages as First Party Benefits, not Basis Economic Loss. This Court disagreed, holding that Defendant’s reading of the caselaw would place an effective ceiling on the recovery of lost wages equal to 80% of the statutory maximum of lost wages. Were that the case, the statutory “limitation” on lost wages could not represent the outer limit of recovery. Further, the Court concluded that, had the legislature intended to apply the 20% deduction of wages in Basic Economic Loss beyond those capped in First Party Benefits, it would have specifically done so.

Plaintiff also alleged that Defendant breached its contract for the insurance policy at issue because the policy failed to comply with the No-Fault Statute. Finding that there was no dispute a contract existed, and that the policy owner preformed on the contract, Plaintiff adequately plead a cause of action alleging breach of contract.

Plaintiff further alleged that the Defendant violated New York General Business Law § 349, which bars “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in [New York] state.” Nick’s Garage, Inc. v. Progressive Cas. Ins. Co., 875 F.3d 107, 124 (2d Cir. 2017) (quoting N.Y. Gen. Bus. Law § 349(a)). Specifically alleging that Defendant misrepresented the insurance plan’s compliance with applicable insurance law as well as the payouts or reimbursements to be issued pursuant to the policy. The Court dismissed this cause of action. While Plaintiff adequately alleged that Defendant’s acts were consumer oriented, and that the acts or practices were deceptive or misleading in a material way, Plaintiff failed to allege that he was injured as a result of those acts, and that he suffered injury separate from the breach of contract claim.

The court further dismissed causes of action for declaratory and injunctive relief, as Plaintiff failed to establish a need to deploy either remedy.

 

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

11/30/21       Avenoso v. Reliance Standard Life Ins. Co.
United States Court of Appeals, Eighth Circuit
The District Court’s Error in Adjudicating the Parties’ Motions for Summary Judgment as if it Were Ruling in a Bench Trial was Harmless and the District Court’s Finding that Plaintiff Lacks Sedentary-Work Capacity was not Clearly Erroneous in ERISA Action

Plaintiff, Michael Avenoso (“Avenoso”) was employed as a maintenance supervisor until July 2016.  Through his employer, he has long-term disability insurance under a policy (the “Policy”) issued by Defendant, Reliance Standard Life Insurance Company (“Reliance”).  The Policy was governed by ERISA and provided two years of benefits if a claimant showed that he was unable to perform the material duties of his current occupation.  It also provided continued benefits after two years if a claimant showed that he was unable to perform the material duties of any occupation.

In July 2016, Avenoso left his job as a maintenance supervisor due to lower-back pain and he underwent back surgery two months later.  In early 2017, Avenoso filed a claim with Reliance and was approved for two years of benefits because he was disabled from his occupation as a maintenance supervisor.  Reliance informed Avenoso that his benefits would be discontinued at the end of the two year period because he had not shown that he was unable to perform the material duties of any occupation.  Reliance had determined that Avenoso was still able to perform “sedentary work function”, which is defined as “the ability to exert up to 10 pounds of force occasionally and/or a negligible amount of force frequently to lift, carry, push, pull, or otherwise move objects” during a workday that “involves sitting most of the time, but may involve walking or standing for brief periods of time.”

Avenoso appealed Reliance’s determination with its claims department.  He argued that he could not submit proof of his condition in the form of an EMG or MRI because it would be too painful to perform the EMG and he could not sit, stand, or lie still long enough to undergo an MRI.  Eventually, however, Avenoso did undergo an MRI and the results were relatively mild.  He also provided Reliance with a note from his treating physician, Dr. Vosough, who recommended that Avenoso avoid lifting, bending, and prolonged sitting due to his lower back condition.  Avenoso also provided Reliance with letters describing his pain, as well as photos of handrails that had been installed in his home to assist him with mobility.  Finally, he noted that he was receiving Social Security disability benefits, which are reserved for those who are unable to engage in any substantial gainful activity.

Avenoso also received a functional capacity evaluation (“FCE”) with a physical therapist who opined that Avenoso could not tolerate an 8 hour workday, but perhaps a 2-3 hour workday.  At the request of Reliance, Avenoso also underwent an independent medical examination (“IME”) with Dr. Liva, who concluded that Avenoso retained sedentary-work capacity and was able to work 8 hours a day, 40 hours per week.  He also reported that Avenoso displayed signs of “symptom magnification.”  Avenoso also underwent a residual-employability analysis with a vocational-rehabilitation specialist who identified 5 “viable sedentary occupational alternatives” consistent with Avenoso’s physical capabilities.

On August 8, 2019, Reliance upheld its denial of long-term disability benefits.  Avenoso then brought suit against Reliance alleging ERISA violations.  Both parties then moved for summary judgment.  The district court granted Avenoso’s motion and denied Reliance’s motion and Reliance then appealed that decision.

The Court of Appeals stated that the district court did not follow the proper standard for adjudicating a summary judgment motion and instead treated the motions as if they were ruling in a bench trial.  The Court stated that the treatment of bench trials like summary judgment is limited to cases where the administrator of an ERISA plan has discretionary authority and if so, then the district court must uphold its decision if it is one that a “reasonable person could have reached” on the administrative record.  However, the Court reasoned that that was not the case here because the parties agreed that the administrator lacked discretionary authority and as such, the Court of Appeals must review the district court’s findings under the customary clearly erroneous standard.

The Court further argued that if the parties wanted the district court to decide the case based on the administrative record pursuant to FRCP 39(b) and 52(a)(1), then they should have requested that.  Instead, the parties moved for summary judgment, so the district court must follow FRCP 56.  Here, the Eighth Circuit found that the district court failed to follow Rule 56 procedure.

The Court then analyzed FRCP 61, which says that harmless errors are not grounds for reversal.  In this case, each party confirmed at oral argument that it had no additional evidence to submit in the event that the case were to be remanded for a bench trial.  Therefore, if the Eighth Circuit did remand, then the district court would do in a bench trial what it did already – decide the case based on the administrative record without giving either side the benefit of all reasonable inferences, but instead weighing the evidence and finding the facts.  Here, the Policy entitled Avenoso to long-term disability benefits if he is unable to perform the material duties of any occupation.  Reliance agreed that Avenoso would meet this standard if he were incapable of performing even sedentary work.  Therefore, the Court stated that whether the district court’s decision survives de novo review of its legal determinations and clear-error review of its factual findings turn on whether the district court clearly erred in finding that Avenoso lacked sedentary work capacity.

The Court stated that it could not conclude that the district court’s finding that Avenoso lacked sedentary-work capacity was clearly erroneous.  The Court acknowledged that it cannot reverse on clear-error review even if the Court believes it would have weighed the evidence differently had it been sitting as the trier of fact.  In other words, where there are two permissible views of the evidence, the factfinder’s choice between them cannot be clearly erroneous.  Therefore, the Eight Circuit affirmed the judgment in favor of Avenoso.

 

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

11/29/21       Weintraub v. Chubb Ins. Co.
United States District Court, Southern District of New York
91-Day Delay in Reporting 1^st-Party Property Claim is Unreasonable as a Matter of Law but Insurer’s Motion to Dismiss is Denied Nevertheless as the Insureds Alleged They Had Not Received the Policy and a Question of Fact Exists Whether the Insurer Abandoned the Defense by Engaging in a 20-Month Investigation Before Denying Coverage

Plaintiffs are collectors of fine arts who own a collection of more than one thousand items insured under a "Chubb Delux House Coverage — Masterpiece" insurance policy which included an "Itemized Articles" rider, which listed items with an insured value of more than $7 million.  The plaintiffs discovered 16 items were missing and 91 days after the alleged loss tendered a claim for $1,499,808. Great Northern (Chubb) acknowledged the claim in a letter in which it "made a reservation of rights concerning the allegedly late notice of claim."

However, the version of the policy delivered to the plaintiffs in connection with a renewal, including the version available electronically through Chubb's website, was incomplete and did not include the provisions requiring a prompt notice of claim.

The Complaint describes the twenty-month investigation as "aggressive, harassing, and overbroad."  Counsel for Chubb allegedly propounded duplicative document requests, insisted on inspections made inconvenient by the COVID-19 pandemic, and made "embarrassing" information requests to third parties, such as auction houses. The plaintiffs allege they nevertheless fully complied with all of counsel’s requests, but that it cost them time, money, and privacy.  They also allege that Chubb’s legal counsel also assured plaintiffs that Chubb was a good insurance company, and the claim would be resolved in good faith and on its merits.

Chubb issued a coverage denial relying among other things on "lack of timely notice of claim" (“You must notify us or your agent of your loss as soon as possible”), as well as "late submission of a pre-printed proof of loss form" and a purported failure to establish that the loss occurred during the term of the policy.

Chubb moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(6), arguing that coverage is precluded because the plaintiffs failed to provide a timely notice of loss as required by the policy.  In support of the motion, Defendant filed two declarations annexing two different versions of the policy documents: 148-page insurance policy ("Long Policy"); and "[a] true and correct copy of the Coverage Summary sent to plaintiffs upon renewal of the policy ("Renewal Policy").  The plaintiffs dispute the authenticity of the Long Policy alleging that neither the printed version of the policy that they received nor the version available on Chubb's online client portal included the notice of loss provision.  Accordingly, the plaintiffs purport to sue on the version of the policy as delivered, which they allege is a valid and enforceable contract.

Chubb describes the Renewal Policy as "a coverage summary annually provided to insureds on renewal that simply summaries the coverages and references the Policy," by which it means the Long Policy submitted in support of its motion, and it asserts that "all terms and conditions of the Policy apply regardless of whether the fully copy of the Policy was delivered to Plaintiffs."

Plaintiffs' opposition raises three issues: (i) whether Chubb may enforce the notice of loss provision, since the plaintiffs allegedly lacked any access to a version of the policy documents that included the notice of loss provision; (ii) whether the plaintiffs' notice was untimely as a matter of law; and (iii) whether Chubb is precluded from raising a late notice defense because it undertook a burdensome, twenty-month investigation of the merits of the claim before disclaiming for late notice.

Assuming that the Long Policy's notice of loss provision were cognizable on this motion and enforceable, the Court holds that the plaintiffs’ late notice of loss was unreasonable as a matter of law, and so they would have failed to establish a necessary condition precedent to coverage, provided that Chubb is entitled to assert a late-notice defense.

Timely notice is a condition precedent to insurance coverage under New York law, and the failure to provide such notice relieves the insurer of its coverage obligation, regardless of prejudice. A notice obligation is triggered when "the circumstances known to the insured at that time would have suggested to a reasonable person the possibility of a claim."  New York courts enforce uncontroverted violations of notice of loss provisions on motions to dismiss unless there is a valid excuse asserted by the insured or waiver by the insurer, because they "enable insurers to make a timely investigation of relevant events and exercise early control over a claim." However, "the insured has the burden of showing the reasonableness of such excuse." "[T]he insurer need not show prejudice before it can assert the defense of noncompliance" with a notice of loss provision. Surveying the case law, the Second Circuit has concluded that "[u]nder New York law, delays for one or two months are routinely held unreasonable." 

No exception is made for losses which appear insubstantial or which in the insured's estimation may not ultimately ripen into a claim. The import is clear; all losses are to be reported as soon as practicable if they are to become the basis of a claim. When the insured indefinitely reserves to itself the determination of whether a particular loss falls within the scope of coverage it does so at its own risk.

The Court denied the motion concluding that under New York case law the notice was tardy and might support dismissal as a matter of law. But nonetheless denied the motion because:

First, the Complaint alleges that the version of the policy that Chubb delivered the plaintiffs upon their most recent renewal did not include the notice of loss provision upon which the motion to dismiss relies. Nor was the notice of loss provision allegedly included in the version posted on the insurer's online client portal or otherwise made accessible to the plaintiffs. Accordingly, the parties dispute both the relevance and the authenticity of the supposedly "full" policy submitted by Chubb in support of its motion.

Second, the Court holds that the Complaint alleges facts that give rise to the plausible inference that Chubb abandoned its late notice defense and so is precluded from using it to obtain dismissal.  Shortly after the plaintiffs tendered their claim, Chubb issued a letter expressly reserving its right to later deny coverage for late notice of loss. Normally, such a reservation would preserve the procedural defense. But in this case, Chubb allegedly embarked on a twenty-month investigation of the claim's merits, allegedly propounding numerous costly, burdensome, and embarrassing demands on the plaintiffs for information, while assuring them that their claim would be adjudicated on its merits. The Complaint therefore gives rise to the plausible inference that Chubb’s extended delay and intensive claim investigation amounted to an implied waiver of its late-notice defense. Viewing this record in the light most favorable to the Complaint, the Court accordingly holds that Chubb is precluded from obtaining dismissal on the pleadings for the plaintiffs' failure to timely file a notice of loss.

Defense counsel presented at argument that the Long Policy was available to the plaintiffs through Chubb's website. But even aside from the fact that the Court cannot make a factual determination based solely on the factual averments of counsel, reliance on this assertion would be prohibited in any event, since it flatly contradicts the Complaint's allegation that only the Renewal Policy was available to the plaintiffs online.  This is a motion to dismiss, so the Court "must take all of the factual allegations in the complaint as true."  Therefore, the Court must assume on the present record that the plaintiffs were never provided access to the Long Policy.

Still, dismissal would later be appropriate if Chubb were able to prevail in demonstrating both that it made the "full" policy adequately available to the plaintiffs and that it did not impliedly waive its late-notice defense. The Court accordingly proposes a limited-scope evidentiary hearing to resolve these two factual disputes. Otherwise, this case will move forward in the usual course on the case management plan.

12/02/21       Mountain Val. Indem. Co. v. Hylton
Appellate Division, First Department
No Duty to Defend or Indemnify as the Premises did not Qualify as a Covered "Residence Premises" or "Insured Location"

The court granted plaintiff's motion for summary judgment declaring that it has no obligation to defend or indemnify Hylton in the underlying personal injury action.  Plaintiff established that it properly disclaimed coverage for the underlying action by submitting evidence that, on the date of the loss, defendant did not live at the premises that were to be covered under the policy. Although she gave a sworn statement to the claims adjuster that she did live at the premises, defendant testified under oath at the deposition in the underlying action that she lived elsewhere at the time of the accident, and her deposition testimony was corroborated by her driver's license.  As a result, the premises did not qualify as a covered "residence premises" or "insured location" as defined by the policy.  Defendant later asserted in an affidavit that she had committed perjury at the deposition because her attorney told her that lying would help her defense. However, she offered no evidence to support her assertion of residence, and, particularly in light of the address on her driver's license, her affidavit is insufficient to defeat plaintiff's motion.

11/30/21       Bitters v. Nationwide General Ins. Co.
United States District Court, Eastern District of Pennsylvania
Question of Fact Whether Homeowner Policy's Additional Coverage for Collapse Applies

Nationwide’s motion for summary judgment was denied because there is a genuine dispute of material fact as to whether the homeowner policy's additional coverage for collapse applies.

Plaintiff alleges he "suffered a sudden and accidental direct physical loss" "caused by collapse due to hidden insect damage" to the foundational structure. Bitters reports that he came home to find the floor of the bedroom in his home collapsed down to the cement slab below. Nationwide denied coverage.

The "Additional Property Coverage" for collapse defines collapse as:

We cover direct physical loss to covered property described in Coverages A, B and C caused by the complete collapse of a building structure or any part of a building structure. Collapse means an abrupt falling down or caving in of a building or other structure or any part of a building or other structure with the result that it cannot be occupied for its intended purpose. A building or other structure or part of a building or other structure is not considered in a state of collapse if:

a) it is standing but in danger of falling down or caving in;

b) it is standing but has separated from any other part of the building;

c) it is standing even if it shows signs of settling, cracking, shifting, bulging, sagging, bowing, bending, leaning, shrinkage, or expansion.

The collapse must be sudden and accidental and caused by one or more of the following:

a) one of the Coverage C — Personal property Perils insured against;

b) hidden decay of a supporting or weight bearing building structural member;

c) hidden insect or vermin damage of a supporting or weight bearing building structural member;

d) weight of: contents, equipment, animals or people; or rain, ice, sleet or snow which collects on the roof; or

e) defective material or methods used in the construction, repair or remodeling or renovation if the collapse occurs in the course of work being done.

The presence of any decay, insect or vermin damage must be unknown to an insured prior to collapse.

Later in the policy, in Section I—Property Exclusions, the policy states, "We do not cover loss to any property resulting directly or indirectly from. . . collapse, except as provided by Section I—Additional property coverages—Collapse."

In Nationwide's view, because "Plaintiff did not suffer a ‘collapse,' the additional coverage for ‘collapse' is not triggered and his damages are excluded under the terms and conditions of the Policy." Bitters alleges that his loss is covered, as he suffered a "sudden and accidental loss" to the insured premises caused by "hidden insect damage of a supporting or weight bearing building structural member," which is covered by the policy.

The insured first bears the burden of proving that the damages claimed fall within the scope of coverage accorded by the policy.  However, when an insurer denies coverage based on a policy exclusion, the insurer "has asserted an affirmative defense, and accordingly, bears the burden of proving such defense."  If the carrier shows that an exclusion applies, the insured then bears the burden of proving that an exception to the exclusion is applicable, creating coverage notwithstanding the exclusion. 

The Court disagreed with Nationwide’s argument that the Additional Property Coverage section, when read in combination with the Exclusions Section should be considered as an exception to an exclusion, with the burden falling on the insured to establish coverage.

The Additional Property Coverages section's language begins with a positive grant of coverage: "We cover direct physical loss to covered property . . . caused by the complete collapse of any building structure or any part of a building structure." It then lists circumstances in which a structure is not considered to be collapsed and limits the covered causes of collapse. This section precedes the Exclusions section and is located in the "Section I—Property Coverages" provision of the policy. The Court, therefore, read the Additional Property Coverage Section to be a grant of coverage, albeit limited by exclusions, rather than an exception to an exclusion. It read the "Exclusions" section as merely a cross-reference to the Additional Property coverages section. Because Nationwide seeks to disclaim coverage based on a policy exclusion, it bore the burden of proving the applicability of the exclusion as an affirmative defense.

The Court then found that there is a genuine dispute of material facts from which a reasonable juror could find for Plaintiff.  First, the parties dispute the amount that the floor dropped during the incident.  Bitters alleges that the floor collapsed down to the cement slab in the crawl space below, a height he believes to be maybe three to three and a half feet. Nationwide, on the other hand, characterizes the loss as a "small amount of sinking," and its litigation expert estimates the floor settled three to five inches.

Therefore, the distance the floor initially fell — a few inches or all the way to the floor — remains a genuine dispute of material fact.  This is material because Bitters is alleging the "falling down" of a part of a building structure, while Nationwide maintains that it merely settled. Nationwide argues that under no interpretation of the facts could the policy apply, as while it has "settled," "it is uncontroverted that the Property is still standing" and is not in a state of collapse under the policy "even if it shows signs of settling, cracking, shifting, bulging, sagging, bowing, bending, leaning, shrinkage, or expansion." But the language of the policy is unambiguous in that it specifically provides that collapse need not have involved the entire property and may instead be just a "part of a building." Consequently, the fact that the entire house has remained intact is not fatal to Bitters' argument.

To the extent that there is ambiguity in the terms defining collapse and "standing" in the policy, the terms are construed in favor of the insured.  Bitters alleges that the floor collapsed to the cement foundation, which a reasonable jury could find to be the kind of "falling down" such that part of the building exceeded merely showing signs of settling and was no longer "standing" under the bounds of the policy's definitions.

Second, the parties dispute the habitability of the room. The policy's definition of collapse requires the "result that it cannot be occupied for its intended purpose." Bitters denies that the room was habitable immediately after the collapse, while Nationwide alleges that the room was and continues to be habitable. This dispute is material because it directly bears on applicability of the collapse coverage.

Third, the parties dispute the cause of the collapse. Four experts have been retained, two by each side. Both of Bitters' experts attribute the cause of the collapse to insect damage. One of Defendant's experts attributes the loss to insect and water intrusion damage, while another expert solely blames water damage. Thus, the parties disagree as to the cause of the collapse, which has implications for coverage under the policy.

11/08/21       Liberty Mut. Ins. Co., et al. v. Frias, et al
Supreme Court, New York County
Coverage Denial Based Upon Rate Evasion Affirmed in Default Motion Precluding Coverage to Insured and Medical Providers

In this declaratory judgment action, the plaintiffs successfully move pursuant to CPLR 3215 for leave to enter a default judgment against defendants Frias and the medical provider defendants. The plaintiffs seek a judgment declaring that they are not obligated to pay no-fault benefits in connection with injuries that Frias allegedly sustained in a motor vehicle accident or to reimburse the non-answering medical defendants for treatment they rendered to her for those injuries.

Frias claimed that she was injured in a motor vehicle accident and thereafter submitted an application for no-fault benefits. She obtained medical treatment or medical supplies from the various medical defendants. The medical defendants sought payment for no-fault benefits under the policy. See Insurance Law 5106(a); 11 NYCRR 65-1.1.

An investigation by the plaintiffs revealed that the subject vehicle was not usually garaged at the address in Fort Lee, NJ, as represented by Frias in connection with procuring the policy, but rather in Bronxville, New York. A visit was made to the New Jersey address and it was confirmed that Frias did not reside at that address. A visit was also made to the New York address; the individual defendant's vehicle was parked directly in front of the house.

Frias appeared for her EUO. She testified that (i) all of her mail is sent to the New York address and (ii) for the past two years her boyfriend has paid her expenses and she assists him with his business. The same day, the boyfriend also appeared for his EUO and testified that (i) Frias resides with him at a house he rents in Bronxville, New York, (ii) she assists him with his business and he helps her with her bills, and (iii) she stays overnight in Bronxville, New York four or five nights a week, receives all her mail at that address, and that he financially supports her. The plaintiffs also submit the affidavit of an underwriter, in which he states that the policy was created and issued to her with a premium of $2,025.00 based upon the N.J. address and that upon discovery of the true address in New York, the policy was re-rated and the premium was increased to $3,015.00.

The plaintiffs denied the defendants' claims for benefits concluding Frias made material misrepresentations in her application with respect to where the insured vehicle was usually garaged thereby vitiating coverage.

"On a motion for leave to enter a default judgment pursuant to CPLR 3215, the movant is required to submit proof of service of the summons and complaint, proof of the facts constituting the claim, and proof of the defaulting party's default in answering or appearing.  The proof submitted must establish a prima facie case. The plaintiffs met their burden.

It is well settled that an insurer may deny coverage based upon an insured's material misrepresentation in his or her insurance application. See Insurance Law 3105(a);(b).   In particular, where an insured makes material misrepresentations on his or her application for insurance as to where he or she regularly garages a vehicle sought to be insured, coverage is defeated.

The plaintiffs' proof establishes, prima facie, that when the policyholder first applied for insurance coverage she represented that she resided primarily at the New Jersey address and that the insured vehicle was regularly garaged there. However, according to the proof submitted by the plaintiff, the car was regularly used and garaged at the New York address, where premium rates are significantly higher. The denial-of-claim statements show that the relevant denials of coverage were expressly based on the ground that the policyholder made material misrepresentations in her application for insurance with respect to the where the vehicle was regularly garaged in order to reduce insurance premium rates. Having failed to answer, the defendants are "deemed to have admitted all factual allegations in the complaint and all reasonable inferences that flow from them." 

11/19/21       Blanton v. State Farm Fire and Casualty Co.
United States District Court, Western District of Pennsylvania
Court Affirms 1^st-Party Property Coverage Denial for Resulting Damages from Broken Downspout: to the Interior Because they Were Due to "Continuous Exposure of Water from the Downspout"; and Deterioration, Rot and Mold Inside the Soffit Under the Gutter

Plaintiff filed a Second Amended Complaint in her breach of contract against State Farm and it moved to dismiss which was granted.

The Policy includes these terms:

We will pay for accidental direct physical loss to the property described in Coverage A, unless the loss is excluded or limited in SECTION I — LOSSES NOT INSURED or otherwise excluded or limited in this policy.

...

SECTION I — LOSSES NOT INSURED

1. We will not pay for any loss to the property described in Coverage A that consists of, or is directly and immediately caused by, one or more of the perils listed in items a. through m. below, regardless of whether the loss occurs abruptly or gradually, involves isolated or widespread damages, arises from natural or external forces, or occurs as a result of any combination of these:

...

g. wear, tear, decay, marring, scratching, deterioration, inherent vice, latent defect, or mechanical breakdown;

...

k. settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations (including slabs, basement walls, crawl space walls, and footings), walls, floors, roofs, or ceilings;

...

However, we will pay for any resulting loss from items a. through l. unless the resulting loss is itself a Loss Not Insured as described in this Section. [the "Resulting Loss Provision."]

Blanton alleges that she suffered sudden and accidental direct physical loss to the property as a result of water damage. According to her the copper downspout on the property split, causing the release of water behind the soffit, fascia, and stucco. The water that ensued from the split downspout caused water staining, delamination, and swelling of the OSB sheathing which resulted in cracking and detachment of the exterior stucco finish of Plaintiff's property.

State Farm "admitted that there was damage from a frozen downspout, applied coverage and prepared an estimate." State Farm denied coverage for damages to the interior of Blanton's property because they were due to "continuous exposure of water from the downspout." It also concluded that there was degradation of structural areas resulting in deterioration, rot and mold inside the soffit under the box gutter.

Blanton alleges that the damages to her property cannot be characterized as degradation, deterioration, rot or mold. Even if they are so characterized, she asserts, these damages are covered under the Policy because they were caused by a sudden and accidental release of water from the cracking of the downspout.

Blanton alleges that her loss was "sudden" and occurred on August 27, 2019. She contends that State Farm admitted that her property sustained water damage as a result of a frozen downspout. In Exhibit B to the Second Amended Complaint, she submits an email from her adjuster that provides an explanation of "the resulting damage from the broken downspout." The adjuster states that when the downspout split, "melting snow and ice" caused delamination and swelling. Even accepting all of her allegations as true for purposes of the pending motion to dismiss, she fails to allege any facts that could plausibly support a conclusion that on August 27, 2019, in Pittsburgh, Pennsylvania, her downspout froze or melting snow and ice suddenly caused water damage. Indeed, the only logical conclusion from reviewing the entire complaint, including its exhibits, is that she discovered "water staining, delamination, and swelling of the OSB sheathing" on or about August 27.

Plaintiff unpersuasively argues that because State Farm concluded that there was coverage for the loss of the split downspout, it cannot deny coverage for the resulting water damage. However, while State Farm determined that damage to the downspout itself, which Blanton alleges froze and split, is a covered accidental loss, this did not preclude it from concluding that the Policy does not provide coverage for the resulting damage claimed by Blanton.

Moreover, Blanton's Second Amended Complaint does not cure the deficiencies of her prior complaints. While she has now defined the damage to the property as "water staining, delamination, and swelling of the OSB sheathing which resulted in cracking and detachment of the exterior stucco finish of Plaintiff's property," a plain reading of the Policy compels the conclusion that these damages are defined as "losses not insured" and thus are excluded from coverage.

Among the "losses not insured" are wear, tear, decay, marring, and deterioration (Section I-Losses Not Insured, 1.g.), as well as cracking, bulging, shrinking or expansion of walls, roofs, or ceilings (Section I-Losses Not Insured, 1.k). The Court finds that these terms are plain and unambiguous and thus must construe them in their plain and ordinary meaning. Delamination, which is defined as "separation into constituent layers," http://www.merriam-webster.com/dictionary/delamination, and water staining fall within the common meaning of decay, deterioration, and/or marring. All of these common terms relate to the impairment of appearance or quality. Likewise, as specifically described in Exhibit B, a swelling of sheathing attached to the rafters of the structure represents a bulging or expansion of the walls and/or roofs, and therefore also represents a loss not insured.

The Policy states that State Farm "will pay for any resulting loss from items a. through l. unless the resulting loss is itself a Loss Not Insured as described in this Section." The resulting loss claimed by Blanton is cracking and detachment of the exterior stucco finish of her property. As noted in the Court's previous opinion, cracking of walls is a loss not insured under the Policy. Moreover, detachment of the stucco walls also falls within item k as it relates to a shrinking, bulging or expansion of the walls of the property. It also represents deterioration of the walls (1.g.). Thus, as these resulting losses are also losses not insured, they are also excluded from coverage pursuit to the terms of the Policy.

For these reasons, Blanton has failed to state a claim on which relief may be granted. The Court finds that any further amendment would be futile.

11/29/21       Liberty Mutual Group, Inc., et al. v. 700 Pharmacy, LLC, et al
Superior Court, Pennsylvania
Insurers Failed to Present Sufficient Evidence to Support Their Claims of Fraud, Unjust Enrichment and Aiding and Abetting Against Medical Providers Claiming They Had Created an Unlawful Business Structure Under Which Doctors Prescribed Topical Compound Pain Creams to Patients Who had Been Injured at Work or in Automobile Accidents

Appellants, Liberty Mutual Group, Inc., et al., appeal from the order granting the motion for summary judgment filed by Appellees, a group of pharmacies, pharmacists, physicians, physician assistants, and lay investors, and entering judgment in favor of Appellees on all claims. Affirmed.

Appellants filed a complaint against Appellees alleging fraud, insurance fraud, aiding and abetting, and unjust enrichment claiming that Appellees had created an unlawful business structure under which doctors prescribed topical compound pain creams to patients who had been injured at work or in automobile accidents. The patients then filled the prescriptions at pharmacies in which the doctors had a financial interest. Appellees alleged that the compound pain creams were formulated by pharmacies for the sole purpose of generating a profit and that Appellee doctors were receiving unlawful kickbacks.

Appellees subsequently moved for summary judgment, arguing that Appellants had neither "presented nor produced any evidence to support the allegations in the complaint”, arguing that the universe of testimony and documents exchanged during discovery establishes that Appellee pharmacies: (1) dispense a wide range of medications, including compound medications, (2) are licensed and operate within the boundaries of state and federal law, (3) have physicians with minority ownership consistent with state and federal law, (4) paid each owner (whether or not a physician) profits based solely upon their percentage of ownership, i.e., there were no kickbacks, (5) did not require physician owners to prescribe any medications through the pharmacies, and (6) operated legally.

In response, Appellants argued:  the majority of the key evidence in this case comes not from Appellants, but from discovery obtained from Appellees in the form of written documents, including tax documentation, and deposition testimony, which has revealed a complex scheme perpetrated by Appellees whereby multiple pharmacies were created to facilitate and promote submission to Appellees of fraudulent claims for compounded medications using pre-printed, non-individualized prescriptions and letters of medical necessity. This generated huge profits for Appellee pharmacies and insiders as Appellee doctors received kickbacks disguised as dividends and other payouts based on volume of prescribing or filling of fraudulent scripts for topical pain cream, all to the detriment of Appellants and the public at large by Appellees' billing the insurers thousands of dollars per tube of cream and raking in millions of dollars in profit as a result.  Further, Appellees asserted that there was "evidence of [the] fraudulent scheme" in (1) Appellees' letters of medical necessity, which misrepresented that the prescriptions were specifically tailored to the needs of each patient; (2) the characterization of the prescription pain creams as compound drugs under Section 503A of the Food, Drug and Cosmetic Act (FDCA), and (3) the illegal structure of Appellees' business. 

Ultimately, the trial court granted summary judgment in favor of Appellees and dismissed Appellant's amended complaint.  The trial court noted that Appellants "failed to produce evidence to show that Appellees made material misrepresentations" to support their claim of fraud. With respect to the letters of medical necessity, the trial court found that it did not have jurisdiction to consider whether those letters contained misrepresentations about the necessity of each patient's medical treatment outside of the Workers Compensation Act. Further, the court concluded that the prescription pain creams met the definition of a "compound drug" under Section 503A of the FDCA and that Appellees' business structure was legal.  Finally, the trial court concluded that there was no evidence to support a claim for unjust enrichment and that, because Appellants failed to prove an underlying tort by Appellees, their aiding and abetting claim must also fail. 

On appeal, Appellants raise multiple issues as follows:

1. Whether the [trial] court had subject matter jurisdiction when [Appellants] did not sue all of the owners of the limited liability companies operating the pharmacies?

2. Whether the [trial court] had jurisdiction to determine whether there were any misrepresentations contained in the letters of medical necessity?

3. Whether there was sufficient evidence of misrepresentations contained in the letters of medical necessity, regarding the compound pain creams prescribed, and concerning the legality of the business structure of the pharmacies, to raise genuine issues of material fact and preclude the entry of summary judgment on the common law and statutory insurance fraud claims?

4.  Whether there was sufficient evidence presented to support a claim for unjust enrichment and to preclude the entry of summary judgment on that claim?

5. Whether the claim for aiding and abetting would survive a motion for summary judgment without the predicate common law and statutory insurance fraud?

Appellants argue that the trial court erred in concluding that it lacked subject matter jurisdiction based on Appellants' failure to join indispensable parties. Appellees respond that Appellants failed to join indispensable parties, including "physicians and owners who were part of the allegedly fraudulent plot." The court held that absent an appropriate claim and identifiable issues of material fact concerning misconduct by the unnamed defendants, the record did not establish that they were indispensable parties. 

Appellants also challenge the trial court's conclusion that it lacked jurisdiction to review the letters of medical necessity outside of the procedures established by the Pennsylvania Workers' Compensation Act. Here, to the extent Appellants challenge the reasonableness or necessity of the treatment provided to patients who suffered work-related injuries, the trial court correctly concluded that it did not have jurisdiction to revisit that issue. However, many of the claims submitted to Appellants were for patients who were injured in automobile accidents or in work-related injuries that occurred in New Jersey, which do not fall under the Pennsylvania Workers' Compensation statute. Therefore, the Court agreed with Appellants that the trial court erred in resolving this issue solely based on the Pennsylvania Workers' Compensation statute.

Appellants next argue that the trial court erred in granting summary judgment with respect to fraud because there was "ample evidence" that Appellees made material misrepresentations in the claims submitted to Appellants.  Specifically, Appellants refer to (1) the letters of medical necessity; (2) the characterization of the pain creams as a compound drug; and (3) the legality of Appellees' ownership and operation of the pharmacies.

The court concluded that Appellants failed to identify any evidence, let alone material issues of fact, to support this claim. Based on our review of the record, we discern no error of law in the trial court's ruling. The trial court thoroughly addressed Appellants' claim regarding the legality of Appellees' business structure and concluded that there was no evidence of a misrepresentation by Appellees. 

Appellants' claim for unjust enrichment fails as a matter of law. First, while Appellee pharmacists, lay investors, physicians and physician assistants did realize a benefit in the form of dividends distributed by the defendant pharmacies to them, the dividends may not be the basis for the unjust enrichment since any dividends paid arise from the Appellants' ownership interest in the pharmacies. To the extent Appellee pharmacists, lay investors, physicians and physician assistants benefitted, the benefit was a result of their ownership in the pharmacies and not from Appellants. As for the remaining group of Appellees, the pharmacies, while the claim reimbursements were made directly to them, there is no evidence that the reimbursements were unjust. The evidence shows that the pharmacies were paid pursuant to the workers compensation and Motor Vehicle Responsibility Law fee schedules. There is no evidence that the pharmacies were paid more than the average wholesale price. Since there is no evidence of overpayment, the claim for unjust enrichment fails.

Based on our review of the record, we agree with the trial court that Appellants failed to present evidence, let alone identify any issues of material fact, to support their unjust enrichment claim. Further, Appellants failed to establish legal error in the trial court's legal conclusions. Instead, Appellants reiterate their assertion that Appellees were unjustly enriched through their participation in a fraudulent scheme. However, because Appellants have failed to produce evidence to prove fraud, their unjust enrichment claim must also fail. Therefore, Appellants are not entitled to relief.

Finally, Appellants argue that the trial court erred in dismissing the claim for aiding and abetting. Here, the trial court concluded that "since the claims for fraud and insurance fraud fail, the underlying unlawful act required to state a claim for aiding and abetting is nonexistent and therefore the claim is dismissed."  Based on our review, we agree with the trial court's conclusion. Because Appellants failed to establish a cause of action for an underlying tort, the aiding and abetting claim must also fail. 

 

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

11/29/21       Genis v. Transamerica Life Ins. Co.
Supreme Court, New York County
Designated Beneficiary under a Life Insurance Policy Challenges Insurer’s Failure to Pay Full Policy on a Variety of Contract Grounds

Plaintiff was the designated beneficiary under an insurance policy between three Defendant insurance companies and the decedent. The policy had a $10,000 primary death benefit and a $90,000 supplemental death benefit. However, Defendants only paid $10,000 from the primary policy and just $10,000 from the supplemental policy (the Court did not elaborate on why Defendants only paid $10,000 of the supplemental policy). Plaintiff commenced suit claiming that Defendants unilaterally reduced the supplemental death benefit from $90,000 to $10,000 and sought to recover the outstanding $80,000. Defendants moved to several of Plaintiff’s causes of action, which were based primarily in contract law. The Court acknowledged that that although it had to accept the facts in Plaintiff’s complaint as true, conclusory allegations consisting of bare legal conclusions were insufficient to survive Defendants’ motion to dismiss. All the claims Defendants sought to dismiss were based on Defendants’ failure to pay the outstanding $80,000.

Defendants first moved to dismiss Plaintiff’s specific performance claim. The Court noted that specific performance is an equitable remedy that is properly pursed only when real property is at issue or when “the uniqueness of the goods in question makes calculation of money damages too difficult or too uncertain.” Here, since money damages would adequately compensate Plaintiff, the Court dismissed Plaintiff’s specific performance claim.. 

Defendants then moved to dismiss Plaintiff’s unjust enrichment claim. Per the Court, unjust enrichment requires a showing that 1) the Defendants were enriched, 2) at Plaintiff’s expense, and 3) it would be against equity and good conscience to permit the Defendants to retain the $80,000. Applying the doctrine to the facts here, the Court noted that under the supplemental insurance contract, the decedent paid the Defendants premiums, but the Defendants failed to payout the full policy to Plaintiff. Since Defendants’ adherence to the insurance contract was in issue, the Court held that Plaintiff sufficiently stated a cause of action for unjust enrichment.

Defendants next sought to dismiss Plaintiff’s claim for breach of the implied covenant of good faith and fair dealing. Per the Court, breach of the implied covenant of good faith and fair dealing requires that the Defendants commit a tort separate and apart from the insurance contract. Where the issue, like here, is solely that the Defendants did not pay under the contract, there is no breach of duty separate and apart from the contract.

Defendants next moved to dismiss Plaintiff’s unfair and deceptive business practices claim, made under General Business Law Section 349, which required a showing that Defendants engaged in “consumer-oriented conduct” which was “materially deceptive or misleading” and that Plaintiff was injured because of it. The Court held that it is blackletter law that a claim for deceptive practices in violation of General Business Law Section 349 cannot arise from a private contract dispute involving coverage under an insurance policy. Under GBL 349, the offending conduct must be conduct which affects the consuming public at large.

Finally, Defendants sought to dismiss Plaintiff’s punitive damages claim. Plaintiff’s punitive damages claim required that 1) Defendants’ conduct must be actionable as an independent tort; 2) the tortious conduct must be egregious; 3) the egregious conduct must be directed to Plaintiff; and 4) the conduct must be part of a pattern directed at the public. The Court dismissed the punitive damages claim since it found that Defendants’ conduct was reserved to a private contract and was not directed at the public.

12/02/21       New York Med. & Diagnostic Ctr. v. GEICO Ins. Co.
Civil Court of the City of New York, Queens County
No-Fault Benefits Insurer Moves to Dismiss an Assignee’s Claim for Benefits on Timeliness and Fee Schedule Grounds

Plaintiff, a medical care provider and assignee of no-fault benefits, sued Defendant insurance company to recover $2,141.70 in unpaid first party No-Fault benefits for medical services provided to Plaintiff’s assignor Browne, plus attorneys’ fees and statutory interest. Defendant moved to dismiss the complaint on the grounds that Plaintiff submitted some claims untimely and other claims exceeded the fee amount prescribed by applicable fee schedules.

Per the Court, an assignee of no-fault benefits must submit proof of the claim to the insurer within 45 days of the date the services were provided. Compliance with the 45-day requirement is a condition precedent to an insurer’s liability. Additionally, any charges submitted for basic economic loss cannot “exceed the charges permissible under the schedules prepared and established by the chairman of the workers’ compensation board for industrial accidents, except where the insurer or arbitrator determines that unusual procedure or unique circumstances justify the excess charge.”

To support its motion, Defendant presented an affidavit from its Claims Associate, Victor. The affidavit detailed the bills Defendant received from Plaintiff, including the dates Plaintiff provided the corresponding service and the dates Defendant received the bills. For most of the bills, Plaintiff clearly failed to timely submit the bills within the 45-day window. Plaintiff argued that Victor’s affirmation that Plaintiff untimely submitted its claims constituted hearsay. However, copies of Plaintiff’s claim forms, Defendant’s denial of claim, and explanations of review for each claim were attached to Victor’s affidavit and provided ample support for his position. The Court also rejected an affidavit from Plaintiff’s employee which attempted to justify the untimely submission of the bills on the grounds that Plaintiff was unable to locate the assignor to ascertain his insurance information. The Court held that the affidavit required more detail regarding Plaintiff’s attempts to locate the assignor.

A minority of the bills were not challenged by Defendant on timeliness grounds but rather on the ground that they exceeded the applicable fee schedule. The Court denied Defendant’s motion on fee schedule grounds, holding that Defendant’s interpretation of the fee schedule required support by expert opinion evidence to be admissible.

 

NORTH of the BORDER
Heather Sanderson
[email protected]

British Columbia
The Atmospheric Rain Event of November 14-16, 2021, could be Canada’s Costliest Natural Disaster – Ever

The flooding in British Columbia’s Fraser Valley and the Nicola Valley caused unprecedented damage:

• All highways and rail lines in and out of Vancouver had sections either washed out or impacted by mudslides or both. It was several days before the rail lines were restored. Highway links have been partially restored adding hours and delay to the delivery of goods and services. Delivery companies are adding fuel surcharges due to the longer service times stressing the price of goods in short supply.

• In addition to Vancouver, multiple towns and cities were also isolated; the entire city of Merritt was evacuated; Princeton was partially evacuated.

• British Columbia’s main agricultural area was flooded resulting in the drowning deaths of thousands of cattle, chickens and pigs.

The proliferation of damage extends beyond beleaguered British Columbia. The main east / west supply route has been severely impacted resulting in shortages across Canada of some categories of food, lumber, consumer goods and parts.

Estimates are that the damage and repairs will likely eclipse the 2016 Fort McMurray wildfire as the costliest natural disaster in Canadian history. The Fort McMurray event resulted in C$3.7 billion in insurance claims and C$9 billion in actual repair costs.

Quoted by Global News on November 19, Rob de Pruis, director, consumer and industry relations for the Insurance Bureau of Canada said

“Between 1983 and 2008, the …[Canadian]… insurance industry was paying out, on average, about $422,000,000 of severe weather damage across …[Canada]… in the last decade, that number has risen to $2.1 billion, on average across ..[Canada]. Last year, …[Canada]… experienced about $2.4 billion in damage related to severe weather events…Before this severe weather event in B.C., we still experienced over $1.3 billion in claims from severe weather, just this year so far.”

Québec
Privacy Regulation:  With the Enactment of Bill 64, Québec becomes the most GDPR-like Jurisdiction in North America

In September of 2021, the Province of Québec enacted Bill 64 that pertains to the collection and use of personal private information (PPI). The standards set by this legislation, which come into effect over the next three years, are the closest emulation of Europe’s General Data Protection Regulation (GDPR ) currently in existence in North America.

This legislation applies to the collection and use of personal information by private sector businesses in Québec and those private businesses outside of Québec  (including those in the United States) that collect the private information of Québec residents.

Key elements of the legislation include:

• Strict consent requirements that must be followed in order to collect the PPI of Québec residents.

   

• Québec residents have the right to have their information deindexed (tantamount to the right to be forgotten under the GDPR).

   

• When the purpose for which the data was collected is achieved, the data must be destroyed or anonymized. Anonymized data must only be used for a serious and legitimate purpose.

   

• Similar to the GDPR, individuals will have a right to data portability. The Act provides that a person may request that their personal information be communicated or transferred to the person or a third-party organization in a structured and commonly used format.

   

The legislation will be enforced by the first Canadian privacy regulatory body with the power to impose administrative monetary sanctions for non-compliance with privacy laws.  Violation of the legislation carries very stiff penalties:  The maximum fine attached to the penal provisions in the Bill is CA$100,000 for an individual and CA$25 million or 4% of the previous year’s global revenue for a corporation.

In addition, the Act will now grant a private right of action for damages resulting from the unlawful infringement of the right to privacy conferred by the Act or by articles 35 to 40 of the Civil Code of Québec.  We will see how the Courts view this right of action but it will undoubtedly fuel class actions for breach of privacy rights of Québec residents. 

This sea change in the use of private information has widespread public support across Canada in view of the Facebook/Cambridge Analytica and Equifax scandals and the massive data breach at Desjardins Financial.

The Canadian federal government is overhauling its privacy legislation which applies to the private sector in all provinces and territories other than Alberta, British Columbia and Québec which have their own privacy legislation. The high bar set by this overhaul of Québec privacy legislation is predicted to cascade to Alberta and British Columbia.  Ontario is another province considering enacting its own privacy legislation. A recently published white paper is peppered with positive references to Bill 64.

As a result, Québec ’s bold legislative move will likely require the federal government to meet the same standard to avoid fragmentation and commercial chaos.

This increased statutory liability that is emerging in Canada will result in privacy claims that will pressure all forms of cyber liability coverages and directors’ and officers’ liability wordings. Without doubt, statutory and common law privacy claims will forge the next frontier of insurance coverage debate and opinion.

 

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