Coverage Pointers - Volume XXIII, No. 19

Volume XXIII, No. 19 (No. 614)
Friday, March 4, 2022
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?  Everyone seems to have one these days.  Have no fear, we LOVE situations.

We are off to Palm Desert, California today, Friday, for the Winter Meeting of the Federation of Defense & Corporate Counsel and to celebrate my birthday on Saturday.  I happen to love birthdays

A little historical tidbit, my parents were considering naming me Joseph, but the events of my birth day changed their decision.  Not surprisingly, my delivery into the world was not the headline on the day I was born, but papers included these front-page headlines instead, reporting on what would the death of the Communist leader on that particular March 5:

Stalin Still Near Death, Red Radio Reports; New Complications Revealed
Oneonta Star

Stalin Reported in Deep Coma;
Red Rulers Are Seen as Divided

Kingston Daily Freeman

Stalin Is in His Final Hours
Ike Wiling to Meet Next Red Dictator

Binghamton Press and Sun-Bulletin

Stalin in New Relapse
Pravda Appeals to People for Unity

Brooklyn Eagle

And, in Palm Springs California (keeping priorities intact …)
Special Census to Start in Palm Springs, Today
Final Report on Count to be Known Soon

Hey, a special thanks to our Canadian contributor, Heather Sanderson, from Sanderson Law in Alberta, Canada for her regular and superb contributions to this publication!

Just a head’s up on an interesting case in my column in the attached issue (Berkshire Hathaway),  How often, in a declaratory judgment action, do policyholder’s attorneys seek discovery of underwriting files, when the lawsuit involves the applicability of an exclusion?  This case (although decided under Florida law), denied discovery of the underwriting file as, basically, irrelevant to the issues under consideration by the court.


CIDA -- Comprehensive Insurance Disclosure Act (NY)

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This is addressed to any lawyer defending civil litigation in New York State and any claims professional working with that lawyer. The CIDA amendments have been signed into law and the statute is now in final form.


Under the newly minted amendments, defense counsel will need to make initial production of policy(ies), dual certifications and related information within 90 days of the date an answer was filed for any civil action (where there is underlying insurance) commenced in 2022. If you didn’t notice that we attached a CIDA compliance checklist in our special edition last week or if you’ve lost it, let us know and we’ll send it along.

In other words, if a lawsuit was commenced on January 2 and an answer was filed on January 30, the first statutory production will be on or about April 30. These productions will not necessitate a discovery demand but there is an affirmative obligation to produce. 

For attorneys, I suggest you check your inventory for all lawsuits filed in 2022, perhaps paralegal help will be very useful here, and diary your production obligation date. You will need to leave time to secure certifications. For claims professionals, you will need to have policies and other information ready to be produced. It was all on the checklist provided earlier. If you need a copy, just holler.

If your organization needs training, your friends at Hurwitz & Fine, P.C., are setting up 30-minute training sessions. Just reach out.


Need a mediator?

Hey coverage lawyers?  Hey claims professionals. Have you and a friend, adversary, or lawyer for whom who have respect reached a stalemate on a coverage dispute?  Look, we know each other.  We know that.  We don’t want to litigate every coverage disagreement.  Why?   Because the position we oppose today may be the one we advocate tomorrow.  Face it.  We all understand that.

Let me help mediate your disagreement to see if there is some mutual agreement, we can reach that will not box us into a corner. Reach out to me.  I will be pleased to mediate your dispute.

My partners, Mike Perley and Ann Evanko, are also available to help resolve other challenges.

You don’t want adverse precedent that will bite you next time you might have a slightly different view on coverage issues. You don’t want to spend tens of thousands of dollars to litigate a coverage issue before a motion judge or appellate justice that know as much about insurance coverage as you do about nuclear physics.  For those in the Western District of New York, I am certified by the Court and on the WDNY Mediation Panel as are Mike and Ann

Try mediation.


Training, Training and More Training:

Schedule your in-house training for 2022.  Need a topic?  Here are 160 or so coverage topics from which to choose.



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.


I Did It, I Did It, and He Deserved It (100 Years Ago):

The Buffalo Times
Buffalo, New York
4 March 1922

Girl Who Stabbed Lover
Thinks He Deserved It


"He deserves all he got but I'm sorry I showed him I cared enough to do it."

These words, spoken as she went into the City Court Saturday, expressed the sentiments of Margaret Volner, No. 183 West Huron Street, charged with assaulting George F. Stockman, No. 123 West Huron, with a hatpin, and severing several arteries in his face.

"Any man who will treat a girl as he treated me, deserves to be stuck in the face," she said. "We had been engaged for more than a year, had been together contentedly, and had spent hours planning a little home of our own filled with business. Last night he told me he was through and would never marry me.

Wanted to Hurt Him.

"I pleaded with him, but he insisted, and refused to give me any sufficient reason. I saw all the air castles slipping away. Still, I begged but he was unmoved. I wanted to hurt him as he had hurt me, and I pulled out a hatpin and scratched him.

"When I saw the blood rush from the wound, where I had severed two arteries. I almost fainted. I was sorry I had hurt him, and I was sorry I had, as it seemed taken the law in my own hands.

"But I was just as sorry that I had let him know I cared enough to let him hurt me, and to want to hurt him. I wished I had let him go as he wanted to.

Miss Volner is 19 years old. She was conducted to City Court this morning by Detective Sergeant Michael Murphy of the South Division Street station, and Miss Elizabeth T. Driscoll, matron of the same precinct. She held tightly to Miss Driscoll's arm as she entered the court building, her lips trembling, and murmuring softly, "Oh, dear, oh, dear!"

She was arraigned before Judge Keeler and released on $500 bail, with her trial postponed until Monday, after pleading not guilty to a charge of assault, second degree. Stockman went to his home after attention.

Stockman met the girl more than a year ago, shortly after he had been divorced from his first wife. After a violent courtship, they became engaged, and according to the girl's story, made "wonderful plans" for a home of their own. Because these were too suddenly shattered, she lost control of her emotions and attacked him with, a hatpin.

"I am sorry, very sorry, I did it," she said, "I suppose I had no right to. But I do think he deserved to be punished.”


Peiper on Property and Potpourri:

Pardon the brevity this week. I had the very good fortune of catching up with old friends at the IADC Mid-Year meeting last week in Paradise Valley/Scottsdale, and I’ve been digging out ever since.  I can now report that it does, in fact, rain in the desert, as the end of my stay was quite unpleasantly interrupted by temps in the 40’s and sideways precipitation.  Who says Buffalo weather is the worst!?!?                  

As for the column this week, we review a waiver of subrogation case from the First Department.  If you have never dealt with this issue before, it can be a bit tricky.

Basically, most first party policies recognize a waiver of subrogation if the right is waived in the underlying documents (usually condominium by-laws).  That said, even if you have a waiver clause in the by-laws, you still also need to have a corresponding waiver clause in the policy. Where you don’t have both clauses acting in concert, the subrogation rights will not be waived, and you revert to the common law right to proceed against the tortfeasor.

That’s it for this week.  See you in two more. 

Steven E. Peiper

[email protected]


Alimony by a Nose – 100 Years Ago:

Buffalo Courier
Buffalo, New York
4 March 1922


Aurora, Ill., March 3.—Herbert P. Crane, wealthy iron manufacturer, who arrived here unexpectedly today to contest court action by his former wife, Miss Elida Piza, Costa Rican beauty, to retain possession of their son and to force Crane to pay back alimony amounting to $70,000, had little to say about-his plans.

He had much to say, however, about a duel to which he was challenged by Senor Antonio Piza, his former wife's father, during a visit to Costa Rica following the divorce. Miss Piza had asserted Crane fled to a railroad train when challenged and said her father pursued him into the coach and slapped him.

Mr. Crane asserted his nose was not tweaked. Crane said the only casualties was a baby on which Senor Piza sat down when the train started suddenly.

Senor Piza, he said, followed him to the railroad station with two rurales and challenged him to fight. Crane was unarmed, he said, and claimed Senor Piza carried a pistol. Senor Piza, Mr. Crane said, threatened him, but Mr. Crane refused to be drawn into an encounter, because of the presence of the officers. The train started suddenly. Senor Piza sat on the baby and was forced to get off, according to Mr. Crane.


Wilewicz’ Wide-World of Coverage (featuring Evan D. Gestwick):

Dear Readers,

A very short missive this week, as the Courts have certainly re-awoken from a covid-slumber and the pace of litigation has pitched up to near full-steam. Suffice it to say, the spring thaw could not come soon enough!

 Now, here’s Evan again with the latest from our Second Circuit Court of Appeals:

Hello Readers! It’s nice to be back to writing for Coverage Pointers after a one-week hiatus. Buffalo weather is showing us its ugly side—it got up to 50 degrees one day last week, and we’ve been stuck in the 20’s ever since.

This week, we have a little fun with words, as we consider the true meaning in the eyes of the law. A policyholder totaled her Lexus and recovered a sum from GEICO, her insurer. Feeling that this sum was too low, however, she sued GEICO under two key provisions in the law: the first forces insurers to pay the “reasonable purchase price” of the car on the date of loss for a new and identical vehicle, and the second forbids insurers from engaging in “deceptive acts or practices” in the conduct of their business. The question then becomes one of reasonableness--”what is the ‘reasonable purchase price’ on the date of the accident? It turns out that it means not necessarily the sticker price, but rather, a price that a reasonable buyer and seller would agree on in the relevant geographical market. The other question asks what is considered “new”--new to the insured, or new to the world? The answer is the latter.

Stay warm, stay safe, and stay tuned until next edition! ~ Evan

Until next time!

Agnes (and Evan)
Agnes A. Wilewicz

[email protected]


Please Send Me to Jail:

Buffalo Courier
Buffalo, New York
4 March 1922


Niagara Falls, March 3—Mrs. Frances Kraft, thirty years old, who has applied for lodging at police headquarters several nights in succession, was sent to the county jail for forty-five days by Judge Piper today at her own request. She said she had been unable to obtain work and hoped things would be brighter when she got out of jail.


Barnas on Bad Faith:

Hello again:

Baseball has officially cancelled Opening Day, and I am officially sad about it.  This was expected, of course, but that does not cure my disappointment.  Luckily, we have March Madness coming up, and I was lucky enough to score tickets to the first and second round games that are going to be played here in Buffalo.  Hopefully, we get some exciting teams coming to town and some great games.

I have a rather lengthy and interesting bad faith case from Kansas in my column today.  It seems there was some confusion about who the tortfeasor’s insurer was, and the plaintiff never made a demand prior to filing a wrongful death action.  After the action was commenced, she received a policy limits offer, but she declined to take it, citing the insurer’s bad faith.  The court was unconvinced, largely because plaintiff had never made a demand prior to turning down the policy limits offer.  The court also found that an insurer has no duty to initiate settlement negotiations absent a claim being made.  Plaintiff had tried to argue that the insurer was required to initiate settlement conversations on its own simply based on the knowledge that an accident resulting in a claim had occurred.  The court disagreed.  The decision also has a lengthy discussion of Kansas bad faith law if you are in the market for that.  Give it a read if you are so inclined.

Brian D. Barnas

[email protected]


Can’t Baptize a Dog:

Buffalo Evening News
Buffalo, New York
4 March 1922

The Rev. and Mrs. Edwin Curtis.

The Rev. Edwin Curtis of the First Presbyterian church, Brookline, Mass., and his wife. Mr. Curtis has been outed from his church for having baptized a dog owned by Mrs. Melbourne Porter of Brookline. The Boston Presbytery voted to depose Mr. Curtis, but his parishioners have come to his aid and threaten to bring the case to court.


Off the Mark (featuring Kyle A. Ruffner):

Dear Readers,

No interesting weather of late in the Metro NYC area, which is fine by me.  The days continue to get longer, and the warmer weather is right around the corner.  Now that the COVID numbers have declined significantly, the family and I went out to eat for the first time in a long time.  The kids wanted to try fondue.  The food was pretty good, but because you must cook the food yourself, it took three hours.  Yes, three hours.  As my wife and I share the cooking duties at home, it wasn’t all that exciting to us.  The kids loved it though, especially the melted chocolate at dessert.

Kyle Ruffner provides two interesting case summaries for this edition of “Off the Mark.”  In Main St. Am. Assur. Co. v. Connolly Contrs., Inc., the U.S. District Court for the Eastern District of Pennsylvania examined the carrier’s duty to defend where the underlying allegations were based on faulty workmanship and held that claims of faulty workmanship do not allege an “occurrence”.  construction defects damaged something other than the project, finding a duty to defend. In the second case, Pavlicek v. Am. Steel Sys., the Supreme Court of North Dakota also reviewed the duty to defend, finding a coverage obligation for damaged property other than the insured’s work product.

Until next time …

Brian (and Kyle)
Brian F. Mark

[email protected]


Hooch Talks, Nobody Walks:

The Brooklyn Daily Eagle
Brooklyn, New York
4 March 1922


Amielo Grasso, 25, of 786 Woodward Ave., and John Mohr, 44, address unknown, were found early this morning in an unconscious condition at Onderdonk Ave. and Palmetto St., Ridgewood. The odor of the breath issuing from the stupefied men indicated hooch of some low grade, the police say. Both were taken to the Glendale police station, but as they did not recover were hustled to Kings County Hospital. When they came out of the coma, they were formally charged with intoxication and arraigned later in the day in the Jamaica court. The refused to tell where they obtained the liquor.


Fleming’s Finest:

Hi CP Subscribers:

As I write this, I am looking at my new wooden “Home Sweet Home” sign in my office that I made at a H&F Women’s Forum event this week. Ominous or charming? Perhaps rustic woodwork is my true calling. In other exciting news, I signed up for the Buffalo half marathon in May, so I am looking forward to returning to more serious training.

This week, I can offer you a case from the North Dakota Supreme Court involving some defective concrete flooring. During a project, a floor drain was installed, but the insured contractor did not properly install the concrete floor and damaged the floor drain while attempting to repair the concrete. To repair the drain, the concrete floor had to be removed and replaced, damaging the in-floor heating system in the process. The $214,045.55 question was whether the insurer had to indemnify the insured because its work product was defective. All will be revealed in the column.

Until next time,

Katherine A. Fleming

[email protected]


Did Legislators Deserve a Gold Badge 100 Years Ago (or Do They, Today?):

New York Tribune
New York, New York
4 March 1922

Asks $7,500 for Gold
Badges for Legislators

ALBANY, March 3.—Gold badges for legislators, with the state’s coat of arms and name of the legislator inscribed on them are sought in a bill introduced in the Legislature to-day by Assemblyman James Male, Democrat, of New York.

The bill seeks to appropriate $7,500 for the badges.


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

With the Comprehensive Insurance Disclosure Act now amended and yesterday’s news (albeit today’s problem), I have taken a break from the Albany Beat this week to focus on an interesting trial court determination and judgment following a non-jury trial. It’s one you may recognize—the facts are unmistakable—and the conduct reprehensible. But was it intentional? Certainly inexcusable.

Until next time,

Ryan P. Maxwell

[email protected]


How Many Spouses are Too Many?

St. Louis Globe-Democrat
St. Louis, Missouri
4 March 1922


Wife Becomes Hysterical When Told
He Deserted Another and 4 Children.

James Muth, 31 years old, of Milwaukee, Wis., who describes himself as an inventor, was arrested last night at 10:30 o’clock at 6187 Delmar boulevard, where he has been living for several months with Emma Erdmann Moth, 22, also of Milwaukee, whom he married here on February 10. The specific charge against him is that he abandoned a wife and four children in Milwaukee.

The couple had been living at the Delmar Avenue address under the name of Mr. and Mrs. James Franke. Muth, according to the police, admitted he has a wife and four children in Milwaukee and that he married Miss Emma Erdmann here on February 10. His explanation was that he loved her.

The couple were traced here by the Family Welfare Association of Milwaukee, which communicated with the Provident Association.

Muth declared his willingness to waive extradition and to return to Milwaukee to “face the music.” He declared his realization of “a great mistake” and said he was ready to do whatever he could to set things right.

When the former Miss Erdmann was told her husband had another wife and four children living, she became hysterical and could not make any coherent statement except to say she didn’t know anything of it. This was corroborated by Muth, who declared he posed as a single man when he was courting the girl.

Muth said he at first intended to go to Chicago but decided to come here following a disagreement with a partner with whom he was working on a concrete brick patent.


CJ on CVA and USDC(NY):

Hello all,

Two weeks has gone by faster than I can imagine. Luckily, I was able to get out on the slopes this past weekend for one of the best days of the year. Sadly, it appears that this weekend will be full of rain so our season may be coming to a quick close. I guess that means it is just time to tune up the boat and get ready for water ski season.

For this edition’s offering I have a case reminding those of us in New York that, for coverage under an Auto Policy to be triggered, the injury must arise out of use of the covered auto.

Until Next Time,

Charles J. Englert, III

[email protected]       


Insurance Fraud Isn’t New:

Buffalo Courier
Buffalo, New York
4 March 1922


Boston, March 3.—Three men said by police to be those indicted in New York today for grand jury as the moving spirits in a gang that has been extorting fake damage claims from insurance companies, were arrested here recently on charges of larceny and conspiracy to steal from insurance firms. They gave their names as Jacob Itzkowitz. alias Ritner: Max Elstein, alias Morris Wolcor, and Benjamin Greenwald, alias Abe Liberman, and were released on bonds for a hearing later.

The trio with three others, including two cripples, were arrested after they had collected $400 from me Massachusetts Bonding and Insurance company and had presented a claim against the Zurich General Accident & Liability company, following automobile accidents which the police said had been framed. The same physician investigated the case for each company, and, becoming suspicious, told the police.


Dishing Out Serious Injury Threshold:

Dear Readers,

Welcome to March. This year is flying by, but I’m looking forward to the warm weather coming back. Hopefully, we won’t have to wait too much longer.

In the Serious Injury Threshold world, we have one case today that merely has to do with Defendant failing to eliminate triable issues of fact regarding plaintiff’s claim, as set forth in her bill of particulars, that she sustained a serious injury under the 90/180-day category.

Be well,

           Michael J. Dischley

           [email protected]  


Don’t Insult a Soldier’s Widow:

Buffalo Courier
Buffalo, New York
4 March 1922


John Lewandowski, No. 97 Mills Street, was placed on probation for one year by Judge Patrick J. Keeler in city court yesterday when arraigned on a charge of interfering with Irene Hartwick, No. 202 Persons Street. Mrs. Hartwick is the widow of one of Buffalo's boys who didn't come back from the war.

According to her story, she was on a Broadway car when Lewandowski, whom she had known for several years, approached and made several insulting remarks to her. She asked the conductor to make the young man leave her alone, but it was only when a policeman boarded the car that the annoyance was stopped.

Judge Keeler censured Lewandowski severely, declaring that for him to approach the girl in any way during the year he was on probation would constitute a violation and would "get him something unpleasant."


Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

You know what the bad part about being on trial is—aside from the 14-hour days and irascibility of judges—it’s all that ‘regular’ work that’s waiting for you when you get back. So, when all you want is a bit of a vacation, instead you’re busy digging out. Well, now that the digging’s almost done, back to normal life, whatever that means.

In this edition, we finally get a coverage case from the Connecticut Supreme Court. Tackling a certified question, the high court is asked to determine if a nolo contendere guilty plea to assault charges is a basis for invocation of the criminal acts exclusion. The answer may surprise you. Read on for the details.

Keep keeping safe.

Lee S. Siegel

[email protected]


Spring Training for the Yankees:

The Buffalo Enquirer
Buffalo, New York
4 March 1922


The Yankees finally managed to put in a day's workout outdoors down at New Orleans.

The New York American league team had to wait five days for decent weather. The diamond was heavy, but the Yankees proved to be like some horse we know, regular mud larks.

Sometimes, the business managers of a team pick the wrong spot for spring training.


Rauh’s Ramblings:

            Hi all,

This week is flying by, and I can’t believe it has already been two weeks since our last issue of Coverage Pointers!  The month of February went by in the blink of an eye and hopefully March passes quickly as well so we can finally get some warmer weather!

I do not have a case to report on this week but hope to find something interesting for you in two weeks!

Until next time,

Patricia A. Rauh

[email protected]


Epidemic Subsiding, 100 Years Ago:

Fitchburg Sentinel
Fitchburg, Massachusetts
4 March 1922


Present Epidemic Bears Little Likeness
To Severe Spanish Variety Of 1918

The present epidemic of influenza, which has spread over France, England, Germany, and other European countries as well as the United States, differs in several marked respects from that of 1918, according to a writer in The Survey. In New York city the epidemic has more nearly resembled the Russian Influenza which swept the world in 1889 and 1890 than the Spanish Influenza of three years ago. The mortality has been largely confined to old persons and to the very young, whereas in 1918 it was heaviest among the middle-aged.


Storm’s SIU Examen:

Hi everyone:

Three interesting cases this week, two from the 2nd and 3rd Circuit Court of Appeals.  When the high court speaks, we should listen. One pertains to calculating the value of a new vehicle under Regulation 64 and the other further clarifying coverage for stacking under Pennsylvania law for underinsured motorist coverage.  I have also included a case pertaining to the attorney-client privilege and why it is important for legal counsel to style their coverage opinions letters as legal advice rather than predominantly appearing as assisting with the coverage investigation.   

  • Interpreting Regulation 64 with respect to the valuation of total losses for the current model year (the meaning of “), the 2nd Circuit grants CCC’s Fed. R. Civ. P. 12(b)(6) motion to dismiss but denies GEICO’s motion with respect to breach of contract and GBL § 349 counts.

  • Under Pennsylvania law, the automobile policy in this case did not contain a valid waiver of inter-policy stacking and neither the household-vehicle exclusion nor the coordination-of-benefits provision can function as a de facto waiver of inter-policy stacking for underinsured motorist coverage.

  • In the context of an insurer’s decision to rescind a policy due to material misrepresentations in the procurement of the policy, advice from outside legal counsel was not predominantly of a legal nature and, therefore, not protected by the attorney-client privilege. 

I have the honor of speaking next Tuesday at the Insurance Fraud Management Conference in Orlando, “Identifying and Evaluating Drug Inspired Claims”.  Please join me if you are attending.

I hope you have an awesome two weeks until we write again!

Scott D. Storm

[email protected]


Flu Remedies:

El Paso Herald
El Paso, Texas
4 March 1922


A proven Remedy that saved thousands of lives during the last big Fluenza Epidemic. Don’t wait to have someone to tell you what to do. Do it now and get at once, Dr. Rider’s Eucalyptus Oil Compound and Eucalyptus Tablets. Each tablet contains ½ gr. pure oil Eucalyptus. Remember they cleanse the stomach and bowels of all Toxic Poisons and “Flu” Germs—A wonderful Antiseptic and Preventive. Ask your Druggist for Dr. Rider’s Eucalyptus Oil Compound, 60c; Eucalyptus Tablets 50c. For sale by all druggists.—Adv.


North of the Border:

This week, Canadian Defence Lawyers, an organization that I proudly serve as its second-vice-president, offered this post on LinkedIn:

Canadian Defence Lawyers stands with people and organizations around the world, condemning the Russian incursion into Ukraine. The attempt to overthrow the democratically elected Ukrainian government is a breach of international law, as is Russia’s effort to annex Ukraine or parts of it. We hope this volatile situation can soon be defused and that the Ukrainian people remain free to determine their own future. We encourage our CDL family to support organizations that are on the ground, helping the Ukrainian people. If you would like to donate to organizations providing aid, here are some options:
Canadian Red Cross:
Canada-Ukraine Foundation:

Please support these worthwhile organizations as they do what they can to ameliorate a terrible situation.

Heather Sanderson

[email protected]


Student Flogging:

The Buffalo Times
Buffalo, New York
4 March 1922


School Authorities Probe
Complaint Against Bugbee.

A complaint that Principal Orrin Bugbee of School No. 47 flogged Henry Silverberg, 11 years old, No. 270 Hickory Street, with a pointer is being investigated by school authorities today. The Silverberg boy is said to be under the care of Dr. Henry G. Goldberg, No. 264 Spring Street, suffering from a bruised back.

It is said the youngster brought a collapsible paper bell to school and played with it in the classroom. For this offense, it is charged, he was flogged.

Dr. Goldstein asserts that when he examined the boy, he found a lump on his back about the size of an egg. He also said there had been a hemorrhage under the skin.

“The injury is painful but not serious,” said Dr. Goldberg.

Principal Bugbee. it is said, admits whipping the Silverberg boy, but asserts he did it because it was necessary to maintain discipline in the school.

Editor’s note:  Principal Bugbee was threatened with criminal assault charges, but they were never reported as being filed, He died on November 18, 1927, and is buried in Glenwood Cemetery in Homer, NY.


Headlines from this week’s issue, attached:

Dan D. Kohane

[email protected]

  • Underwriting File Not Discoverable in Declaratory Judgment Action Seeking to Enforce Exclusion


Steven E. Peiper

[email protected]

  • Waiver of Subrogation Clause in Insurance Policy was Enforceable where Condominium By-Laws Required Owner to Obtain a Policy Waiving Subrogation Rights
  • Insurance Proceeds Could Not Be Recovered Directly by the Contractor Where Proof of Completion was Not Provided



Michael J. Dischley
[email protected]

  • Defendants Failed to Meet Prima Facie Burden as to 90/180-day Category Alleged in Plaintiff’s Bill of Particulars


WILEWICZ’S WIDE WORLD of COVERAGE (featuring Evan D. Gestwick)
Agnes A. Wilewicz

[email protected]

  • When a New Car is Totaled, Insurer Must Pay the “Reasonable Purchase Price” for a “New Identical Vehicle”


Brian D. Barnas

[email protected]

  • No Bad Faith Where Claimant Made no Demand Prior to Filing Lawsuit and Rejected Policy Limits Offer


Lee S. Siegel

[email protected]

  • Nolo Contendere Plea Insufficient to Invoke Criminal Acts Exclusion


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

  • U.S. District Court Finds No Duty to Defend as Claims of Faulty Workmanship do not Allege an “Occurrence”
  • North Dakota Supreme Court Finds Duty to Defend Claim of Damage to Property Other than the Insured’s Work Product


Ryan P. Maxwell

[email protected]

  • Trial Court Rights a Wrong, After Appellate Division Found Issue of Fact as to Whether Intentionally Tossing Liquid Out of Car Window May Be Accidental if the Pedestrian is Hit by the Cup


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

[email protected]

  • Auto Liability Policy Does Only Covers Claims for Injuries Sustained While Actually Using the Covered Auto, not Merely in the Proximity of a Covered Auto


Patricia A. Rauh

[email protected]

  • No notable cases to report this week


Scott D. Storm

[email protected]

  • Interpreting Regulation 64 with Respect to the Valuation of Total Losses for the Current Model Year (the Meaning of “), the 2nd Circuit Grants CCC’s Fed. R. Civ. P. 12(b)(6) Motion to Dismiss but Denies GEICO’s Motion with Respect to Breach of Contract and GBL § 349 Counts

  • Under Pennsylvania Law, the Automobile Policy in this Case did Not Contain a Valid Waiver of Inter-Policy Stacking and Neither the Household-Vehicle Exclusion nor the Coordination-of-Benefits Provision can Function as a De Facto Waiver of Inter-Policy Stacking for Underinsured Motorist Coverage

  • In the Context of an Insurer’s Decision to Rescind a Policy Due to Material Misrepresentations in the Procurement of the Policy, Advice from Outside Legal Counsel Was Not Predominantly of a Legal Nature and, Therefore, Not Protected by the Attorney-Client Privilege


Katherine A. Fleming

[email protected]

  • Property Damage Caused by Faulty Workmanship Covered to The Extent It Causes Property Damage to Property Other Than the Insured’s Defective Work Product


Heather Sanderson
Sanderson Law
Alberta, Canada

[email protected]

  • A Clear Case for the Application of Anti-Concurrent Cause Language is Denied



All the best to you and yours.  We LOVE your feedback.


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

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

Dan D. Kohane

[email protected]

Agnes A. Wilewicz

[email protected]

Patricia A. Rauh

[email protected]

Dan D. Kohane, Chair
[email protected]

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

Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Diane L. Bucci
Scott D. Storm
Thomas Casella
Brian D. Barnas
Ryan P. Maxwell
Charles J. Englert
Patricia A. Rauh
Diane F. Bosse
Joel R. Appelbaum
Kyle A. Ruffner
Katherine A. Fleming (Admission Pending)

Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley
Scott D. Storm
Brian D. Barnas

Dan D. Kohane
[email protected]

Alice A. Trueman

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

Ryan’s Capital Roundup

CJ on CVA and USDC(NY)

Rauh’s Ramblings
Storm’s SIU Examen

Fleming’s Finest

North of the Border

Dan D. Kohane
[email protected]

02/24/22       Berkshire Hathaway Spec. Ins. Co. v. H.I.G. Capital, LLC
Appellate Division, First Department
Underwriting File Not Discoverable in Declaratory Judgment Action Seeking to Enforce Exclusion

In 2014, Starr issued an excess professional liability policy (the 2014 policy). In connection with its application for the policy, the applicant signed a "Warranty and Representation Letter" (the W&R Letter) representing that there were no pending claims, suits, actions, or investigations against any of the proposed insureds and that none of the proposed insureds had any knowledge of any act, error, or omission that might give rise to such claim, suit, action, or investigation.

Defendant expressly agreed that if any such claims or knowledge or information existed, they would be excluded from coverage.  In December 2014, the United Kingdom's Pension Regulator served a warning notice on several of defendant's affiliates, alleging improper actions relating to pensions, and warning of an intention to seek contribution. In January 2015, defendant, through its brokers, notified its insurers, including Starr, of the warning notice. Starr denied coverage. In June 2016, the Regulator served another warning notice, again seeking contribution.

In May 2017, Starr and other insurers commenced this declaratory judgment action. As pertinent on this appeal, Starr seeks a declaration that the W&R Letter precludes coverage under the 2014 policy for claims related to the Regulator's warning notices.

Under Florida law, which applies in this case, there is a statute which relates to rescission of policies based on misrepresentations in insurance applications, does not apply in this case. Starr was not seeking to rescind the policy only to enforce a policy exclusion based on the W&R Letter, which defendant executed.

Thus, the underwriting file is neither material nor necessary to present a defense.

Editor’s note:  This is a helpful decision to try to preclude broad discovery is certain declaratory judgment actions.  Policyholder lawyers regularly seek discovery of underwriting files when the contents of same have nothing to do with the applicability of an exclusions.


Steven E. Peiper
[email protected]

02/24/22       Aspen Am. Ins. a/s/o 2900 Ocean Condo. v. Newman
Appellate Division, First Department
Waiver of Subrogation Clause in Insurance Policy was Enforceable where Condominium By-Laws Required Owner to Obtain a Policy Waiving Subrogation Rights

Plaintiff’s subrogor’s, 2900 Ocean, building was damaged due to a fire that originated in Newman’s condominium.  After paying the loss on behalf of 2900 Condo., Aspen sought to subrogate its claim against Newman as the alleged negligent party. 

Here, however, the condominium agreement provided a waiver of subrogation.  Because the Aspen policy indicated that it would not seek subrogation where such right was waived in the underlying documents, it followed that Aspen’s claim had to be dismissed.

02/24/22       Hai Hong Construction Corp. v. NAB 2000 Realty, LLC
Appellate Division, First Department
Insurance Proceeds Could Not Be Recovered Directly by the Contractor Where Proof of Completion was Not Provided

Plaintiff commenced this action seeking to force defendant to direct insurance proceeds it had received after a covered loss.  The insurer issued the settlement check to both Hai Hong (as the engaged contractor) and NAB 2000 (as the property owner).  NAB 2000, apparently, cashed the check, and kept the insurance money. 

In reversing the trial court, the Appellate Division noted that the contact between Hai Hong and NAB 2000 provided that Hai Hong was only to be provided payment through the insurer.  However, that same contract did not permit Hai Hong a right of direct recovery from the carrier unless proof of the completion of work was first provided.  On this Record, there was no evidence that Hai Hong’s work was complete.


Michael J. Dischley

[email protected]

02/16/22       Danielle P. Fanfan v. Boguslaw Sowacki, et al
Appellate Division, Second Department
Defendants Failed to Meet Prima Facie Burden as to 90/180-day Category Alleged in Plaintiff’s Bill of Particulars

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Nassau County (James P. McCormack, J.), entered December 7, 2018. The order, insofar as appealed from, granted the defendants' motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

On June 7, 2017, the plaintiff was a passenger in a vehicle, operated by the defendant Boguslaw Sowacki and owned by the defendant Stream Management Corp., which collided with a parked vehicle. The plaintiff commenced this action to recover damages for personal injuries that she allegedly sustained as a result of the accident. The defendants moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. In an order entered December 7, 2018, the Supreme Court, inter alia, granted the defendants' motion. The plaintiff appeals.

The Appellate Court found that defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The papers submitted by the defendants failed to eliminate triable issues of fact regarding the plaintiff's claim, set forth in her bill of particulars, that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d).

Since the defendants failed to meet their prima facie burden, it is unnecessary to determine whether the submissions by the plaintiff in opposition were sufficient to raise a triable issue of fact.

Accordingly, the Appellate Court found that the Supreme Court should have denied the defendants' motion for summary judgment dismissing the complaint.


WILEWICZ’S WIDE WORLD of COVERAGE (featuring Evan Gestwick)
Agnes A. Wilewicz

[email protected]

02/14/22        Milligan v. GEICO Gen. Ins. Co. et al
United States Court of Appeals, Second Circuit
When a New Car is Totaled, Insurer Must Pay the “Reasonable Purchase Price” for a “New Identical Vehicle”

The Second Circuit recently defined two key provisions in the world of automobile insurance: “reasonable purchase price” and “new identical vehicle.” In this case, Milligan had purchased a brand new 2015 Lexus for $51,400 and proceeded to insure it under an auto policy through GEICO. Just two months after purchasing the Lexus, it was totaled in a roll-over accident. At trial, representatives of GEICO testified that it was their customary practice to outsource to a third-party company the task of valuing totaled vehicles to allow them to ascertain how much to pay out. The company used by GEICO, CCC Intelligent Solutions, Inc., prepared a “market valuation report,” or MVR for short. This MVR compared the replacement price of the Lexus to three other similar vehicles from other dealers that were either currently available or had been recently sold in the same geographical marketplace. In this case, the MVR came back at $45,924, which is what GEICO paid to Milligan.

Milligan, unhappy with the several thousand-dollar difference between the purchase price and the MVR price, sued GEICO, alleging, in part, that it failed to comply with a New York regulation. The regulation at issue requires insurers to pay, for insured private passenger automobile that are of the current model year, the “reasonable purchase price . . . of a new identical vehicle.” See 11 NYCRR § 216.7(c)(3). Here, it was undisputed that the Lexus was indeed “of the current model year;” thus, the two questions that remained were how to define the phrases “reasonable purchase price” and “new identical vehicle.”

In holding that “reasonable purchase price” should be defined as that price upon which a reasonable buyer and a reasonable seller would agree in the relevant geographic market, the Second Circuit reasoned that the only other possible way to define this term is simply by the sticker price. However, as the court reasoned, if the legislature had intended for this term to be defined that way, the statute would say that, and it does not. Thus, the court concluded that the term must mean the price a reasonable consumer and a reasonable seller would agree on in the same geographic market.

The Court went on to describe how the “reasonable purchase price” can be honestly ascertained. One way is for the insurer to simply consult with local dealerships to identify identical new cars for sale, or those which have been recently sold. If no identical cars are available, then nearly identical cars can be used to aid in this determination, with the aid of a professional appraiser.

The second question was how to define the term “new identical vehicle.” The court noted that this term is subject to two possible definitions: either new to the buyer, or new to the world. In adopting the latter definition, the court reasoned that, had the legislature intended this term to take on the former definition, the word “new” in the statute would serve no purpose, since, under such a definition, any car could be sufficient. Since the legislature did include the word “new,” however, the amount of money given to the insured must be sufficient to enable the insured to purchase a brand-new vehicle of the same make and model, with identical features, and almost no miles on the odometer.


Brian D. Barnas

[email protected]

02/18/22       Granados v. Wilson
Court of Appeals of Kansas
No Bad Faith Where Claimant Made no Demand Prior to Filing Lawsuit and Rejected Policy Limits Offer

On October 4, 2017, Granados was driving his car in Kansas City, when Wilson failed to stop at a red light and hit him.  Granados died as a result.  Wilson’s passenger Elkins told the police that Wilson had drank half a pint of brandy and had smoked a blunt before driving.  Wilson called Key, his insurer, and reported the accident, but he maintained that he had a green light and the other person hit him.  He did advise Key of the fatality.  Key received the police report November 7, 2017, which had no insurance information for Wilson and stated he was under the influence of drugs and ran a red light.  By December 19, 2017, Key had determined Wilson was at fault.

Wilson’s wife Nancy received a letter from her own insurance company State Farm in December 2017 asking her to report any claims, but she threw it away.  Nancy hired an attorney in February 2018.  She agreed to pay counsel one-third of any fee recovered unless the case settled for $50,000 or less before suit was filed.  On June 4, 2018, Nancy's attorney told State Farm that he was representing her.  Sometime after June 9, 2018, Nancy opened a letter from State Farm, dated May 31, 2018, stating she had a liability claim against Key, but the letter did not mention Wilson or provide any contact information for Key. 

A wrongful death suit was filed on June 12, 2018.  Nancy had not made a demand for damages from Key prior to filing the lawsuit.  Key received the pleading on July 2, 2018, and it offered to settle for the policy limit of $25,000 by July 23, 2018.  Nancy rejected the offer through counsel on July 26, 2018, and she did not make a counteroffer.  The letter stated that the policy limit should have been offered “a long time ago” and made a bad faith claim.  On October 2, 2018, Nancy’s counsel demanded almost $3 million to settle.

Nancy moved for summary judgment in the wrongful death action on liability.  The motion was denied.  The case proceeded to a bench trial, and a verdict of over $4.5 million was awarded, which was eventually reduced to $3,353,777.52.  This action against Key ensued.

The court concluded that Nancy would have settled for the policy limit if it had been offered prior to suit.  However, the court also concluded that Nancy had set an arbitrary deadline for settlement of when the lawsuit began.  Nancy never revealed that she was seeking damages or that there was a deadline for settlement.  In addition, no legal right would have been compromised if settlement were not reached by the time the lawsuit was filed.  The court also noted that Nancy’s policy limit rejection did not make any counteroffer and gave no reason why she would not settle for the policy limits, except referring to a potential bad faith claim.

In addition, Nancy did not make a policy limit demand to Key that it refused to pay prior to the lawsuit, yet her entire bad faith argument stemmed from Key’s conduct before she sued the case.  Key never refused to settle for the policy limits.  Nancy’s argument that she had to reject the policy limit offer because of the fees she incurred by filing a lawsuit was rejected as unpersuasive.  By the time she received the policy limit offer, Nancy had no intention to settle the case for close to the policy limits.

Notably, the court found that Key violated its own standards and industry standards for investigating the accident.  It also found that Key failed to communicate with Wilson and advise him of the risk of an excess judgment before Nancy filed the lawsuit.  However, Key’s breach of its duty to communicate did not cause the excess judgment.  Instead, the record showed that the excess judgment was more the result of Nancy’s actions after the lawsuit was filed.  As such, the court found that Key's conduct in handling the claim was not the legal cause of the excess judgment.

Nancy also argued that Key had an affirmative duty to initiate settlement negotiations.  The court found no legal authority in Kansas that required Key to initiate settlement negotiations with Nancy before she made any claim for damages against Wilson or Key.  The mere fact that Key was aware of the occurrence of an injury accident caused by its insured was insufficient to create a duty to initiate settlement negotiations.  The duty to defend begins when a demand for damages is made or a lawsuit is filed.

Accordingly, the court remanded the case to the court below with directions to enter judgment for Key.


Lee S. Siegel

[email protected]

02/23/22       Allstate Ins. Co. v. Tenn
Connecticut Supreme Court
Nolo Contendere Plea Insufficient to Invoke Criminal Acts Exclusion

Nolo contendere, meaning a plea by which a defendant in a criminal prosecution accepts conviction as though a guilty plea had been entered but does not admit guilt.

Answering a certified question, the Supreme Court held that a criminal defendant’s nolo contendere plea to an assault charge did not preclude coverage under a criminal acts exclusion in a homeowners insurance policy.

Tenn repeatedly struck the underlying plaintiff, Moscaritolo, with a metal baseball bat. Tenn was identified as the perpetrator and, a few weeks later, arrested. Tenn entered a plea of nolo contendere to a charge of assault in the first degree. At the plea hearing, the prosecutor summarized the evidence of the assault and detailed the plea agreement. Tenn confirmed that he had heard the evidence and that he elected not to contest that charge. At that time, Moscaritolo had already commenced suit against Tenn, seeking indemnity from Tenn’s mother’s Allstate issued homeowners policy. Among the reasons why the State sought only limited jail time was Tenn’s cooperation in the civil suit. The prosecutor informed “the court that Tenn was cooperating in that civil lawsuit, and, for that reason, the victim was not necessarily seeking much jail time and that he may be monetarily indemnified for the injuries he suffered.” Tenn was sentenced to a 12-year sentence but suspended after serving only two years in prison.

Moscaritolo brought causes of action against Tenn sounding in assault, negligent assault, and negligent and intentional infliction of emotional distress. The complaint asserted, in the negligence counts, that the injuries arose from Tenn’s negligent swinging of the bat wildly, near Moscaritolo. Allstate afforded a defense and brought this declaratory judgment action, seeking a finding of no coverage.

Allstate moved for summary judgment, arguing that it had no duty to defend or to indemnify Tenn because coverage was precluded under the policy’s criminal acts exclusion, which provided that: ‘‘[Allstate does] not cover bodily injury or property damage intended by, or which may reasonably be expected to result from the intentional or criminal acts of the insured person. This exclusion applies even if: ‘‘(a) such bodily injury or property damage is of a different kind or degree than that intended or reason-ably expected; or ‘‘(b) such bodily injury or property damage is sustained by a different person than intended or reasonably expected.” This exclusion applies regardless of whether or not such insured person is actually charged with or convicted of a crime. . ..’’

Relying on the nolo plea, Allstate claimed that there was no question of material fact that the criminal acts exclusion precluded coverage. Allstate argued that ‘‘Tenn’s plea of nolo contendere precludes any argument that he did not commit [a] crime.’’ The District Court, unsure of Connecticut law on this point, asked the Supreme Court ‘[w]hether a plea of nolo contendere and the resulting conviction can be used to trigger a criminal acts exclusion in an insurance policy.’’

The Supreme Court held that a nolo plea cannot be used as evidence in a subsequent proceeding to prove a criminal act. See Groton v. United Steelworkers of America, 254 Conn. 35, 51, 757 A.2d 501 (2000) (‘‘under our law a prior plea of nolo contendere and a conviction based thereon may not be admitted into evidence in a subsequent civil action or administrative proceeding to establish either an admission of guilt or the fact of criminal conduct’’); see also § 4-8A (a) of the Connecticut Code of Evidence. Relying on Connecticut precedent and the statutory prohibition, the nolo plea is not evidence of a criminal act.

The Court rejected Allstate’s argument that Connecticut public policy compels the use of the nolo plea to preclude coverage for illegal misconduct. First, the Court found that the Code of Evidence precluded the use of the plea, even in a declaratory judgment action. “Second, although we wholeheartedly endorse the well-established legal maxim that no one should be allowed to profit from his or her own wrongdoing, the exclusion of Tenn’s plea of nolo contendere in no way precludes Allstate from vindicating that principle by seeking to enforce the criminal acts exclusion on the basis of the evidence that led to Tenn’s prosecution and conviction. Indeed, Allstate is no less able to enforce the exception in this case than it would be in a case in which the state declined to pursue a criminal prosecution of the insured party in the first instance.”

Although it lost this round, the Supreme Court made it clear that Allstate would have the opportunity to establish the applicability of the criminal acts exclusion at trial.

Two justices, however, dissented, finding that the majority’s application of the inadmissibility rule went too far. “In my view, by holding that the defendant's plea of nolo contendere is not admissible in the present controversy, today's decision unnecessarily extends the rule of inadmissibility beyond the scope of its intended purpose—to encourage plea bargaining—to ensure victim compensation, which, although laudable, is not the purpose of this rule. Despite its protestation to the contrary, the majority treats the rule codified at § 4-8A (a) (2) as akin to an absolute privilege that cannot be pierced. I do not believe that ‘‘the very essence’’ of the nolo plea itself will be undermined if the defendant's plea is admitted into evidence in the insurance coverage dispute pending in District Court. Nor do I believe that our case law supports the majority's holding.”

The dissenters went on to cite numerous exceptions the rule barring admission of nolo pleas. “[R]ecognizing an exception to the general rule of inadmissibility of nolo pleas under the circumstances of this case ensures the vindication of a public policy that competes with—and, in my view, overtakes—the policy of encouraging plea bargaining, namely, the policy of not indemnifying insureds for criminal acts.”

However, the dissenters would still not go as far as to find that the nolo plea was a basis for summary judgment for Allstate. While dissenting from the majority's holding that the nolo contendere plea is inadmissible evidence in the declaratory judgment action, the dissenters did not believe that the plea by itself triggered the criminal acts exclusion.


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

02/28/22       Main St. Am. Assur. Co. v. Connolly Contrs., Inc.
United States District Court for the Eastern District of Pennsylvania
U.S. District Court Finds No Duty to Defend as Claims of Faulty Workmanship do not Allege an “Occurrence”

This insurance coverage dispute arose out of a series of actions filed against a general contractor by homeowners who claimed their houses were defectively built.  In the underlying action, several homeowners alleged that their houses were damaged due to moisture penetration due to faulty construction.

The general contractor then filed a joinder action against the defendant, subcontractor Connolly Contractors, Inc., seeking a defense, contribution, and indemnification.  Both the general contractor, who sought additional insured coverage, and Connolly Contractors requested that Main Street defend and indemnify them in these actions under the insurance policies issued by Main Street to Connolly Contractors.  Main Street commenced a declaratory judgment action seeking a declaration it had no duty to defend or indemnify either Connolly Contractors or the general contractor.

Under Pennsylvania law, it is well settled that actions arising from faulty workmanship do not allege an “occurrence”.  Courts have held that such claims do not present the degree of fortuity contemplated by the ordinary definition of “accident”.  In addition, the natural and foreseeable acts that tend to exacerbate the damage caused by faulty workmanship also cannot be considered sufficiently fortuitous to constitute an accident.  The court held that the claims in the underlying action, arising from the moisture penetration in the homes, were premised entirely upon faulty workmanship.  For example, the homeowner actions allege, among other things, breach of contract, breach of implied warranty of habitability, and breach of implied warranty of workmanlike construction.  As a result, the court held that Main Street had no duty to defend Connolly Contractors or the general contractor because the underlying actions to not allege an “occurrence” and therefore do not trigger coverage under the policies.

Further, the court held the general contractor did not qualify as an additional insured.  To qualify as an additional insured and be afforded coverage under the policies, there must exist a written contract between the insured and the purported additional insured. However, the court held that no such contract existed, as the alleged subcontracts asserted by the general contractor were extraneous to the underlying Joinder Actions and therefore immaterial.  The court concluded there was no duty for Main Street to defend or indemnify either party.

02/18/22       Pavlicek v. Am. Steel Sys.
Supreme Court of North Dakota
North Dakota Supreme Court Finds Duty to Defend Claim of Damage to Property Other than the Insured’s Work Product

This insurance coverage dispute arose out of an underlying construction defect action relative to the construction of a steel building.  The property owner, Larry Pavlicek, hired a contractor to construct a steel building.  JRC Construction installed a concrete floor and floor drain, and another subcontractor installed the in-floor heating system for the floor.  Grinnell Mutual Reinsurance Company (“Grinnell”) insured JRC under a CGL policy throughout the projects. JRC completed the floor drain but failed to properly install the concrete floor and its attempts to repair the concrete damaged the drain. Pavlicek sued JRC for breach of contract and filed a supplemental complaint against Grinnell to satisfy the judgment as JRC’s insurer.

The district court reached the following conclusions: JRC’s defective work on the concrete floor was not covered, the damage to the floor drain was covered, as the floor drain could only be repaired by removing the replacing the concrete floor, and the replacement of the floor was covered, which was required in order to replace the drain.  Grinnell argued the district court erred and claimed the policy does not cover the cost of replacing the concrete floor, in-floor heating system, or floor drain.

On appeal, the Supreme Court explained that the policy provides coverage for property damage that results from an “occurrence” during the policy period.  Property damage caused by faulty workmanship is a covered occurrence to the extent the faulty workmanship causes bodily injury or property damage to property other than the insured’s work product.  The policy contained several exclusions, including the “Damage To Your Work” exclusion, excluding property damage to “your work”, defined as work or operations performed by you or on your behalf, arising out of it or any part of it and included in the products completed operations hazard.

The Supreme Court held that the district court erred in finding the drain was property other than the insured’s work product, because under the policy’s definition of “your work”, the drain was work or operations performed by JRC.  However, the Supreme Court agreed that the drain was a completed product.  Since the policy excludes coverage for property damage to “your work” but provides coverage for “products completed operations”, the court held that the policy could be construed as to provide coverage for the drain, a completed product, but also to excluded coverage because the drain was JRC’s work.  Since the most favorable interpretation of the policy to the insured must be adopted, the court held that coverage existed for the cost to repair and replace the floor drain.

Regarding the cost of replacing the concrete floor, the Supreme Court held the district court erred in finding the policy covered the floor replacement.  Although the policy covers the cost to repair the floor drain it did not provide coverage for the cost of replacing the floor because the damage was the result of JRC’s defective work.  Lastly, the Supreme Court held the district court erred in concluding the policy provided coverage for replacement of the in-floor heating system.  Because the system was not damaged during the policy period, there was no “occurrence” under the policy.  Accordingly, the court held the policy covered the cost of replacing the floor drain, but not the cost to replace the concrete floor or heating system.


Ryan P. Maxwell
[email protected]

03/01/22       Unitrin Auto and Home Ins. Co. v. Sullivan et al.
Suffolk County Supreme Court
Trial Court Rights a Wrong, After Appellate Division Found Issue of Fact as to Whether Intentionally Tossing Liquid Out of Car Window May Be Accidental if the Pedestrian is Hit by the Cup

With all the buzz surrounding the Comprehensive Insurance Disclosure Act recently, I had to get away from Albany for this edition. This case will serve as a welcomed reprieve. And if the facts sound familiar, it’s because we’ve written about this case before, albeit under different circumstances (here and here). They are, unique…

This coverage action sought to determine whether Unitrin Auto and Home Ins. Co. was responsible for providing coverage to its insured, Brian C. Sullivan for an underlying jury award of $3.6 million in damages, including punitive damages, for a conceded liability cause of action, which now totals over $6 million, including interest. The issues were eloquently framed by the court:

Can an intentional tort, that is, a battery, be considered as an “accident” for purposes of a Homeowners Insurance Policy? More to the point, can the use of a 7-Eleven Big Gulp cup, filled with urine, which is either thrown, pushed, “tossed” or has “slipped” from the hand of a passenger in a vehicle traveling 30 - 40 miles an hour, which strikes the eye of an innocent person who is walking home from a movie theater, causing bodily harm, be deemed to be a covered event under the terms of an Insurance Policy?


At the time of the civil jury trial, eleven years after the incident, testimony was offered that Robert Harford, the passenger holding the cup of urine, while intending to empty the contents of the cup onto Ciminello as they drove by, had no intention to hit him in the face with the cup itself, but the cup slipped out of Harford's hand.' The Appellate Division determined that such testimony created an issue of fact, necessitating a trial on the issues set forth above.

According to a statement provided by Sullivan the day of the incident in July 2005, a plan was hatched at a Diner “to throw a cup of urine on a stranger from Sullivan’s car.” And so, it came to pass. However, a literal throw of the cup was, as alleged, not part of the plan.

The victim, George Ciminello, claimed that both “the cup and the arm” contacted his face, including the left side of his face, the bridge of his nose and under his right eye. According to medical reports, this caused central vision loss of the left eye due to “severe blunt trauma in the left eye [which] led to a choroidal rupture through fixation in his macula.”

Most importantly, and the reason I’m writing today, Robert Harford, the passenger responsible for throwing the cup, testified in February 2007 that the cup “slipped” out of his hand, despite intentionally dousing Ciminello in urine. At trial, however, it was emphasized that Sullivan recounted Harford’s statement in the immediate aftermath that Harford had let go of the cup—not that it slipped.

The court began its assessment of New York law by identifying the question posed: “to determine whether the event qualifies as an ‘accident,’ as defined by the policy,” and as required to be an “occurrence” thereunder. Under New York law, the loss is to be viewed from the point of view of the insured.

Continuing the court noted that the conduct constituted an assault and battery, since “[t]here is no doubt that on July 29, 2005, the bodily contact was offensive and that there was an intention to make such contact without the consent of Ciminello. Any reasonable person would find the bodily contact offensive. Moreover, the physical conduct of Harford placed Ciminello ‘in imminent apprehension of harmful contact.’” And the court makes clear that there is no cause of action in New York for negligent assault.

Reviewing fundamental principles of New York insurance law, the court indicated that a fortuitous event is required for coverage, since “no one shall be permitted to take advantage of his own wrong.”

Although the state adopts the prevailing view that “once intentional offensive contact has been established, the actor is liable for assault and not negligence, even when the physical injuries may have been inflicted inadvertently,” the question is “whether the damages ‘flow directly and immediately from an intended act, thereby precluding coverage’, or whether the damages ‘accidentally arise out of a chain of unintended though expected or foreseeable events that occurred after an intentional act.’”

Finding for Unitrin, the court held that

  • “the striking of Ciminello with the cup was done with the intention of inflicting offensive bodily contact upon Ciminello and thus, an assault was committed regardless of whether there was actual intent to inflict injury;”

  • “the injuries were the direct and immediate result of the intentional act;”

  • “Harford's actions were intrinsically intentional and therefore excluded from coverage, as not an ‘occurrence’ under the policy;”

  • “the injuries did not arise out of a chain of unintended though foreseeable events that occurred after the intentional act;”

  • “rejects the claim that the injuries suffered were the accidental result of intentional acts;”

  • “that an ordinary person would not construe this event as an ‘accident’ in any sense of the word;” and finally, that

  • “the injuries Ciminello sustained were inherent in the activity Harford engaged in, and Harford's assault cannot be construed as an accident within the definition of ‘occurrence’ for which Unitrin's policy affords coverage.”

Drawing an appropriate analogy, the court provided clear justification for the reasonableness of its finding:

Defendant's counsel seeks to convince one and all that what was intended here was the simple “dousing” of Ciminello, with the Big Gulp cup of urine, similar to the actions of the ex-New York Yankee outfielder, Brett Gardner, who would jokingly “douse” a player who just hit a game-winning hit, with a large container of Gatorade, to the thrill of the home-team crowd. However, that same crowd would be horrified if a grounds-crew vehicle approached the player at 30-40 miles an hour, dipping in to within two feet of the player and Brett Gardner proceeded to strike the player with the Gatorade container.

Since there was nothing fortuitous about “driving a vehicle at 40 miles an hour, while one forces a cup into a victim's face,” this incident was not an accident required to be a covered “occurrence” under the policy. “Coverage cannot be created where the policy was not written to provide same,” and accordingly, “Sullivan cannot insist that his insurance company indemnify him for his intentional actions in 2005.”


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

[email protected]


02/28/22       Samsung Fire & Marine Insurance Company, Ltd. v. Liberty Mutual Fire Insurance Company
United States District Court, Southern District of New York
Auto Liability Policy Does Only Covers Claims for Injuries Sustained While Actually Using the Covered Auto, not Merely in the Proximity of a Covered Auto

Plaintiff brings this declaratory judgment action seeking a declaration that defendant has a duty to defend and indemnity Plaintiff’s insured T&E Stores in an underlying state court action and reimburse any attorneys expended by Plaintiff in the defense of the state court action. Joseph Darretta commenced an action to recover for personal injury against various defendants including T&E Stores. Darretta alleged that he was working as a delivery driver for UPS and while making a delivery to a premises T&E Stores was in control of, he stepped on debris and was injured. Notably, Derretta did not alleged that UPS was liable for his injuries. Plaintiff tendered the defense and indemnity of its insured to defendant. Defendant denied any duty to defend or indemnify Plaintiffs insured in the state court action.

Plaintiff issued both a Commercial Auto and General Liability Policy to T&E Stores and handled and paid for the defense and settlement for the Underlying Action under the General Liability Coverage Part of its Policy. Defendant issued a Business Auto Policy to UPS which provided in relevant part:

SECTION II – Liability Coverage A. Coverage We will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance, or use of a covered “auto”.

We have the right and duty to defend any “insured” against a “suit” asking for such damages or a “covered pollution cost or expense”. However, we have no duty to defend any “insured” against a “suit” seeking damages for “bodily injury” or “property damage” or a “covered pollution cost or expense” to which this insurance does not apply. We may investigate and settle any claim or “suit” as we consider appropriate. Our duty to defend or settle ends when the Liability Coverage Limit of Insurance has been exhausted by payment of judgments or settlements.

1. Who Is An Insured The following are “insureds”:

a. You for any covered “auto.”

 b. Anyone else while using with your permission a covered “auto” you own, hire, or borrow . . .

c. Anyone liable for the conduct of an “insured” described above but only to the extent of that liability.

Plaintiff argued that T&S Stores qualify as insureds under paragraph 1.c of the “Who Is An Insured” provision of the defendant’s Policy. However, this language limits insured status to where the putative insured is being sued vicariously for the conduct of a named insured or permissive user. It is undisputed that there is no claim for vicarious liability in the underlying state court action. Plaintiff also argued that T&S Stores qualified as a permissive user of the UPS truck, thus an insured under the policy issued by defendant to UPS, as T&S Stores was unloading the truck. However, as T&S Stores permissive use is not alleged in the underlying state court action, nor does Plaintiff allege that T&S Stores was a permissive user in this action. Accordingly, this argument fails

Further, the Court held that this claim did not arise under an automobile policy. The insuring agreement in the policy issued to UPS extends potential coverage only to claims for bodily injury “caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.’” Plaintiff alleges contends that Mr. Derratta’s injuries are covered under the UPS policy as he was injured while unlading the truck. New York Law however disagrees. As Mr. Darratta was not injured while actually unloading the truck. Liability under an auto policy can be triggered where the relevant accident occurs during the loading or unloading of property from a covered vehicle. In New York, only when a party can establish that the accident resulted from “some act or omission related to the use of the vehicle,” can that party establish a right to recover under an auto policy. See Eagle Ins. Co. v. Butts, 269 A.D.2d 558, 559, 707 N.Y.S.2d 115 (2d Dep’t 2000). Here, the underlying state court action was one for premises liability, and the undisputed facts prove that Mr. Darratta’s injury occurred, not while unloading his truck, but when he tripped walking around his truck. Accordingly, the Court denied Plaintiff’s motion for summary judgment and granted defendant’s cross-motion dismissing the claims against the defendant.


Patricia A. Rauh

[email protected]

No notable cases to report this week – check back next time!


Scott D. Storm

[email protected]

02/14/22       Milligan v. GEICO General Ins. Co. and CCC Intelligent Solutions
United States Court of Appeals, Second Circuit
Interpreting Regulation 64 with Respect to the Valuation of Total Losses for the Current Model Year (the Meaning of “reasonable purchase price…of a new identical vehicle" and How Such a Price Must be Determined), the 2nd Circuit Grants CCC’s Fed. R. Civ. P. 12(b)(6) Motion to Dismiss but Denies GEICO’s Motion with Respect to Breach of Contract and GBL § 349 Counts

Summary order granting CCC's motion to dismiss in its entirety, and GEICO's motion to dismiss counts for violation of Regulation 64, negligence, and unjust enrichment. The District Court's order is vacated in part as far as it granted GEICO's motion to dismiss the breach of contract and GBL § 349 counts. The case is therefore remanded to the District Court with instructions that only the breach of contract and GBL § 349 claims against GEICO should proceed to discovery. 

The District Court granting motions to dismiss in favor of GEICO and CCC Intelligent Solutions, Inc.  In March 2015, Plaintiff purchased a 2015 Lexus for $51,400. Plaintiff insured the vehicle with GEICO. In May 2015, the vehicle was totaled.   The vehicle was a "current model year" vehicle as defined by "Regulation 64" (N.Y. COMP. CODES R. & REGS, Title 11, § 216.7 (2020)). Regulation 64 provides that "total losses" for "current model year" vehicles require the insurer to pay "the reasonable purchase price to the insured on the date of loss of a new identical vehicle," less certain applicable reductions for depreciation based on the number of miles driven by the lost vehicle. Id. § 216.7(c)(3).

GEICO contracts with CCC to provide vehicle valuations which provided GEICO with a "ONE Market Valuation Report" (an "MVR"), in which it "compared Plaintiff's current model year vehicle…with three similar dealer vehicles that were available or recently sold in the marketplace at the time of valuation."  The MVR valued Plaintiff's vehicle at $45,924, and GEICO issued a claim payment for that amount to Plaintiff.

Plaintiff filed a Complaint in this putative class action articulating six counts in the complaint: (1) breach of contract; (2) violation of Regulation 64; (3) negligence; (4) unfair and deceptive trade practices in violation of New York General Business Law ("GBL") § 349; (5) declaratory and injunctive relief against GEICO; and (6) unjust enrichment. Defendants moved to dismiss for failure to state a claim upon which relief can be granted under Fed. R. Civ. P. 12(b)(6). Defendants also filed a separate motion to compel Plaintiff to comply with the Policy's appraisal process.

To make out a breach of contract claim, a plaintiff must plead: (1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages.  Regulation 64 is "deemed to be part of an insurance contract as though written into it." Trizzano v. Allstate Ins. Co., 7 A.D.3d 783, 785 (2d Dep't 2004) (cleaned up). Plaintiff therefore claims that GEICO breached the Policy by failing to comply with Regulation 64.

The question regarding 11 N.Y.C.R.R. § 216.7(c)(3) is the meaning of the phrase "reasonable purchase price…of a new identical vehicle" and how such a price must be determined.  The District Court based its interpretation of this phrase on § 216.7(c)(4) of the regulation which provides that if an insured notifies her insurer that she "cannot purchase a comparable vehicle for the market value, as determined under the provisions of subparagraph (1)(i), (ii), (iii), or (v) or [§ 216.7(c)(3)]," the insurer must offer the insured certain alternatives.  The District Court concluded that "a ‘reasonable purchase price' is one that would allow the insured to purchase a ‘comparable vehicle for the market value.'" GEICO based its payment to Plaintiff on the MVR, which was derived from three "comparable vehicle(s) available or recently sold in the marketplace." The District Court therefore concluded that "GEICO complied with Regulation 64" by "issuing a payment reflective of the market value of Plaintiff's vehicle."  We disagree with the District Court’s conclusion that, as a matter of law, GEICO complied with Regulation 64.

The plaintiff argued that the direction to the insurer to pay "the reasonable purchase price…of a new identical vehicle" requires the payment of the "sticker price" (MSRP plus the transportation fee charged by the manufacturer for transporting the car to that dealer).  However, the sticker price reflects only the manufacturer's suggested price which acts as a starting point for bargaining between the dealer and the purchaser. If Regulation 64 intended to require the insurer to pay the sticker price of a new vehicle identical to the lost car, it could and would have used that term.  That market price may often differ from the sticker price.  The "reasonable purchase price" must instead refer to the price that a reasonable buyer and a reasonable seller would agree upon for the purchase of such a car in the relevant geographic market.

The parties also disagree about the meaning of the word "new" in the disputed phrase. Section 216.7(c)(3) requires that the insured be paid the "reasonable purchase price of…a new identical vehicle". At oral argument, GEICO's counsel clarified that it interprets "new" to mean a vehicle that is new to the customer, in the sense that it is different from the customer's old vehicle destroyed in the accident. According to GEICO's formulation, Regulation 64 allows them to compensate the customer with the reasonable purchase price for a used replacement vehicle of the same age and with the same number of miles on it as the vehicle that was lost. Thus, GEICO argues that Regulation 64 merely requires the insurer to pay the customer, as is usual with respect to insured property, the market value of the car that was destroyed.

We disagree. If that were the meaning of Regulation 64, the word "new" would add nothing. The disputed phrase would have the same meaning without the word "new," because any vehicle purchased to replace the one that was totaled in the accident would be new to the customer.  A "new identical vehicle" means precisely what it says in plain English: a brand-new vehicle of the same make and model, with identical features and almost no miles on the odometer. Accordingly, the "reasonable purchase price of…a new identical vehicle" is the price that a reasonable buyer would pay to purchase an identical, brand new, factory-fresh car from the local dealership in the normal course of business. Insurers may only compensate the insured for less based on the applicable deductible, and the statutorily permitted depreciation schedule. See § 216.7(c)(3).

There may be several ways to estimate this reasonable purchase price. For example, insurers might consult with local dealerships to identify new cars being offered for sale, or the actual transaction prices for new cars that were sold at or around the time of loss. Indeed, the "sticker price" might well be a relevant variable to consider, albeit not a controlling one. To the extent no "identical" cars were sold within the relevant geographic area reasonably near to the time of the loss, insurers may be able to extrapolate a reasonable purchase price from the sale price of nearly identical cars with the aid of a professional appraiser. But regardless of the precise metes and bounds of what is permitted when computing the "reasonable purchase price…of a new identical vehicle," Plaintiffs have plausibly alleged that the MVR prepared in the present case was fundamentally deficient.

The MVR itself contains multiple indications that the value it calculated for Plaintiff's vehicle differs from the value that Regulation 64 requires insurers to pay:  explaining that comparable vehicles may be "recently sold in the marketplace" without reference to time of loss; showing that all the comparable vehicles were used cars, and two had more than 10,000 miles on them; and showing all comparable vehicles as priced in New Jersey rather than New York. Moreover, CCC candidly acknowledged at oral argument that it had contracted with GEICO to appraise the reasonable value of Milligan's car at the time of the loss. It may well be the case that the MVR did, in fact, wind up yielding the reasonable purchase price of a new identical vehicle. But it is far from apparent that the MVR represents "the reasonable purchase price to the insured on the date of loss of a new identical vehicle" as set forth in Regulation 64, or that it was ever intended to do so. At this stage, construing the facts in favor of Plaintiff as we must, her allegation that GEICO failed to comply with Regulation 64 is well-pleaded.

We therefore vacate the District Court's order of September 30, 2020, insofar as it granted the motion to dismiss the breach of contract claim against GEICO, and remand it for further proceedings consistent with this order.

By contrast, Plaintiff's breach of contract claim against CCC was properly dismissed. Plaintiff has no contractual relationship with CCC, so her claim relies on being a third-party beneficiary of CCC's contract with GEICO. To establish her claim, Plaintiff must plead: (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for her benefit and (3) that the benefit to her is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate her if the benefit is lost.  The language of the contract must clearly evidence an intent to permit enforcement by the third party.  The District Court's dismissal of the breach of contract claim against CCC is therefore affirmed.

Regarding the cause of action under GBL § 349, it prohibits "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state." N.Y. GEN. BUS. LAW § 349(a). To state a claim under § 349,"a plaintiff must allege that a defendant has engaged in: (1) consumer-oriented conduct that is; (2) materially misleading; and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice. 

The District Court rested its rejection of Plaintiff's § 349 claims against GEICO primarily on the logic of its breach of contract analysis, namely that because "Regulation 64 contemplates the payment of a market value price as a reasonable purchase price," it could not be materially misleading for GEICO to pay such a market value price to satisfy a claim.  But as we have already explained, it is not clear at this stage—with the evidence construed in Plaintiff's favor—that the MVR did not undervalue Plaintiff's claim under Regulation 64.

The District Court also dismissed the § 349 claim against GEICO because it was not "independent of the loss caused by the alleged breach of contract." (quoting DiGangi v. Gov't Employers Ins. Co., 2014 WL 3644004, at *7 (E.D.N.Y. July 22, 2014).  On appeal, GEICO attempts to reinforce the notion that "[a]lthough a monetary loss is a sufficient injury to satisfy the requirement under § 349, that loss must be independent of the loss caused by the alleged breach of contract" (quoting Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009)). See also Sokoloff v. Town Sports Int'l Inc., 6 A.D.3d 185, 186 (1st Dept. 2004) (rejecting a GBL § 349 claim where "[p]laintiff does not claim any kind of monetary loss other than payment of her membership fees").

However, as we made clear most recently in Nick's Garage, Inc. v. Progressive Casualty Insurance Co., the Spagnola and Sokoloff cases "do not establish…a requirement" that a plaintiff "allege an injury [under § 349] independent of their contract damages."  Instead, those cases stand for the proposition that no § 349 claim exists "where the plaintiffs allege damages in the amount of the purchase price of their contracts but fail to allege that defendants have denied them the services for which they contracted."  Here, by contrast, Plaintiff does allege that she was denied the services for which she contracted. As in Nick's Garage and Orlander, "Plaintiff has alleged both a monetary loss stemming from the deceptive practice and the Defendant's failure to deliver contracted-for services". 

As in the breach of contract context, GEICO may yet prove that its alleged practices were not, in fact, materially misleading. But the contrary is at least well-pleaded at this stage.  We therefore vacate the District Court's order insofar as it granted the motion to dismiss the § 349 claim against Defendant GEICO, and remand it for further proceedings consistent with this order.

The District Court properly dismissed the § 349 claims against CCC because Plaintiff failed to allege that CCC engaged in any materially misleading conduct.

02/16/22       Donovan v. State Farm Automobile Ins. Co.
United States Court of Appeals, Third Circuit
Under Pennsylvania Law, the Automobile Policy in this Case did Not Contain a Valid Waiver of Inter-Policy Stacking and Neither the Household-Vehicle Exclusion nor the Coordination-of-Benefits Provision can Function as a De Facto Waiver of Inter-Policy Stacking for Underinsured Motorist Coverage

Corey Donovan was seriously injured while driving his motorcycle. He collected from the driver of the other vehicle involved in the accident and from his own motorcycle insurance. He also made a claim on insurance issued by State Farm to Linda Donovan, his mother with whom he lived. State Farm denied the claim. The parties dispute whether under Pennsylvania insurance law Linda waived inter-policy stacking for underinsured motorist coverage.

Underinsured motorist coverage provides benefits when a third-party tortfeasor injures or damages an insured and the tortfeasor lacks sufficient insurance coverage to compensate the insured in full. That is what happened here. "Stacking” refers to the practice of combining the insurance coverage of individual vehicles to increase the amount of total coverage available to an insured. There are two types of stacking. Intra-policy stacking is the aggregation of the coverage limits on multiple vehicles covered under a single policy—even though not all vehicles are involved in the accident or occurrence. For example, if a two-vehicle policy provided $50,000 in coverage for each vehicle, intra-policy stacking would allow the insured to make a claim of up to $100,000. In contrast, inter-policy stacking is the aggregation of coverage limits for vehicles insured under separate policies. Here the dispute is about inter-policy stacking: Can Corey collect under both his motorcycle insurance and Linda's automobile insurance?

Corey settled with the driver of the other vehicle for its $25,000 liability limit. Corey also made a claim for underinsured motorist benefits on a motorcycle insurance policy State Farm had issued to him being paid the $50,000 policy limit.  He then made a claim for underinsured motorist benefits under the automobile insurance policy Linda had from State Farm. It covered three vehicles (none of which was the motorcycle) and offered underinsured motorist benefits up to a limit of $100,000. That policy also insured Corey as a resident relative. State Farm denied his claim for benefits under the Automobile Policy, explaining that Linda had waived stacked underinsured motorist coverage. The waiver said:

By signing this waiver, I am rejecting stacked limits of underinsured motorist coverage   under the policy for myself and members of my household under which the limits of coverage available would be the sum of limits for each motor vehicle insured under the policy. Instead, the limits of coverage that I am purchasing shall be reduced to the limits stated in the policy. I knowingly and voluntarily reject the stacked limits of coverage. I understand that my premiums will be reduced if I reject this coverage.

This language is mandated by § 1738(d) of Pennsylvania's Motor Vehicle Financial Responsibility Law. 75 Pa. Cons. Stat. § 1738(d)(2).  An insured can waive stacked coverage in exchange for a reduced premium.

Two other provisions of the Automobile Policy are relevant. First, it contained a "household-vehicle exclusion" that stated "THERE IS NO COVERAGE FOR AN INSURED WHO SUSTAINS BODILY INJURY WHILE OCCUPYING A MOTOR VEHICLE OWNED BY YOU OR ANY RESIDENT RELATIVE IF IT IS NOT YOUR CAR OR A NEWLY ACQUIRED CAR."  Corey's motorcycle was not included on the declaration page of the Automobile Policy. Thus, if the household-vehicle exclusion is valid, it defeats his claim. Second, the Automobile Policy contained a "coordination-of-benefits provision" that explained:

If Underinsured Motor Vehicle Coverage provided by this policy and one or more other vehicle policies issued to you [i.e., Linda] or any resident relative [i.e., Corey] by one or more of the State Farm Companies applies to the same bodily injury, then:

a. the Underinsured Motor Vehicle Coverage limits of such policies will not be added together to determine the most that may be paid; and

b. the maximum amount that may be paid from all such policies combined is the single highest applicable limit provided by any one of the policies. We may choose one or more policies from which to make payment.

Translated into everyday language, this means that when an insured recovers on multiple policies issued by State Farm, his maximum payment is capped at the highest applicable coverage limit. If applicable here, this provision limits Corey to recovering at most $100,000 (i.e., the "single highest limit" provided by the State Farm policies) in total from his claims on the Automobile Policy and his motorcycle insurance. Since Corey already received $50,000 from the motorcycle policy, he would be limited to a payment of $50,000 from the Automobile Policy. The household-vehicle exclusion and the coordination-of-benefits provision are included in State Farm's non-stacking policies but not in its stacking policies. 

Corey and Linda Donovan sued State Farm seeking a declaration that Corey is entitled to underinsured motorist benefits under the Automobile Policy.

State Farm contends: (1) the Automobile Policy contains a valid waiver of inter-policy stacking of underinsured motorist benefits; (2) alternatively, Corey cannot recover from the Automobile Policy because the household-vehicle exclusion applies; and (3) assuming Corey can recover from the Automobile Policy, it is limited to $50,000 per the coordination-of-benefits provision. The Donovans respond: (1) any inter-policy stacking waiver is invalid, (2) the household-vehicle exclusion cannot function as a de facto waiver of stacked coverage, and (3) the lack of a valid waiver renders the coordination-of-benefits provision inapplicable.

Because this dispute is one of state law, the court certified three questions to the Supreme Court of Pennsylvania.  It accepted the certified questions and issued a comprehensive opinion. Donovan v. State Farm Mut. Auto. Ins. Co., 256 A.3d 1145 (Pa. 2021).

1. Is a named insured's signing of the waiver form set out at 75 Pa. Cons. Stat. § 1738(d) sufficient to waive inter-policy stacking of underinsured motorist benefits under Pennsylvania's Motor Vehicle Financial Responsibility Law, where the policy insures more than one vehicle at the time the form is signed?

2. If the answer to Question 1 is no, is a household vehicle exclusion contained in a policy in which the named insured did not validly waive inter-policy stacking enforceable to bar a claim made by a resident relative who is injured while occupying a vehicle owned by him and not insured under the policy under which the claim is made?

3. If the answers to Questions 1 and 2 are no, is the coordination-of-benefits provision in the Automobile Policy nonetheless applicable, such that it limits Corey Donovan's recovery of underinsured motorist benefits under the policy to $50,000, or does the lack of a valid waiver of inter-policy stacking render that provision inapplicable?

On the first question, the Pennsylvania Supreme Court held no. It explained that the § 1738(d) waiver provision's use of the singular in the phrase "under the policy" means that the waiver is limited to intra-policy stacking in multiple-vehicle policies, such as the Automobile Policy. In short, the plain language of the waiver appears, at least in the context of multiple-vehicle plans, to disclaim only stacking the coverage of the vehicles covered "under the policy." See 75 Pa. Cons. Stat. § 1738(d). Since the waiver does not mention other policies, it does not provide notice to insureds that they are also waiving inter-policy stacking.

On the second question, the Court again held in the negative. It concluded that the household-vehicle exclusion is unenforceable here because, when there is no valid § 1738(d) inter-policy stacking waiver, another contract provision cannot function as a de facto waiver.  

And finally on the third question, the Court held the coordination-of-benefits provision was not a partial waiver of inter-policy stacking for the same reasons. 

Here, the opinion the Supreme Court issued to answer our certified questions governs. The Automobile Policy did not contain a valid waiver of inter-policy stacking. And neither the household-vehicle exclusion nor the coordination-of-benefits provision can function as a de facto waiver of inter-policy stacking for underinsured motorist coverage. Accordingly, Corey is entitled to a payment up to the Automotive Policy's coverage limit of $100,000.

02/04/22       Propokovic v. United Property & Casualty Ins. Co.
United States District Court, S.D. New York
In the Context of an Insurer’s Decision to Rescind a Policy Due to Material Misrepresentations in the Procurement of the Policy, Advice from Outside Legal Counsel Was Not Predominantly of a Legal Nature and, Therefore, Not Protected by the Attorney-Client Privilege

Plaintiffs had a fire at their premises, claiming a total loss under their homeowners policy.  Defendant denied plaintiffs' insurance claim and rescinded the policy on the ground that plaintiffs made material misrepresentations and/or false statements on the insurance application. Defendant refunded policy premiums paid to date via direct deposit into plaintiffs' bank account.

Plaintiffs seek to compel disclosure of communications between defendant and its outside counsel, from November 17, 2020 (when outside counsel was retained) through January 19, 2021 (when coverage was disclaimed). Defendant asserts that these communications are protected by the attorney-client privilege because:

they relate to the retention of outside counsel for legal advice relating to the investigation and potential rescission of a claim. This is fundamentally different than advice relating to the processing of a claim, or the denial of a claim, in the ordinary course of business. UPC is in the business of processing claims but is not in the business of rescinded policies.

New York law governs the applicability of the attorney-client privilege in this diversity case.  Under New York law, an insurance company's claim handling activities are generally subject to discovery even if they were performed by an attorney.  This rule is grounded in an obvious principle: The payment or rejection of claims is part of the regular business of an insurance company.  Thus, the key question is whether the attorney is predominantly investigating an insurance claim or providing legal advice. This approach extends to evaluations of assertions of attorney-client privilege in the context of an insurance company's decision to rescind a policy based upon alleged material misrepresentations made by the insured in the procurement of the policy. 

Here, defendant attempts to draw a fine line between its handling of plaintiffs' claim and its evaluation of the rescission option. In the first place, defendant's proposition that it is "not in the business of rescinded policies" defies logic. Defendant is in the business of providing insurance coverage; it assesses risk (and determines whether or not to provide insurance) based (at least in part) on a potential insured's application. That is precisely why policy rescissions are often based upon misrepresentations or false statements in insurance applications. Defendant's point — that it makes no money from rescinded policies — is facially true but ignores situations (like the one at bar) where defendant rescinds a policy and avoids paying a substantial claim. In any event, in this case, defendant's decision to rescind plaintiffs' policy was inexorably intertwined with its denial of plaintiffs' claim. In other words, any advice from outside counsel related to rescission of plaintiffs' policy cannot be parsed from defendant's denial of plaintiffs' claim. Thus, defendant's communications with outside counsel were not predominantly of a legal nature and, therefore, are not protected by attorney-client privilege. Accordingly, defendants shall produce all responsive communications with outside counsel between November 17, 2020, and January 19, 2021.


Katherine A. Fleming

[email protected]

02/18/222     Pavlicek v. American Steel Systems, Inc., et al.
North Dakota Supreme Court
Property Damage Caused by Faulty Workmanship Covered to The Extent It Causes Property Damage to Property Other Than the Insured’s Defective Work Product

Pavlicek hired a contractor to construct a steel building on his property, and as part of the project, JRC Construction installed the concrete floor and floor drain for the project. Another subcontractor installed an in-floor heating system for the floor. Grinnell insured JRC under a commercial general liability (CGL) policy throughout the project. After JRC finished the floor drain, it did not properly install the concrete floor, and it damaged the drain when attempting to repair the concrete. Pavlicek sued JRC for breach of contract regarding the defective flooring, and a jury awarded Pavlicek damages against JRC for the replacement of the concrete floor, drain, and in-floor heating system. Then, Pavlicek filed a supplemental complaint against Grinnell to satisfy the judgment as JRC’s insurer. Grinnell argued it had no duty to indemnify JRC under the CGL policy and that the damages were not covered under the policy.

The policy contained several exclusions to coverage, including a “Damage to Your Work” exclusion. The damage to your work exclusion stated the insurance did not apply to: “‘Property Damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard.’” The policy defined “[y]our work” as “[w]ork or operations performed by you or on your behalf.” “Products-completed operations hazard” was defined as:

a. Includes all ‘bodily injury’ and ‘property damage’ occurring away from premises you own or rent and arising out of ‘your product’ or ‘your work’ except:

(1) Products that are still in your physical possession; or

(2) Work that has not yet been completed or abandoned. However, ‘your work’ will be deemed completed at the earliest of the following times:

(a) When all of the work called for in your contract has been completed.

(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.

(c) When that part of the work done at the job site has been put to its intended use by any other person or organization other than another contractor or subcontractor working on the same project.

Work that may need service, maintenance, correction, repair, or replacement, but which is otherwise complete, will be treated as completed.

Grinnell argued the damage to your work exclusion excluded the damage to the drain because the drain was JRC’s work. The exclusion was intended to exclude insurance for damage to the insured’s work or product, but not for damage caused by the insured’s product or work. CGL policies are intended to protect the insured from clams of injury or damage to others. Since the district court found the drain was functioning properly before the concrete floor was poured, and JRC damaged the drain when it attempted to repair the floor, the damage to the drain was covered as damage to property other than the insured’s work product. Since the only way to fix the drain was to remove and replace the floor, the district court found the removal and replacement of the floor and the damage to the in-floor heating system were covered to give Pavlicek complete relief.

On appeal, Grinnell argued the district court misinterpreted the policy and that it did not cover the cost of replacing the concrete floor, in-floor heating system, and floor drain. Grinnell also argued the policy excluded coverage for damage to JRC’s work. The North Dakota Supreme Court found that the drain was a completed work product since it had been put to its intended use before it was damaged by the attempt to repair the concrete floor. The exclusion was also ambiguous since the policy excluded coverage for property damage to “[y]our work” but provided coverage for “Products-Completed Operations.” Since exclusions must be clear and explicit and are strictly construed against the insurer, the policy had to be construed to cover the cost to repair and replace the floor. Regarding the floor replacement and removal, the Supreme Court disagreed with the district court, reasoning a CGL policy does not cover an insured’s economic loss due to repairing or replacing its own defective work, and found that the policy did not cover the cost of replacing the floor as a result of JRC’s defective work. Regarding the in-floor heating system, it was not damaged during the policy period, so there was no “occurrence” under the policy for which there would be coverage.


Heather Sanderson

[email protected]

02/28/22       2102908 Alberta Ltd. v. Intact Insurance Company, 2022 ABQB 175
The Alberta Court of Queen’s Bench, Edmonton

A Clear Case for the Application of Anti-Concurrent Cause Language is Denied

In the May 15, 2020, edition of this newsletter (Volume XXI, No. 24) I discussed the April 27, 2020, flooding in Fort McMurray that was caused by an epic ice jam on the Clearwater River. On February 28, 2022, the Alberta Court of Queen’s Bench released a decision on disputed coverage for water damage sustained by a business in the heart of that flood zone.

The insured, 2102908 Alberta Ltd., operated a bowling alley called “The Alley” on the ground floor of rented premises, barely a block south of the banks of the Clearwater River. Flood water in that area was variously between the top of the wheel wells on pickup trucks to the bottom of the windows on those trucks. The water flowed into “The Alley” through the walls and doors and upwards from the underground parkade.

The insured held a commercial property policy issued by Intact Insurance Company that covered all risks of direct physical loss or damage to the insured property. The policy contained anti-concurrent cause language and stated that “This Form does not insure against…damage caused directly or indirectly: Flood in whole or in part by flood, including “surface water”. water”, waves, tides, tidal waves, tsunamis, or the breaking out or overflow of any natural or artificial body of water.”

The policy had a “seepage and leakage” exclusion, but that exclusion was removed by an extension of coverage which read “This Form is extended to cover loss or damage caused by seepage, leakage or influx of water derived from natural sources through basement walls, doors, windows or other openings, foundations, basement floors, sidewalks or sidewalk lights.”

Intact argued that the damage was caused by the excluded peril of “flood”; that the flood exclusion applied regardless of any other concurrent cause. The influx of water in the extension of coverage was a concurrent cause.

The insured states it was covered under the extension of coverage.

Although several arguments were proffered to the Court, Intact’s main argument was that the anti-concurrent cause language of the policy meant that damage caused by flood was excluded, even if that damage was covered by other policy provisions. The Court rejected that argument stating the flood exclusion was ambiguous; it would be “perverse” to have an ambiguous exclusion apply to a loss covered by another policy provision.

It is difficult to comment on this case as the full policy wording is not given. We do not know if the preamble to the coverage extension deleted the seepage and leakage exclusion but stated that all other terms and conditions of the policy apply to that extension.  If so, the extension of coverage would have placed the peril of leakage and seepage back into the coverage, allowing it to remain there until another exclusion removed that peril from the coverage: CUMIS General Insurance Co. v. 1319273 Ontario Ltd. (2006), 84 O.R. (3d) 113.

It is often the case that an excluded peril operates concurrently with a covered peril to cause damage. Words such as “cause directly or indirectly”; “caused by, resulting from, contributed to or aggravated by”; “We do not insure for such loss regardless of the cause of the excluded event, other causes of the loss, or whether other causes acted concurrently or in any sequence with the excluded event to produce the loss” have been held by Canadian Courts to be sufficient to exclude an otherwise covered cause of loss: Derksen v. 539938 Ontario Ltd., 2001 SCC 72; Pavlovic v. Economical Mutual Insurance Co. (1994), 28 C.C.L.I. (2d) 314, at p. 320 (BC C.A.) The anti-concurrent cause language employed by Intact in this case met these criteria, excluding the damage that occurred in this case.

Perhaps the ancillary coverage arguments supporting exclusion offered by Intact clouded the delivery of this crucial argument.  However, if the extension of coverage stipulated that it was subject to the other exclusions of the policy, then this case may be ripe for appeal.


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