Coverage Pointers - Volume XXIII, No. 25

Volume XXIII, No. 25 (No. 620)
Friday, May 27, 2022
A Biweekly Electronic Newsletter

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

      Long Island Office:
575 Broad Hollow Road
Melville, New York 11747
Phone: 631-465-0700
Fax: 631-465-0313

www.hurwitzfine.com

© Hurwitz & Fine, P. C. 2022
All rights reserved

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:

See the source image

Do you have a situation?  Everyone seems to have one these days.  Have no fear, we LOVE situations.

Special greetings to those who have attended our Risk Transfer Zoom Training programs and have signed up to become new subscribers to Coverage Pointers. So you know, you are reading our “cover letter” and the actual issue of Coverage Pointers is always attached as a pdf file.  Back issues of this publication can be found on our website, www.hurwitzfine.com.

Law School Commencement Remarks a/k/a What Makes Kohane Tick:

Those who know me well, appreciate that I love the opportunity to teach and empower.  An Adjunct Professor of Insurance Law at the Buffalo Law School, I’ve been teaching there 34 years or so.  I was honored to receive the Ken Joyce Award for Excellence in Teaching at the UB Law School during commencement ceremonies last week.  I had the pleasure of speaking to the graduating class and the subject I selected was about passion in practice.  If you have nothing else to do this weekend, the intro and my remarks begin at the 51:40 mark in the commencement ceremony https://lnkd.in/eYjnjzk6.

It’s always a dangerous time in Albany when the Legislative session is heading towards adjournment.

Insurance Bad Faith Bill Under Serious Consideration by Legislature  A 7285-AS 6813-A 

Please read Ryan Maxwell’s column in the attached issue of CP.

As the legislature winds down, it may consider legislation to create statutory bad faith in New York including a new cause of action allowing a third-party bad faith action brought by an injured person, without having to secure an assignment from the policy holder.  While Ryan Maxwell covers the legislation in detail in his column, I need to include some of the lowlights of the legislation here:

I would suggest that this bill is unnecessary because there is available to policyholder’s common law bad faith case law, the Legislature is seriously considering a bill to impose requirements on insurers that go way beyond common law bad faith.  Included in the legislation are 13 different acts or failure to act, which would be considered “unfair claims settlement practice, including this one:

fails to make a final determination and notify the policyholder in writing of its position on both liability for and the insurer's valuation of a claim within a reasonable time not to exceed six months of the date on which it received actual or constructive notice of the loss upon which the claim is based.

Six months?  A final determination on both liability and valuation?  No lawsuit may have been commenced, no discovery, no depositions, no medical and hospital reports received, no independent medical examination and the carrier is required to provide the policy holder with a final determination of its valuation of liability and value?

An “unfair claims settlement practice” would entitle a policy holder to be entitled to recover, in addition to amounts due under the policy, costs and disbursements,  consequential  damages, reasonable attorneys’ fees incurred by the policyholder, interest from the date of the loss, and punitive damages as determined by the finder of fact…

But wait, there’s more.  Ready to be rid of work product and material prepared to litigation privileges?:

Upon demand of a claimant policyholder or injured person pursuant to this section,  an  insurer shall make available to the claimant or injured person the entire claim file within thirty days.

Read Ryan’s column and contact your legislators.

New York Adult Survivors Act becomes Law:

By Anastasia M. McCarthy, Esq. and Michael J. Williams, Esq.

On May 24, 2022, Governor Kathy Hochul signed into law the Adult Survivors Act, which renews access to judicial relief for adult survivors of sexual assault.  In the State of New York, the current statute of limitations for filing a civil suit for rape is 20 years, while some forms of forcible sexual contact have only a 5-year statute of limitations.  The new law implements a one-year lookback window for individuals who were sexually assaulted as adults to file claims against their abusers, even if the statute of limitations has already expired. 

Governor Hochul’s official statement regarding the Adult Survivors Act may be accessed here.

The new law is patterned after the Child Victims Act, which, by the end of the lookback window in August 2021, resulted in nearly 11,000 civil actions being filed.  As with the Child Victims Act, the Adult Survivors Act provides survivors six months to determine if litigation is the right choice for them, investigate their claims, and consult with counsel prior to the commencement of the one-year lookback window. 

The lookback window allows these same individuals to sue the entity where the assault occurred, such as workplaces, schools, or religious institutions.  Given the age of the claimants at the time of the alleged abuse, the universe of potential institutional defendants, as well as avenues for insurance coverage, may be quite different than the claims made under the CVA.  Such entities who suspect that they may become defendants would be well served to consider their document retention policies and how best to position themselves for litigation during this six-month period. 

Hurwitz & Fine represents local, national, and international organizations—and individuals—in the defense of Child Victims Act cases and anticipates that there will be a number of Adult Survivors Act cases brought in the near future.  Our insurance coverage team also helps guide insurers and institutional clients, alike, through the complex array of issues involving insurance coverage for abuse cases, including issues concerning lost or historical policies, late notice, policy towers, and other related coverage matters.

Expert Witness and Mediation Services:

By the way, if you are looking for an expert witness or a mediator to help resolve coverage or risk transfer issues, feel free to reach out.  For insurers battling with each other over coverage issues and justifiable concerned about developing precedent that may work against them in their next case, mediation is an excellent alternative.

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 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.

Newsletters:      

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

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

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

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

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

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

Peiper on Property and Potpourri:

Ignoring the actual terms of the calendar, I will remain of the opinion that Memorial Day Weekend is the official start of summer.  With approximately 87.8% of us having a wedding of some sort to go to this weekend, feel free to break out the poplin suits and pastel ties. 

While we here at PPP don’t follow the rules of the calendar strictly, it appears that the fine judges of the Second Department are a bit more traditional.  In the NY Property case reviewed in this week’s column, the Court ruled that a suit limitation clause was really just a contractually restrained statute of limitations period.  As such, it is not a policy defense.  In reaching its conclusion, the Court rejected the policyholder’s argument that a decision to deny coverage effectively waived the suit limitation defense.

That’s it for this week.  Enjoy the long holiday weekend, and welcome to summer. 

One final thought for those wondering.  The number starting off this week’s musing is your columnist’s current Softball OPS rating.

For those not familiar, OPS is short for On-Base Percentage + Slugging Percentage.  For point of reference, last year’s MLB OPS leader was Bryce Harper at 1.044. Barry Bonds’ 2004 season ended with 1.4217 which was the highest OPS recording ever for a single season.  Babe Ruth holds the highest OPS for a career at 1.1636.

So, being faithful to the numbers, my lawyer league softball season is currently more than doubling the best season in the history of Major League Baseball.  You’d have thought, maybe, these accomplishments would have been picked up on the CP wire, but alas no, my colleagues are not fully appreciating how unprecedented this run is. 

Next week, we’ll compare the typical number of hot dogs eaten by the Babe with the number of chicken wings taken down by Team H&F at the post-game buffet.  While not your author, we have some other folks who may have given ol’ Babe a run for his money.  Stay tuned for that discussion. 

Steve
Steven E. Peiper

[email protected]
 

Stealing Corpses for Insurance – 100 Years Ago:

The Los Angeles Times
Los Angeles, California
27 May 1922

EXTRADITION GRANTED
IN SWINDLING CASE

Man accused of stealing
corpse in “death” for

insurance

            TONOPAH (Nev.) May 26. – Jack McFachern, alleged swindler of insurance companies, has been extradited from Nevada and returned to Leadville, Colo., to answer to a charge of grand larceny.

To collect $10,000 life insurance, McFachern is accused of having stolen a corpse from a cemetery at Victor, Colo., placed the body in a mine tunnel and fired a heavy charge of dynamite to destroy the corpse and give the impression that he himself had been killed.

Afterward, it is alleged, he watched his supposed funeral from a house in which he was hidden and read his eulogy in a local newspaper. One insurance company paid the claim, but another investigated and fought the case.
 

Wilewicz’ Wide-World of Coverage:

Dear Readers,

These last couple of weeks have been heavy. It is hard to express in words what has been happening, both in our hometown of Buffalo and elsewhere, and frankly, it may even be too soon to process fully. Suffice it to say that I do hope that one day we can come up with some sort of solution to curb senseless acts of criminal violence. Until then, hug your loved ones a little tighter tonight. You never know what tomorrow brings.

Until next time,

Agnes
Agnes A. Wilewicz

[email protected]
 

Blacksmith’s Shop AKA Still – 100 Years Ago:

Buffalo Courier
Buffalo, New York
27 May 1922

SAY “BLACKSMITH SHOP”
PROVES BIG BOOZE PLANT

               Shortly before 6 o’clock last evening, dry agents, acting on a tip, swooped down on what, to all outward appearances, was a blacksmith’s shop in rear of No. 15 Mortimer Street, where they seized a twenty-gallon still, six gallons of the finished product, and eight barrels of mash.

Meyer Grossman, forty-two years old, who lives on the premises with his wife and family, was arrested. The agents claim to have caught Grossman operating the still. He is charged with manufacturing and processing booze. He was taken to Sycamore Street police station and released in $500 bail to appear before United States Commissioner Charles E. Doane this morning.
 

Barnas on Bad Faith:

Hello again:

Memorial Day always feels like the beginning of summer in Western New York.  The weather is almost always nice, and this year looks like no exception.  I am hoping there are a couple of rounds of golf in my future this weekend.  Hopefully, you find some time to get outside and enjoy the long weekend as well.

While we are on the topic of things we are hoping for, I am hoping that my Blue Jays’ bats start heating up with the summer weather.  Last year, the Jays were first in all of baseball in home runs and OPS, second in batting average and wRC+, and third in runs scored.  So far this year, with largely the same lineup, we have plummeted down to twenty-fifth in runs, twenty-first in average, twentieth in OPS, and eighteenth in wRC+.  The biggest culprit is hitting with runners in scoring position, where the Jays .178 batting average ranks dead last in baseball.  This is particularly frustrating because our pitching staff has been quite good, sitting at tenth in ERA and WHIP and seventh in fWAR.  There is nothing more frustrating as a baseball fan than watching your team consistently waste good pitching efforts because they keep leaving runners on base.  Hopefully, the bats regress to the mean soon because the Yankees and Rays look mighty tough this year.

I have a bad faith case from Arizona in my column this week that presents an interesting issue.  The court found that the policy ultimately did not provide coverage, but it allowed the bad faith claim to proceed.  The bad faith claim was based on the purported failure of the insurance company to authorize its assigned defense counsel to commence a timely third-party action against a subcontractor hired by the insured.  By the time the claim was filed, it was barred by the applicable statute of limitations.  The court found an issue of fact as to whether the insurance company had unreasonably delayed authorization to file the action and allowed the bad faith claim to survive summary judgment.

Brian
Brian D. Barnas

[email protected]e.com
 

Liquor May Not be Good for Marriages – 100 Years Ago:

Buffalo Morning Express and
Illustrated Buffalo Express
Buffalo, New York
27 May 1922

MOONSHINE AND
HARD CIDER VERY
BAD FOR DRINKERS

Wife finds missing auto in
front of saloon and husband
in place

HAPPY FAMILY BROKEN

New lodger is sent to pen with
other drunks after husband
tells of trouble

                  Moonshine and hard cider played havoc with many of the 21 dunks arraigned before Judge Lamson yesterday. Two of them lost their happy lodging houses. Matthew Leidy, a boss carpenter, living at No. 911 West Delavan Avenue, has been drunk for several weeks, his wife said. On Thursday when she missed their machine from the garage, she notified the police. She feared he might be driving it while drunk. The machine was found in front of a saloon and Leidy was in the saloon. His wife wanted him sent to the City hospital and his son pleaded that he be put on probation. Judge Lamson reserved decision of the case until Monday, pending Leidy’s behavior.
 

Off the Mark (featuring Kyle A. Ruffner):

Dear Readers,

For just about every Memorial Day weekend the kids and I have gone camping in the Catskills.  This year, we decided to switch things up and camp right here on Long Island.  We are trading in a four-hour ride for a 45-minute ride.  With the price of gas and not having to sit in traffic for hours, this was a no-brainer.  The forecast is calling for rain Friday evening and night, but the rest of the weekend looks good.  Should be a good time.

Kyle brings us an interesting construction defect case from the United States District Court for the District of Connecticut.  In Cnty. Wide Mech. Servs., LLC. v. Regent Ins. Co., the U.S. District Court examined the duty to defend as well as the Contractual Liability exclusion, finding a duty to defend and that the exclusion was ambiguous.

Looking forward to going on a mini vacation to Saratoga next weekend for my cousin’s wedding. The whole family decided to rent a lake house and make a weekend trip out of it. Seems like it has been quite some time since I’ve been away, so it promises to be a good time!  Otherwise staying busy, playing some softball and, of course, a lot of golf. ~Kyle

Enjoy the holiday weekend!

Brian (and Kyle)
Brian F. Mark

[email protected]

 

Lighter Beer an Option for Prohibition – 100 Years Ago:

New York Herald
New York, New York
27 May 1922

Representatives Ask for
Report of 2.75 Beer Bill

Special Dispatch to The New York Herald

                 Fifty members of the House joined in a request to the Ways and Means Committee today asking for a prompt report on the Hill local option bill allowing the sale of beer and cider containing not more than 2.75 per cent alcohol.

                 The measure provides that each Congress district is to be a local option unit and that in the November elections the voters will decide whether they want beer and cider. The bill fixes a tax of 2 cents a gallon on beverages sold, and the author. Representative Hill (Md.) estimates it would increase Treasury receipts from $400,000 to $500,000 a year.
 

Fleming’s Finest:

Hi Coverage Pointers subscribers,

We have been feeling the heat at H&F—and not just because the sun has emerged. A devastating loss in the firm’s first softball game of the season lit a fire under these attorneys, and the team took home a win last week. Sweet redemption. Clearly, we are all training like Rocky and jogging up the steps of city hall every day before work.

This week, I can offer you a case from Colorado. Nil Sine Numine/Nothing without Providence or Deity. The Colorado Supreme Court looked at whether a hospital’s chargemaster, a database that lists rates for specific medical services and supplies, was incorporated by reference into hospital service agreements that a patient had signed. Since the patient had neither knowledge of nor assented to the chargemaster, which was not referenced in the hospital services agreements or disclosed to her, the chargemaster was not incorporated by reference into the hospital services agreements. The hospital service agreements left the price term open, and the jury appropriately determined at term.

Catch you later,

Kate
Katherine A. Fleming

[email protected]
 

Men Shouldn’t Smell So Sweet – 100 Years Ago:

New York Herald
New York, New York
27 May 1922

SWEET SCENTED MEN
PROBLEM OF DRUGGISTS

Dealers Should Reach Out for
Trade, Says Leader.

                   AVALON, Santa Catalina Island, May 26.— Every man who lays claim to any class at all has his pet shade of face powder, his particular fragrance in toilet water, his favorite shaving soap and his distinctive preference in nail polish, F. M. Head of Los Angeles declared here in an address before the sixteenth annual convention of the California Pharmaceutical Association.

“The up-to-date man seeks to make himself just as attractive to women as they are supposed to strive to make themselves to men,” said Mr. Head. “Druggists must recognize the fact men now constitute a great and rapidly growing percentage of the patrons of the toilet articles, and they must make greater efforts to accommodate this class of patronage.”
 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

On Saturday, May 14th, I attended the University at Buffalo School of Law Commencement, where UB President Satish Tripathi shared some words of wisdom with the Class of 2022:

“We are living in precarious times. Times of war and suffering; of unprecedented attacks on our democratic values; … of racial injustice and economic instability. So much of this strife is rooted in our own failure. Our failure to see the humanity in one another. Our failure to compromise or even tolerate opposing viewpoints…. We have all witnessed major breakdowns in trust and the rise of misinformation that ensues. Mind you I do not catalogue these shortcomings to dampen your spirits …. In fact, my goal is opposite. What I want to impress on you today is one simple fact: …. You are prepared to push against this tide. To heal these societal fractures. As UB graduates, not only can you deeply analyze and evaluate the trajectory of society. You can change that trajectory.”

Minutes later, Erie County District Attorney, John Flynn, would quietly leave the stage, cell phone in hand. Only afterwards would University at Buffalo graduates and attendees learn why he answered that call. Some things cannot wait.

This cannot. Answer your call, today. Take steps now. Generate necessary change in our communities and beyond. We can do more and be better together.

Buffalo was one too many and at its time, just the latest example of too little done, too late. Uvalde, the next. Both agonizing examples of societal shortcomings that need answers, now. Buffalo is my home. Children are our future. Neither should be taken by evil, but there is evil in this world and that is a fact.

This isn’t political. This is personal. No person should grieve solely due to the color of their skin or sending their kids to school, but this is our reality. All people should understand what is at stake and realize that we own this collectively. Lace ‘em up, roll up those sleeves, and let’s get to work.

In today’s column, we have addressed two pieces of legislation. The first is the Adult Survivors Act that was signed into law this week. Our own Michael Williams and Anastasia McCarthy break it down for you, so you do not have to (nor I, thanks to them). The second is the infamous bad faith bill that we hear so much, except this time it has a head of steam with support throughout Albany. You’ve been warned. I will breakdown what it could mean and why it matters. Spark Notes: Call your legislator, yesterday…

Until Next Time,

Ryan
Ryan P. Maxwell

[email protected]
 

Wedding on a Dare – 100 Years Ago:

Times Herald
Olean, New York
27 May 1922

COUPLE READY TO MARRY
WITHOUT INTENT BECAUSE
FRIENDS DARED THEM TO

(By The Associated Press)

BOSTON, Mass., May 27.— A dare accepted, and a bet made resulted in Miss Elizabeth D. Wells, daughter of State Senator Wellington Wells and William Fitzgerald, son of a Boston banker, being on record at City Hall today as intending to marry, yet with each protesting that there was no real intent.

It all grew out of a dare given Miss Wells by girl society chums, she explained, adding, “rather than be a poor sport I accepted the defy.”        

Part of the pact was the man be chosen by her chums and when Fitzgerald, a Harvard under-graduate, was named, Miss Wells assented.

But the young man had to be convinced that she would go through with it and offered to bet that she would not. The bet was accepted like the dare and Miss Wells, 20, with Mr. Fitzgerald, 22, went to City Hall and filed formal announcement of their intention to marry.

“It was a lark, a joke. No oath was taken, no promise made and except for what appears now, a rather foolish stunt and the substantial bet I expect Mr. Fitzgerald to pay. It’s all over,” Miss Wells asserted today.

Young Fitzgerald’s parents spoke for him to say there was no serious intention whatever involved. Miss Wells spoke for herself in scouting the suggestion that it was possible that they might still carry the matter to the story book climax and “live happily ever after.”
 

Dishing Out Serious Injury Threshold:

Dear Readers,

The weather downstate has been wonderful. I have had fun the last few weekends getting out and enjoying the outdoors. Looking forward to more great weather and some nice time with family for this Memorial Day weekend.

I selected two decisions for this issue. These are both Appellate Division, Second Department, matters.  Both are brief decisions finding that plaintiff raised a triable issue of fact as to whether he sustained a serious injury to the lumbar region of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d).

Enjoy,

Michael
Michael J. Dischley

[email protected]  

 

Babe Ruth is Insubordinate, but Can He Hit the Ball – 100 Years Ago:

The New York Times
New York, New York
27 May 1922

THE RAZZLING OF RUTH

For Mr. George Herman Ruth’s insubordinate behavior in throwing dust on the umpire who called him out there is no extenuation. His invasion of the grandstand in pursuit of a man who was saying things about and to him was improper and deplorable, but there was no provocation. He has been back in the game less than a week, after a long suspension. Yet a large part of the baseball populace expects him to produce a home run every time he comes up; and if he fails, he gets, in the colloquial, “the raspberry.” The fact that he batted his team into a championship last year is forgotten; if he hit fifty-nine home runs in 1921, that proves nothing to a good many Polo Ground judges, except that he ought to hit at least sixty this season.

Editor’s Note – He didn’t hit 60 until 1927. He only hit 35 in 1922. The 1922 home run leaders were:

1: Rogers Hornsby (42)

2: Ken Williams (39)

3: Tillie Walker (37)

4: Babe Ruth (35)

5: Cy Williams (26)
 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

It’s been a quiet fortnight—despite the kids being home from college. Managed to take in a Yankees game at the Stadium this week. An eleven-inning nail biter that the Yanks won in walk-off fashion. Exciting game, but I paid the price with a 2 a.m. return time to Hartford. At least I snoozed a bit on the train ride home.

Everyone here in the Connecticut office of H&F wish you a safe and solemn Memorial Day, as we keep in mind the true meaning of the holiday.

Keep keeping safe and watch out for the Monkeypox. Who had that one on their disaster bingo card?

Lee
Lee S. Siegel

[email protected]
 

Pay Those Premiums – 100 Years Ago:

Wilmington News-Journal
Wilmington, Ohio
27 May 1922

SERVICE
Beyond the
PREMIUM

Payment of your premium does not mean that you are forgotten until the next payment is due. On the contrary this agency is on the alert at all times to shoulder your insurance problems.

Insurance

Common sense demands your insurance matters should be handled by men trained to solve insurance problems, men capable of relieving you of all worry concerning your insurance needs.

Local Agent of
The Hartford Fire
Insurance Co.

Terrell & Terrell
Wilmington, Ohio

 

Rauh’s Ramblings:

Hi all,

I hope you are all having a good week.  We are finally getting the warmer weather we spend all winter dreaming about, which is great.  Let’s hope it sticks around for a while!  I don’t have a case to report on this week, but hopefully I can find something interesting for you in two weeks.

Until next time!

Patty
Patricia A. Rauh

[email protected]

 

Russians Seek US Army Assistance – 100 Years Ago:

Appeal to Reason
Girard, Kansas
27 May 1922

Appeal Army Asked to Assist
In Reconstructing Soviet Russia

Dear Comrades of the Appeal Army:

The Russian Famine, the greatest disaster that the modern world has known, has called forth the sympathy and response of the workers and farmers all over the world.

The workers and farmers of America, too, have heeded the call. Out of their little and their much they have given—workers, farmers, artisans, thinkers—have all given in the full realization that what they were giving was not for the men, women, and children of the Soviet Russia alone, but for the working class of the world. They knew that the Russian Revolution is THEIR revolution, that freedom in Russia is the is the presage and beginning of freedom for the working class the world over.

The Appeal Army has marched forward in the far-flung ranks of the FRIENDS OF SOVIET RUSSIA. Embracing the workers and farmers of the powerful West and South, it has gone to the front—of famine relief for the millions on the Volga waiting for help from the Workers of the World.

In the name of the Workers’ International Famine Relief Committee, the FRIENDS OF SOVIET RUSSIA expresses its thanks to the Appeal Army and hopes that in the forward movement for the conquest of bread and peace, in the drive for tools for the building up of Soviet Russia, for the emancipation of the workers and farmers, the Army of the Appeal will march along to victory.

FRIENDS OF SOVIET RUSSIA.

                                                                                                  s/ A.B. Martin

                                                                                     National Secretary.

 

Storm’s SIU Examen:

Hi everyone:

Four interesting cases to share:

  • Coverage for plaintiff’s 1st-party property claim is precluded due to 2-year contractual suit limitation condition; plaintiff fails to prove equitable estoppel.
     

  • 10–14-month delay in providing notice of 1st-party claim unreasonable as a matter of law (the court recognizing delays of under 3-months have been held untimely); no waiver; initial belief the damages may be less than the deductible was not a reasonable excuse for the delay; discussing the damage with the agent shortly after it occurred and deciding not to submit a claim was not formal notice of claim to the insurer.   
     

  • No-fault insurer is not required to set forth objective reasons for requesting EUOs in order to establish its prima facie entitlement to summary judgment.
     

  • Exception to exclusion in homeowners’ policy which grants coverage for fire loss to a detached garage which "contains" business property solely owned by the insured, not applicable where the business property is owned by the insured’s LLC.
     

This week’s encouraging word: “A mistake that makes you humble is better than an achievement that makes you arrogant”.

Have a nice long weekend!  Until we write again!

Scott
Scott D. Storm

[email protected]
 

Jews Aide Ukraine – 100 Years Ago:

The Akron Beacon Journal
Akron, Ohio
27 May 1922

HELPED TO HELP THEMSELVES

The Jewish People’s Relief committee, which is planning to raise a million dollars for the aid of people in southern Russia and the Ukraine, has the right idea. It will not dole out the funds through a relief committee. Instead, they will be invested in plows and harrows and other agricultural implements to help the people raise a crop. That is the one and only way to bring a famishing nation back to normalcy. The man with the hoe in all countries will grub enough sustenance out of the earth for himself, his family, and neighbors besides, if the gentlemen who make a specialty of starting wars will keep their taxes and soldiers off his back and give him half a chance. A few international syndicates are interested in oil and are keeping the world in turmoil while they scramble for concessions, but more than a billion of the world’s people are presently interested only in bread, and there is but only one way to get it. More than five thousand years ago the Jewish people were taught how men should earn the means to live, and they have never forgotten the lesson. That’s why Ukraine gets plows instead of dollars.

North of the Border: 

Spring has finally come to Southern Alberta. The hardwoods have the light green, feathery look of early spring as they come into leaf, the risk of frost has diminished and brave souls, including myself, have planted colourful annuals. But against this promise of spring, the world news is full of the incomprehensible: Another brutal school shooting; supermarket shoppers posing no threat to anyone gunned down because of race; senseless invasion, death, and destruction in the Ukraine. I admit to a sense of powerlessness in the face of this evil.

My column this week discusses an errant Ontario Court of Appeal decision that will hopefully be relegated to its facts and not form precedent in future duty to defend applications.

Heather
Heather A. Sanderson

[email protected]
 

Headlines from this week’s issue, attached:

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

  • Vehicle Not on Policy, Benefits Accidental Paid? No Coverage by Estoppel without Prejudice

  • Summary Judgment Seeking Rescission Denied with Leave to Renew
     

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

  • Suit Limitation Clause is Considered a Statute of Limitation Defense
     

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

  • Plaintiff Raised a Triable Issue of Fact as to Serious Injury Sufficient to Defeat Defendant’s Motion

  • "Ditto" 

    WILEWICZ’S WIDE WORLD of COVERAGE
    Agnes A. Wilewicz

    [email protected]om

  • All quiet on the Circuit Court front

    BARNAS on BAD FAITH
    Brian D. Barnas

    [email protected]

Insurer's Purported Failure to Timely Authorize Third-Party Action Raised Question of Fact on Bad Faith Claim
 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]

  • Interpreting Klass, Trial Court Seemingly Expands Appraisal 

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

  • U.S. District Court Finds a Duty to Defend Where Construction Defect Claims Could Potentially Fall Within the Scope of Coverage 
     

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell

[email protected]

  • End Of Session Presents Potential Turning Point of No return Regarding Bad Faith Legislation in New York. Thousands Flee 
  • New Law Passed Resetting the Clock for the Commencement of Legal Action by Adult Survivors of Sexual Assault 
     

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

  • Check back next time! 

STORM’S SIU EXAMEN
Scott D. Storm

[email protected]

  • Coverage for Plaintiff’s 1st-Party Property Claim is Precluded Due to 2-Year Contractual Suit Limitation Condition; Plaintiff Fails to Prove Equitable Estoppel
  • 10-14 Month Delay in Providing Notice of 1st-Party Claim Unreasonable as a Matter of Law (the Court Recognizing Delays of Under 3-Months Have Been Held Untimely); No Waiver; Initial Belief the Damages May be Less than the Deductible was Not a Reasonable Excuse for the Delay; Discussing the Damage with the Agent Shortly After It Occurred and Deciding Not to Submit a Claim was Not Formal Notice of Claim to the Insurer
  • No-Fault Insurer is Not Required to Set Forth Objective Reasons for Requesting EUOs in Order to Establish its Prima Facie Entitlement to Summary Judgment
  • Exception to Exclusion in Homeowners Policy Which Grants Coverage for Fire Loss to a Detached Garage Which "Contains" Business Property Solely Owned by the Insured, Not Applicable Where the Business Property is Owned by the Insured’s LLC
     

FLEMING’S FINEST
Katherine A. Fleming

[email protected]

  • Hospital’s Chargemaster Not Incorporated by Reference into Hospital Services Agreements that Patient Signed Where Patient had No Knowledge of and Did Not Assent to the Chargemaster

NORTH of the BORDER
Heather A. Sanderson

[email protected]

  • The Ontario Court of Appeal Refused to Uphold the Insurer’s Denial to Defend Claims Within the Policy’s Deductible. In Addition, the Insurer was Liable for a ‘Small Amount’ of Pre-Notification Defence Costs in the Absence of Any Prejudice to the Insurer for Pre-Notification Defence Steps When a Duty to Defend Had Been Improperly Denied and Refused to Parse the Allegations Between Covered and Uncovered Claims to Allocate Future Defence Costs
     

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

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


NEWSLETTER EDITOR
Dan D. Kohane

[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz

[email protected]

ASSISTANT EDITOR
Patricia A. Rauh

[email protected]

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

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

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

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

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

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

Alice A. Trueman

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

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner
Peiper on Property and Potpourri
Dishing Out Serious Injury Threshold
Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Off the Mark
Ryan’s Capital Roundup

Rauh’s Ramblings

Storm’s SIU Examen

Fleming’s Finest

North of the Border

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

05/25/22       Ottey v. Maya Assurance Company
Appellate Division, Second Department
Vehicle Not on Policy, Benefits Accidental Paid? No Coverage by Estoppel without Prejudice


Ottey was injured when the livery cab from which she was exiting suddenly sped away, causing her to fall.  The cab was owned by ABC Global Limo (“ABC”).  The plaintiff sued ABC to recover for her injuries.  ABC defaulted and the plaintiff took a default judgment for $75,000.

The plaintiff also applied to May Assurance for no-fault benefits, claiming it insured the livery.  Initially, Maya paid benefits but then advised Ottey that they had been paid in error because its policy did not cover the cab.

Maya moved to dismiss the complaint seeking to enforce the judgment against it.  It submitted evidence that it had insured the livery until August 14, 2020, some months before the accident. It claimed that ABC had asked to take the vehicle off the policy and transfer coverage to a replacement vehicle. Accordingly, it argued, that it no longer insured the livery vehicle being used at the time of the accident.

The plaintiff opposed the motion, arguing that Maya should be estopped from denying coverage because it had failed to timely deny coverage, that he prejudiced her by paying benefits and thus preventing her from timely filing a claim with MVAIC, the Motor Vehicle Accident Indemnification Corporation

The lower court found that Maya had no obligation to timely deny because the vehicle was not on the policy and there was no prejudice because she still had 180 days following the reversal of its decision to file a claim with MVAIC.

On appeal, the plaintiff argued that the defendant should be equitably estopped from denying coverage because it was complicit in ABC Global's insurance fraud. She further contends that she was prejudiced by the defendant's failure to issue a disclaimer and partial payment because the statutory maximum she could receive if she filed a claim with the MVAIC is $25,000, and, therefore, she could not recover the full $75,000 default judgment amount.

The court properly rejected those arguments.

Editor’s Note – kudos to the lower court for properly analyzing the issues.  There is no obligation to issue a disclaimer letter for a vehicle that is not on the policy.  If the plaintiff had been prejudiced by the delay in realizing its mistake, and had lost a substantive right, then, and only then would there have been an argument in favor of binding the carrier by estoppel.

05/17/22       463 Saddle Up Tremont LLC v. Union Mutual Fire Ins. Co.
Appellate Division, First Department
Summary Judgment Seeking Rescission Denied with Leave to Renew


Union Mutual sought summary judgment confirming the rescission of an insurance policy issued to Plaintiff.  The court concluded that the summary judgment motion was properly denied as premature, with leave to renew upon completion of discovery.  Union Mutual failed to establish as a matter of law that the insured made a false statement that was material.  Plaintiff also raised triable issues of fact as to whether Union Mutual waived the right to rescind.

  • Insurer’s Purported Failure to Timely Authorize Third-Party Action Raised Question of Fact on Bad Faith Claim
     

  • Interpreting Klass, Trial Court Seemingly Expands Appraisal   
     

  • U.S. District Court Finds a Duty to Defend Where Construction Defect Claims Could Potentially Fall within the Scope of Coverage
     

  • End of Session Presents Potential Turning Point of No Return Regarding Bad Faith Legislation in New York. Thousands Flee

  • New Law Passed Resetting the Clock for the Commencement of Legal Action by Adult Survivors of Sexual Assault
     

  • Check back next time!

  • Coverage for Plaintiff’s 1st-Party Property Claim is Precluded Due to 2-Year Contractual Suit Limitation Condition; Plaintiff Fails to Prove Equitable Estoppel

  • 10-14 Month Delay in Providing Notice of 1st-Party Claim Unreasonable as a Matter of Law (the Court Recognizing Delays of Under 3-Months Have Been Held Untimely); No Waiver; Initial Belief the Damages May be Less than the Deductible was Not a Reasonable Excuse for the Delay; Discussing the Damage with the Agent Shortly After It Occurred and Deciding Not to Submit a Claim was Not Formal Notice of Claim to the Insurer

  • No-Fault Insurer is Not Required to Set Forth Objective Reasons for Requesting EUOs in Order to Establish its Prima Facie Entitlement to Summary Judgment

  • Exception to Exclusion in Homeowners Policy Which Grants Coverage for Fire Loss to a Detached Garage Which "Contains" Business Property Solely Owned by the Insured, Not Applicable Where the Business Property is Owned by the Insured’s LLC
     

  • Hospital’s Chargemaster Not Incorporated by Reference into Hospital Services Agreements that Patient Signed Where Patient had No Knowledge of and Did Not Assent to the Chargemaster

  • The Ontario Court of Appeal Refused to Uphold the Insurer’s Denial to Defend Claims Within the Policy’s Deductible. In Addition, the Insurer was Liable for a ‘Small Amount’ of Pre-Notification Defence Costs in the Absence of Any Prejudice to the Insurer for Pre-Notification Defence Steps When a Duty to Defend Had Been Improperly Denied and Refused to Parse the Allegations Between Covered and Uncovered Claims to Allocate Future Defence Costs

     


PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

05/18/22       Van Der Velde v. NY Prop. Underwriting Assoc.
Appellate Division, Second Department
Suit Limitation Clause is Considered a Statute of Limitation Defense

Plaintiff commenced this action after sustaining damage to the insured premises, which was caused by a frozen, and burst, pipe.  It is unclear why, but we are advised that NY Property denied the claim. Plaintiff, in turn, commenced the instant lawsuit, but after more than two years after the initial date of loss. 

NY Property immediately moved to dismiss citing to the suit limitations clause within the policy.  Interestingly, rather than characterizing its motion as based upon documentary evidence (i.e., the policy), NY Property’s motion was based upon statute of limitations grounds.  Essentially, NY Property argued that the suit limitation resulted in a contractual limitation to the statute of limitations which expired prior to the commencement of this lawsuit. 

Plaintiff, likely stymied by the actual calculation of time, appears to have argued that while late, NY Property waived the suit limitation clause when it denied coverage.  Plaintiff referenced caselaw which holds that an insured is not obligated to provide documents, sit for an EUO or file a proof of loss if the insurer first denies coverage.  However, in rejecting the plaintiff’s argument, the Appellate Division noted that “the contractual limitations period here does not furnish a ground for the denial of a claim under the policy. Rather, the contractual limitations period operates as a defense to an action (see CPLR 3211[a][5]), and it thereby limits a party's right to enforce the policy.”

The Second Department then went on to cite the traditional rule of waiver relative to suit limitation clauses which requires the insured to demonstrate “clear manifestation of intent.”  In short, plaintiff needed to provide some evidence that NY Property clearly intended to waive compliance with the suit limitation clause. Where no such proof was offered, the matter was dismissed as untimely. 
 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley

[email protected]

05/18/22       Charles Holloman v. Tieraney D. Glover
Appellate Division, Second Department
Plaintiff Raised a Triable Issue of Fact as to Serious Injury Sufficient to Defeat Defendant’s Motion

In an action, inter alia, to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (Larry D. Martin, J.), dated August 6, 2019. The order granted the defendant's 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.

The plaintiff commenced this action, inter alia, to recover damages for personal injuries that he allegedly sustained in a motor vehicle accident that occurred on December 9, 2013. The defendant 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 dated August 6, 2019, the Supreme Court granted the defendant's motion, and the plaintiff appeals.

The Appellate Court found that defendant met her 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 accident. The defendant submitted competent medical evidence establishing, prima facie, that the alleged injury to the lumbar region of the plaintiff's spine did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d), and that, in any event, the alleged injury was not caused by the accident.

In opposition, however, the Appellate Court found that plaintiff raised a triable issue of fact as to whether he sustained a serious injury to the lumbar region of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d), and as to whether the alleged injury was caused by the accident.

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

05/11/22       Luis Rivera v. Roberto Ramirez, et al
Appellate Division, Second Department
“Ditto”

In an action, inter alia, to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Robert I. Caloras, J.), entered June 27, 2019. The order, insofar as appealed from, granted the motion of the defendant Abdoul M. Kone for summary judgment dismissing the complaint insofar as asserted against him 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.

In March 2016, the plaintiff commenced this action to recover damages for personal injuries he allegedly sustained in connection with a motor vehicle accident on March 21, 2015. The defendant Abdoul M. Kone (hereinafter the defendant) moved for summary judgment dismissing the complaint insofar as asserted against him 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. In an order entered June 27, 2019, the Supreme Court, inter alia, granted the defendant's motion, and the plaintiff appeals.

On appeal, the plaintiff does not challenge the Supreme Court's determination that the defendant met his 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 accident.

However, the Appellate Court found, contrary to the defendant's contention, that the plaintiff raised triable issues of fact as to whether he sustained a serious injury to the lumbar region of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d), and as to whether this alleged injury was caused by the accident.

Accordingly, the Appellate Court found that the Supreme Court should have denied the defendant's motion for summary judgment dismissing the complaint insofar as asserted against him.
 

WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz

[email protected]

All quiet on the Circuit Court front.

BARNAS on BAD FAITH
Brian D. Barnas

[email protected]

05/24/22       Clarendon America Ins. Co. v. R.E.P. Custom Builders Inc.
United States District Court, District of Arizona
Insurer’s Purported Failure to Timely Authorize Third-Party Action Raised Question of Fact on Bad Faith Claim

In early 2006, the Whiles wanted to build a house in Comville, Arizona.  They hired REP as the general contractor.  REP contracted with McBride to prepare the ground on which the house would be built.  After the house was built, the While began noticing issues, including doors not closing, drywall cracking, and concrete walkways separating.  They determined the issues were actually substantial latent defects and commenced a lawsuit against REP.

REP was insured by Praetorian.  Praetorian issued a reservation of rights and assigned defense counsel.  REP attempted to file a third-party action against McBride for its poor work, but the complaint was dismissed as untimely under Arizona’s statute of limitations.  REP and the Whiles settled and entered into a stipulated judgment for $406,824.01.  REP also assigned the Whiles the right to insurance claims against REP’s insurers for not paying the amount of the stipulated judgment.

Just before the stipulated judgment was entered, Pretorian and Clarendon, who also insured REP, filed a declaratory judgment action seeking a judgment that the policies they issued to REP did not cover the Whiles’ claims.  Counterclaims for breach of contract and bad faith were asserted.  Praetorian filed a motion for summary judgment seeking a judgment that there was no coverage and that the counterclaims should be dismissed.

First, the court concluded that the policy excluded coverage for the Whiles’ claims.  The property damage liability coverage contained an exception for subsidence of land.  It also contained an exception for property damage that would not have occurred but for the subsidence of land if such subsidence arises out of or is any way connected with REP’s work.  The court concluded that coverage was excluded under these provisions.

However, the court did not grant summary judgment on the bad faith counterclaim.  Under Arizona law, breach of the insurance contract is not a prerequisite to a tort claim based on bad faith.  Praetorian had a duty of good faith regardless of whether coverage existed.

Under Arizona law, when an insurer assumes a duty to defend, it may breach that duty if it inhibits the timely filing of pleadings.  REP claimed that Praetorian acted in bad faith by inhibiting the timely filing of the third-party action against McBride.  The court rejected the insurer’s argument that this was a legal malpractice claim rather than a bad faith claim, noting that the focus of the inquiry is on what Praetorian did, not whether assigned defense counsel committed malpractice.

Considering this claim, the court found that there was a genuine dispute of fact precluding summary judgment.  REP argued that Praetorian delayed authorizing litigation against McBride, but it failed to explain what that authorization consisted of or why it was necessary.  Praetorian, in turn, produced an email

Note: the decision on this case just came out and no link to it is yet available.  If you are interested in a full copy of the decision, please email Brian for a pdf version.

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected].com

05/12/22       51 Roses Mill, LLC v. Am. Guar. & Liability Ins. Co. [Decision unavailable] 
Superior Court of Connecticut (New Haven) 
Interpreting Klass, Trial Court Seemingly Expands Appraisal   

As we reported in January, the Connecticut Supreme Court took up the issue of when appraisal is appropriate in a first party property damage claim. The underlying dispute was a common one: the wind damaged the homeowner’s roof shingles, the carrier acknowledged a covered loss, and then they fought over how much of the roof needed to be replaced. Liberty offered to replace the rear slope of the roof where the missing shingles were located. The homeowner’s contractor provided an estimate for replacement of the entire roof. The homeowner demanded appraisal, but Liberty claimed that this was a coverage dispute making appraisal inappropriate.  

The Connecticut Supreme Court found that the scope of an insurer's replacement obligation under the state’s matching statute is a question of the amount of loss, and issues of adjacency and reasonableness of matching, are to be resolved by the appraisal panel.  

Taking up the issue of appraisal, a Superior Court judge expanded Klass’s application beyond the matching statute. In 51 Roses, a vacant commercial property was burned to the ground by vagrants. Following the fire, the owner sold the property to 51 Roses for $1 million. The carrier later paid the insured $1.3 million for demolition and ACV. Post-sale and ACV payment, the owner transferred its rights under the policy to the buyer, and the buyer (51 Roses) demanded appraisal.  

The trial court held that appraisal was appropriate to determine the “value of the property and the extent of the damage.” Interpreting Klass, the court wrote that appraisal can be compelled where the “damages in question [are] the result of a covered peril, and the issue to be appraised [is] purely a question of fact.” The court was not deterred by the existence of a pending federal court DJ action by the carrier against the insured. Appraisal may proceed prior to or concurrent with the determination of legal issues.  

In the coverage action, the carrier claims that there is no coverage owed because the post-sale assignment of rights is not binding on the carrier and that in any event the sale of the property before reconstruction limits the insured to ACV.  
 

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

5/13/22       Cnty. Wide Mech. Servs., LLC. v. Regent Ins. Co. 
United States District Court for the District of Connecticut

U.S. District Court Finds a Duty to Defend Where Construction Defect Claims Could Potentially Fall within the Scope of Coverage

This insurance coverage dispute arises out of an underlying construction defect action related to the installation of a heating, ventilation, and air conditioning (“HVAC”) system. 

The plaintiff in the underlying action, The Saybrook, entered a contract with the underlying defendant, PAC Group, under which PAC Group agreed to serve as the general contractor for the construction of an addition to Saybrook’s facility. PAC Group entered a contact with County Wide to install an HVAC system for the addition.

The Saybrook filed the underlying complaint alleging failures of the HVAC system and considerable damages as a result of the various malfunctions. The Saybrook brought claims for breach of contract against PAC Group and County Wide, and PAC Group brought a crossclaim against County Wide for contractual indemnification and breach of contract.

County Wide was insured under a Contractor’s General Liability Coverage policy issued by Regent Insurance Company (“Regent”). Relevant to this case, the policy provided that Regent will pay those sums the insured becomes legally obligated to pay as damages because of property damage and contained exclusions for damage arising from liability that the insured has assumed form a third party. County Wide tendered the action to Regent for defense, but Regent declined. County Wide brought this action against Regent alleging it had improperly denied its obligation to defend County Wide under the policy. County Wide alleged causes of action for (1) breach of contract and (2) breach of the implied covenant of good faith and fair dealing.

The Court noted that the Connecticut Supreme Court has held that damage caused by faulty workmanship does not constitute property damage where the injury to property includes only construction deficiencies and does not damage other non-defective property. If there is damage beyond the defective work to other property, however, such damage falls under a CGL policy’s grant of coverage. Regent argued that The Saybrook only alleged damages to the HVAC system itself and not to any other non-defective property external to the system. The court held that The Saybrook alleged facts that potentially could fall within the scope of coverage, triggering the duty to defend, because as a result of the HVAC system failure, The Saybrook alleged it replaced multiple compressors in the system and several circuit boards and other components.

Further, the Court held that the exclusion at issue, Contractual Liability, was susceptible to two equally reasonable interpretations. The exclusion provided that the insurance did not apply to damage the insured is obligated to pay by reason of assumption of liability in a contract. Regent argued that the exclusion should be read broadly to include any assumption of liability undertaken by County Wide, while County Wide contended that the exclusion did not apply because it should be construed narrowly to include only assumption of another party’s liability, not direct liability to a contractual counter-party. The court held that the two possible constructions of the assumption of liability exclusion were reasonable, rendering the exclusion ambiguous. Therefore, Regent had a duty to defend County Wide in the underlying suit.

Lastly, County Wide alleges that Regent’s refusal to defend County Wide in the underlying action was in bad faith. The Connecticut Supreme Court has held that bad faith means more than just mere negligence, it involves a dishonest purpose. The court explained that Regent was correct that bad faith is generally not actionable apart from a wrongful denial of a benefit under the insurance policy. However, the Court held that questions remained as to whether Regent’s initial refusal to defend constituted a breach of the policy, whether County Wide suffered damages arising from the refusal, and whether Regent’s actions involved a dishonest purpose. Therefore, because County Wide stated plausible claims for breach of contract and the implied covenant of good faith and fair dealing, and because Regent did not demonstrate the absence of any dispute of material fact, its motion for judgment on the pleadings was denied.

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

Legislative List

05/26/22       Bad Faith Bill Looms Large
New York State Legislature
End of Session Presents Potential Turning Point of No Return Regarding Bad Faith Legislation in New York. Thousands Flee

We hear a lot about insurance bad faith outside of New York, and in recent memory, the New York Legislature has attempted to pass legislation itself that would create a statutory private cause of action for bad faith. Those attempts have failed until now. However, we understand that a new fire in Albany burns for bad faith, and this one may ultimately deliver its promised inferno.

Assembly Bill No. A7285A (same as S6813-A) has a head of steam heading into the end of the legislative session, and it is important that you take note of its potential impact before it’s too late.

According to the bill’s Sponsor Memorandum, it would “allow insurance policy holders and injured people to recover damages when an insurance company's refusal to pay or unreasonable delay in paying a claim was not substantially justified.” This is done in a proposed Insurance Law §2601-a(a), which creates a private cause of action and sets out the appropriate standard of review:

(a) The holder of a policy issued or renewed pursuant to article thirty-four of this chapter or injured person shall have a private right of action against any insurer doing business in this state for damages as provided in this section upon proof by a preponderance of the evidence that such insurer's refusal to pay or unreasonably delay payment to the policy-holder or injured person of amounts claimed to be due under a policy is not reasonably justified.

Under the preponderance standard implicated, an insurer’s conduct is an unfair claim settlement practice if its 51% likely to be the case. Truly, I ask what jury is not chomping at the bit to find an insurer culpable for paying a fair settlement amount only after due investigation and discovery takes place? Additionally, note that an insurer’s delay—any delay—is assumed unreasonable, before it is even adjudged “not reasonably justified.” But how will we know when an insurer’s refusal to pay or delay in paying a claim was “not substantially justified?” The bill sets out exactly what would render such conduct “not substantially justified,” but it’s as clear as mud. We will discuss each ground in turn:

An insurer is not reasonably justified in refusing to pay or is unreasonably delaying payment when the insurer:

(1) fails to provide the policyholder with accurate information concerning policy provisions relating to the coverage at issue.

In other words, a typo in a coverage letter or inadvertently citing the wrong provision / omitting relevant provisions renders a non-payment or delay in payment unjustified. I could understand if an insurer intentionally or grossly misrepresented the policy provisions at issue, but short of intentional or reckless misrepresentation of the terms at hand, I fail to see how this conduct amounts to bad faith.

(2) fails to effectuate a prompt and fair settlement of a claim or any portion thereof, in that the insurer (i) fails to reasonably accord at least equal or more favorable consideration to its insured's interests as it did to its own interests, and thereby exposes the insured to a judgment in excess of the policy limits, or (ii) refuses to settle in response to a fair and reasonable settlement offer within the policy limits from an injured party.

In fairness, this (a)(2) seems like what bad faith should be and is under common law in New York. An insurer placing its own interests ahead of its insured, resulting in damage to the insured as an avoidable consequence of the insurer’s over-emphasis on its own interests.

But then there’s (a)(3) …

(3) fails to provide a timely written denial of a policyholder's claim with a full and complete explanation of such denial, including references to specific policy provisions wherever possible.

So not only must an insurer disclaim coverage within 30-days of knowledge of the grounds to disclaim, pursuant to Insurance Law §3420(d)(2), or risk waiving the right to rely upon an exclusion altogether, but now an insurer who fails to issue a disclaimer runs the risk of any delay in ultimate resolution of the claim being labeled “not reasonably justified.” There are shades of “untimely” and this renders all timeliness black or white. And wait until its argued that, given the extra-contractual nature of damages associated with bad faith, this likely opens the door for relitigating well-established caselaw prohibiting coverage by estoppel in New York. See Zappone v. Home Ins. Co., 55 N.Y.2d 131 (1982) (noting that the purpose of Ins. Law §3420(d)(2) “was not . . . to provide an added source of indemnification which had never been contracted for and for which no premium had ever been paid.”).

Can we at least finally get a definition of what “timely” means? Careful what you wish for, because the timing requirements articulated under (a)(4) are a doozy…

(4) fails to make a final determination and notify the policyholder in writing of its position on both liability for and the insurer's valuation of a claim within a reasonable time not to exceed six months of the date on which it received actual or constructive notice of the loss upon which the claim is based.

In other words, (a)(4) requires an insurer to make a “final determination” in writing of both liability and valuation within six months of notice of the LOSS. An insured has a duty to notify a carrier following an accident that may give rise to a claim. An injured party has THREE YEARS to file suit following an accident and has no obligation until suit is filed to sit for an independent medical examination or a deposition. The insurance company is without judicial authority to subpoena witnesses, request written or document discovery until suit is filed. The insurance company is without an understanding of economic damages and has not had input from defense counsel as to the retention of experts to run the numbers and verify the necessity of any past or future medical treatments. In other words, this provision provides that an insurer’s refusal to pay or unreasonable delay in paying is not justified if the insurer wishes to utilize standard discovery procedures while preparing to defend liability as best it can against its insured, under the fog of litigation. Certainly, an insurer has an initial understanding of liability and value within six-months, but a “final determination” is a bridge too far and itself, an unreasonable requirement.

(5) fails to act in good faith by compelling a policyholder to institute suit or compel appraisal to recover amounts due under its policy by offering substantially less than the amounts ultimately recovered in suit or by appraisal.

There are often disagreements regarding the amounts recoverable that result in a wide margin that requires the use of appraisal or implementation of lawsuits. These often times implicate coverage issues and the availability of certain limits of liability or lack thereof. Certainly, an insurer that is adjudged incorrect owes more than it thought it did. But why does the resolution of such a disagreement constitute per se bad faith as not reasonably justified? A carrier with a justifiable view may lose in litigation. That’s why we litigate, but litigation is not itself a failure to act in good faith.

(6) fails to advise a policyholder that a claim may exceed policy limits, that counsel assigned by the insurer may be subject to a conflict of interest, or that the policyholder may retain independent counsel.

Aside from a scenario where the defense could be steered towards non-covered claims, stretching the tri-partite relationship between insured, defense counsel, and insurer one stitch beyond its seams, see Public Service Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392 (1981), what conflict exists in assigning an insured’s defense to counsel with a proven track record, and how does an insurance company inform the average insured of that fact without risking full, unfettered cooperation from the majority of insureds?

(7) fails to provide, on request of the policyholder or their representative, all reports, letters or other documentation arising from the investigation of a claim and evaluating liability for or valuation of such claim.

This gives a policyholder unfettered access to everything in the insurance company’s underlying defense file.

(8) refuses to pay a claim without conducting a reasonable investigation.

Fair read here is that yes, (a)(8) likely constitutes bad faith. But how about we define what a “reasonable investigation” looks like. Spoiler alert: (a)(12) forbids an insurer from conducting an investigation that may result in duplicative information sought by multiple sources. But does an insurer not also run the risk of leaving a gap in its investigation, rendering it unreasonable under (a)(8)? The struggle will continue…

(9) negotiates or settles a claim directly with a policyholder known to be represented by an attorney without the attorney's knowledge or consent. The provisions of this paragraph shall not be deemed to prohibit routine inquiries to a policyholder to obtain details concerning the claim.

(10) negotiates or settles a claim directly with a policyholder known to be represented by a licensed public adjuster.

(11) negotiates or settles a claim directly with a contractor or unlicensed public adjuster.

Fine. An insurer should negotiate with the appropriate person. But what if the claimant decides to cut out an ineffective representative from negotiations, and contacts the carrier themself? This should cut both ways.

(12) requires a policyholder to submit duplicative or repetitive information already submitted by a policyholder or an injured party; or

See (a)(8) above. And finally…

(13) acts in violation of section two thousand six hundred one of this article or any regulation promulgated pursuant thereto.

….Could we not have just saved a lot of time by incorporating a private cause of action into Insurance Law §2601(a)?

Moving on the subsection (b), this bill would permit the following damages upon establishing liability under (a):

(b) Any policyholder who establishes liability pursuant to subsection (a) of this section shall be entitled to recover, in addition to amounts due under the policy, costs and disbursements, consequential damages, reasonable attorneys' fees incurred by the policyholder, interest from the date of the loss, and punitive damages as determined by the finder of fact.

A successful action for bad faith in most scenarios, involving some minor, technical failure to abide by the terms of subsection (a)(1)-(13) would result in an express, statutory exception to the American Rule for recovery of fees and costs associated with filing an affirmative coverage action. See Mighty Midgets v. Centennial Ins. Co., 47 N.Y.2d 12, 21 (1979). However, violations might result in extracontractual, punitive damages awarded by a fact finder, with interest thereon, for bad faith associated with the insured’s interests during litigation. Just wait until we discuss subsection (f), below.

Logistically speaking, subsection (c) would permit an insured to file a bad faith cause of action alongside a declaratory judgment action seeking coverage under an insurance policy or separately altogether. Subsection (d) renders evidence of settlement discussions, written and verbal offers to compromise and other evidence relating to the claims process admissible at trial.

Granting a concession to the interests of an insurer, subsection (d) also provides that a “court may bifurcate the trial of issues so as to avoid prejudice to the insurer on the issue of liability under the policy and facilitate admissibility of evidence on the causes of action asserted pursuant to this section.” Notably, 16 this is the one and only concession made in what is otherwise an entirely biased bill.

Next, despite public policy favoring adherence to statistical modeling and probabilities in the insurance world, which would require accounting for some percentage of failures under subsections (a)(1)-(13), this bill removes that from the equation entirely under subsection (e):

(e) All amounts recovered from an insurer as damages and reasonable attorneys' fees in any action authorized in this section shall be excluded by the insurer in its determinations of the premiums it will charge all policyholders on all policies issued by it.

Subsection (e) is part of the problem with this bill. This totally makes sense if the refusal to pay or delay in paying as defined under subsection (a) actually involved some intentional conduct associated with placing the insurance company’s interests above the insured’s, or some gross disregard for an insured’s interests. But subsection (a) contains numerous tripwires designed to trap an insurance company for technicalities associated with claims handling. How will those damages associated with accidental failures to abide by subsection (a) impact the risk pool and statistical modelling when money is paid but not accounted for on the ledger? I do not know the answer, I’m not an actuary. But someone is, and it’s worth looking into.

Now we reach subsection (f). Subsection (f) creates a private cause of action for third-party bad faith associated with the interests of the injured party in a prompt and fair settlement:

(f) An action may also be maintained by any injured person or representative thereof including, but not limited to, a guardian, administrator, executor, individual with a power of attorney or any other personal representative against an insurer to recover damages including costs and disbursements, consequential damages, reasonable attorney's fees, interest from the time of failure to offer a fair and reasonable settlement in accordance with this section, and punitive damages as determined by the finder of fact or court, not limited to the policy limits, where a preponderance of the evidence establishes that the insurer fails to effectuate a prompt and fair settlement of a claim or any portion thereof, in that under the totality of the facts and circumstances related to the claim, the insurer fails to reasonably accord at least equal or more favorable consideration to its insured's interests as it did to its own interests.

This creates third-party bad faith, something unknown in New York law, without assignment from the policyholder.

In this proposed cause of action, currently unrecognized in New York absent an assignment, there would be nothing stopping an injured party from a second bite at the apple after every settlement funded by an insurer, in which the injured party would attempt to (i) accrue interest from some earlier date in litigation, and (ii) add punitive damages after a fair and reasonable settlement has been signed, sealed and delivered, which should close the matter entirely. Assuming this cause of action will be used by injured parties to leverage a settlement that has not yet occurred, this permits an injured party to insert themself into a private contractual relationship, directly target the interests of an insurance company by forcing them to incur unnecessary defense costs associated with baseless allegations, and potentially raise an insured’s premium following payment of an inflated, global settlement amount in the process to avoid nuisance costs associated with paying multiple attorneys.

Additionally note that interest accrues “from the time of failure to offer a fair and reasonable settlement, and punitive damages are determined by a preponderance of the evidence. Cats and dogs living together.

Subsection (g) would require a thirty-day warning to the insurer prior to filing a bad faith action, with what amounts to a time limited demand to settle.

(g) At least thirty days prior to the filing of any action pursuant to this section, a written demand for relief, identifying the claimant and reasonably describing the unfair claim settlement act or practice and the injury suffered, shall be mailed or delivered to any insurer doing business in this state. Any insurer doing business in this state receiving such a demand for relief who, within thirty days of the mailing or delivery of the demand for relief, makes a written tender of settlement which is rejected by the claimant may, in any subsequent action, file the written tender and an affidavit concerning its rejection and thereby limit any recovery to the relief tendered if the finder of fact finds that the relief tendered was reasonable in relation to the injury actually suffered by the claimant. In all other cases, if the finder of fact finds for the claimant, recovery shall be in the amount of actual damages; or up to three but not less than two times such amount if the finder of fact finds that the unfair claim settlement act or practice was a willful or knowing violation of subsection (a) or (f) of this section or that the refusal to grant relief upon demand was not reasonably justified with knowledge or reason to know that the act or practice complained of violated subsection (a) or (f) of this section. For the purposes of this chapter, the amount of actual damages to be multiplied by the finder of fact shall be the amount of the damages as determined by  the finder of fact on all claims arising out of the same and underlying transaction or occurrence, regardless of the 18 existence or nonexistence of insurance coverage available in payment of the claim. In addition, the court shall award such other equitable relief, including an injunction, as it deems to be necessary and proper. The demand requirements of this subsection shall not apply if the claim is asserted by way of counterclaim or cross-claim.

Under this provision, although an insurer can tender a reasonable settlement offer following such a demand to limit in the amount of recovery available should it be rejected, should such an offer not be extended, the insurer faces bad faith damages accounting for the amount of actual damages suffered, or potentially 2-3 times such damages should the violation of subsection (a) or (f) be deemed willful or knowing.

In addition, subsection (h) permits insureds and injured parties to exercise other private causes of action under statute or common law, which would include common law breaches of the covenant of good faith and fair dealing (which seems superseded by this bill, anyway) and claims like those existing under General Business Law §349 for deceptive trade practices, among others.

Finally, I will leave with the most egregious overstep in this bill. I present to you subsection (i), first without comment:

(i) Upon demand of a claimant policyholder or injured person pursuant to this section, an insurer shall make available to the claimant or injured person the entire claim file within thirty days.

With respect to the insured, this provision flies in direct opposition to express policy language contained within every policy prohibiting conduct detrimental to defense of the action, as well as the very purpose of the protections afforded by CPLR 3101(d)(2). An insured demanding its insurer to provide the entire, unredacted claim file to a claimant or injured party during the pendency of active litigation is a failure to cooperate in the insurer’s agreement to defend an insured in such litigation. Disclosure of “the entire claim file”—including litigation strategies, attorney client confidences associated with the strengths and weaknesses of cases, the estimated full and potential settlement values of the case—materially scuttles that defense, to the detriment of both the insured and the insurance company. Although an insured certainly has a right to waive confidentiality, but not to the risk of exposing the carrier to liability it would not otherwise face on account of opening the Pandora’s box that is an insured’s entire defense strategy. If insurance companies cannot discuss liability and valuation of claims with defense counsel representing an insured in confidence, the insurance system which provides litigation insurance utterly fails.

Read this bill for yourself and call your legislators today. A bad faith bill is one thing. This bill needlessly upends New York insurance, which has served as a leading model for insurance regulation around the country and will result in several steps backward as a state, despite whatever intentions it may have had.

Thousands Flee.

05/24/22       Adult Survivors Act
New York Governor’s Office
New Law Passed Resetting the Clock for the Commencement of Legal Action by Adult Survivors of Sexual Assault

On May 24, 2022, Governor Kathy Hochul signed into law the Adult Survivors Act, which renews access to judicial relief for adult survivors of sexual assault.  In the State of New York, the current statute of limitations for filing a civil suit for rape is 20 years, while some forms of forcible sexual contact have only a 5-year statute of limitations.  The new law implements a one-year lookback window for individuals who were sexually assaulted as adults to file claims against their abusers, even if the statute of limitations has already expired. Hurwitz & Fine’s own Anastasia McCarthy and Michael Williams provided an excellent summary of its provisions here and I encourage you to read it and understand its importance moving forward.

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

Check back next time!

STORM’S SIU EXAMEN
Scott D. Storm

[email protected]

05/05/22       Endemann v. Liberty Ins. Corp.
United States District Court, N.D. New York
Coverage for Plaintiff’s 1st-Party Property Claim is Precluded Due to 2-Year Contractual Suit Limitation Condition; Plaintiff Fails to Prove Equitable Estoppel

Plaintiff claims that defendant failed to provide coverage and subrogation for water damage he sustained to his house on February 21, 2014.  On January 18, 2018, plaintiff filed a complaint against defendant with four causes of action: (1) a request for declaratory relief; (2) breach of contract; (3) breach of the covenant of good faith and fair dealing; and (4) a violation of New York General Business Law ("GBL") § 349. Liberty moved for summary judgment which was granted.

Liberty paid the plaintiff the $10,500 policy limit for sewer or sump pump backup.  It also sent letters telling plaintiff to guard against further water damage and asserting that defendant was not waiving any of the insurance policy's provisions or defenses.  On April 17, 2014, Liberty let plaintiff know that it would not pursue a subrogation claim and would close his claim file accordingly. In August of 2014 plaintiff called his agent to see if they would be willing to subrogate him against his neighbor, Dubois, who he believed was responsible for his loss. Plaintiff had sued Dubois on his own and hoped that with defendant's resources at his back through subrogation, he could pressure Dubois's insurance company to settle.

Liberty relented but warned plaintiff that they would only pursue its $10,500 payment to him as well as his $1,000 deductible, they would not recover his out-of-pocket expenses. At no time did plaintiff complain about defendant's $10,500 payment.

Plaintiff’s suit against Dubois culminated in a jury trial with a finding that Dubois's negligence did not proximately cause plaintiff's injury.  In the intervening years, plaintiff’s damages from the water loss ballooned to $512,143.41. As a result, plaintiff grew dissatisfied with the initial adjustment, and on April 26, 2017, his attorney reached out to Liberty to discuss "widening the original claim."  Defendant issued denial letters on June 12 and June 19, 2017, reiterating that plaintiff's damage was covered by a sump pump exclusion. Plaintiff then filed this case on June 14, 2018.  On February 21, 2022, defendant moved for summary judgment against plaintiff's complaint, arguing that his claims were untimely.

The Court said that the statute of limitations for a claim under GBL § 349 is three years and for a contractual claim six years.  However, the six-year period provided for in a breach of contract claim can be reduced if the agreement itself specifies a shorter —but still reasonable— timeframe.  Unless the plaintiff can prove that the shorter limitations period was the result of "fraud, duress, or other wrongdoing," though, an agreed-upon timeframe to file suit of one year or longer will generally be upheld. 

Plaintiff’s homeowner’s policy with Liberty is subject to a limitations period of two years.  Since that reduction allows plaintiff more than one year to file suit, it is reasonable in the absence of some showing of wrongdoing.  Plaintiff does not dispute that his claims are untimely on their face, and nowhere does he claim that defendant manipulated him into agreeing to the reduced statute of limitations.  Instead, he relies on the doctrine of equitable estoppel.

Under New York law, "equitable estoppel will preclude a defendant from using the statute of limitations as a defense where it is the defendant's affirmative wrongdoing which produced the long delay between the accrual of the cause of action and the institution of the legal proceeding."  In other words, "equitable estoppel is appropriate where the plaintiff is prevented from filing an action within the applicable statute of limitations due to his or her reasonable reliance on deception, fraud, or misrepresentations by the defendant." 

Equitable estoppel is an "extraordinary remedy" which should only be "invoked sparingly and only under exceptional circumstances."  Thus, to salvage his late claims, a plaintiff must "make sufficient factual allegations that each of the requirements of equitable estoppel is satisfied, or at least raise an issue of fact as to whether equitable estoppel applies." 

Ultimately, establishing equitable estoppel requires a plaintiff to prove: (1) a concealment or misrepresentation; (2) upon which defendant intended or expected plaintiff to rely; (3) defendant's actual or constructive notice of the truth; and (4) reliance upon the misrepresentations causing the plaintiff to change its position to its "substantial detriment."  The deception the plaintiff claims must be distinct from the facts of his underlying claim. 

Plaintiff claims that Liberty should be estopped from relying on the statute of limitations because it failed to inform him that it would not pay him any more than the initial $10,500. Plaintiff's arguments fail for two reasons.

Plaintiff has failed to point to any concealment or misrepresentation on Liberty's part that would justify estopping it from relying on the statute of limitations.  None of the evidence plaintiff has ginned up suggests at any point that defendant was still considering paying him more than the $10,500 it gave him on March 3, 2014.

On the contrary, it is undisputed that Liberty told Endemann that they would not pursue subrogation, and as a result would close his claim file.  In other words, plaintiff was put on notice that subrogation was the only alternative to his claim being closed. Once defendant elected to pursue subrogation, it is just as undisputed that defendant was repeatedly clear that the only funds defendant was attempting to recover from Dubois were the $10,500 it paid to plaintiff as well as his deductible.  No part of that set of facts smacks of deception. Equitable estoppel is therefore inappropriate.

But even if Liberty had misled Endemann at any point about its position on his insurance claim, his equitable estoppel arguments fail for the additional reason that no reasonable jury could conclude that plaintiff relied on any deception to his detriment. The undisputed evidence establishes that plaintiff was fully aware throughout the subrogation that defendant had no intention of recovering any more from Dubois than the amount it had paid him. In other words, Endemann did not sit on his rights generally, but instead aggressively pursued Dubois to recover for the damage to his house.

Endemann made the strategic decision that instead of fighting Liberty on the scope of the applicable coverage, he would go straight to the source and try to recover from Dubois. That his chosen strategy backfired and left him empty-handed in no way entitles him to equitable estoppel. Plaintiff's claims must be dismissed. 

05/09/22       State Street LLC v. Acadia Ins. Co.
United States District Court, N.D. New York
10-14 Month Delay in Providing Notice of 1st-Party Claim Unreasonable as a Matter of Law (the Court Recognizing Delays of Under 3-Months Have Been Held Untimely); No Waiver; Initial Belief the Damages May be Less than the Deductible was Not a Reasonable Excuse for the Delay; Discussing the Damage with the Agent Shortly After It Occurred and Deciding Not to Submit a Claim was Not Formal Notice of Claim to the Insurer

This is an insurance dispute between plaintiff 13 State Street LLC and Acadia Insurance Company over coverage for loss related to water damage.  Both parties moved for summary judgment.

Acadia issued insurance policies to State Street covering the Property that plaintiff was renovating. The Policy required State Street to "give ‘us' or ‘our' agent prompt notice including a description of the property involved."  Given the Property's age and history, State Street submitted a Historic Preservation Certification Application to New York State. It did so on August 7, 2015, indicating that plumbing leaks had caused extensive damage to certain areas of the Property, that water remained on floors, and that mold remained on doors. The Application described the gymnasium floors as "severely damaged" and noted that recent water infiltration had "severely damaged" acoustical ceiling tile, plaster ceilings, walls, and hardwood floors throughout the gymnasium. However, the Application, observed the floor to be repairable.

State Street began renovations consistent with the Application around June 2016.  In late October or early November 2016, a roofing subcontractor stepped through the Property's roof, penetrating the plywood and causing a hole to form.  The presence of asbestos in the Property's roof prevented immediate replacement. State Street claims it reported the roof incident to its insurance agent, Lawley Real Estate Insurance Services, but did not make a formal claim at that time because, among other things, it believed the anticipated damage was below its policy deductible.  Acadia claims to have no knowledge that plaintiff reported the incident to Lawley. In January 2017, once the state approved plaintiff's repair and asbestos remediation, plaintiff began work on the Property's roof.  It finished these repairs by April 2017. 

Once State Street finished the repairs, it then submitted an Amended Historic Preservation Certification Application on April 10, 2017.  In the Amended Application, it "observed the main gym floor to be beyond feasible repair."  It further noted that the "condition of the floor worsened since the initial application," specifically "with cupping, buckling, and cracking throughout" and concluded that the "floor needs to be replaced in full."  It attributed these conditions to water damaged that had either continued since or occurred after it submitted the initial application. 

State Street claims that the worker stepping through the Property's roof was the only water intrusion it suffered between August 7, 2015, the date of the Application, and April 10, 2017, the date of the Amended Application.  However, Acadia notes that a June 1, 2016, site survey performed by Alexander & Schmidt indicates that water intrusion occurred as a result of a roof drain breaking about a year prior.

On February 13, 2018, State Street filed a formal insurance claim to Acadia for damages to the Property. Two days later, defendant issued a reservation of rights that noted "the delay in reporting this claim may impede Acadia's ability to properly investigate and evaluate State Street's claim" and cited the Policy's provision on prompt notice.  Acadia spent 1.5 years investigating the Claim, and formally denied it on August 2, 2019.  Defendant based the Denial on several considerations, namely, that State Street failed to provide it with timely notice of the alleged loss, and thus failed to satisfy a condition precedent to coverage.  Although plaintiff knew of the alleged roof damage "as early as December 1, 2016," it did not provide defendant with notice of the loss until February 13, 2018.

In New York, timely notice is a condition precedent to insurance coverage, and the failure to provide such notice relieves the insurer of its coverage obligation, regardless of prejudice.  A notice obligation is triggered when "the circumstances known to the insured... would have suggested to a reasonable person the possibility of a claim."  The insurer need not demonstrate prejudice before it can assert the defense of noncompliance by the insured." 

Plaintiff admits that "in late October or early November 2016, a roofing subcontractor stepped through the roof, penetrating the plywood, and causing a hole to form."  Although plaintiff claims to have "reported the roof penetration to Lawley, an agent of plaintiff," it further admits that it did not file "a formal notice of claim" until February 13, 2018 — approximately fourteen months later.

Where an insurance policy requires notice be given as soon as practicable, "such notice must be accorded the carrier within a reasonable period of time."  "On numerous occasions, New York courts have held notice delays of less than three months unreasonable as a matter of law and discharged insurers of coverage obligations."  Accordingly, the fourteen-month delay in this case was unreasonable as a matter of law.

In response, State Street offers three reasons why Acadia's late notice argument either fails or is inapplicable. None of these arguments are persuasive.

First, State Street argues that Acadia waived late notice as a grounds for denying coverage because it failed to include such grounds in its denial letter. However, on February 15, 2018 — just two days after it received notice of the alleged loss — Defendant issued the Reservation of Rights, which specifically noted it was reserving rights based on late notice and quoted the Policy's language requiring prompt notice. Defendant’s August 2, 2019, disclaimer letter incorporated its Reservation of Rights and reiterated the prompt notice policy language. The mere fact that it later denied coverage on "other grounds in addition to late notice does not render the late notice claim waived." 

New York insurance law defines waiver as a voluntary and intentional relinquishment of a known right.  Waiver may be found "where there is direct or circumstantial proof that the insurer intended to abandon the defense."  An implied waiver exists when there is an intention to waive unexpressed, but clearly to be inferred from circumstances.  Even viewing the facts in the light most favorable to State Street, no reasonable jury could conclude that defendant voluntarily and intentionally relinquished its late notice argument. 

Second, State Street argues that even if Acadia did not waive its late notice defense, plaintiff provided proper notice to Lawley, an insurance agent. In plaintiff's view, this was sufficient to put Acadia on notice of a claim under the Policy. This argument also fails.

Although State Street claims to have promptly notified Lawley when the worker first put a hole in the Property's roof, it concedes that it did not make a formal notice of claim to Acadia until nearly fourteen months later. Even viewed in the light most favorable to State Street, the record establishes that plaintiff and Lawley generally discussed the damage and together decided not to report it to defendant. Indeed, plaintiff's own representative testified in his deposition that plaintiff and Lawley: “Didn't really talk about a claim at that point because we knew the costs for the repair of the actual damage to the roof would be covered under the construction contingency. So, we didn't have to worry about the actual repairs to the roof... And then the subsequent damage wasn't felt to be sufficient to create a claim if we already have a deductible”.

Plaintiff was aware of the possibility of a claim under the Policy when the damage first occurred but decided not to tender one because it estimated that the deductible exceeded the loss amount. That is not a valid excuse under New York law. No exception is made to the timely notice requirement for losses which appear insubstantial or which in the insured's estimation may not ultimately ripen into a claim. The import is clear; all losses are to be reported as soon as practicable if they are to become the basis of a claim. When the insured indefinitely reserves to itself the determination of whether a particular loss falls within the scope of coverage it does so at its own risk.

Third, State Street claims that it had a reasonable excuse for the delay in providing notice to Acadia due to its "reasonable belief" in non-coverage. Specifically, plaintiff claims that neither it nor Lawley believed that a minor hole in the roof would cost more than the deductible, so it never pursued a claim because it believed there was no coverage. As an initial matter, this argument fails for the same reasons as immediately above. Plaintiff's representative indicated that plaintiff knew there was a possibility of the Policy's applicability but made the tactical decision to not formally submit a claim to defendant because it believed the deductible amount would be in excess of the damage. As New York law makes clear, there is no exception to the timely notice requirement in such a situation. 

Moreover, the Amended Application indicated that, by April 10, 2017, the Property's floors had worsened to the point where they were beyond repair. No reasonable jury could find, at that point, that plaintiff had a reasonable belief that the Property's damage was below the deductible. Yet, by plaintiff's own admission, it waited an additional ten months to report the claim to Acadia.  Even standing alone this ten-month gap is unreasonable as a matter of law. 

Notice provisions in insurance policies afford the insurer an opportunity to protect itself."  "Without timely notice an insurer may be deprived of the opportunity to investigate a claim and is rendered vulnerable to fraud."  While there may be circumstances that excuse or explain an insured's delay in giving notice to its insurer, the burden is on the insured to show the reasonableness of its excuse.  Viewed in a light most favorable to State Street, the record shows that it failed to give Acadia timely notice of the alleged loss, and thus failed to satisfy a condition precedent to coverage. Plaintiff has failed to show its excuses for giving late notice were reasonable, and summary judgment in favor of defendant is appropriate.

04/28/22       NY Wellness Medical, P.C., A/A/O Grant v. Nationwide Mut. Ins. Co.
Supreme Court, Appellate Term, Second Department
No-Fault Insurer is Not Required to Set Forth Objective Reasons for Requesting EUOs in Order to Establish its Prima Facie Entitlement to Summary Judgment

Nationwide’s motion for summary judgment dismissing the complaint is granted.

In this action by a provider to recover assigned first-party no-fault benefits, defendant moved for summary judgment dismissing the complaint on the ground that plaintiff failed to appear for duly scheduled examinations under oath.  The District Court denied the motion, but implicitly found that defendant had established the timely and proper mailing of the EUO scheduling letters and the denial of claim form, as well as plaintiff's failure to appear for the EUOs. The only remaining issue for trial was the reasonableness of defendant's EUO requests.

To establish its prima facie entitlement to summary judgment dismissing a complaint on the ground that a provider failed to appear for an EUO, an insurer must demonstrate, as a matter of law, that it twice duly demanded an EUO from the provider, that the provider twice failed to appear, and that the insurer issued a timely denial of the claims.  Plaintiff does not argue that defendant did not demonstrate its prima facie case. Rather, plaintiff argues that the grounds for defendant's EUO requests were not based on objective reasons. However, defendant was not required to set forth objective reasons for requesting EUOs in order to establish its prima facie entitlement to summary judgment.  As plaintiff failed to raise a triable issue of fact, defendant is entitled to summary judgment dismissing the complaint.

05/16/22       Montgomery v. Travelers Personal Ins. Co.
United States District Court, E.D. Pennsylvania
Exception to Exclusion in Homeowners Policy Which Grants Coverage for Fire Loss to a Detached Garage Which "Contains" Business Property Solely Owned by the Insured, Not Applicable Where the Business Property is Owned by the Insured’s LLC

Businessperson Bryan Montgomery admittedly stored business inventory owned by his LLC in a detached garage on his residential property for a decade before a fire damaged it. His homeowner insurer declines to cover the loss arguing its insurance policy precludes coverage for loss to a detached garage used to "store" business property, and Mr. Montgomery admits he stored inventory in the garage. However, in the same subsection of the Policy Travelers agrees to pay for loss to a detached garage which "contains" business property solely owned by the insured.

PROPERTY COVERAGE B – OTHER STRUCTURES

2. We do not cover.

d. Other structures used to store "business" property. We do cover a structure that contains "business" property solely owned by an "insured"…

The parties do not dispute the retail inventory stored in the detached garage is business property. The parties each move for summary judgment as a matter of law.

We find the insurer did not breach the agreed policy terms by declining to pay for the loss to the detached garage because the term "store" in the exclusion is understandably different than the term "contains" in the exception as a matter of law. The exception allowing coverage for a structure which "contains" business property solely owned by the insured Mr. Montgomery does not apply. The LLC owned the inventory and not him.  He instead admittedly "stored" inventory for his businesses in the detached garage.

We grant Travelers's motion for summary judgment finding it has not breached a contractual obligation to Mr. Montgomery.  The exclusion uses "store" while the exception uses "contains." These sentences appear within the same subsection of the Policy, directly next to each other, yet use different verbs. We conclude "if the exclusion and the exception were intended to have the same meaning, they would have the same language."  The parties must have intended different meanings to the exclusion and the exception.  

Our conclusion is also confirmed by the ordinary meanings of the otherwise undefined terms "store" and "contain."  "Store" is defined as "to leave or deposit in a store, warehouse, or other place for keeping, preservation, or disposal."  "Contain" is defined as "to have within."  Tellingly, "store" and "contain" are not synonymous nor are they considered related words. 

The record is abundantly clear Mr. Montgomery used the garage to store business inventory. We conclude "store" and "contains" mean two different things under the Policy. Thus, the garage did not merely "contain" business inventory; Mr. Montgomery used the garage for storing business inventory, conduct explicitly excluded under the Policy. The exception does not apply as a matter of law.

We hold the exclusion for storing business property excludes coverage for "other structures" used to store business property regardless of who owns the business property stored in it. And we find the exception to the exclusion providing coverage for "other structures" which contain business property does not apply.  The LLC is not the insured.  The business which owned the property in the garage is a limited liability company. It is an entity distinct from its members.  We find the storing business property exclusion and exception unambiguous. The exclusion and exception are not reasonably susceptible to different constructions.

Travelers demonstrated no genuine issue of material fact precludes summary judgment in its favor on Mr. Montgomery's breach of contract claim as a matter of law.
 

FLEMING’S FINEST
Katherine A. Fleming

[email protected]

05/16/22       French v. Centura Health Corp.
Supreme Court of Colorado
Hospital’s Chargemaster Not Incorporated by Reference into Hospital Services Agreements that Patient Signed Where Patient had No Knowledge of and Did Not Assent to the Chargemaster

French went to Centura Health Corporation and Catholic Health Initiatives Colorado d/b/a St. Anthony North Health Campus (collectively, Centura) for spinal fusion surgery. Based on its understanding of the information that French had provided, Centura estimated that her surgeries would cost $57,601.77 and that after French’s insurance payment, she would personally be responsible for $1,336.90 of that amount. After the surgery, however, Centura determined that it had misread French’s insurance card and that she was, in fact, an out-of-network patient. Centura then billed French $229,112.13 and ultimately sued her to collect. The Colorado Supreme Court granted certiorari to decide (1) whether, on the facts presented here, Centura’s chargemaster, a database used by Centura that lists rates for specific medical services and supplies, was incorporated by reference into hospital services agreements (“HSAs”) that French had signed; and (2) if so, whether the price term in the HSAs was sufficiently unambiguous to render the HSAs enforceable.

French signed two-page HSAs and three two-page Patient Bill of Rights forms. Neither the HSAs nor the Patient Bill of Rights forms mention the chargemaster or include an express price term. Patients cannot directly access the chargemaster and before French’s surgeries, Centura did not provide to her, and she could not have looked at the chargemaster. After the surgery, Centura determined that it had misread French’s insurance card and that she was, in fact, an out-of-network patient. Centura calculated the amount due after subtracting from the total charges the payment from French’s insurer of $73,597.35 and French’s payment of $1,000.00 (thus, the total amount that Centura charged was over $300,000.00, notwithstanding its pre-procedure estimate that the surgeries would cost $57,601.77). Centura sued French for breach of contract, alleging that under the HSAs that she had signed, she had agreed to pay Centura’s chargemaster rates and therefore owed Centura the full balance of $229,112.13.

The trial court could not find that the hospital-patient forms incorporate or refer to the chargemaster as a matter of law. According to Centura, the plain meaning of “all charges” unambiguously refers to rates generated from the chargemaster. The court disagreed and found that the term was ambiguous. The document signed by French was devoid of any reference to the Hospital’s chargemaster and did not define the meaning of “all charges.” At the very least, the hospital-patient forms were reasonably susceptible to more than one meaning. Therefore, the definition of “all charges” was a question of fact appropriately decided by the jury at trial. The jury ultimately found that the term “all charges of the Hospital” meant the “reasonable value of the goods and services provided to [French]” (and not the chargemaster rates) and that the chargemaster rates billed to French were not reasonable. The jury then determined that French owed Centura $766.74 in damages, apparently reflecting the balance due above the amounts already paid by French and her insurer

On appeal, a division of the court of appeals agreed with Centura’s view that the HSAs were unambiguous and French’s agreement to pay “all charges” “could only mean” the predetermined rates set by Centura’s chargemaster.

However, the Colorado Supreme Court concluded the chargemaster was not incorporated by reference into the HSAs signed by French prior to her surgeries. The court also noted that hospital chargemasters have become increasingly arbitrary and, over time, have lost any direct connection to hospitals’ actual costs, reflecting, instead, inflated rates set to produce a targeted amount of profit for the hospitals after factoring in discounts negotiated with private and governmental insurers. Since French neither had knowledge of nor assented to the chargemaster, which was not referenced in the HSA or disclosed to her, the chargemaster was not incorporated by reference into the HSA. Accordingly, the HSA left its price term open, and therefore, the jury appropriately determined that term.
 

NORTH of the BORDER
Heather A. Sanderson

[email protected]

05/16/22       GFL Infrastructure Group Inc. v. Temple Insurance Company, 2022 ONCA 390
Ontario Court of Appeal
The Ontario Court of Appeal Refused to Uphold the Insurer’s Denial to Defend Claims Within the Policy’s Deductible. In Addition, the Insurer was Liable for a ‘Small Amount’ of Pre-Notification Defence Costs in the Absence of Any Prejudice to the Insurer for Pre-Notification Defence Steps When a Duty to Defend Had Been Improperly Denied and Refused to Parse the Allegations Between Covered and Uncovered Claims to Allocate Future Defence Costs

Just east of Toronto’s financial district and butting up against the Canadian National Railway mainline, is 13 acres (5.3 hectares) of brick streets and Victorian era buildings called the Distillery district.  This district is the site of the former Gooderham & Worts Distillery. Founded in 1832, this distillery produced fine whisky that was sold to the world via the transportation network at its doorstep. In 1926 Hiram Walker, famous for producing Canadian Club Whiskey, bought Gooderham & Worts. The distillery flourished during prohibition and onwards but began to decline in the 1990’s when the distillery closed, and the buildings were at risk of deterioration and demolition. As the former distillery was deemed to be the largest and best preserved collection of Victorian-era industrial architecture in North America,  the Distillery District was designated as a National Historic Site, and has been protected under the Ontario Heritage Act since 1976. Slowly, it grew into its present self: a wonderful warren of boutiques, restaurants and bars.  The Distillery District was  listed by National Geographic magazine as a "top pick" in Canada for travellers. But enough of that … this is legal newsletter, not a travel blog.

Residential condo towers have sprung up around the Distillery District and are selling for over $1,000 a square foot. One of those towers is the 350-unit, Clear Spirit Condominium Project. The building went up in 2013 and by 2015 deficiencies prompted the filing of an action by the condo owners against GFL Infrastructure Group Inc., one of the contractors on the shoring, for about $10 million. GFL and two other contractors were named insureds on a project specific wrap-up liability insurance policy.  The Project Policy was intended to include all contractors, subcontractors, engineering, and architectural consultants as “additional insureds”. The policy extended an additional 24 months for the “Completed Operations Hazard” which covered bodily injury or property damage resulting from an “occurrence” after the insured’s work was completed or abandoned.  The Project Policy had several exclusions, including “work performed” or “own work” exclusions for the repair or replacement of defective work.  Crucially, the Project Policy is subject to a deductible of $10,000 for “Property Damage”.

GFL and the named sub-contractors sought a defence under the project policy. The insurers that issued that policy declined to defend stating that the claim against some of the insureds was entirely within the deductible, which nullified the duty to defend those insureds and, if there is a duty to defend, that much of the claim was excluded, forcing an allocation of the future defence costs.  The parties agreed that no Canadian case directly addresses whether an insurer has a duty to defend against a claim whose amount falls below the deductible.

The dispute over the duty to defend went before a trial judge who ordered the project insurers to defend. The insurers appealed to the Ontario Court of Appeal.  That Court upheld the decision at first instance.

The Court of Appeal firstly addressed the demand for allocation of the cost of the defence between covered and excluded claims. If there was a duty to defend, the Court held that “…the notion that potentially covered and uncovered claims can be identified at this juncture is illusory.” As for the obligation to defend those claims within the deductible, the Court held that there is no clear evidence of the amount of the ultimate liability and dismissed that ground of appeal. Finally, there was an issue of whether the insurers were liable for pre-notification defence costs. Those costs amounted to about 11% of the total incurred defence costs at the time of the application. A condition of the project policy stated that the insureds were not to incur any expenses before notification.  The Court of Appeal held that “it would be unfair to allow … [the insurers] … to rely on this provision in a case where they deny their duty to defend the claim.”  Further, there was a lack of prejudice to the insurers given the ‘modest nature’ of the pre-notification costs as against the total defence burden to that point.

This very brief /brusque decision of the Ontario Court of Appeal gives rise to concerns as to whether a duty to defend exists for claims within a self-insured retention. The policy, which was cited in the trial judgment, is quite clear (to my read) that the deductible was just that. There was no language quoted in the matter at first instance that in my opinion obviates a duty to defend claims that fall within the deductible.

If the claim had to clear the hurdle of a self-insured retention before the policy was triggered, one would expect a different result, as the policy and premium structure is premised upon the stipulation that the insurer does not accept the duty to defend nor indemnify claims that have potential within an agreed upon band of exposure. If the policy language reflected that intention, then, that ought to force a different result.

The Court of Appeal was clear that the issue of allocation of defence costs may be decided once the action concludes. However, doesn’t that confuse the obligation to defend with the obligation to indemnify?  On what possible basis can it be said that the insurer agreed to defend excluded claims or has an obligation to do so?  What assurance does the insurers have that the insured(s) will be able to reimburse defence costs should an order follow at the end of the action that the insureds owe the insureds a percentage of those costs? Will these insurers file an application for an order directing that the insureds post security against those costs? If they do, will a court hearing that application state that the application for security robs the insureds of the benefit of a defence?  As for pre-notification costs, the Court ignores a body of law from the British Columbia and Saskatchewan Courts of Appeal that holds that an insurer is not liable for pre-notification costs. Period. This decision is very unsatisfactory from the insurer perspective. Hopefully, going forward, this case is distinguishable from other similar cases on the facts and the policy wording.

 

  1. < > to provide the policyholder with accurate information concerning policy provisions relating to the coverage at issue.

    fails to effectuate a prompt and fair settlement of a claim or any portion thereof, in that the insurer (i) fails to reasonably accord at least equal or more favorable consideration to its insured's interests as it did to its own interests, and thereby exposes the insured to a judgment in excess of the policy limits, or (ii) refuses to settle in response to a fair and reasonable settlement offer within the policy limits from an injured party.

  2. fails to provide a timely written denial of a policyholder's claim with a full and complete explanation of such denial, including references to specific policy provisions wherever possible.

  3. fails to make a final determination and notify the policyholder in writing of its position on both liability for and the insurer's valuation of a claim within a reasonable time not to exceed six months of the date on which it received actual or constructive notice of the loss upon which the claim is based.

  4. fails to act in good faith by compelling a policyholder to institute suit or compel appraisal to recover amounts due under its policy by offering substantially less than the amounts ultimately recovered in suit or by appraisal.

  5. fails to advise a policyholder that a claim may exceed policy limits, that counsel assigned by the insurer may be subject to a conflict of interest, or that the policyholder may retain independent counsel.

  6. fails to provide, on request of the policyholder or their representative, all reports, letters or other documentation arising from the investigation of a claim and evaluating liability for or valuation of such claim.

  7. refuses to pay a claim without conducting a reasonable investigation.

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