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Coverage Pointers - Volume XXIII, No. 3

Volume XXIII, No. 3 (No. 595)
Friday, July 23, 2021
A Biweekly Electronic Newsletter  

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

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

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

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

 

Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.  We really do.

OK, First things first:

As a subscriber to Coverage Pointers, you are the first to get this announcement and the first to have the opportunity to register for this fabulous virtual program, the FDCC CGL Boot Camp.  Only one hundred spots available.

This is for attorneys and claims professionals alike.  If you or your staff are interested in attending this fabulous program sponsored by the FDCC, the Federation of Defense & Corporate Counsel, register NOW.  I’m a faculty member, co-presenting on the approach to insurance coverage claims.  It will be held – virtually – over two afternoons in September and the faculty members are some of the most well-respected coverage lawyers in the country:

REGISTRATION NOW OPEN

FDCC INSURANCE COVERAGE
TRAINING ACADEMY

VIRTUAL CGL BOOT CAMP
September 14 -15, 2021 from 1:00-5:00 EST

Meet the Experts and Learn Industry Best Practices

The FDCC is pleased to present the
Insurance Training Academy’s Third CGL Boot Camp which now
offers both up to nine (9) hours of CE and CLE CREDIT!.

What will be Covered

This immersion-learning program is built around a hypothetical fact pattern and places the attendees directly in a collaborative environment, identifying and working through the coverage issues faced most often in commercial liability claims. Some of the highlights of the program include:

  • In depth, true-to-life training program with small breakout sessions led by leading coverage attorneys and senior insurance claim executives from around the country.

  • Practical hands-on focus on issue spotting, duty to defend considerations, preparing coverage position letters, dissecting additional insured and contractual indemnity tenders, evaluating risk transfer opportunities, and responding to time limit demands.

  • Exemplar coverage position and tender letters to use for future reference.

  • Presentation of a repeatable process by which to analyze coverage issues in a CGL Policy.

    The FDCC has secured for approval for both CE and CLE credits for the program.


    Who Should Attend

    The CGL Boot Camp is open to all FDCC members as well as others within their firms, companies and their clients who may not be members and is targeted to:
     

  • Associates who are defense and/or coverage attorneys with one to five years of coverage experience;

  • Insurance claims professionals who can benefit from hands-on training; and

  • Experienced defense trial attorneys who want to learn or sharpen their skill sets and learn CGL coverage protocols in the trenches.

    To make the small breakout sessions meaningful for attendees, Registration is limited to 100 attendees. This program fills up quickly, so please mark your calendar now and confirm registration if you would like to attend.

    To reserve a spot or spots for this select program, please
    call FDCC Headquarters: 610-992-0022, or send an email
    to
    [email protected].
    We look forward to seeing you at the FDCC's 2021
    Virtual Insurance
    Coverage Training Academy CGL Boot Camp.

     

     

    Thoughts from the Editor’s Desk:

    Summer is speeding by.  You’ve all likely heard that the US-Canadian border is cracking open for US citizens commencing August 9th.  That’s exciting for us, as we long to return to the Land of the Blue Martinis.  We know we need to be vaccinated in advance (we have been since February), but the remaining question is whether, and how often, and what kind of COVID-19 testing is necessary to cross the border into Canada.  Reports differ.  If we need to have a COVID test 72 hours before entry into Canada, this might be an extraordinarily expensive border crossing for someone who usually commutes each day between our US office and our Canadian property. We watch the press and government announcements closely.

    And speaking of Canada, we thank, again, Heather Sanderson from Sanderson Law in Calgary, Alberta Canada from offering us perspective from North of the Border.

    Not a whole lot of excitement in this week’s offerings but we give them to you all.

    We say goodbye to the Toronto Blue Jays who have ended their season-and-a-half stay in Buffalo.  Great fun to watch games this season; we caught six.  Last year they played here but fans were not permitted into the stadium.

     

    Risk Transfer Training:

    So much of my casualty coverage work, these days, focuses on risk transfer – additional insured questions, contractual hold-harmless agreements and how the interrelationship between them impacts on the ultimate resolution of complex cases.  We are conducting, via Microsoft Teams, a regional training program on risk transfer next week for a good client.  If your shop can benefit from that training, let me know and we can arrange a date and time to help train your staff.

     

    New York Coverage Protocol Training:

    Another very popular program is one designed to remind, refresh or instruct claims professionals who handle New York insureds, claims and policies, on the special nuances (and traps) that are part of the New York coverage experience.  Does your staff need it? Here’s the way to find out.  Ask your staff these questions:
     

  • Are you sending out reservation of rights letter in NY claims? 

  • Do you know the “30-day” rule?

  • Are you certain you know who gets copies of coverage position letters in New York?

  • If the insured fails to respond to 10 letters seeking cooperation, can you successfully deny coverage for lack of cooperation?

  • If the insured gives you notice of an accident, five years after it occurred, in violation of notice obligations in the policy, is that enough to sustain a late notice disclaimer?
     

If the answer to question “1” was “yes” or the answer to any of the remaining questions were “no”, sign up for NY Protocol training.

 

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.

     

    ruMIRNAtions:

    Can you believe the summer is halfway over already?! I feel like I blinked and July flew by. *sigh*

    In addition to watching the days, weeks and months fly by, I have also been observing the trends in diversity, equity and inclusion for 2021. And there have been many. By far, the most impactful have been the issues raised by remote work and now, the return to office efforts of many employers. But there have been many others: gender identity and expression (particularly in light of the many states seeking to ban trans athletes in school sports); dismantling systemic racism (and the frenzy over Critical Race Theory); work/life balance; and problem solving and communicating across generations, where you have more seniors remaining in the work force past retirement age. I’m sure that many of you in the insurance industry are encountering some of these issues in your own offices.

    In this edition of Coverage Pointers, I provide a brief overview of these trends and a few more.

    Mirna
    Mirna M. Santiago

    [email protected]

     

    Boy Pilfers Six Cents and is Lectured by the Judge:

    Buffalo Courier
    Buffalo, New York
    23 Jul 1921

    JUDGE LECTURES BOY
    FOR TAKING SIX CENTS

                Tapping a “silent salesman” for six cents landed Lawrence Striker, sixteen years old, No. 63 Burham street, in city court yesterday on a charge of petit larceny.  The “silent salesman” was one of the boxes used to sell papers in the streets.  There is a slot where the pennies may be dropped.  The one which underwent the substruction was located at Kensington avenue and Park Ridge.

                Judge Harry B. Lamson lectured the boy severely.  Starting at his age with petty thefts would lead to larger thefts later on, the court warned.  He concluded his talk by putting the lad on probation for six months.

     

    Peiper on Property and Potpourri:

    Greetings from Chicago where I am attending the “welcome back” for the defense bar.  It has been written about endlessly over the last 18 months, so we will not devote time to a discussion of how nice it is to see people in person.  Rather, we wonder aloud how much longer we will feel compelled to share are COVID stories.  I am calling for a moratorium on all future discussions, primarily because I realize how shamefully uninteresting I am and how little self-improvement I achieved during lockdown. 

    As for this week’s column, we formally review the interesting Appellate Decision from earlier this month by the First Department.  For those who may not yet have heard, the Court ruled that the act of sending an e-mail is sufficient to “subscribe” a formal stipulation under CPLR 2103.  In other words, so long as you mean to send an e-mail agreeing to a settlement, and that e-mail contains all of the material terms, it is fully binding on counsel and client.  It is a common-sense decision, frankly, that respects how the practice of law has evolved over the past 25 years.  Twenty-five years from now, we’ll be dealing with issues of telepathic transmissions and arguing over whether they fall within the confines of the CPLR. 

    For a closing point, congratulations to Jen Ehman for successfully launching DRI’s Insurance Coverage & Claims Institute program.  It was originally scheduled to go off in March of 2020, then in July of 2020, and yet here we are.  She, and her team, organized one conference at least three times, and her dedication to the organization should be applauded.  Nice work.

    That’s it for now.  See you in two weeks.   

    Steve
    Steven E. Peiper

    [email protected]

     

    Rock Solid Evidence – 100 Years Ago:

    Buffalo Courier
    Buffalo, New York
    23 Jul 1921

    5-POUND STONE EVIDENCE
    IN ASSAULT CASE

                Niagara Falls, July 22.—During a family quarrel at Sugar Street Antonio Rig, twenty-eight years old, and John Gardena, also twenty-eight, had a hand-to-hand fight.  Gardena is at St. Mary’s hospital with a broken head tonight.  Rig is held on a second-degree assault charge.  Police have a five-pound stone alleged to have been used in the encounter. 

     

    Wilewicz’ Wide-World of Coverage:

    This week’s Wide World missive will need to be pithy, as we are on our way out the door to visit our local Wonder of the World – Niagara Falls. We are currently hosting friends from D.C. for a week, as our very first post-vaccine houseguests. It has been lovely thus far to have a household filled with people and games and laughter, after so many months of quiet days that really did blend into each other.

    In terms of our coverage of coverage, as it were, look out below for Nick Heintzman’s column about a Third Circuit case. It discusses Pennsylvania law on underinsured motorist coverages and a “household vehicle exclusion”. Enjoy!

    Until next time, stay safe everyone,

    Agnes
    Agnes A. Wilewicz

    [email protected]

     

    She Lost This Election but Was a Force in Democratic Politics in NYC for Quite a While:

    The Chat
    Brooklyn, New York
    23 Jul 1921

    QUEENS WOMAN TO RUN
    FOR ASSEMBLYMAN JOB

                Mrs. Ebba M. Winslow, of Rosedale, vice chairman of the Republic County Committee, of Queens, has decided to run for the assembly nomination in the Fourth District.  The district is represented by Assembly Nicholas Pette who has been appointed an assistant District Attorney in Queens.  Mrs. Winslow’s opponent will be Raymond O’Connor.  This is the first time in the history of Queens that a woman was pitted against a man for a nomination. 

     

    Barnas on Bad Faith:

    Hello again:

    Tonight is the final Blue Jays game in Buffalo, and I am going to be very sorry to see them go.  I was hoping we would get one more homestand before the Jays go back to Toronto, but it is hard to blame the team for wanting to get back to their home ballpark.  As a lifelong Blue Jays fan living in Buffalo, it has been amazing to go to so many games and watch them play in my hometown.  It also has been nice to see a number of people around town embrace them and wearing Blue Jays hats and shirts around the city.  Hopefully they can make a playoff push in front of the hometown fans in Toronto.

    It was slim pickings in terms of bad faith cases this week.  My column has a nice decision from Pennsylvania where the court granted summary judgment dismissing a bad faith claim.  The insured vehemently disagreed with the insurer’s evaluation of her bad faith claim.  Unfortunately, this was not enough to proceed with a bad faith claim since she could not show any facts showing that valuation was made in bad faith.

    That’s all for now. 

    Brian
    Brian D. Barnas

    [email protected]

 

Never Thought About “Rain Out” Insurance:

Buffalo Morning Express and
Illustrated Buffalo Express
Buffalo, New York
23 Jul 1921

INSURANCE CARRIED BY
THE BIG LEAGUE CLUBS

            New York, July 22.—An idea of the amount of insurance carried by big league baseball clubs against inclement weather was given when William Massce,  an insurance broker, filed a complaint against the Detroit (American league) club, alleging that his commission of $910 on a $91,000 policy has not been paid.  The insurance, he said, was to cover Saturdays, Sundays and holidays in May.

            The complainant stated that after he had secured the policy the Detroit owners refused to accept it, obtaining insurance through another broker.  He claimed he was engaged to get insurance for the club and that he had earned his commission regardless of the fact that his employers did not accept the policy.

            Supreme Court Justice Finch granted a writ of attachment against the Detroit club’s property in this state pending a hearing. 

 

Off the Mark:

Dear Readers,

I hope everyone is enjoying the summer.  It seems that the courts are, as there were no newsworthy construction defect cases to report on.

Check back in two weeks.

Until then …

Brian
Brian F. Mark

[email protected]

 

Six-Year-Old Physiology Prodigy:

The Yonkers Herald
Yonkers, New York
23 Jul 1921

UNCANNY KNOWLEDGE
OF ANATOMY BY CHILD

            St. Louis, Mo., July 23rd.—When he told his school teacher that he’d rather talk on “Hygiene and Sanitation” than recite “a silly rhyme,” Gene Baldwin Starkloff, six-year-old son of City Health Commissioner Max C. Starkloff attracted attention.

            In St. Louis now he is considered a prodigy.  He possesses a very phenomenal brain, physicians declare, and destiny has so shaped it that he will become one of the America’s foremost surgeons or physicians.

            The boy, in Latin terms, is able to give technical definitions of all parts of the human anatomy.  Further, he is able to describe the functions of the body’s organs.  The best physicians here have been unable to rattle him with puzzling questions.

            In his father’s office the youth pours over books on medical science.  His hours at home, when not given to arduous play, are spent in studying a chart of the human body.

Editor’s note:  I had to wonder what happened to the young lad. Here’s his obituary, some 73 years late.  You’ll see he stuck to medicine:

St. Louis Post-Dispatch (MO) - January 14, 1994

Dr. Gene B. Starkloff, surgeon and professor, died Tuesday (Jan. 11, 1994) of infirmities at Mari De Villa Nursing Home in west St. Louis County. He was 79 and had made his home for years on Westminster Place in the city's West End.

Dr. Starkloff was one of the pioneers in intestinal bypass surgery for grossly overweight people. In his non-medical pursuits, he played a bit of professional baseball, served in an embassy and wrote a book on the finer points of running field trials for Labrador retrievers.

His father was Dr. Max C. Starkloff, the city health commissioner whose name later graced the old City Hospital as its formal name.

The senior Starkloff passed along medical lore to his son, who at age 7 could identify by name all 208 bones in the human body. He jumped from the first grade to the fifth.

Later, he spent a little time in the farm system of the old St. Louis Browns but gave up any notion of a sports career in favor of medicine. Washington University awarded Dr. Starkloff his bachelor's and medical degrees, the latter in 1939.

 

Boron’s Benchmarks:

Sometimes, looking back is a good thing . . . and other times, it is a bad thing.  For example, it is a good thing to look back when driving in reverse.  Conversely, it is a bad thing to look back if doing so distracts you from what you need to do right now or want to do in the future.  Today, as I dare to look back over the past twelve months, my mind jumps to the old saying “what a difference a year makes!”  We’ve all lived through so much in the past year, including, first and foremost, a global pandemic.  It is so nice to think that many aspects of life are better today than they were one year ago!  

For this edition of Boron’s Benchmarks, the Coverage Pointers beat monitoring and reporting on insurance coverage decisions of the high courts of the 49 states not named New York, I offer for your consideration a Supreme Court of Nevada in opinion concerning the applicability of an exclusion in a personal umbrella liability insurance policy, Sciarratta vs. Foremost Insurance Company, issued July 8, 2021.  The Nevada Supreme Court affirmed summary judgment granted to the insurer by the district court upholding the applicability of an exclusion precluding coverage.  

Have a healthy and happy next two weeks, folks.

Eric
Eric T. Boron

[email protected]

 

Tough Competitors – a Century Ago:

The Brooklyn Citizen
Brooklyn, New York
23 Jul 1921

STORE IS BOMBED
BY GROCER’S FOES

Marked Family Dashes Into
Street In Night Clothes as
Excited Crowd Gathers

            Excitement was caused to-day by the explosion of a small bomb in the doorway of the grocery store of Charles Navarro, at No. 1685 East New York avenue.  No one was hurt, but many men, women and children ran out of buildings in the neighborhood, when they felt the chock of the blast and heard the report, and gathers about the scene.

            The double doors of the store were blown off and two plate glass windows were cracked, Navarro, his wife and nine children were sleeping on the second floor.  They ran to the street in night clothes.  Frank Navarro said his father had received a letter threatening him with death unless he paid $1,500 to a man who would greet him at Forty-second street and Broadway on July 2.  The money was not paid and the police were not notified. 

 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

Between last issue and this one, I began pursuing my CPCU designation, which has been a personal goal of mine for some time. Now if only I actually had time to continue my pursuit of same. Credit to those that have come before, those grinding alongside me at the moment, and those that begin their journey in the future. As a professor of mine in undergrad used to say, we should all strive for life-long learning and approach every opportunity as a partnership of co-teachers and co-learners. We all have something to teach to others and should always learn something in the process ourselves.

This week, Ryan’s Capital Roundup contains a write-up of a new Insurance Circular Letter pertaining to disaster planning, preparedness, and response by the property and casualty industry.

Until next time,

Ryan
Ryan P. Maxwell

[email protected]

 

Ever Attend a Wild Dope Party?:

Daily News
New York, New York
23 Jul 1921

WILD DOPE PARTY ENDS IN
ATTACK ON FAIR ACTRESS

Windsor Case Starts Ward
On Drug Fiends.

            Los Angeles, July 22.—Hollywood police are investigating alleged dope parties among the movie people here, as a result of the finding of Claire Windsor, beautiful Seattle society girl and actress in small parts in movies, on the back doorstep of a house at Cahuenga Pass.  Miss Windsor, the police say, was lured away to a "dope party," and there badly beaten and thrown out of the house. She was gone two days.

            Wild drug parties have been held among the moving picture people, according to the police, and a great many of them have become victims of the drug habit. It is nothing, they say, for prominent moving picture people to give “snow parties” and for all who participate to become unconscious from drugs.

 

CJ on CVA and USDC(NY):

Hello all,

In less than a week the Englert family will be packing up and heading to Hilton Head for a few days of fun in the sun. My wife and I have been making a list of all the gear we’ll need and have come to realize that traveling with a nine-month-old may be the biggest challenge either of us have taken on. As challenging as the trip to and from the island will be, I cannot wait to travel again, and see some of the country that isn’t Western New York for the first time in almost two years.

This edition I have three cases for your enjoyment. The first is CVA adjacent case coming from the Fourth Department, successfully briefed, and argued by H&F’s own Anastasia McCarthy. Many CVA complaints include a cause of action for negligent supervision or the like, Anastasia successfully argued that if the school district did not have evidence of prior conduct similar to that which caused the alleged injury, the plaintiff’s claim for negligent supervision must be dismissed. This was argued against a tough set of facts, in which the alleged abuser had a number of disciplinary infractions, but none related to sexual abuse or violet tendencies towards other students. Congratulations Anastasia!

This edition’s second case comes from an order denying the Niagara Falls City School District’s motion to dismiss a CVA complaint with causes of action sounding in negligent hiring, retention, supervision and direction of Lewis; negligent, reckless and willful misconduct; premises liability; and breach of statutory duties to report pursuant to Social Services Law §§ 413 and 420 and Education Law Art. 23-B and challenging the constitutionality of the CVA itself.

The third case comes to us from the Southern District, in which the District Court denied a motion to dismiss a plaintiff’s claim alleging the insurer breached a duty of good faith and fair dealing, but granted motions to dismiss New York General Business Law § 349 claims, and a demand for punitive damages.

See you in two weeks,

CJ
Charles J. Englert, III

[email protected]       

 

President Harding Kicks the Tires, and the Cars:

The Buffalo Commercial
Buffalo, New York
23 Jul 1921

President Expects to Spend Night
Under Canvas at Licking Creek, Md.

By the Associated Press.

            WASHINGTON, July 23—President Harding left here by automobile, to join the camping party of Henry Ford, Harvey Firestone and Thomas Edison on Licking Creek, near Peckville, Md., 17 miles from Hagerstown, Md.  He expected to spend the night under canvas.  Mrs. Harding did not accompany the President having decided not to accept the invitation.

            The President’s schedule called for luncheon at the camp and an afternoon in the Maryland hills.  Besides Mr. Firestone, Mr. Ford and Mr. Edison and their wives he will find Bishop William F. Anderson of the Methodist Episcopal church, an old friend, and Mrs. Anderson at the camp.

 

Dishing Out Serious Injury Threshold:

Dear Readers,

As this summer seems to be flying by, I hope everyone has been able to get out to enjoy the nice weather and relax. I’ll be heading up to Portland, Maine, this weekend for some beers and lobster rolls with some college friends. It will be my first trip there so if anyone has any recommendations for places to visit, feel free to reach out.

In the Serious Injury Threshold world, we don’t have any cases of pertinence to report.

Be well,

Michael
Michael J. Dischley

[email protected]  

 

Mon Ami:

Buffalo Courier
Buffalo, New York
23 Jul 1921

ROMANCE OF WAR ENDS IN
PRETTY FRENCH WEDDING

            Paris, July 22.—The romance of a war nurse and an officer patient was happily concluded in Passy town hall, here this afternoon when Herbert Childs of Clark, Childs & Co., a prominent New York clubman, married Alexina Renaudin.

            The bride is a beautiful society girl who nursed Childs after he was wounded in the war.  The bride’s witnesses were Viconte de Briment, and Jacques de Balloca.  Those for the bridegroom were Frederick Gallatin and John Sawyer. 

 

Bucci on “B”: 

Hello all,

Funny that the only case I could find this issue with any substance involves triggering coverage for pleading disparagement.  It just so happens David Gauntlett and I are writing a point/counterpoint paper for publication in the ABA, TIPS magazine, the Brief.  I am surrounded with disparagement cases addressing the pleading requirements.  They often differ from state to state, and some courts recognize implied disparagement where the pleading requirements are not precisely satisfied.  It will be an interesting read.

Also, our fair leader, Jody Briandi, acted as an expert panelist for a Buffalo Business First Diversity & Inclusion event.  This is so exciting because the Firm takes diversity seriously, and we often get presentations regarding diversity and inclusion that are fascinating.

For example, imagine a couple flying off in a plane for vacation, a couple celebrating their wedding anniversary sitting at the table next to you in a nice restaurant, and the pilot of a passenger plane.  Now, what images came to you first, sorting in terms of color, gender, age, sexual preference, and the like.  You may be very surprised.  I’ll explain in the next issue. 

Hope you are enjoying the season…even if you do not like heat, the late night light is worth it every time.

Until next time!

Diane
Diane L. Bucci

[email protected]

 

Dempsey KO’s by Taxes:

The Yonkers Herald
Yonkers, New York
23 Jul 1921

DEMPSEY MUST PAY
N. Y. STATE $12,000

            Albany, N. Y., July 23rd.—Jack Dempsey, world’s heavyweight champion, must pay New York State approximately $12,000 income tax or face a change of perjury, James S. Y. Ivins, Income Tax Bureau head, said to-day.

            If Dempsey insists he is not a resident of this State, the affidavit which he is alleged to have sworn to recently to prevent a writ of attachment on his automobile by New York City creditors will be produced.  Dempsey swore, it is claimed, that he was a resident of this State. 

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

The problem with asking your buddies to help out with a small landscaping issue is that, at some point, you’re asked to return the favor. Now, when I say small, I mean really small, like tiny. It took three guys a little over an hour, thanks largely to my friends’ power tools. Growing up and living my formative years in urban New York, power tools are not in my lexicon. I was appreciative, very appreciative. I provided beer and grilled ribeyes—and not that under the plastic wrap stuff—real steaks wrapped in paper from the butcher. Generous compensation for an hour’s work.

Well, this past weekend was payback. My friend lives on three acres in the middle of nowhere, which isn’t hard to get to when you live in central Connecticut. Did I mention three acres? Three acres of digging, pulling, cutting, carting, and snakes! I thought the rains would save me. The forecast called for torrential downpours all afternoon. By 1 pm, the skies were dark, and the rumbling of distant thunder soothed my achy muscles. But no rain. 2 pm, still no rain. 3 pm—this is crazy—no rain. The weather app on my phone called out a flash flood warning, but the only precipitation was the tears from rarely used muscle groups.

In two weekends, it’s off to friend number two’s house. I’m going to use that time to rethink this whole friendship thing.

Be smart and keep staying safe. Don’t give Delta a chance.

Lee
Lee S. Siegel

[email protected]       

 

Stalkers, Even 100 Years Ago:

Buffalo Morning Express and
Illustrated Buffalo Express
Buffalo, New York
23 Jul 1921

TELEPHONE PEST CAUGHT
HERE AFTER TWO YEARS

Man who has been insulting women over
The wire taken at last—Society had
been wellnigh desperate.

            The degenerate who has been annoying society girls for the last two years by calling them on the telephone and using vile language and indecent suggestions, was caught last night.  Chief Higgins has ordered that the fellow’s name be not entered on the police blotter.  Last night he admitted the arrest, but said he did not know the man’s name.  The purposed, it is under stood, is for the arraignment to be put over until next week when plans for speedy justice will have been matured.

            A state of indignation has been created among the more prominent of Buffalo homes the last two years by this miscreant, who would telephone at all hours, asking for the girls of the various home by their given names.  When the girl would answer a call presumably from an acquaintance she would be greeted with a flood of filthy language.  While these outrages have been reported for two years at certain periods they would become more pronounced and at other times there would be a cessation of the annoyance.  It is understood that little was heard from the fellow since May until the present week when he broke out with even greater virulence.

 

Rauh’s Ramblings:

Hi all,

This has been a very busy work week for me, so I don’t really have anything interesting to report on that is non-work related. 

So, with that being said, instead of reporting on a new case decision like I typically do, I will be reporting on new legislation that was passed by the NYS Assembly that went into effect on 7/16/21.  This legislation deals with the ways that insurers who are unauthorized in NYS and the methods these insurers can use to issue and service life insurance policies and annuity contracts.  Also, thank you to Ryan Maxwell for giving me the heads-up about this important piece of legislation!

Have a good week!

Patty
Patricia A. Rauh

[email protected]       

 

Columbus “Discovered” America. Poughkeepsie Discovers Shoes:

Poughkeepsie Eagle-News
Poughkeepsie, New York
23 Jul 1921

Christopher Columbus
Discovered America—

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Every pair guaranteed perfect.

 

Storm’s SIU Examen:

Hi everyone:

In this edition of The Examen, we will examine the following:

Ulster County Fire Investigation Unit and the NYS DFS CIU arrest Yevganiy Ilyayev for Insurance Fraud in the 2nd Degree following a year-long criminal investigation.

  • In a liability coverage action, Safeco’s motion for summary judgment seeking a declaration that it had no duty to defend of indemnify was denied, the Court holding that a criminal acts exclusion did not operate to bar coverage for the underlying claim as a plea of nolo contendere does not definitively establish conduct violating criminal law. There was also a question of fact whether the insured was privileged to use force because he acted in defense of property in the face of an alleged threat. 

  • Fire products liability case.  Refrigerator manufacturer’s motions for summary judgment and to preclude the testimony of Allstate’s electrical expert were denied.  Under the malfunction theory of product liability, the plaintiff may prove a defect by circumstantial evidence even if the product is still available, as long as it is seriously damaged.  The expert’s testimony applied reliable methodology under Daubert and FRE 702.  NFPA 921 does not require an expert to conduct specific tests that would definitively prove the source of the fire.  All that is required is for the expert to appropriately apply a reliable methodology.  The expert’s opinion was admissible even though he does not identify a single cause of the fire but rather identified two possible causes both of which would impose liability, as the opinion may be helpful and relevant.

  • Superior Court affirms decision of the trial court that Nationwide had a duty to defend the insured in an underlying personal action where the insured shot the claimant, based upon the four corners of the underlying complaint and the four corners of the policy.  The factual allegations of the complaint did not necessarily preclude the possibility that the shooting was accidental.

Please check out my recent article published in SIU Today! "Remote Virtual EUOs -- No Need For Bathroom Breaks Anymore! (Remotely Conducted v. In-Person EUOs - Which Are More Effective?)". I hope you find it informative and a little humorous. EUOs sure are a strange animal!  You may read it on our firm’s blog or at the publisher’s website

This week’s encouraging word, in honor of the last MLB game in Buffalo this week: 

“Nobody wanted me. Scouts told me to go to school, to forget baseball. Coaches said, ‘You’re never going to make it.’ I appreciated their honesty because I think when someone tells you something you may not like, you have to use that as fuel for motivation.” ~ Mike Piazza

If you and I are not yet friends on LinkedIn, please send me a connection request. 

I look forward to speaking with you regarding any challenging coverage issues you are evaluating.  Call me anytime at (716) 220-1478.  Talk to you soon! 

Scott
Scott D. Storm

[email protected]

 

Prohibition or Not, New Yorkers Continue to Booze it Up:

The New York Times
New York, New York
23 July 1921

SAYS NEW YORKERS
INSIST ON DRINKING

But People Don’t Want Saloons, Justice Borst
Asserts, as Rum Court Quits.

TELLS OF CITY’S PROBLEMS

Will Recommend More Prohibition
Courts and the Licensing of
Soft Drink Places
THINKS FINE SYSTEM BEST

Grand Jury Criticizes Policeman—
Haylan Orders That Unlawful
Search for Liquor Cease.

            New York City is faced with a big problem in the enforcement of the State prohibition law, Justice Henry V. Borst declared yesterday just after bringing to a close the Extraordinary Term of the Supreme Court of the trial of liquor cases, over which he had presided for the last seven weeks.  He said that apparently there are a great many persons here who are going to have their strong drink, and if they cannot get it in any other way will manufacture it.  However, he said, the people of New York don’t want saloons and the saloons are out of business forever.

            “I am going back to my own court up in Amsterdam,” said Justice Borst just before the Grand Jury was discharged.  “New York City has a great problem before it  in connection with enforcement of the Mullen-Gage Prohibition act.  It is a problem greater there than in the country districts.  There offenders against the new law plead guilty and save the courts a trial.  In this city a different condition exists.  The police have placed uniformed men in saloons where arrests have been made, and after a conviction it is contended the place itself becomes a nuisance.  Therefore lawyers for the defendants hesitate to enter pleas of guilty.

 

Heintzman’s Hideout:

Dear Readers,

Since starting work as an attorney in October, I have used a meal-prep service that precooks all my meals for me. This way, I get nutritious meals without spending time on cooking. As a 6’5, 26-year-old male, I find it nearly impossible to cook enough food to keep myself full. I recently changed to a meal prep service I like even better than the previous one, and my energy levels are through the roof. I am running, playing basketball, and lifting weights nearly every day – despite keeping a busy work schedule. I am happy, and extremely fortunate, to report that nine months into my legal career I’m the healthiest I’ve ever felt. I highly recommend the meal prep service for anyone who is pressed for time or who does not enjoy cooking. It has really changed my life.

Two fun cases this week. In the first, New York Supreme Court Kings County analyzes the mutual mistake doctrine and mysterious disappearance exclusion in a stolen stamp case. In the second, the Third Circuit Federal Court holds the household vehicle exclusion invalid under Pennsylvania law.

Best,

Nick
Nicholas J. Heintzman

[email protected]

 

More from the Black Sox Trial:

New York Tribune
New York, New York
23 Jul 1921

Confessions of 3 Sox
Missing From Records

Eastern Gamblers Accused of Raising $10,000
to Obtain Grand Jury Papers Bearing on Indictments

State Has Carbon Copies

Fight Begins to Introduce Admissions
Of Cicotte, Jackson and Williams

            CHICAGO, July 22.—Original copies of the grand jury confessions, in which Eddie Cicotte, Joe Jackson and Claude Williams, White Sox players, declared they had been paid from $5,000 to $10,000 to throw games in the 1919 world’s series and the statements they signed waiving immunity, are missing, it became known to-day, when the state began its fight to introduce the confessions as evidence in the baseball trial.

            The announcement came as a dramatic sensation, near the end of to-day’s session of court, when the state placed Hartley Replogle, former Assistant State’s Attorney, who directed the first grand jury investigation of the baseball scandal, on the stand and revealed that it would have to depend on carbon copies of the confessions, and on the testimony of men who heard them and who are said to have seen the immunity waivers signed.  The defense plans to contend that the confessions were made involuntarily.

 

North of the Border: 

The news reports are correct. Southern Alberta’s royal blue skies have been obscured by wildfire smoke. Steps away from our front door one can usually see the front ranges of the Rockies. But not this week.  It is like they are not there at all.  Is it possible to import rain from Europe? Climate change is impacting all of us … we are seriously considering trading in our Jeep and replacing it with a Jeep with a hybrid engine. One would think that eliminating the cost of gas will make up for the increased purchase price … might need an actuary to help with the math but it seems to be the right thing to do.

Heather
Heather Sanderson

[email protected]

 

Headlines from this week’s issue, attached:

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

  • Leased Employee was Employee of Company that Leased Him AND the Leasing Company

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

  • Sending of an E-mail Qualifies as a Binding Stipulation under CPLR 2104

 

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

  • No cases to report.

     

    WILEWICZ’S WIDE WORLD OF COVERAGE
    Agnes A. Wilewicz

    [email protected]

  • See Nick Heintzman’s column for this week’s Circuit Court coverage of coverage.

     

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

  • General Disagreement over Monetary Value of Claim Insufficient to Establish Bad Faith

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]

  • No UIM Coverage for Tennessee Vehicle

 

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

  • Summary Judgment for Insurer Reversed – an Advertising Injury Does Not Have to Occur during Advertising Activities

 

OFF THE MARK
Brian F. Mark
[email protected]

  • No construction defect cases to report on this edition.

 

BORON’S BENCHMARKS
Eric T. Boron

[email protected]

 

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell

[email protected]

Regulatory Wrap-Up

  • DFS Issues New Circular Repealing and Replacing Prior Guidance on Disaster Planning, Preparedness, and Response

 

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

[email protected]

  • Without Evidence of Prior Conduct Similar to that Which Causes an Unanticipated Injury, a Claim for Negligent Supervision Must Fail

  • Claims of Negligence Against a School District Made in a CVA Complaint Survive a Motion to Dismiss When an “In Loco Parentis” Duty is Plead

  • Without Evidence of Prior Conduct Similar to that Which Causes an Unanticipated Injury, a Claim for Negligent Supervision Must Fail

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

  • New Legislation to Amend the Insurance Law in an Effort to Modernize the Methods of Consumer Servicing Options for Unauthorized Insurers in NYS

 

ruMIRNAtions
Mirna. M. Santiago

[email protected]

  • Emerging Trends in Diversity Equity and Inclusion

 

STORM’S SIU EXAMEN
Scott D. Storm

[email protected]

  • Ulster County Fire Investigation Unit and the NYS DFS CIU Arrest Yevganiy Ilyayev for Insurance Fraud in the 2nd Degree Following a Year-Long Criminal Investigation

  • In a Liability Coverage Action, Safeco’s Motion for Summary Judgment Seeking a Declaration that it had No Duty to Defend or Indemnify was Denied, the Court Holding that a Criminal Acts Exclusion did not Operate to Bar Coverage for the Underlying Claim as a Plea of Nolo Contendere Does Not Definitively Establish Conduct Violating Criminal Law. There was also a Question of Fact Whether the Insured was Privileged to Use Force Because He Acted in Defense of Property in the Face of an Alleged Threat

  • Fire Products Liability Case.  Refrigerator Manufacturer’s Motions for Summary Judgment and to Preclude the Testimony of Allstate’s Electrical Expert Were Denied.  Under the Malfunction Theory of Product Liability, the Plaintiff May Prove a Defect by Circumstantial Evidence Even if the Product is Still Available, as Long as it is Seriously Damaged.  The Expert’s Testimony Applied Reliable Methodology Under Daubert and FRE 702.  NFPA 921 does not Require an Expert to Conduct Specific Tests that Would Definitively Prove the Source of the Fire.  All that is Required is for the Expert to Appropriately Apply a Reliable Methodology.  The Expert’s Opinion was Admissible Even Though He does not Identify a Single Cause of the Fire But Rather Identified Two Possible Causes Both of Which Would Impose Liability, as the Opinion may be Helpful and Relevant

  • Superior Court Affirms Decision of the Trial Court that Nationwide had a Duty to Defend the Insured in an Underlying Personal Action Where the Insured Shot the Claimant, Based Upon the Four Corners of the Underlying Complaint and the Four Corners of the Policy.  The Factual Allegations of the Complaint did not Necessarily Preclude the Possibility that the Shooting was Accidental

 

HEINTZMAN’S HIDEOUT
Nicholas J. Heintzman

[email protected]

  • Kings County Court Dismisses Defendants’ Summary Judgment Motion on Mutual Mistake and “Mysterious Disappearance” Exclusion Grounds

  • Third Circuit holds “Household Vehicle Exclusion” Invalid under Pennsylvania Law

 

NORTH OF THE BORDER
Heather Sanderson

[email protected]

  • What Constitutes “Notice” under Liability Policies in Saskatchewan

 

 

That’s all for now.  Get vaccinated and stay healthy.

 

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

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


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

Mirna Martinez Santiago

Scott D. Storm

Thomas Casella

Brian D. Barnas

Eric T. Boron

Ryan P. Maxwell

Charles J. Englert

Patricia A. Rauh

Nicholas J. Heintzman

Diane F. Bosse

Joel R. Appelbaum

 

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

Michael F. Perley

Scott D. Storm

Eric T. Boron

Brian D. Barnas

 

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

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

Mirna Martinez Santiago

Diane F. Bosse
 

Topical Index
 

Kohane’s Coverage Corner

Peiper on Property and Potpourri
Dishing out Serious Injury Threshold

Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Off the Mark

Boron’s Benchmarks

Bucci on “B”

Ryan’s Capital Roundup

CJ on CVA and USDC(NY)

Rauh’s Ramblings

ruMIRNAtions

Storm’s SIU Examen

Heintzman’s Hideout

North of the Border

 

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

07/22/21       Cardona v. DRG Construction LLC
Appellate Division, Third Department
Leased Employee was Employee of Company that Leased Him AND the Leasing Company

This was an appeal from a Workers Compensation Board decision.  Cardona was part of a construction crew lifting a home off of its foundation and was injured when it collapsed. After claimant filed a workers' compensation claim, a dispute arose as to whether he was an employee of DRG Construction LLC, the subcontractor handling the house lifting work.

Claimant's relationship with DRG was further relevant as to whether he was also an employee of Avitus Inc., a professional employer organization (hereinafter PEO) to which DRG had "outsource[d] its payroll and human resources responsibilities," including those related to workers' compensation, for certain employees.

A Workers' Compensation Law Judge held hearings and determined both that Avitus was a proper employer and Zurich Avitus’ workers compensation carrier was responsible for payment.  That determination was affirmed by the Workers' Compensation Board.

Substantial evidence supports the Board's determination that an analysis of the pertinent factors — including the right to control a putative employee's work and set his or her work schedule, the manner in which wages are paid, the right to discharge, the provision of equipment and the nature of the work — reveals an employer-employee relationship between DRG and the claimant. The Board acknowledged that an examination of those factors did not support a similar finding for Avitus, and therefore considered whether Avitus was an employer under the provisions of the New York Professional Employer Act which sets forth circumstances under which a PEO and its business client co-employ an individual for workers' compensation purposes. In particular, when a PEO enters into a professional employment agreement with a client, it assumes the responsibility to "secure and provide required workers' compensation coverage for . . . worksite employees" (Labor Law § 922 [3] [c]) who have an employment relationship with both the PEO and the client.

A state-specific addendum modifying the agreement between Avitus and DRG specified that the Avitus was "co-employing all or a majority of DRG employees" as required by the New York Professional Employer Act. Avitus and Zurich failed to clearly establish that claimant was not a leased employee covered by the policy.

Editor’s Note:  This is one of the first Workers Compensation appeals about which I’ve ever reported.  However, there was simply nothing else decided by the appellate courts on insurance coverage in the past two weeks. I was desperate.

 

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

07/09/21       Philadelphia Ins. Indemn. Co. v. Kendall
Appellate Division, First Department
Sending of an E-mail Qualifies as a Binding Stipulation under CPLR 2104

When is a settlement binding?  We’ve all had that thought a time or two, and this case represents a nod to the ongoing evolution of the practice of law.  The issue here involved a settlement of a SUM claim.  The timeline is interesting, if not entirely important.  Kendall was injured in an automobile collision and collected $25,000 from the underinsured tortfeasor.  She then demanded arbitration as is her right under the SUM policy issued by Philadelphia.

After the arbitration was fully submitted, but before a decision was rendered, the parties engaged in substantive settlement discussions.  On September 16, 2019, the SUM Arbitrator issued a decision awarding plaintiff $750,000.  The decision was sent to Kendall’s counsel via e-mail, and faxed to Philadelphia’s retained counsel.  Apparently, neither side saw the binding decision, and negotiations continued through September 19, 2019 when a settlement of $400,000 was agreed to by both sides.   Naturally, despite agreeing to the settlement, Kendall’s counsel argued that the matter was formally decided before the settlement, and thus she was entitled to the full $750,000 awarded in arbitration.  Philadelphia disagreed, and commenced the instant special proceeding seeking to enforce the terms of the settlement. 

In support of its position, Philadelphia argued that the two counsel exchanged emails confirming the settlement.  Philadelphia then sent an email to Kendall’s counsel imploring Kendall to sign before the arbitration decision came out.  In reply to which, her counsel acknowledged that he would get the Release as soon as possible. 

The trial court, however, adopted Ms. Kendall’s argument that the settlement agreement was not properly “subscribed” so as to make it a binding stipulation under CPLR § 2104.  In essence, because counsel’s e-mail was not formally signed, instead relying on a prepopulated signature block, the trial court reasoned that the document did not satisfy a strict reading of the statute.

The Appellate Division first noted that Section 2104 does, in fact, require a stipulation to be “subscribed,” and this has been interpreted to mean “signed” by the parties or his/her counsel.  The Court then engaged in a review of the previous decisions which have addressed what it means to sign a document, and all of the unique circumstances which have previously come to light involving e-mails and faxes.  At the end of its review, however, the First Department simply stated that the times have changed.

In reversing the trial court, and enforcing the settlement, the Appellate Division noted a “distinction between prepopulated and retyped signatures in emails reflects needless formality and does not reflect how law is commonly practiced today.”  The new rule announced by the First Department is that the “sign off” doesn’t matter, it’s the transmission.  When counsel hits “send” with the intent of relaying a settlement offer or acceptance, the email is binding. 

In reaching this conclusion, the Court ruled that given the significant nature of responding to a settlement offer there is not legitimate concern that the “informality” of email will have acceptances sent prematurely.  Further, the Court noted that the e-mail must have been intentionally sent by the acknowledging counsel.  Incidents of hacking or artificial intelligence may rebut the intentionality of counsel’s actions. 

In so holding, the Appellate Division does remind all practitioners that for any settlement (email or otherwise) to be binding it must include all of the material terms.  That was satisfied here where the only material term was the amount of payment.  In furtherance of this point, the Appellate Division rejected Kendall’s argument that the settlement was not complete until the terms of the Release and Trust Agreement were completed.  The Release amounts to further documentation of the settlement, but it is not a material term to the settlement. 

 

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

No cases to report.

 

WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz

[email protected]

 

See Nick Heintzman’s column for this week’s Circuit Court coverage of coverage.

 

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

 

07/19/21       Stegena v. Nationwide Property & Casualty Ins. Co.
United States District Court, Western District of Pennsylvania
General Disagreement over Monetary Value of Claim Insufficient to Establish Bad Faith

Stegena was involved in a motor vehicle accident with Geyer.  She claims she suffered several injuries, including lower back, carpal tunnel, dental and head injuries.  Stegena's vehicle was insured by Nationwide and Geyer's vehicle was insured for $25,000.00 by State Farm.  Stegena's policy covered a total of four vehicles, with each being individually insured for $300,000.00. The policy allowed for those amounts to be aggregately stacked for a total of $1,200,000.00.

Stegena filed an underinsured motorist claim with Nationwide.  Nationwide’s assigned adjuster, Friel, conducted a review that included reviewing demand packages, the first-party medical benefits claim file, and Stegena’s out of pocket expenses.  Friel identified several preexisting medical conditions, and Nationwide made an offer of $65,000 to settle the claim.  Stegena rejected that offer, having sent a demand package requesting $320,000.

Nationwide conducted an EUO and raised its offer to $100,000.  Stegena’s attorney recommended that she accept the $100,000 offer, but she terminated her attorney, retained new counsel, withdrew all previous settlement demands, and sought the total stacked policy limit of $1,200,000.  Stegena subsequently filed a lawsuit alleging breach of contract and bad faith against Nationwide.  Nationwide moved for summary judgment on the bad faith claim.

The court dismissed the bad faith claim on summary judgment.  In support of her bad faith claim, Stegena recited the materials and evidence submitted in support of her claim, together with the monetary valuations included in the opinions of experts procured after the initiation of the litigation.  However, while she provided sizable dollar amounts, she did not address why there was an absence of a reasonable basis for Nationwide’s position or how Nationwide knew or recklessly disregarded that absence.

While a low ball offer may support a bad faith claim, Stegena failed to identify any unreasonable conduct on the part of Nationwide.  The claim amounted to little more than a generalized grievance over the monetary valuation of her claim.  While Stegena disagreed with Nationwide’s valuation of her injuries, she failed to offer any facts that showed that valuation was made in bad faith.

 

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

06/29/21       Finley v. Western Express, Inc.
Appellate Court of Connecticut
No UIM Coverage for Tennessee Vehicle

The Connecticut Court of Appeals dismissed an injured driver’s appeal that contested the trial court’s finding that there was no requirement that an out-of-state vehicle carry UM/UIM coverage in Connecticut. In 2019, Finley was injured when he crashed into an unavoidable object while operating a Western Express tractor trailer along I-84 in West Hartford. National Casualty Company insured the vehicle which was registered and garaged in Tennessee.

Finley’s UIM claim was denied, and he brought this suit. The defendants moved for summary judgment, arguing that the policy expressly provided that it did not afford uninsured motorist coverage, and Connecticut law requiring such coverage did not apply to the policy because the tractor trailer was not registered or principally garaged in Connecticut. Finley did not contradict the material facts, but instead argued that summary judgment should be denied, stating that “[t]he tractor trailer the plaintiff was driving was owned and self-insured by the defendant Western Express.” While tacitly acknowledging that the policy did not contain UIM coverage, he argued that, pursuant to Connecticut General Statutes §§ 38a-371 (a) (2) and 38a-336 (a) (1), “[t]he defendant was required to maintain uninsured motorist coverage while operating in Connecticut.”

The trial court determined that Tennessee law applied and that the plaintiff was not entitled to uninsured motorist benefits under Tennessee law, as Tennessee does not mandate UIM coverage. The trial court also rejected plaintiff's argument that Connecticut law required Western Express to carry uninsured motorist coverage. The court concluded that, “[a]pplying these statutes ... would not change the outcome” it had reached in applying Tennessee law because “it ha[d] been established that the defendants' vehicle was neither registered nor principally garaged in [Connecticut] ....”

On appeal, the plaintiff argued that the trial court erred because Connecticut law “mandates that all vehicles operating on Connecticut roadways maintain uninsured motorist coverage” and that Connecticut “has consistently maintained a strong public policy favoring uninsured motorist coverage.” Finley, however, failed to challenge the principal basis for the court's summary judgment ruling, that Tennessee law applied, and that he was not entitled to uninsured motorist benefits under Tennessee law. Because the plaintiff failed to challenge that independent basis for the court's ruling, the court dismissed the appeal as moot.

 

BUCCI on “B”
Diane L. Bucci

[email protected]

07/19/21       Minnesota Sporting Clays Ass’n v. National Casualty Co.
Minnesota Court of Appeals
Summary Judgment for Insurer Reversed – an Advertising Injury Does Not Have to Occur during Advertising Activities

The Minnesota Sporting Clays Association (“MSC”) brought suit against CGC to recover fees allegedly owed in connection with a championship shooting event.  CGC brought counterclaims against MSC for intentional interference with contractual relations, intentional interference with prospective economic advantage, and a violation of the Minnesota Deceptive Trade Practices Act (“DTPA”), Minn. Stat. § 325D.44 (2020).  CGC alleged that MSC made statements falsely claiming that CGC did not pay its bill which placed CGC “not in good standing” by at least one other shooting/target association. CGC alleged that MSC's actions caused CGC damages for “[d]isparagement of its reputation and credibility within shooting sports, not only nationally but across the [w]orld.”  MSC’s insurer denied coverage for CGC’s counterclaims.

In the lawsuit that followed, MSC argued that CGC sufficiently pled the elements of a disparagement claim.  The court disagreed, finding that to trigger coverage, the disparagement had to occur during an advertising activity, relying on Polaris Indus., L.P. v. Cont'l Ins. Co., 539 N.W.2d 619, 621 (Minn. App. 1995), review denied (Minn. Jan. 25, 1996).  There, the court held that in order to constitute a covered claim, the defined advertising injury must: (1) arise out of the insured's advertising activity, (2) fall within the policy's definitional scope of advertising injury, and (3) not be within a policy exclusion. 539 N.W.2d at 621-23 (emphasis added).  The trial court granted summary judgment to the insurers finding MSC failed to satisfy the first Polaris prong, that the advertising injury was made during an advertising activity.   

On appeal, MSC again argued that the term advertising activity did not apply to the analysis at issue, because the term “advertising activity” was not in the policy.  It also argued that the pleading requirements for disparagement were satisfied by the allegations in the DTPA count, which states, in relevant part:

A person engages in a deceptive trade practice when, in the course of business, vocation, or occupation, the person  “disparages the goods, services, or business of another by false or misleading representation of fact[.]

The appellate court held that Polaris did not govern the outcome of the MSC case, distinguishing Polaris on many fronts.  First, the court held that Polaris applied to cases involving advertising activity that causes an advertising injury.  The term advertising injury in Polaris i.e., libel, slander or defamation of character, but the tort has to be conducted during the insured’s advertising activities and also had to have occurred within the policy period.  Moreover, according to the MSC court, the Polaris Coverage B offenses included only advertising injury, whereas the MSC policy provided coverage for personal and advertising injury, which, held the court, indicated an intent to provide broader coverage than the policy analyzed in Polaris

According to the appellate court, the issue in Polaris was whether an insurer’s obligation to defend is contractual in nature.  Id. at 621. It held that Polaris did not hold that the standard principles of contract interpretation were not applicable in the context of insurance coverage provisions.    Thus, in MSC, the contract should have been analyzed but instead of analyzing the policy, the trial court analyzed Polaris and then sought to “force the MSC policy into that framework.”

Also, in the MSC policy, the term “advertisement” is “a notice that is broadcast or published ... about [the insured's] goods, products or services for the purpose of attracting customers or supporters.”  It did not require that the disparagement occur in the context of an “advertising activity,” like the policy in Polaris

The Court of Appeals concluded that the district court erred in finding that coverage was limited to disparaging statements made during advertising activities. It reversed the summary judgment granted to the insurers by the trial court, and remanded the case to address additional issues including whether a policy exclusion applied. 

 

OFF the MARK
Brian F. Mark
[email protected]

No construction defect cases to report on this edition.

 

BORON’S BENCHMARKS
Eric T. Boron
[email protected]

07/08/21       Sciarratta vs Foremost Insurance Co.
Supreme Court of Nevada 
Personal Umbrella Liability Insurance Policy – Summary Judgment for Insurer Affirmed – Policy Exclusion Found Valid Precluding Coverage

The insured’s appeal concerned the validity of an exclusion in a personal umbrella liability insurance policy. Consistent with the third-party nature of liability insurance, the policy expressly excluded coverage for damages that are “payable to any insured.’'  The insured asserted that the exclusion was invalid because it veered from Nevada statutory requirements and was not disclosed to him at the time of purchase. The Nevada Supreme Court concluded that the Nevada statute at issue - NRS 687B.147 - requires disclosures to be made in a certain manner when an exclusion like the one at issue in this case appears in a “policy of motor vehicle insurance”.  However, it was held that the statute does not apply to umbrella policies, such as the policy at issue in this matter.

Supreme Court further held that while it recognized that an exclusion that is never disclosed to any insured may be unenforceable, here, the insured who asserted the nondisclosure did not offer admissible evidence supporting that assertion, such as an affidavit. In sum, the Nevada Supreme Court found that in the proceedings below the district court properly found that the exclusion was valid and precluded coverage.  Accordingly, Supreme Court affirmed the district court’s order granting the insurer summary judgment.

 

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

Regulatory Wrap-Up

07/19/21       Disaster Planning, Preparedness, and Response by P&C Industry
Department of Financial Services
DFS Issues New Circular Repealing and Replacing Prior Guidance on Disaster Planning, Preparedness, and Response

On Monday, DFS issued Insurance Circular Letter No. 6 (2021) that sets forth standards expected of the P&C industry regarding planning and preparing for, and responding to, disasters occurring anywhere in the world, which repealed and replaced Insurance Circular Letter No. 5 (2019) (available here). In rather self-explanatory fashion, DFS notes that, relative to its communication with the Governor’s Office and State Office of Emergency Management of critical information regarding the amount and extent of losses, damages, personal injuries, and deaths resulting from an ongoing disaster:

“[t]he insurance industry has been identified as a key resource in providing early assessments of losses, damages, personal injuries, and deaths arising from disasters, and plays an important role in quantifying the magnitude of losses, damages, personal injuries, and deaths, whether insured or uninsured, and in determining the appropriate response to the disaster.”

Prior to any disaster, all addressees (except rate service organizations (“RSOs”) or ELANY) providing coverage in certain enumerated insurance lines, including fire, allied lines, multiple peril crop, federal flood, farmowners multiple peril, homeowners multiple peril, commercial multiple peril (non-liability portion), earthquake, private passenger auto physical damage, and commercial auto physical damage, must submit a response to DFS’ pre-disaster data survey pursuant to Insurance Law §308. Responses are utilized by DFS to apportion corporate emergency access system adjuster cards as described in Supplement No. 1 to Circular Letter No. 8 (2007).

Additionally, each addressee is expected to regularly perform a business impact analysis identify the operational and financial impacts resulting from the disruption of business functions and processes, including:

  1. the point in time when a business interruption would have a greater impact, such as a particular season or the end of the month or quarter;

  2. the amount of time before which the business interruption would have an operational or financial impact;

  3. the operational and financial impact of physical damage to buildings; damage to or breakdown of machinery, systems, or equipment; restricted access to a site or building; a utility outage; damage to or loss or corruption of information technology; and absenteeism of essential employees;

  4. resources needed for the business to continue to function at varying levels of disruption; and

  5. potential for dissatisfaction or defection by policyholders, contract holders, insureds, third-party claimants, and health service providers (collectively, “customers”).
     

The results from the analysis above should inform updates to the addressee’s business continuity plan. Except for ELANY, RSOs, or financial guaranty insurers, each addressee is also expected to perform regular risk-based analysis of its capacity to assist customers domestically that have been affected by a disaster foreign or domestic, which should serve to inform regular updates to the addressee’s separate and distinct disaster response plan. However, addressees that can demonstrate that the business continuity or disaster response plan established by a holding company, parent domestic insurer, or another member of the group, under Insurance Law Article 15 or 16.

For specifics on what the business continuity plan or disaster response plan should cover, detailed questionnaires outlining the minimum expectations are provided here.

By August 20, 2021, each addressee must submit a response to the pre-disaster data survey to the Department, as applicable, pursuant to Insurance Law § 308.  By October 8, 2021, each addressee must submit to the Department a disaster response plan, a response to the disaster response plan questionnaire, and a response to the business continuity plan questionnaire, as applicable, pursuant to Insurance Law § 308. Such required submissions should be made electronically through DFS’s new portal application.

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

07/16/21       Knaszak v. Hamburg Central School District
Appellate Division, Fourth Department        
Without Evidence of Prior Conduct Similar to that Which Causes an Unanticipated Injury, a Claim for Negligent Supervision Must Fail

Plaintiff commenced this action seeking damages for injuries she sustained as a result of defendants alleged negligent supervision following an incident in which plaintiff was sexually assaulted by another student while plaintiff and this student were alone in a classroom.

Defendant moved for summary judgement based on the defendant’s inability to foresee the alleged injury sustained by plaintiff. In support of its motion defendant submitted evidence of the alleged abuser’s (“SB”) past disciplinary records, testimony of plaintiff, and the testimony of school administrators, faculty, and staff. Defendant highlighted that all of the evidence set forth was devoid of any instances or mention of violent behavior or sexual assault by SB. The evidence submitted in support od defendant’s motion also showed that students did not congregate, nor was SB given permission to use, the classroom where the alleged abuse occurred. In opposition plaintiff argued that SB’s extensive history of attendance issues, insubordination towards teachers, alcohol and drug abuse, drug dealing, detentions, and suspensions evidenced that the defendant could have reasonably anticipated the alleged sexual assault.

The lower court ruled in favor of the plaintiff holding that due to SB’s extensive disciplinary issues the defendant could not have lacked knowledge that SB posed a threat to his classmates and should have not been allowed to mingle freely with other students. The lower court went on to hold that a reasonable person, acting to safeguard all the students (as defendant must do) would arguably have been on notice to do something to protect the student body from SB. The Fourth Department overruled the lower court. Holding that, “while the student’s history involved attendance issues, insubordination toward school staff, inappropriate verbal outbursts, being under the influence of drugs or alcohol, possession and sale of drugs, and academic problems, that history did not raise a triable issue of fact whether defendant had sufficiently specific knowledge or notice of the injury-causing conduct inasmuch as it was not similar to the student’s physically and sexually aggressive behavior that injured plaintiff.” Notably, the Fourth Department relied heavily on Brandy B. v Eden Cent. School Dist., which stands for the proposition that “without evidence of any prior conduct similar to the unanticipated injury-causing act,” a claim for negligent supervision must fail. (15 NY3d 297, 302 [2010]).

 

07/19/21       PB-36 Doe v. Niagara Falls City School District
New York State Supreme Court, Niagara County   
Claims of Negligence Against a School District Made in a CVA Complaint Survive a Motion to Dismiss When an “In Loco Parentis” Duty is Plead

Plaintiff brought this claim pursuant to the Child Victims Act claiming, that he was sexually abused by teacher Robert Lewis while a minor student attending LaSalle Junior High School. Plaintiff asserted four causes of action against the District in the Complaint: negligent hiring, retention, supervision and direction of Lewis; negligent, reckless and willful misconduct; premises liability; and breach of statutory duties to report pursuant to Social Services Law §§ 413 and 420 and Education Law Art. 23-B. The District moved to dismiss, arguing that the Complaint fails to state a cause of action, that the statute of limitations on plaintiff’s claim had expired, and that the CVA was unconstitutional.

The District’s motion to dismiss the first cause of action was denied as the complaint sufficiently states a cause of action based on the negligent hiring, retention, supervision and direction of Lewis. The Districts motion to dismiss the second cause of action or negligent, reckless and willful misconduct, based on, among other things, the failure to train students, parents and staff about the risk of sexual abuse was also denied. With regard to the second cause of action for negligent, reckless and willful misconduct, based on, among other things, the failure to train students, parents and staff about the risk of sexual abuse, the Districts motion was also denied. The Court held that the duty owed by the District to plaintiff is based on the concept of in loco parentis, in other words, to take "the place of parents and guardians," and that plaintiff sufficiently alleged a breach of that duty.

The Court granted the District’s motion to dismiss the fourth cause of action sounding in premises liability, as duplicative of the negligence cause of action. The Court reasoned that he elements of a cause of action based on premises liability and the elements of a cause of action for negligence against the District are the same: a duty to protect; breach of that duty; notice; and injury.

The District’s motion to dismiss the cause of action based upon the alleged failure to report abuse under Social Services Law § 413 was denied, as the District’s argument that Lewis was not a “person legally responsible” for plaintiff’s cause was without merit. Citing to Fourth Department caselaw, the Court reasoned that it is not the duty of the mandated reporter to determine if the abuser is a person “legally responsible” for the care of the alleged abused, it is the duty of the reporter to report the abuse, and an investigative agency will then determine if the abuse is founded.

Lastly, the District’s motion to dismiss this action based upon the unconstitutionality of the CVA was likewise denied.  The District argued that the CVA violates the New York State Constitution’s due process clause by allowing decades old claims, which were previously unreported, to be brought. The Court held that the District’s arguments that it had no information regarding prior reports of abuse, that witnesses may have died and that memories may be impaired were insufficient to establish the CVA, as applied, deprived the District of due process.

 

07/20/21       Fishberg v. State Farm Fire and Casualty Company
United States District Court, Southern District Of New York      
Without Evidence of Prior Conduct Similar to that Which Causes an Unanticipated Injury, a Claim for Negligent Supervision Must Fail

Plaintiff, at all relevant times, was insured under a Renter’s Policy of Insurance issued to him by defendant (the “Policy”). Within the effective period of the Policy the apartment building plaintiff occupied suffered substantial damages when the ceiling collapsed due to a windstorm, causing a water leak from the roof as a result of a severe rainstorm, and that Plaintiff’s personal property sustained damage or was rendered useless. Plaintiff also alleges that he lost use of the Premises and was forced to expend monies to repair, remediate, and restore his personal property. The Policy provides the following pertinent coverages:

COVERAGE B- PERSONAL PROPERTY We insure accidental direct physical loss to property described in Coverage B caused by the following perils . . . 2. Windstorm or hail. This peril does not include loss to property contained in a building caused by rain, snow, sleet, sand or dust. This limitation does not apply when the direct force of wind or hail damages the building causing an opening in a roof or wall and the rain, snow, sleet, sand or dust enters through this opening.

COVERAGE C – LOSS OF USE 1. Additional Living Expenses. When a Loss Insured causes the residence premises to become uninhabitable, we will cover the necessary increase in cost you incur to maintain your standard of living up to 24 months…

Plaintiff submitted a timely notice of claim under the Policy to State Farm and alleges that he fully complied with the notice provisions of the Policy as well as other conditions precedent to payment for what he claims was a “Covered Loss” under the Policy, but that, by letter dated August 20, 2019, defendant denied coverage to the plaintiff. Plaintiff asserted four causes of action against defendant. The first alleges a breach of contract, the second alleges that defendant refused to timely investigate and adjust the claim in good faith, the third alleges materially unfair and deceptive acts and practices in violation of N.Y. General Business Law § 349 (“GBL 349”), and the fourth alleges that defendant engaged in “willful and wanton” misconduct and engaged in “improper procedure and tactics and violate[d] applicable law, rules and regulations in denying his claim and failing to investigate, adjust and pay the loss in accordance with the Policy,” and as a result Plaintiff is entitled to punitive damages. Defendant moved to dismiss the second through fourth causes of action. (citing to the complaint)

With regard to the second cause of action defendant correctly argued that except in cases where an insurance company refuses to defend or settle a claim brought by a third party against an insured, New York law does not recognize an independent cause of action for bad faith denial of insurance coverage. However, in this case, plaintiff specifically alleged that defendants handling of a claim is the basis for the cause of action sounding in a breach of good faith and fair dealing. The court held that plaintiff had sufficiently plead conduct different from the conduct alleged in the breach of contract cause of action, in that plaintiff specifically addresses the process by which defendant reached its denial of plaintiff’s claim, therefore the second cause of action could not be dismissed.

The court ruled in favor of defendant’s motion to dismiss the GBL 349 cause of action. Understanding that in order to successfully plead a GBL 349 cause of action, plaintiff must allege that the practices complained of have a broad impact on consumers at large and that private contract disputes unique to the parties would not fall within the ambit of the statute. Plaintiff alleges that defendant maintains a publicly accessible website describing its renters’ insurance and then states in conclusory terms that the language it conveys regarding the coverage of the policy with respect to damage from windstorms, hail, and water damage from plumbing would lead a reasonable person to understand that the policy would cover losses such as that sustained by plaintiff. However, plaintiff did not precisely allege what loss he suffered and what language on the website would lead a reasonable consumer to believe that the insurer would automatically agree to extend coverage to an insured upon notice of claim without determining for itself whether the loss was covered or not. The court held that the dispute in this matter was not whether or not plaintiff received the coverage he applied and paid for; the dispute is over whether or not defendant properly applied the Policy’s terms to plaintiff’s specific facts.

The court also granted the defendants motion as to the dismissal of plaintiff’s cause of action demanding punitive damages finding that defendants actions toward plaintiff were not egregious in nature, nor was there a pattern of egregious conduct directed toward the public. Further, any allegations of defendant’s “willful, wanton, or improper procedure and tactics” were based “upon information and belief: and not supported by any facts. 

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

07/16/21       An Act to Amend the Insurance Law, in Relation to Improving Insurance Consumer Servicing Options
New York State Assembly
New Legislation to Amend the Insurance Law in an Effort to Modernize the Methods of Consumer Servicing Options for Unauthorized Insurers in NYS

This new act (the “Act”) went into effect on July 16, 2021 and amends NY Insurance Law §§ 1101 & 1105.  The purpose of the Act is to improve insurance consumer servicing options; to modernize the methods of consumer servicing that unauthorized users are permitted to use, including servicing by telephone, video call, facsimile, web portal, electronic transfer of funds, and other methods approved by the Superintendent of Financial Services (the “Superintendent”).

Insurance Law § 1101(b)(2)(C) has been amended under this Act to provide that the Superintendent’s approval granted pursuant to Insurance Law § 1105 may authorize transactions involving the continuance or servicing of life insurance policies or annuity contracts to be effected by an unauthorized insurer from outside NY by telephone, video call, facsimile, web portal, electronic transfer of funds, or by any other electronic means approved by the Superintendent.  However, the unauthorized insurer shall not have any other contact or interaction with a person in New York other than as specified and in the manner provided in Insurance Law § 1101(b)(2).

The Act also amends Insurance Law § 1105 to provide that a plan submitted by an authorized insurer to voluntarily cease maintaining a license in NY may request that the insurer be permitted to continue or service a life insurance policy or annuity contract from outside New York by telephone, video call, facsimile, web portal, electronic transfer of funds, or any other electronic means approved by the Superintendent pursuant to Insurance Law § 1101(b)(2)(C).

Here is what the NY Assembly said about the Justification for this Act:

Insurance Law § 1101(b)(1) identifies acts that constitute doing an Insurance business in New York and that therefore may only be done by an insurer licensed to do an insurance business in New York. Insurance Law § 1101(b)(2)(C) provides a limited exception for transactions involving the continuance or servicing of (individual or group) life insurance policies or annuity contracts lawfully issued or delivered in New York by an authorized insurer and occurring subsequent to the termination of such insurer's authority to do an insurance business in New York. However, the transactions may only be effected by mail.  Insurance Law § 1101(b)(2)(D) provides a limited exception for transactions with respect to (individual or group) life insurance policies or annuity contracts lawfully issued without New York occurring subsequent to issue, if, at the time of issue, such policies or contracts covered subjects of insurance or risks not resident or located in New York. However, the transactions may only be effected by mail.

Whereas the current exemptions authorize continuance and servicing by mail only, this bill would authorize continuance and servicing by telephone, video call, facsimile, web portal, electronic transfer of funds, or by any other electronic means approved by the Superintendent. It would apply to individual and group life insurance policies and annuity contracts.

This bill is narrowly drafted to modernize the methods of post-issuance continuance and servicing that unauthorized insurers may use in certain limited cases. This bill is not intended to expand the ability of unauthorized insurers, or any persons or entities acting on their behalf, to sell, solicit, negotiate; deliver, or issue for delivery in New York any insurance policy or contract. By way of example, here are some instances in which the bill will benefit New York consumers:

1.       A resident of another state moves to New York. While residing in the other state, the individual was issued a life insurance policy, annuity contract, or group life insurance or annuity certificate in the other state by an insurer licensed in the other state but not licensed in New York. The revisions will ensure that the "new" New York resident will not lose access to servicing options offered by the unlicensed insurer such as servicing by telephone, video call, facsimile, web portal, electronic transfer of funds, or other electronic means approved by the Superintendent.

2.       A New York resident is the named beneficiary under a life insurance policy, annuity contract, or group life insurance or annuity certificate issued in another state to a resident of the other state by an insurer licensed in the other state but not licensed in New York. The revisions will ensure that the New York beneficiary can access methods of facilitating payment of the claim offered by the unlicensed insurer, including by telephone, video call, facsimile, web portal, electronic transfer of funds, or other electronic means approved by the Superintendent.

3.       A New York resident owns a life insurance policy, annuity contract, or group life insurance or annuity certificate issued in New York by an insurer that was licensed in New York at the time the insurer issued the policy or contract. Subsequently, the insurer terminates its license to do business in New York. The revisions expand the scope of the withdrawal plan, pursuant to Insurance Law § 1105, so that the Superintendent may approve continuance and servicing of the New York contracts by methods including telephone, video call, facsimile, web portal, electronic transfer of funds, or other electronic means approved by the Superintendent. This narrow legislative change does not permit any solicitation or sales in New York by an unauthorized insurer.

 

ruMIRNAtions
Mirna M. Santiago
[email protected]

Emerging Trends in Diversity Equity and Inclusion

There are trends in everything; the area of diversity and inclusion is no different. Even the name is in flux—so many organizations are speaking about “diversity, equity and inclusion” now, or about “belonging” or “cultural competence and/or humility.” It’s all about the same thing—making the people who comprise your work force feel like they are leading impactful, meaningful work lives.

While for many years, the diversity, equity and inclusion (DEI) space was all about recognizing and interrupting implicit biases, 2020 forced many people to realize that not all biases are implicit. As such, people started talking openly about racial equity and being anti-racist.

2021 has brought with it a new crop of issues that people are concerned with. At the top of the list is the remote workforce. 2020 made many industries realize that they really didn’t need their employees in the physical office all the time. Many of those industries have embraced this fact and reduced their physical footprint. https://fortune.com/2021/06/23/companies-reducing-office-space-fortune-500-ceos/ And why not? It will significantly reduce overhead and increase profit margins. But with those reductions come the questions about equity—why are white collar workers allowed to save money and wear and tear on their bodies by eliminating the commute, while essential workers are not?

Gender identity and gender expression have also come roaring into everyday discussion, with at least 18 states introducing and/or passing bills banning trans athletes from competing in sports of the gender they identify with. Many have gone with the histrionic title “Save Women’s Sports” for the discriminatory bills. https://www.newsnationnow.com/us-news/here-are-the-states-banning-transgender-athletes-in-womens-sports-and-the-states-considering-it/ With the recent US Supreme Court decision (Bostock v Clayton County) which held that the Civils Rights Act of 1964 protects LGBTQ individuals from discrimination in the workplace, it will be interesting to see if any of the new laws hold up when challenged in court. https://www.npr.org/2020/06/15/863498848/supreme-court-delivers-major-victory-to-lgbtq-employees

With people living longer, pensions shrinking and social security age being increased time and time again, more seniors are working longer. https://www.npr.org/local/305/2020/01/07/794209698/seniors-are-working-longer-out-of-choice-and-necessity  When there is a multigenerational workforce, there tend to be culture clashes based on how each age group approaches problems. Today’s DEI professionals must be versed in problem solving across generations.

The pandemic also taught people the importance of work/life balance. For the first time in, well, ever, people could actually do their work, log off and spend quality time on themselves or their families. https://hbr.org/2020/04/what-will-work-life-balance-look-like-after-the-pandemic Suddenly, having it all seemed achievable. Human Resources will have their hands full dealing with a workforce that may feel forced to fit into a work model that no longer suits their needs.

Last, employees are hungry for systemic change—change that uproots the old systems that only seemed to work for one group of people and one gender. https://blog.vantagecircle.com/diversity-and-inclusion-trends/ People want a new way of working and living. They want to feel engaged in the workplace. They want “equity” and “representation” not just “diversity.”

It will be interesting to see how these trends play out throughout the year and whether any one of them will effectuate long lasting change in the workplace.

 

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

07/14/21       Dept. of Financial Services Press Release
Ulster County Fire Investigation Unit and the NYS DFS CIU Arrest Yevganiy Ilyayev for Insurance Fraud in the 2nd Degree Following a Year-Long Criminal Investigation
The Ulster County Fire Investigation Unit investigated an incendiary house fire which occurred 1/28/20 at 37 Cranberry Hill Road, Wawarsing.  The house had been condemned by the Town and a “Stop Work Order” enacted for suspected illegal renovations.  Yevganiy Ilyayev is said to have submitted a fraudulent claim and falsified claim records to Travelers Insurance seeking $478,000.00.  Yevgniy Ilyayev turned himself in at the Ulster County Sheriff’s Office on Monday, July 12th. He was charged with Insurance Fraud in the Second Degree, a class C Felony.  The Ulster County Fire Investigation Unit and the New York State Department of Financial Services’ Criminal Investigation Unit were assisted by the Ulster County Sheriff’s Office and Ulster County District Attorney’s Office.

 

07/07/21        Safeco Ins. Co. of Ill., et al., v. Nikolai Gasiorowski, et al
United States District Court, Eastern District of Pennsylvania
In a Liability Coverage Action, Safeco’s Motion for Summary Judgment Seeking a Declaration that it had No Duty to Defend or Indemnify was Denied, the Court Holding that a Criminal Acts Exclusion did not Operate to Bar Coverage for the Underlying Claim as a Plea of Nolo Contendere Does Not Definitively Establish Conduct Violating Criminal Law. There was also a Question of Fact Whether the Insured was Privileged to Use Force Because He Acted in Defense of Property in the Face of an Alleged Threat

Safeco sought a declaration that it has no duty to defend or indemnify its insured under a homeowner’s policy in a personal injury case. The underlying lawsuit arose out of a physical altercation between Gasiorowski, the insured, and Avizohar, an individual recreationally using a PECO property that Gasiorowski was licensed to use. Avizohar alleges that Gasiorowski "menacingly approached" Avizohar as he led a horseback ride, pulled Avizohar off his horse, pinned him down, and struck him in the face. Gasiorowski was criminally charged and pled “nolo contendere” to simple assault, harassment, and false imprisonment.  “Nolo contendere” means “I will not contest” and may only be plead with leave of court.  It neither admits nor denies the charges and may still be the basis for a fine or sentence to be imposed.  The advantage is that the plea may not be used against the defendant in a civil action based upon the same acts. 

Safeco moved for summary judgment arguing that a criminal acts exclusion operates to bar coverage for the underlying claim. The Court concluded that Gasiorowski's plea of nolo contendere does not definitively establish that his conduct violated criminal law. No criminal act can occur without criminal intent.  There was also a question of material fact as to whether Gasiorowski was privileged to use force because he acted in defense of property and in the face of an alleged threat. 

Gasiorowski's homeowner's policy contains a criminal acts exclusion:

LIABILITY LOSSES WE DO NOT COVER

1. Coverage E — Personal Liability and Coverage F — Medical Payments to Others do not apply to bodily injury or property damage:. . . .

b. which results from violation of criminal law committed by, or with the knowledge or consent of any insured.

This exclusion applies whether or not any insured is charged or convicted of a violation of criminal law, or local or municipal ordinance.

Safeco agreed to defend Gasiorowski subject to a reservation of rights, which cites the criminal acts exclusions found in both the primary and umbrella policies.

An insurer has the duty to defend the insured whenever the underlying complaint may potentially fall within the insurance coverage. To determine the insurer's obligation, the court examines both the factual allegations in the underlying complaint and the language of the insurance policy. The "factual allegations of the underlying complaint against the insured are to be taken as true and liberally construed in favor of the insured." Finally, if the court finds that there is no duty to defend, then there is no duty to indemnify. 

Safeco alleged that Gasiorowski's nolo contendere plea should be treated the same as a guilty plea, thereby triggering the criminal act exclusion in the insurance policy such that it has no duty to defend him in the underlying civil case. Gasiorowski responded that a plea of nolo contendere may only be considered as equivalent to a guilty plea for the purposes of sentencing in the same criminal case, and beyond that, the plea has no legal effect.

Gasiorowski's nolo contendere plea does not conclusively establish that his conduct was criminal.  A question of fact exists whether Gasiorowski's actions, as described in the underlying complaint, necessarily fall within the criminal acts exclusion, a separate basis for relieving Safeco of its duty to defend.

Gasiorowski's nolo contendere plea is inadmissible in this matter and cannot establish a violation of criminal law. Federal Rule of Evidence 410 provides that a nolo contendere plea is not admissible in a subsequent civil or criminal case against the defendant who made the plea. A defendant that pleads nolo contendere does not admit guilt or having committed the alleged acts. A plea of nolo contendere cannot be "used against the defendant as an admission in any civil suit for the same act."  A nolo plea does not constitute an admission of factual guilt, and thus has no evidentiary value in assessing whether the defendant has committed a crime.  Therefore, Gasiorowski's plea cannot serve as a basis upon which to grant summary judgment.

However, under the language of the policy, a conviction is not required to trigger the exclusion. The question remains whether Gasiorowski's acts, as described in the underlying complaint, definitively constituted criminal conduct. In Pa. self-defense is justifiable "to prevent or terminate an unlawful entry or other trespass upon land ... if such land ... is, or is believed by the actor to be, in his possession or in the possession of another person for whose protection he acts." 18 Pa.C.S.A. § 507(a)(1). An individual "who has a license to use or occupy real property is deemed to be in possession thereof except against the licensor acting under claim of right." 18 Pa.C.S.A. § 507(b)(3). The licensee's right to terminate a trespass is limited to "reasonable, non-lethal force."  Defense of property, therefore, may negate criminal intent for all three of Gasiorowski's charges, and as a result, the criminal act exclusion would not apply.

Because simple assault, harassment, and false imprisonment cannot occur without criminal intent, and because there are questions of fact as to whether Gasiorowski's use of force was reasonable to protect property, Safeco was not entitled to summary judgment.  Defendant asserts a history of trespassing on the property by the plaintiff in the underlying case and further alleges that he reacted in response to a perceived threat.  Additionally, the underlying complaint pleads that Gasiorowski was party to a licensing agreement that contractually required him to "protect the Premises from any and all trespassers." That agreement further provides that "[l]icensee agrees to protect the Premises from any and all trespassers and adequately to notify and warn the public that the Premises is private property and that all trespassing is prohibited."  Aviozhar was attacked by Gasiorowski "upon entering the PECO properties, and before entering the area of the parcel which shared a common property line with the Gasiorowski properties."  Following the attack, Gasiorowski called the local police to report Avizohar as a trespasser. These allegations, when construed liberally in favor of the insured, raise a factual issue as to whether Gasiorowski subjectively believed he acted in defense of property. The broader issue of whether his use of force was reasonable could not be resolved at this stage.

 

07/08/21       Allstate Ins. Co., a/s/o Ellis v. LG Electronics USA, Inc.
United States District Court, Eastern District of Pennsylvania
Fire Products Liability Case.  Refrigerator Manufacturer’s Motions for Summary Judgment and to Preclude the Testimony of Allstate’s Electrical Expert Were Denied.  Under the Malfunction Theory of Product Liability, the Plaintiff May Prove a Defect by Circumstantial Evidence Even if the Product is Still Available, as Long as it is Seriously Damaged.  The Expert’s Testimony Applied Reliable Methodology Under Daubert and FRE 702.  NFPA 921 does not Require an Expert to Conduct Specific Tests that Would Definitively Prove the Source of the Fire.  All that is Required is for the Expert to Appropriately Apply a Reliable Methodology.  The Expert’s Opinion was Admissible Even Though He does not Identify a Single Cause of the Fire But Rather Identified Two Possible Causes Both of Which Would Impose Liability, as the Opinion may be Helpful and Relevant

Fire damaged a private residence. Allstate, covered the damage and now brings this case against LG, alleging that the refrigerator it designed and manufactured was the cause of the fire. LG seeks to preclude the testimony of one of Plaintiff's experts and for summary judgment as well.  The Court denied the motion concluding that Plaintiff's expert meets the standard laid out in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993), and there exists disputes of material fact. 

A municipal fire investigator said that the firefighters responding to the fire witnessed the fire coming from the top third of the refrigerator. He also found (with 5 other fire chiefs concurring) that the burn patterns were consistent with the theory that the refrigerator was where the fire started.  Plaintiff retained an origin and cause expert who also determined that the fire began in the interior top third of the refrigerator.

Plaintiff also retained Christoph J. Flaherty as an expert, an electrical engineer with over fifteen years of experience investigating failures of household products. His opinion is the subject of the motion.  Mr. Flaherty was retained to provide electrical engineering expertise to the fire origin and cause investigation.  In conducting his investigation, Mr. Flaherty reviewed several sources of information including photographs of the scene, reports of the other experts, testimony of the Ellises, and documentation related to the refrigerator.

Mr. Flaherty first excluded all potential electrical failures external to the refrigerator as potential causes of the fire. Next, he concluded that the location of electrical arcing was consistent with a fire starting in the front of the top part of the refrigerator. He then explained that there are two potential causes of damage in this area. First is the failure of the FD-HTR heater circuit insulation due to mechanical damage sustained over years of use" and second is "ignition of combustible food storage containers close to the internal light fixture. Ruling out abnormal use of the refrigerator as a possible cause, Mr. Flaherty concluded that the damage was sustained due to a manufacturing defect.

The methodology Mr. Flaherty employed is laid out in the National Fire Protection Association 921 — a Guide for Fire and Explosion Investigations ("NFPA"). In developing and testing a hypothesis, the NFPA states that first an investigator should use inductive reasoning to develop one or multiple hypotheses, and then use deductive reasoning to test those hypotheses and rule out those which are not possible based on the evidence.

Defendant filed the present Daubert Motion and Motion for Summary Judgment, seeking to exclude the opinion of Mr. Flaherty and arguing that without his testimony there was no dispute of material fact.

The admissibility of expert testimony is governed by Federal Rule of Evidence 702, which provides that:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

Under Rule 702, a district court judge functions as a gatekeeper to "ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." Daubert, 509 U.S. at 589. As a general proposition, Third Circuit law freely permits expert testimony as long as the expert has established basic qualifications, offers reliable testimony, and gives testimony that fits the facts of the case.

Rule 702 imposes three requirements for admissibility of expert testimony: "(A) the proffered witness must be an expert, i.e., must be qualified; (B) the expert must testify about matters requiring scientific, technical or specialized knowledge; and (C) the expert's testimony must assist the trier of fact."  The second and third requirements are at issue here.

Reliability:  The reliability inquiry requires evaluating if "the expert's testimony is supported by good grounds."  The Third Circuit has identified eight factors for district courts to consider in assessing whether "good grounds" support potential expert testimony:

(1) whether a method consists of a testable hypothesis;

(2) whether the method has been subject to peer review;

(3) the known or potential rate of error;

(4) the existence and maintenance of standards controlling the technique's operation;

(5) whether the method is generally accepted;

(6) the relationship of the technique to methods which have been established to be reliable;

(7) the qualifications of the expert witness testifying based on the methodology; and

(8) the non-judicial uses to which the method has been put.

"While no one factor is dispositive, some analysis of these factors is necessary." The standard for determining reliability "is not that high . . . even given the evidentiary gauntlet facing the proponent of expert testimony under Rule 702. The court's focus in assessing reliability "must be solely on principles and methodology, not on the conclusions that they generate." "The test of admissibility is not whether a particular scientific opinion has the best foundation, or even whether the opinion is supported by the best methodology or unassailable research."  "A judge will often think that an expert has good grounds to hold the opinion that he or she does even though the judge thinks that the opinion is incorrect." 

Fit:  An expert's testimony fits the case if the testimony will "assist the trier of fact." Thus, the fit requirement "goes primarily to relevance." Put another way, the fit requirement simply extends "the requirement of reliability, or ‘good grounds,’ . . . to each step in an expert's analysis all the way through the step that connects the work of the expert to the particular case." 

Malfunction Theory:  To succeed on a strict product liability claim under Pa. law, "a plaintiff must demonstrate, inter alia, that the product was defective, that the defect caused the plaintiff's injury, and the defect existed at the time the product left the manufacturer's control." 

Under what is referred to as the malfunction theory of product liability, "when a product is destroyed or otherwise unavailable -- as is often the case with fire damage -- the plaintiff may prove the defect's existence by circumstantial evidence of a malfunction." To succeed under this theory, "the plaintiff must produce:

(1) evidence of the occurrence of a malfunction,

(2) evidence eliminating abnormal use, and

(3) evidence eliminating reasonable secondary causes for the malfunction." 

"Evidence supporting this theory relieves the plaintiff from the obligation to pinpoint the precise defect and indicates that the alleged defect both caused the injury and existed when the product left the manufacturer's control."

Discussion:  Defendant argues that Mr. Flaherty's opinion will be unhelpful to a jury, is not rendered to reasonable degree of scientific certainty, is not relevant, and does not have a factual or scientific basis. All these arguments boil down to claiming that Mr. Flaherty cannot testify because he has not identified the specific cause of the fire, but instead identified two possible causes. Plaintiff responds that Mr. Flaherty has applied a reliable methodology to reach his conclusion as required by Daubert and Rule 702, and that he does not need to determine a single cause of the fire in order for his opinion to be helpful and relevant.

Considering the elements which Plaintiff must prove, it is not necessary for Mr. Flaherty to point to a single cause of the fire for his opinion to be helpful or relevant. Plaintiff must present circumstantial evidence that the fire was due to a manufacturing defect in the refrigerator and not due to other causes, such as some unreasonable use. Mr. Flaherty's opinion is certainly helpful to the jury and relevant on this issue. Mr. Flaherty ruled out all other potential causes of the fire and determined that there were two potential causes, both of which, if they were determined to be the actual cause, would be the result of a manufacturing defect. Either one would impose liability and Mr. Flaherty's opinion will be helpful in demonstrating the elements which Plaintiff is required to prove under malfunction theory.

Defendant also argues that Mr. Flaherty has not appropriately applied NFPA 921 because he did not perform testing regarding his hypotheses for the cause of the fire. However, the NFPA supports the process used by Mr. Flaherty, namely developing hypotheses and eliminating them, and does not require him to conduct specific testing as Defendant claims. All that is required is for Plaintiff to show that its expert appropriately applied a reliable methodology. Defendant does not question that the NFPA methodology is inappropriate, and in fact its own experts relied on the same method. The NFPA does not require an expert to conduct specific tests that would definitively prove the source of the fire, and in many cases, as here, that would not be physically possible.

Defendant contends that the malfunction theory of liability does not apply here because the defective product at issue was not destroyed and was available for Mr. Flaherty to inspect. Considering "unequivocal precedent," "[p]ossessing, retaining, and having an expert examine a product does not preclude a plaintiff from advancing a product malfunction theory of liability." This holding is also consistent with the purpose of malfunction theory, namely to allow "a plaintiff, who cannot do so directly, to circumstantially prove that a product is defective by presenting evidence of a malfunction coupled with evidence eliminating abnormal use or reasonable, secondary causes for the malfunction." While the refrigerator in this case might not be destroyed or unavailable, the evidence in the record demonstrates that it was seriously damaged to the extent that an expert could not determine exactly what had happened to it. This is the exact situation in which malfunction theory applies.

 

07/13/21       D'Imperio v. Nationwide General Ins. Co.
Superior Court of Pennsylvania
Superior Court Affirms Decision of the Trial Court that Nationwide had a Duty to Defend the Insured in an Underlying Personal Action Where the Insured Shot the Claimant, Based Upon the Four Corners of the Underlying Complaint and the Four Corners of the Policy.  The Factual Allegations of the Complaint did not Necessarily Preclude the Possibility that the Shooting was Accidental

Appeal from the Judgment in favor of the insured D'Imperio in the Court of Common Pleas after a bench trial.  Nationwide claims the trial court erred by concluding that it had a duty to defend in an underlying the personal injury lawsuit brought against the insured.  Specifically, Nationwide contends that the trial court erred in concluding that: (1) the underlying action involved an occurrence; and (2) the policy's intentional act exclusion did not apply.

Nationwide argues that that under Pa. law, the duty to defend is governed by the allegations of the complaint in the underlying action. It contends that there is no duty to defend when the allegations in the underlying action fall into "a clear and unambiguous exclusion of coverage."  Specifically, Nationwide claims that the factual allegations of the underlying complaint indicate that the insured acted intentionally by firing his gun at the claimant but artfully pled a claim of negligence to avoid the intentional act exclusion in the policy.  Nationwide contends that all of the references to negligence in the underlying complaint are conclusions of law and not factual allegations.  It argues that to claim that the insured aiming his handgun at the claimant and firing a shot was an accident "strains common sense." Because the underlying complaint does not plead facts that would constitute an accident, Nationwide argues that the shooting does not qualify as an "occurrence" as defined in the policy, and therefore the underlying complaint does not trigger a duty to defend.

The insured responds that because the underlying complaint asserted facts that could support a finding that the insured acted negligently, Nationwide had a duty to defend.  Specifically, the insured pointed to a count in the complaint which pled a cause of action of negligence.

Quoting case law, the Court said that the insurer is required to accept all of the allegations contained in the third party's complaint as true and provide a defense if there is a possibility that the injury alleged could fall within the scope of the policy. Generally, exclusionary clauses are strictly construed against the insurer and in favor of the insured.

Furthermore, the duty to defend is broader than the duty to indemnify. The insurer may not justifiably refuse to defend a claim against its insured unless it is clear from an examination of the allegations in the complaint and the language of the policy that the claim does not potentially come within the coverage of the policy. This duty is not limited to meritorious actions; it even extends to actions that are groundless, false, or fraudulent so long as there exists the possibility that the allegations implicate coverage. The duty persists until an insurer can limit the claims such that coverage is impossible.

In determining whether an insurer's duties are triggered, the factual allegations in the underlying complaint are taken as true and liberally construed in favor of the insured.  The obligation of an insurer to defend an action against the insured is fixed solely by the allegations in the underlying complaint. As long as a complaint alleges an injury which may be within the scope of the policy, the insurer must defend its insured until the claim is confined to a recovery the policy does not cover.

The Court agreed with the trial court's analysis that the factual allegations of the underlying complaint plead an occurrence (“an accident”). The underlying complaint alleged that the insured drew and fired a handgun at the claimant.  The factual allegations of the complaint could be read to allege that the insured intentionally shot the claimant, but in liberally construing the underlying complaint in favor of the insured, its factual allegations could also depict an accidental shooting. Accordingly, the factual allegations of the complaint do not necessarily preclude the possibility that the shooting was accidental, therefore the trial court did not err in concluding the underlying complaint pled an "occurrence".

In his complaint, the claimant alleges that he was accosted by the insured who produced a handgun and fired it at the claimant thereby striking him in the abdomen. The claimant brings a negligence claim against the insured, claiming that the insured "carelessly [fired] a gun in the vicinity of a crowd of people," "[created] a trap and/or nuisance and/or dangerous condition;" and "[failed] to properly control a firearm." Therefore, on the face of the complaint, the claimant’s injury may have been an "occurrence" resulting from the insured accidentally firing a gun, i.e., "failing to properly control a firearm." If true, these allegations constitute an "unexpected or undesirable event," and therefore fall within the scope of Nationwide's Policy.

Likewise, the Court agreed with the trial court's conclusion that the policy's intentional act exclusion does not apply when considering only the underlying complaint's factual allegations. The factual allegations of the underlying complaint, when liberally construed in favor of the insured, do not preclude the possibility that the shooting was accidental.

As for Nationwide’s contention that the underlying plaintiff has artfully pleaded the factual allegations of his complaint to avoid coverage exclusions, the Court disagreed. Here, the underlying complaint alleges both intentional and negligent conduct.  As long as the factual allegations of a complaint allege an injury which may be within the scope of the policy, the insurer must defend its insured until the claim is confined to a recovery the policy does not cover.

Nationwide argues that the trial court erred in not considering evidence outside the complaint, specifically, the insured’s deposition and responses to requests for admissions in this matter.  Nationwide contends that this evidence shows that the insured acted intentionally in the shooting and, therefore, the intentional acts exclusion applies.  The Court said that the case law holds that the initial determination of whether an insurer has a duty to defend requires the trial court to examine the underlying complaint. The  analysis is limited to the four corners of the complaint and the four corners of the insurance contract. A court errs in relying on additional facts, such as deposition testimony, in determining whether the insurer has a duty to defend. 

 

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

06/24/21       Inter-Governmental Philatelic Corp. v. Aspen Am. Ins. Co.
New York Supreme Court, Kings County
Kings County Court Dismisses Defendants’ Summary Judgment Motion on Mutual Mistake and “Mysterious Disappearance” Exclusion Grounds

Plaintiffs Inter-Governmental Philatelic Corp. (“IPGC”) and Ideal Stamp Company (“Ideal”) are both companies that buy and sell collectible stamps. The companies share the same office space, many of the same employees, and are owned by the same individuals. Plaintiffs sought insurance coverage and contacted a retail insurance broker, defendant 718 Insurance (“718”). 718 completed an insurance application provided by FACE, a wholesale insurance broker. The application listed both IGPC and Ideal as insureds. However, the defendant Aspen, the policy’s underwriter, only listed IPGC—not Ideal—as the policyholder and named insured.

Two years later, a cabinet which contained valuable stamps was reported stolen from Plaintiffs’ warehouse. No specific evidence of theft was established and the cabinet was never found. Plaintiffs submitted a claim for the lost stamps to Aspen. Aspen declined coverage on the grounds that: 1) Ideal, the owner of the lost stamps, was not a named insured; and 2) the “mysterious disappearance” exclusion in the policy excluded coverage. Aspen moved for summary judgment on these grounds.

The Court dismissed the summary judgment motion on both grounds. First, it held that contract reformation is appropriate where a mutual mistake in the policy formation occurs such that both parties “share the same erroneous belief and their acts do not in fact accomplish their mutual intent” and the party seeking recission can prove that “the agreement does not accurately express the parties’ intentions or previous oral agreement.” Here, the applications and documentations from 718 and FACE clearly indicated that insurance was sought for IPFC and Ideal. Employees at 718 and FACE testified that they believed IPGC and Ideal were the same company, but the employees nevertheless clearly listed them as distinct companies in the application documents. The Court found that Aspen made a mistake in not listing Ideal as an insured and that as such Plaintiffs were entitled to reform the policy to include Ideal.

The Court turned to the policy’s mysterious disappearance exclusion, which disclaimed coverage for “missing property where the only proof of loss is unexplained or mysterious disappearance of covered property ... or any other insurance where there is no physical evidence to show what happened to the covered property.” The Court conducted an extensive review of New York caselaw to determine what constitutes sufficient “physical evidence” in instances of theft. It held that the disappearance of a large item, like the Cabinet in this case, and an accompanying report of theft, sufficiently satisfied the “physical evidence” requirement necessary to succeed on a claim of stolen property. Thus, the Court held the exclusion inapplicable.

 

07/14/21       National General Insurance Company v. Mark Sheldon
United States Court of Appeals for the Third Circuit
Third Circuit holds “Household Vehicle Exclusion” Invalid under Pennsylvania Law

Mark Sledon purchased a motorcycle and insured it with Dairyland Insurance Company (“Dairyland”) instead of his automobile insurer, National General Insurance Company (“National General”). Later, Mr. Sheldon was injured in a motorcycle accident involving an underinsured driver and sought underinsured motorist (UIM) coverage from Dairyland and National General. National General denied coverage and sought declaratory judgment in the United States District Court of Pennsylvania to that effect. National General pointed to the “household vehicle exclusion” in its policy that excluded coverage for accidents occurring while Mr. Sheldon operated a household vehicle that was not insured on its policy. The District Court denied the motion, holding the household vehicle exclusion invalid under Pennsylvania law. On appeal, the Third Circuit applied Pennsylvania law and affirmed the District Court's decision.

Pennsylvania Law provides that when a person insures more than one vehicle with UIM coverage those policies will “stack,” such that the insured is entitled to coverage equal to the “sum of the limits for each motor vehicle as to which he is insured.” An insured only waives this stacking rule by completing a specific rejection form. The Pennsylvania Supreme Court in Gallagher v. GEICO Indemnity Co., 201 A.3d 131 (Pa. 2019), held that the household vehicle exclusion violated Pennsylvania law because it effectively barred stacking UIM coverage across multiple insurance policies.

National General attempted to distinguish Gallagher from the present facts on the grounds that: 1) this case involved two different insurers; and 2) National General, unlike the Gallagher insurer, had no knowledge of Mr. Sheldon’s motorcycle. The Third Circuit agreed with National General that Mr. Sheldon knowingly signed a policy containing the household vehicle exclusion and that, in some ways, invalidating that exclusion would provide Mr. Sheldon benefits for which he did not pay.

However, the Third Circuit held that the Pennsylvania Supreme Court would still invalidate the exclusion under Gallagher, despite the factual discrepancy. In Gallagher, the Pennsylvania Supreme Court acknowledged that its “decision may disrupt the insurance industry’s current practices … when multiple policies or insurers are involved,” but it was confidant the insurance industry could “employ its considerable resources to minimize” the disruption. As such, the Third Circuit held the exclusion, in the context of this case’s facts, invalid under Pennsylvania law. 

 

NORTH OF THE BORDER
Heather Sanderson
SANDERSON LAW
Legal Counsel

[email protected]

Saskatchewan:

What Constitutes “Notice” under Liability Policies:

Temple Insurance Company v. Aberdeen Specialty Concrete Services et al, 2021 SKCA 94

Public spending on infrastructure projects is expected to increase in the next year or two in order to jump start the post-pandemic economy.  An increase in construction means an increase in insurance coverage disputes.

A demand for coverage starts with notice. A liability insurer must be notified of a potential claim. Almost all liability policies contain a notice condition. A contentious coverage issue in construction coverage disputes (and, frankly, most other coverage disputes under liability policies) is what constitutes “notice” of a potential claim to a wrap-up liability insurer? Once the notice condition is satisfied and the insurer determines that the claim is one within coverage, then, under the vast majority of liability policy wordings, (at least those with that exclude liability for voluntary payments), the insurer’s obligation to provide a funded defence initiates. As a result, much turns on whether the insurer has received notice and whether “effective” notice substitutes for actual notice.

Project Insurance on Large Scale Construction Projects

A general contractor operating under the Canadian standard form construction agreement (usually CCDC 2, 2008) is contractually required to place, at its cost, Builders’ Risk coverage (referred to in the CCDC 2 as “broad form” property insurance) in the joint names of the owner and the contractor.  All sub-contractors are also required to be additional insureds.

In addition to the property cover, the contractor is contractually bound to place “general liability” coverage (which the industry calls “wrap-up” liability coverage) for the duration of the construction project plus one year following substantial performance. Most wrap-up policies carry a longer policy term following substantial completion – two- or three-years following completion is common.  The CGL coverage issued that each project participant carries independent of its work on the project is exposed to the long tail construction risk once the wrap-up expires. The contractor is the principle named insured under the wrap-up and controls the coverage. The owner and sub-contractors are additional insureds.

In that fashion, the owner, general contractor, and all sub-contractors engaged on the project have property coverage under the Builders’ Risk in the event that construction materials or completed work is damaged. They also have access to liability coverage under the Wrap-Up in the event that there is a third-party claim.

The professional consultants are seldom covered under the wrap-up. They often have project specific professional liability coverage – if the project is large enough to justify that type of coverage – in addition to their practice professional liability policies. That leaves the Wrap-up to look after the third-party liability of the owner, the general contractor and the sub-contractors. Insured v. insured claims are usually within the coverage of wrap-up liability policies, however, under most wrap-up liability policies, any given insured is not covered for property damage caused by its own faulty workmanship.

Notice Condition under the Wrap-Up

It is almost universal that the project specific wrap-up liability policy contains a condition that stipulates how the wrap-up liability insurer is to receive notice of claims. A typical notice condition reads:

a) In the event of an accident, Occurrence, claim or suit, written notice containing particulars sufficient to identify the Insured and also information that can be reasonably obtained with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given as soon as practicable by or for the Insured to …[the insurer] … at the address indicated in the Declarations.

(b) If a claim is made or suit is brought against the Insured, the Insured shall immediately forward to…[the insurer].... every writ, letter, document or advice received by him or his representative.

(emphasis added)

When is Notice Delivered?

In a June 30, 2021, judgment, Temple Insurance Company v. Aberdeen Specialty Concrete Services et al, 2021 SKCA 94, found here, the Saskatchewan Court of Appeal addressed the type of written information required to satisfy this condition. It also discussed the meaning of the phrase “…by or for the insured…”.

  1. Background to Temple Insurance v. Aberdeen

Briefly, a retirement residence was constructed in Saskatoon, Saskatchewan between 2010 and 2012. At the outset of the project, the contractor had a builders’ risk policy in place. The contractor also placed a wrap-up liability policy with Temple expiring in March of 2014, two-years following construction.

In August 2014 (presumably after the builders’ risk expired), the project owner wrote to Encon (who was managing the wrap-up liability policy for Temple) and claimed the cost to remedy deficiencies in workmanship and materials.  The deficiencies involved improperly installed and deficiently manufactured windows, deficiently constructed balconies, and water ingress issues.

In what the Saskatchewan Court of Appeal calls a “comedy of errors” Encon erroneously accepted coverage under the wrap-up liability policy. Encon misconstrued the property claim as a liability claim.

In January 2015, Encon realized that no one was making a claim against the project owner and the owner’s demand for coverage under the Wrap-up was denied. There is nothing in the judgment as to whether the owner disputed this coverage reversal.

Two weeks after coverage was denied, the owner sued the general contractor and material suppliers. Of these defendants, only the general contractor was an insured under the wrap-up. Between March 2015 and March 2017, the general contractor issued four third-party notices against four separate sub-contractors, each of whom were additional insureds under the wrap-up. Unaware of their status as additional insureds under the wrap-up, the sub-contractors reported these claims to their own CGL insurer. Each of those insurers defended.

In April of 2018, Encon notified the sub-contractors that they were additional insureds under the wrap-up. The policy excluded liability for damage caused by that insured’s faulty workmanship – not the faulty work of others on the project – opening the door to coverage. In June of 2018, Temple acknowledged an obligation to defend them under the wrap-up.  Each of the sub-contractors had incurred defence costs through to that point. Temple refused to pay the defence costs incurred prior to June of 2018. The contractors filed an originating application in the Saskatchewan Court of Queen’s Bench requesting a declaration that Temple was obliged to pay those costs. To ascertain liability to pay defence costs, the Court had to first determine when Temple received notification of the claims against the sub-contractors.

  1. Decision of the Saskatchewan Court of Queen’s Bench

    On January 20, 2020, the Saskatchewan Court of Queen’s Bench declared that Temple had effective notice of the claims against the sub-contractors as of January 14, 2015. The Queen’s Bench judge found that Temple knew, as of that date, that the project owner intended to issue a statement of claim against the parties it believed responsible for the deficiencies.  Temple also knew that one or more of the allegedly negligent parties might file a claim pursuant to the wrap-up policy.  Under these circumstances, that Court held that Temple had effective notice as of January of 2015 and was liable for the defence costs. 
     

  2. Decision of the Saskatchewan Court of Appeal

The Court of Appeal reversed the Court of Queen’s Bench decision. That Court agreed that in January of 2015, Encon (on behalf of Temple) knew that the project owner intended to institute a claim against parties that may be able to call upon the protection of the wrap-up. In short, it gained “some knowledge” of a lawsuit that “might ensue”. However, that “could hardly satisfy” the notice condition of the policy which read:

In the event of an accident, Occurrence, claim or suit, written notice containing particulars sufficient to identify the Insured and also information that can be reasonably obtained with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given as soon as practicable by or for the Insured to …[the insurer]

The Court of Appeal found (a) that the project owner did not give notice by or for the sub-contractors. It was giving notice for itself and (b) did not give the balance of the information set out in the notice condition. To say that in January of 2015 Temple had knowledge of the claim against the sub-contractors means “…that Temple is deemed to have notice of a claim that had not yet been made and for which no details had been provided, including the identity of the insured – on the basis of knowledge that Temple had gleaned by investigating a claim that did not fall within the terms of the Wrap-Up Policy.” (para. 69).   Such a finding “..strays from the wording and intent…” of the notice condition (para. 70). As of January of 2015, the project owner was not sufficiently proximate to the claim to advise Temple of “…who was claiming what and as of when…” (para. 71).

In summary, the Court of Appeal found that “…while Temple had some knowledge of the potentiality of other claims, there had been no compliance with …[the notice condition]… of the Wrap-Up Policy as of any of the identified dates.”

The Court of Appeal then addressed the issue of whether Temple was liable for the defence costs before notice was given. Under Canadian law, the duty of a liability insurer to defend is triggered by a claim within coverage. However, the British Columbia Court of Appeal in Blue Mountain held that an insurer’s obligation to pay for that defence cannot arise under a policy that excludes liability for voluntary payments (such as “…The Insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expenses…”)  until the insured gives the insurer notice of the claim. Temple was correct in denying any liability for defence costs incurred by the sub-contractors until Temple was given notice that met the notice condition. That occurred in the spring of 2018.

Conclusion

It follows from this case that a liability insurer receives effective notice of a claim under a similarly worded notice provision to that considered here when it has the essential facts that identifies the entity against whom the claim is made; what is being claimed and when the claim was made against that entity.  The insured cannot anticipate reimbursement for legal fees until such notice is given.  Although this decision is routed in a wrap-up liability policy, this reasoning is transposable to most other liability policies. It is most relevant to those policies written on a claims-made and reported basis.

We will not know if this is the final word in this case for a few weeks as the period to apply for leave to appeal to the Supreme Court of Canada has yet to expire.

 

 

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