Coverage Pointers - Volume XXIII, No. 4

Volume XXIII, No. 4 (No. 596)
Friday, August 6, 2021
A Biweekly Electronic Newsletter  

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

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

© Hurwitz & Fine, P. C. 2021
All rights reserved

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

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

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

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


Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations. 

Our courts are quiet in mid-August and will be until the end of September.  This happens every years as the appellate courts dramatically decrease the number or reported decisions between Memorial Day and the end of their first term after Labor Day.

We are hopeful to be back in Canada shortly, after being exiled for 16 months or so.  We shall see.

Greetings from the lovely Greenbrier resort in White Sulphur Springs, West Virginia, where I’m attending the Federation of Defense & Corporate Counsel Annual Meeting.  Fabulous location for a wonderful organization.  As I write this, on Thursday morning, I just completed my role as a panelist at the FDCC plenary program that reviewed coverage and tort claims arising out of the pandemic – COVID 19 – The End of the Pandemic is Just the Beginning.  Lots of litigation besides business interruption claims, indeed.

In the previous issue, we advised you of the FDCC CGL Boot Camp – you were the first to know and by 8:00 the next morning, CP subscribers had flooded the organization with requests to attend.  We have expanded the number of attendees to 120 but those who haven’t yet registered may be closed out.  However, if you are interested in attending, we will be starting a wait list for a repeat program. Here are the details:


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:



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
[email protected].
We look forward to seeing you at the FDCC's 2021
Virtual Insurance
Coverage Training Academy CGL Boot Camp.

I have two other New York State Bar programs scheduled in the upcoming days.  The first is a reprise of an earlier presentation, but I will be there to answer questions at the end.  That’s the August 11 presentation.  The second is a live August 18 presentation, both described below.

Basics Of Insurance Liability In New York
New York Liability Insurance Basics: Learning What You Need to Know

A Claim by or Against Your Client – Now What?

Speaker – Dan D. Kohane, Hurwitz & Fine, P.C.

August 11, 12:00 noon EST

Whether one represents plaintiffs or defendants, every practitioner needs to appreciate the fundamentals of New York liability insurance, whether it be homeowners, auto or commercial coverage. This program is designed to demystify insurance policies, outline the critical importance of statutory protocols, help secure, preserve and protect coverage and demonstrate how to properly evaluate insurance company communications.  

To Register:


What Every Trial Lawyer Needs To Know About Liability Insurance
August 18, 2021, 12:00 Noon

Speaker – Dan D. Kohane, Hurwitz & Fine, P.C.

To Register:

A trial lawyer, whether representing an injured party or a party charged with negligence, is regularly confronted with liability insurance coverage questions. Often, they arise when the lawyer or client receives and must evaluate an insurer-crafted coverage position letter, a partial or complete disclaimer or a “reservation of rights letter”. The attorney may also need to identify the proper insurer or insurers, in order to give appropriate notice and protect insurance assets.  This presentation is designed to provide a practical and empowering approach to liability insurance coverage issues, useful and appropriate for the trial lawyer.


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.  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:

  1. Are you sending out reservation of rights letter in NY claims? 
  2. Do you know the “30-day” rule?
  3. Are you certain you know who gets copies of coverage position letters in New York?
  4. If the insured fails to respond to 10 letters seeking cooperation, can you successfully deny coverage for lack of cooperation?
  5. 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.



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.



    You guys, I just realized that I’ve been speaking about diversity, equity and inclusion in this space for months now, but never did the table setting so that we have the same understanding of the relevant terms when I use them. This time is perfect to do that, as things are relatively quiet on the diversity front right now. In this article, I define and differentiate “diversity,” “equality,” “equity,” “inclusion,” and “cultural competence/humility.” I hope you will reach out and let me know if you have a different understanding of the terms than the definitions I posit in this article.

    Enjoy what’s left of the summer!

    Mirna M. Santiago

    [email protected]


Never the “Twain” Shall Meet:

Hinton Daily News
Hinton, West Virginia
06 Aug 1921


          Ronceverte, August 5.—On Saturday night, a young man of about 18 years, fell from a Chesapeake & Ohio railway freight train fin Alleghany tunnel, 18 miles east of Ronceverte, and was cut in twain just below the waist.  He lived for a time after the accident.  He had $35 on his person and with a companion was on his way to Virginia, Charlottesville.  His name was Adolph Stuebener, of Illinois. 


Peiper on Property and Potpourri:

Quiet week for the courts, means a quiet week for this space.  Enjoy the Summer, and we’ll see you in two weeks.

Steven E. Peiper

[email protected]


Driverless Cars 100 Years Ago:

The New York Times
New York, New York
06 Aug 1921

Driverless Auto in Dayton
Is Run by Army Radio Car

Special to The New York Times.

            DAYTON, Ohio, Aug. 5.—Hundreds of people hurrying to work this morning stopped in amazement as they saw an oddly-shaped driverless car about eight feet long wend its way through the business section.  What they saw was the first radio-controlled care ever invented.

          The experiment, conducted by Captain R. E. Vaughn of McCook Field, its army inventor, was the first attempt to test the car under the strain of traffic.

          The car was guided through the traffic by a radio apparatus, attached to an automobile, following fifty feet behind it and operated by Vaughn.  The car never failed once.  As it approached street intersections, traffic signals were observed, and the horn was blown if some pedestrian or other obstacle got in its path. 


Wilewicz’ Wide-World of Coverage:

On the road again! It has been quite a while since I crisscrossed the great State of New York (taking that old Route 17 “future 86”), but I’m doing so this week. Beyond checking in with the good folks at our Melville office, I hope to hit the beach at some point, as I have been missing the ocean these last few long months. A road trip is long overdue, and since I’m still weary of air travel these days, it suits me just fine to log some miles. Frankly, my mechanic recently said that my Subaru needs to get out more anyway.

As such, that’s all from me for now, but check back here next time for all of the latest from the Circuit Courts.

Until next time,

Agnes A. Wilewicz

[email protected]


Lonely Wife Seeks Counsel 100 Years Ago:

Buffalo Courier
Buffalo, New York
06 Aug 1921

Cozy Corner Confidences
By Mrs. Martha Wheeler

Forewarned is Forearmed.


Dear Mrs. Wheeler:

          My husband and I are happily married.  He is out of town a great deal on business, and as I am all alone I get lonesome.  There is a bachelor friend of ours who has been very kind to me, and comes to see me often, both when my husband is home and when he is away.  We read together and play cards together, and occasionally I go riding with him.

          Recently I have heard that there is talk among the neighbors because of his attentions, and it hurts my feels very much.  What can I do?  Should I tell him not to call on me when my husband is away? LONELY.


Dear Lonely:

The only trouble in such a situation is that a man gets so used to the agreeable company of the wife who is lonely without her husband that in time a serious romance may grow, and the too generous husband may find himself bereft of the company of his wife.  Divorce records are crowded with such recitals.

          It may be that you are a strong character that your bachelor friend is a Sir Galahad, and the trust of your husband is altogether justified.  However, human nature is human nature, and the fact that the neighbors talk must be considered.

          It may be that the friend’s visits are too frequent, that you have not realized how much his companionship means to you, and that your husband does not realize the true situation.

          Thank it all over carefully.  Decide whether it would be better if you saw each other less frequently, then take a stand, pleasantly and firmly, and it is quite likely that your long continued friendshi0p may remain unbroken, and none of you be made unhappy.

          Forewarned is forearmed.

          Don’t let loneliness get you into a tangle.


Barnas on Bad Faith:

Hello again:

I am happy to report that for the first time in many years the Hurwitz & Fine lawyer league softball team has made it to the playoffs! How many years has it been?  Well, nobody is exactly sure - that is how long it has been.  Safe to say it has been at least eight years and probably longer than that.  We have one more regular season game tomorrow before we play in the 4-5 matchup in the first round the week after.  Hopefully we can mark our first postseason appearance in many years with a playoff win.

I’ll be sorry to see the season end when that time eventually comes, whether that be with a trophy in hand or not.  It has been a very enjoyable season, and our participation in the office has been excellent for both players and fans alike.  We are in the market for a new weeknight activity once the season ends.  Cornhole?  Curling?  Kickball?  If you have any suggestions, send them my way.

We have a bad faith case from the Southern District of New York this week in the column.  The court dismissed claims for violation of General Business Law § 349, punitive damages, and attorneys’ fees.  However, the claim for violation of the implied covenant of good faith and fair dealing survived since the court concluded it was based on different conduct than the breach of contract claim.

That’s all for now. 

Brian D. Barnas

[email protected]


Justice by the Seat of Their Pants:

The Brooklyn Daily Eagle
Brooklyn, New York
06 Aug 1921

Mentor Hits Two Judges,
Calls One “Silly Ass”

          A scathing indictment of two unnamed Brooklyn judges who are characterized as silly, stupid asses and demagogues because of their propensity to cultivate popular opinion and votes by suspending sentences on vicious criminals and of cloaking patronage under the guise of charity, is embodied in the leading editorial of the current issue of the Mentor, a publication issued regularly by the Church of the Nativity, of which the Re. Father John L. Belfort is the rector.

          The editorial continues:

          “As a rule judges realize the dignity and importance of their office and, for the most  part, they conduct their courts with dignity and propriety.  But there are a few Brooklyn judges who disgrace the bench and bring ridicule and contempt upon the judicial office and function.  They are ignorant, not only of law, but of propriety.  They have no conception of their exalted office and they use it to coin votes or evoke the cheap applause of the thoughtless loafers who frequent their courts.  One of them prides himself on what he calls his ‘charity’ and suspends sentence or dismisses, unpunished, vicious criminals who have done great harm and who clearly deserve punishment.  He delivers long and stupid homilies in which he lauds virtues which he does not possess and condemns vices in which he is notoriously proficient.  He prates about ‘religion,’ which he does not practice and, with all the antics of a demagogue, quotes wise saws in a foreign or dead language (which he does not understand) to impress his silly audience.  He is just an ass, a silly, stupid ass. …”


Off the Mark:

Dear Readers,

My kids have been enjoying a few different summer camps this year, from your standard school programs to video game coding at a local SUNY college.  After this week, they will be in their last one for the summer, which will take them through August.  After that, we are headed to Ocean City, Maryland, for our first vacation since the start of the pandemic and then it’s back to school.  I have been trying to get my oldest to get started on his summer reading assignments before he runs out of summer.  So far, video games have won out.

As the summer doldrums are upon us, interesting construction defect cases seem few and far between.  Hopefully, I will have better luck in two weeks.

Until then …

Brian F. Mark

[email protected]


Kill a Lawyer?  Get Acquitted:

The Brooklyn Daily Eagle
Brooklyn, New York
06 Aug 1921


“Happiest Woman on Earth,” Says Slayer – Tells of
Hounding Victim, Then Killing Him on Street in
Cold Blood—Wife Recites Story of Other Escapades
Murderess Had With Men.

          A few minutes before being arraigned on a charge of homicide in the Gates Avenue Court, this morning, Olivia M. P. Stone, who last night shot and killed Ellis Guy Kinkead, former Corporation Counsel of Cincinnati, in front of 77 South Elliott pl., made this statement.

                     “I have absolutely no regrets.

                     “I am the happiest woman in the world.

                     “Ellis Kinkead is now in the place where the dawn comes up like thunder and I am glad.”

          She had followed him here from Cincinnati, claiming that he was her common-law husband, and promising to “get justice.”  Last night she stood waiting for him in a doorway on South Elliott pl., a few doors from the busy Fulton St.-Lafayette Ave. business section.

          At 5:30 o’clock he passed, bound for his home and wife and 45 South Elliott Pl.  In the presence of a half-dozen or more witnesses, pedestrians and shopkeepers, the woman stepped from the doorway, drew a .38 caliber revolver, and fired two shots in rapid succession into his back.  …

Editor’s Note:  It took several years, but Stone was acquitted of murdering her husband, who left her for another woman.


Boron’s Benchmarks:

August.  The summer month that wishes it was named June or July.  August gets an undeserved bad rap, right?  The “dog days” of summer, and all that.  Hey – it is still summer the entire month of August!  31 more days of glorious summer!  I’ll take it and celebrate it.  Go August!

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 Michigan opinion reversing the decision of its state court of appeals, holding that an insurer who paid benefits could nonetheless later be reimbursed what had been paid out under a theory of equitable subrogation.  Check out the case, Esurance Prop. & Casualty Ins. Co. v. Michigan Assigned Claim Plan, in Coverage Pointers, and then go make the most of the rest of August.  

Have a healthy and happy next two weeks, folks.

Eric T. Boron

[email protected]


Feline Murderer Results in Two Days in Jail:

The Buffalo Enquirer
Buffalo, New York
06 Aug 1921


(By the United Press.)

          New York, Aug. 6.—Michael Zistoni, arraigned for hurling a cat out of a window, said he did it in self-defense.  He got two days in the workhouse for feline murder.


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

The Summer Olympics in the Maxwell household means one thing—well, mostly thing. Volleyball. The DVR has been pulling overtime, but I got to tell you. The guide is deceiving. Just because it says volleyball doesn’t mean it means volleyball. I’ve watched enough equestrian and team handball to know it just doesn’t equate to volleyball for us (fun fact: I like the handball). Don’t get me wrong, though. Love the obscure. Water Polo? For it. Skateboarding and surfing? Hooked. Synchronized diving? I dig. Gotta love table tennis and badminton. Archery? All right. Staples like swimming, track and field, gymnastics. No brainers.

Still though, volleyball has our heart. The men are out. But the women remain. Fingers crossed we podium.

This issue of Ryan’s Capital Roundup, we have a draft regulation regarding Risk Based Capital and Financial Statement Filings and Accounting Practices and Procedures. The comment period ends August 9.

Until next time,

Ryan P. Maxwell

[email protected]


Monticello – Land of Wickedness:

The Buffalo Times
Buffalo, New York
06 Aug 1921

Form Alliance to
Rout Wickedness

          NEW YORK—No longer will a gallon of gas be a greater source of wickedness at Monticello, N. Y., than $100 on Broadway.

          When Mrs. Lucy Ostrom recently charged that in country places, among them Monticello, more wickedness prevails under cover than exists in New York’s marts of folly, specifying that automobiles induced young women to go astray in rural districts, she stirred the indignation of Monticello.

          There has now been formed there the Allied Citizens of America.

          Though the organization’s ambitious name portends harsh campaigns against all evil sections of the land, its immediate purpose is to purge Monticello of immorality.

          Mrs. Osborne’s comment resulted from the sensational elopement of her son-in-law, Earl Vernooy, with Mrs. Clark Duryea, wife of an unordained preacher, of Monticello.  The elopers returned to their respective homes and were compelled to depart together again because they could not effect reconciliations.


CJ on CVA and USDC(NY):

Hello all,

The Englerts have returned from a much needed, and much appreciated, trip to Hilton Head Island. Our son Charlie’s first flights were a rousing success; in fact, he practically slept through all four flights! My wife and I are both rested and a little more relaxed than when we left. As nice as it was to get away, it was very nice to get home and start easing back into our normal routine.

This week I bring you a case from the Southern District that is a continuation from our February 5, 2021, issue. In this week’s offering, Cosmopolitan Shipping Co. attempts to bring a negligence claim against its former insurance broker but is stopped short by a pesky statute of limitations.

See you in two weeks,

Charles J. Englert, III

[email protected]


Tenants Strike Over High Rent:

The New York Times
New York, New York
06 Aug 1921


Jersey City Householders Will
Refuse to Pay Higher Rent or Move.

          Three hundred member of the James F. Gannon Rent Payers and Fair Property Owners Association of Jersey City last night adopted a resolution to “stand pat” when landlords try to make them pay increased rent or move by the three months’ notice method.  The tenants say that the landlords construe the New  Jersey rent laws as giving them the right to raise rents if they create “technical vacancies and technical new rentals by notifying tenants to vacate three months in advance.

          Under last night’s resolution member of the association will refuse to move, will offer the old rentals, and will wait for the courts to decide.


Dishing Out Serious Injury Threshold:

Dear Readers,

Happy August everyone, I hope everyone has been able to get out to enjoy the nice weather and relax. Portland, Maine, was great. If you are a craft beer and lobster roll fan, I highly recommend the trip.

In the Serious Injury Threshold world, there has been a slowdown in cases being decided in these summer months. However, in Sheets v. Kilbury the Appellate Court found that the Supreme Court erred in granting defendant’s motion and, in fact, found that defendant failed to even meet their initial burden.

Be well,

Michael J. Dischley

[email protected]


A May – June Wedding Discouraged:

Dayton Daily News
Dayton, Ohio
06 Aug 1921

Betty Fairfax
Her Curiosity Shop

Dear Miss Fairfax:  I am a young man 18 years of age and am in love with a young widow woman six years my senior.  My question is:  Is she too old for me.  She says she is afraid of ruining my life if she were to marry me, but I have known her for four years and look upon her as something not of this earth.  She is a true Christian girl and I believe she would be the making of me.  I know I am too young to get married now, but do you think it would be all right if I should wait a year, that is, if I still love her?  My love is not puppy love and do not care for firls in general at all.  Well, Miss Betty, I want your advice and will go according, but I will never forget her.  J.H.

Dear J.J.:   I think you are extremely foolish to think of marrying a woman so much older.  It might not make so much difference if you yourself were told, but you are a mere lad and she is worldly wise.  You may think you will never love anyone again, and in all probability you will remember her for a long time, but do not think of marriage for several years—you can afford to wait until you are at least 25 and then be a young man.  She is very sensible in wanting you to wait for a year and I imagine you will be nothing more than good friends by that time.  I advise you to wait at least two years—please do, and then note the difference in your affection. 


Bucci on “B”: 

Hello all,

Hope everyone is enjoying the last month of summer.  Gosh that went fast!  The weather was weird this summer though…you couldn’t tell if it was too cold for summer, too hot to live, or too wet to have fun.  

This summer, for the first time, I started a garden…really a strip of ground.  Needless to say, I know nothing about gardening. We already had hydrangea and rose bushes that are well established.  But I am trying to make sure that there are always flowers blooming because they bloom at different points through the season.  It was a huge effort to take out the hosta plants that covered the area.  I know, people love hostas, but mine were plain ugly.  And, after all of that work (done by a friend), I’ve killed pretty much every plant.  I understood that you were supposed to water them once a day for a few weeks after they are planted…but I kept watering them and the rain kept double watering them.  And down they went.    

Now that they are gone, I’m planning to plant different, more colorful and longer blooming, in the new garden.  Any suggestions of plants that I can’t kill that fit the bill?  

Last issue, I asked some questions to provoke thought.  There are no right answers.  You are now supposed to think of what implicit biases the questions revealed to you.  For example, when I did it, I thought of the married couple as an old white couple.  In fact, it was a gay mixed couple, which I never even thought of.  It is all pretty interesting. 

I hope you all have a good couple of weeks and be sure to reach out anytime.

Diane L. Bucci

[email protected]


Why Do Want Ads Prefer Men?:

The News-Review
Roseburg, Oregon
06 Aug 1921

Prune Pickin’s
By Bert G. Bates

          We have been reading the “want ads” and we find when roomers or boarders are wanted the adlets almost invariably say:  “Men” or “Men Preferred.”  Yet for these many years we have been told that men are careless about their rooms, require twice as much cleaning up after as women do, and that they eat twice as much as any woman can.  Most women take care of their own rooms, and they will eat anything as long as it has this stuff they call “Thousand Island” dressing poured over it.  They do not pay their bills any more promptly than men, but they are probably quite as prompt.  Why then, “men preferred?”  We inquire to know. 


Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Question for you: When is emotional and mental injury not bodily injury? Answer: When coverage is not being construed under New York law. In Connecticut, as in most jurisdictions, for an emotional injury to be deemed a bodily injury, a physical injury must precede the emotional injury. In our case this week, claims of stalking causing emotional injury were not covered under a standard homeowners policy because, as the Appellate Court correctly held, there was no allegation of bodily injury to trigger the grant of coverage. Read on for more details.

Delta is lurking; don’t give it a chance. Be smart and stay safe.

Lee S. Siegel

[email protected]


Object Matrimony:

Oroville Daily Register
Oroville, California
06 Aug 1921


          A refined widow, age 60 years, with some means, wishes to correspond with elderly gentleman, with means, object matrimony.  Address Mrs. Molly Platt, Linesville, Pa.


Rauh’s Ramblings:

Out on staycation this week.

Patricia A. Rauh

[email protected]


Too Many Cars?:

The Post-Star
Glens Falls, New York
06 Aug 1921


Many Motorists Are Carrying
Camping Equipment With Them

          The business depression throughout the country has not affected the automobile traffic through the Adirondacks.  In fact, the number of tourists passing through Glens Falls this year is much larger than in any other season.  One of the traffic officers said yesterday that the travel through this city  this summer is at least one-third larger than that of last season.

          One feature of the traffic this year which has impressed the traffic officers and local motorists is the large number of tourists who carry camping equipment with them.  A large percentage of the tourists who pass through Glens Falls every day have all the necessary appliances for sleeping and eating out in the open.  One care which went through Glen street yesterday afternoon had camping equipment not only on the running boards, but on the bumper and on the spare tire.  The traffic officer said that between one-third and one-half of the tourists who pass through this city carry tents, blankets and other necessities for camping. 


Storm’s SIU Examen:

Hi everyone:

This week in the Examen we have four cases.

In the first case, although the court found the policy language to be ambiguous, after examining available extrinsic evidence to ascertain the meaning intended by the parties during the formation of the contract, it determined a policy limit to apply broadly to all buildings insured under the policy, not just specified buildings in an “address clause”. 

The second case is from an action which garnered national attention involving a college hazing.  The Court held that negligence after an intentional act can still trigger coverage.  The Court also declined to apply broad allegations of conspiracy against a group to find an exclusion for criminal acts applicable. 

In the third case, the Court denied a motion for removal to federal court.  The Insurer alleged that the plaintiff joined the agent fraudulently for the purpose of avoiding federal diversity jurisdiction.  The Court disagreed. 

Lastly, in a long but interesting case, the Court granted summary judgment to an insurer due to a breach of an agency agreement because of an agent’s negligence involving a material misrepresentation that was made in an application regarding a sprinkler system and a failure to immediately notify the insurer of the loss.  After a fire the agent attempted to cover up the issue.  I like this case because it affirms that, although materiality of misrepresentations are typically proven through testimony of the underwriter supported by underwriting guidelines, in certain circumstances there is no need to introduce evidence of the underwriting rules or practices when common sense dictates that the policy would not have been written had the truth been disclosed.  Furthermore, it also confirms that rescission is an extraordinary remedy and an insurer may alternatively elect to issue a coverage denial instead. 

"Good things come to people who wait, but better things come to those who go out and get them." --Anonymous

Talk to you in two weeks,

Scott D. Storm

[email protected]


Japanese Education Scorned:

The New York Times
New York, New York
06 Aug 1921


Dr. Waltz Urges Americans to Lead
in Educating the Orient.

          DIXON, Ill., Aug. 5.—The one practical way for the United States to conquer Japan is to carry Christian education around the world before the “evils of pagan education obtain a permanent foothold in the East,” Dr. S. S. Waltz, Chicago, Executive Secretary of the Brotherhood of the united Lutheran Church of America, said today at a church assembly.

          “Japan is the present power in the Orient,” he said, “ and she is trying the experiment of heathen education.  If she succeeds, the entire Orient will follow her lead.  America is the power of the Occident.  It is our duty to carry Christianity to the Orient, and if we fail the Japanese educational system will spread to our shores and will attempt to paganize the Occident.” 


Heintzman’s Hideout:

Dear Readers:

Last work week was a whirlwind of social activity. On Tuesday, I attended a dinner for a new associate joining our Melville office. Wednesday, I attended a firm event for all associates. Thursday was firm softball and then a trip to the bar afterwards. And I finished the week on Friday with a going-away celebration for two staff members leaving the office. One of Hurwitz’s strengths is its great social atmosphere, and last week was the perfect illustration, with back-to-back-to-back-to-back socials. If only there had been something Monday. Suffice it to say I spent a lot of the weekend catching up on work.

This week’s case comes from Albany County and involves a restaurant chain seeking insurance coverage for COVID-19 related losses under a “Communicable Disease Response” provision in the policy. The case is ongoing, and this opinion only involved a venue argument (which the restaurant chain resoundingly lost). I will provide updates on how the coverage issues play out. 

Nicholas J. Heintzman

[email protected]


A More Perfect World:

Buffalo Courier
Buffalo, New York
06 Aug 1921


          Gorham, N. H., Aug. 5.—A national “committed to the task of reforming the world,” was pictured by President Harding here today as his ideal for America.

          In a speech delivered in the course of a flying circuit of northern New Hampshire towns, the President declared:  “That America’s mission not only was to banish warfare from the earth, but to establish everywhere right principles of freedom and justice.

          In the same speech, which was addressed to a group of disabled World war veterans, Mr. Harding said the real reason behind the administration’s opposition to immediate action on soldier compensation was that it desired, first of all to do its duty by those who came from the war impaired.


North of the Border: 

Heather Sanderson

[email protected]


The Sultan of Swat:

The Standard Union
Brooklyn, New York
06 Aug 1921


          “Babe,” the “Big Bam” is now at the foot of a steep grade on the way to a new home-run record.

          For the first time this year, Ruth is actually behind his 1920 run of clouts.

          On Aug. 5 last year, the Babe had connected with the ball in his noted bamming manner for thirty-nine homers.  His count to-day is thirty-eight.

          In this year of poor pitching and the allowed lively balls the diamond prophets freely oracle that the bammer would run ahead of his 1920 high mark by a dozen or maybe more.

          He started out that way and kept well ahead of his record until mid-season.  Then he slumped.  Because some of the lesser lights go right ahead and pound them out is not sufficient cause to believe that the big bam is losing his eye or that the layer of flesh around his bean is restricting the action in his shoulders. 

Editor’s Note:  He ended up with 59 dingers, only short of his iconic record of 60, set in 1927.


Headlines from this week’s issue, attached:

Dan D. Kohane

[email protected]

  • Not a single casualty case decided by the appellate courts in New York over the past two weeks


Steven E. Peiper

[email protected]

  • Summer Slowdown catches up with Property.  All quiet this week.


Michael J. Dischley

[email protected]

  • Defendant Failed to Meet Prima Facie Burden as Physician who Opined as to Degenerative and Preexisting Nature of Plaintiff’s Injury Did Not Review Plaintiff’s MRI’s from Prior to the Subject Accident


Agnes A. Wilewicz

[email protected]

  • On the road this week


    Brian D. Barnas

    [email protected]

  • Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing Survived based on Allegations Related to the Process by which Claim was Denied


    Lee S. Siegel

    [email protected]

  • No HO Policy Coverage for Stalking


Diane L. Bucci
[email protected]

  • The Unintended Disclosure of Credit Card Information to Hackers Who Stole the Information is Publication


Brian F. Mark
[email protected]

  • No newsworthy construction defect cases to report on this edition


Eric T. Boron

[email protected]

  • Reversal of State Court of Appeals; Insurer’s Equitable Subrogation Claim is Viable; Auto Insurance; PIP Benefits


Ryan P. Maxwell

[email protected]

  • DFS Issues Pre-Proposed Insurance Outreach Requesting Comments on Potential New Risk Based Capital NYCRR Part 77 And Amendment To Financial Statement Filings and Accounting Practices and Procedures Part 83


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

[email protected]

  • In New York Claims for Negligence Against an Insurance Broker Must be Brought Within Three Years of the Date the Injury Accrues


Patricia A. Rauh

[email protected]

  • On staycation


Mirna. M. Santiago

[email protected]

  • The Difference Between the Terms “Diversity,” “Equality,” “Equity,” “Inclusion” and “Cultural Competence/Humility”


Scott D. Storm

[email protected]

  • Whether a Flood Sublimit Applied Only to the Buildings Specified by an "Address Clause" or Whether it Included All Buildings
  • Negligence After an Intentional Act Can still Trigger Coverage.  Court Declined to Apply Broad Allegations of Conspiracy Against a Group to Find an Exclusion for Criminal Acts Applicable
  • Motion for Removal to Federal Court on the Basis that the Insurance Agent was Fraudulently Joined for the Purpose of Avoiding Federal Diversity Jurisdiction
  • Material Misrepresentation Regarding a Sprinkler System Due to an Agent’s Negligence which then Attempted to Cover Up the Issue After a Fire, Breaching its Agency Agreement


Nicholas J. Heintzman

[email protected]

  • Restaurant Chain, Seeking Insurance Coverage for Losses Caused by COVID-19 Governmental Shutdowns, Loses a Venue Argument


Heather Sanderson

[email protected]

  • Life is returning to normal.



All the best.  Please get your vaccination and help everyone 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.

Dan D. Kohane

[email protected]

Agnes A. Wilewicz

[email protected]

Patricia A. Rauh

[email protected]

Dan D. Kohane, Chair
[email protected]

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

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Diane L. Bucci

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


Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Scott D. Storm

Eric T. Boron

Brian D. Barnas


Dan D. Kohane
[email protected]


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


Storm’s SIU Examen

Heintzman’s Hideout

North of the Border


Dan D. Kohane
[email protected]

Not a single casualty case decided by the appellate courts in New York over the past two weeks.


Steven E. Peiper
[email protected]

Summer Slowdown catches up with Property.  All quiet this week.


Michael J. Dischley
[email protected]

07/16/21       Irene Sheets v. Alaina Marie Kilbury
Appellate Division, Fourth Department
Defendant Failed to Meet Prima Facie Burden as Physician who Opined as to Degenerative and Preexisting Nature of Plaintiff’s Injury Did Not Review Plaintiff’s MRI’s from Prior to the Subject Accident

This appeal was from an order of the Supreme Court (William K. Taylor, J.), entered October 22, 2019, in Monroe County, which granted defendant's motion for summary judgment dismissing the complaint. Plaintiffs appeal from a judgment that, inter alia, granted defendants' motion for summary judgment dismissing the complaint.

Irene Sheets (plaintiff) and her husband, James E. Sheets (collectively, plaintiffs), commenced this action seeking to recover damages for injuries plaintiff allegedly sustained when the vehicle that she was operating was rear-ended by a vehicle driven by Alaina Marie Kilbury (defendant) and owned by Jefferey J. Kilbury (collectively, defendants).

The Appellate Court found that defendants failed to meet their initial burden on their motion of establishing that plaintiff did not sustain a serious injury as a result of the motor vehicle accident. On their motion, defendants contended that the alleged injuries sustained in the accident were preexisting and were not causally related to the accident. Defendants submitted the affirmed report of a physician who conducted an examination of plaintiff on behalf of defendants and opined that plaintiff's injuries were degenerative in nature and predated the accident in question. Defendants' physician, however, did not review plaintiff's medical imaging study from prior to the accident in question, and did not address the possibility that plaintiff's condition was aggravated or exacerbated by the accident. In addition, the physician did not indicate that plaintiff had any complaints of cervical pain or limited range of motion in her cervical spine prior to the subject accident. Thus, defendants “failed to submit evidence establishing as a matter of law that the injuries were entirely [preexisting] . . . and were not exacerbated by the accident in question”. In light of defendants' failure to meet their initial burden on the motion, there is no need for us to consider the sufficiency of plaintiffs' opposition thereto.

Accordingly, the Appellate Court found that the Supreme Court erred in granting defendants' motion to the extent that the complaint, as amplified by the bill of particulars, alleges that plaintiff sustained a serious injury within the meaning of the significant limitation of use, permanent consequential limitation of use, and significant disfigurement categories of serious injury, and therefore they modified the judgment accordingly.


Agnes A. Wilewicz

[email protected]

On the road this week.


Brian D. Barnas

[email protected]

07/20/21       Fishberg v. State Farm
United States District Court, Southern District of New York
Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing Survived based on Allegations Related to the Process by which Claim was Denied

Fishberg was insured under a State Farm Renter’s policy.  Plaintiff alleges that the Premises was damaged when the ceiling collapsed due to a windstorm, causing a water leak from the roof.  Plaintiff alleges his personal property was damages and that he lost use of the premises.  A claim was submitted to State Farm, and State Farm declined coverage.

Plaintiff alleged that State Farm failed to investigate the covered loss and adjust the claim.  He filed a lawsuit with four causes of action : (1) breach of contract; (2) refusal to timely investigate and adjust the claim in good faith; (3) violation of General Business Law § 349; and (4) willful and wanton misconduct entitling him to punitive damages.  State Farm moved to dismiss the second, third, and fourth causes of action.

The bad faith cause of action survived.  The court concluded that Plaintiff had stated a cause of action for violation of the implied covenant of good faith and fair dealing.  State Farm argued that the conduct giving rise to the bad faith and breach of contract claims was duplicative, but the court concluded that different conduct was alleged.  The first cause of action is addressed to the denial of insurance coverage and the second is addressed to the process by which State Farm reached that result.  This included an allegation that no adjuster was sent to the premises.  The court stated that it was assuming, but not deciding, that the implied covenant of good faith and fair dealing contains an obligation on the facts here for an adjuster to inspect the Premises.  Accordingly, the bad faith cause of action survived.

In contrast, Plaintiff’s GBL 349 claim was dismissed.  Plaintiff did not identify any deceptive conduct with respect to State Farm’s issuance of renter’s insurance policies.  He received exactly what he paid for – a policy that covered loss from windstorms, hail, and water damage from plumbing.  The dispute was over the application of that policy to the facts of the loss, which was not within the ambit of GBL 349.

Plaintiff’s demand for punitive damages was also stricken. Plaintiff failed to plead any facts that met the elements required to state a claim for punitive damages in New York.  Bare legal conclusions that State Farm’s conduct was willful and wanton and violated applicable law and regulations were insufficient.  In addition, Plaintiff’s demand for attorney’s fees was stricken.  The general rule is that attorneys’ fees are not available to an insured where he brings litigation against his insurer to settle rights to coverage, and none of the exceptions to the rule applied.


Lee S. Siegel

[email protected]

07/27/21       Warzecha v. USAA Cas. Ins. Co.
Appellate Court of Connecticut
No HO Policy Coverage for Stalking

Cindy Watson sued the plaintiff, alleging that he “engaged in serial acts of surveillance, stalking, and harassment of [Watson] and her children, including taking photographs and videos of them and their home.” Watson asserted causes of action for invasion of privacy, intentional infliction of emotional distress, and negligent infliction of emotional distress. Warzecha tendered the suit to his homeowners insurer, USAA, which provided coverage for claims “brought against any insured for damages because of bodily injuries.” The HO policy also provided that “bodily injury” does not include “mental injuries such as: emotional distress, mental anguish, humiliation, mental distress, or any similar injury unless it arises out of physical injury to the person claiming a mental injury.” USAA denied the claim and this lawsuit for breach of contract and a declaration of a duty to defend followed.

The Appellate Court found that USAA had no duty to defend, affirming the trial court decision. The court concluded, in construing the HO policy, that it only provided a duty to defend claims for bodily injury, but that mental injuries alone do not trigger coverage. [This is a deviation from New York law, which follows the minority approach that mental injuries are a bodily injury.] Since Watson never alleges a bodily injury in the underlying complaint, the court held, the allegations are insufficient to trigger coverage.

The policyholder argued that Watson could suffer a physical manifestation of injury from each of her causes of action, thus triggering coverage, but the court was unpersuaded. “To prevail on a claim of negligent infliction of emotional distress, the plaintiff is required to prove that his or her emotional distress was “severe enough that it might result in illness or bodily harm ....” Hall v. Bergman, 296 Conn. 169, 182 n.8, 994 A.2d 666 (2010). Accordingly, the phrase “could cause physical illness” included in Watson's complaint was necessary to meet the pleading requirements for a claim of negligent infliction of emotional distress. Actual physical illness or injury is not necessary for such a claim and Watson's complaint pleads no such illness or injury.”

Since the complaint never alleged a bodily injury, the court did not consider that the alleged acts were all excluded intentional conduct.


BUCCI on “B”
Diane L. Bucci

[email protected]

07/21/21       Landry's, Inc. v. Ins. Co. of the State of Pennsylvania
United States Court of Appeals, Fifth Circuit
The Unintended Disclosure of Credit Card Information to Hackers Who Stole the Information is Publication

Landry's operated various restaurants, hotels, casinos and the like.  It entered into a Select Merchant Payment Card Processing Agreement with Paymentech, requiring Paymentech to process credit card transactions at Landry’s establishment for Visa and Mastercard.  At some point, Paymentech discovered data was breached at numerous Landry’s locations.  Landry’s investigation uncovered the unauthorized installation of a program designed to search for data from credit cards’ magnetic strips for hackers.

Paymentech had agreements with Visa and Mastercard requiring it to comply with specific security programs that protect against data breach.  The agreements placed liability on Paymentech for such breaches.  Paymentech demanded indemnification from Landry’s for the data breach damages.  When Landry’s refused, Paymentech filed suit.  Landry’s insurer, Insurance Company of the State of Pennsylvania (“ICOSP”) denied coverage.  In the lawsuit that followed, Landry’s argued that Paymentech’s allegations constituted the offense of “(e) [o]ral or written publication, in any manner, of material that violates a person's right of privacy.”

Did the data breach constitute a publication within the meaning of a Coverage B offense?  The trial court said no.  The Fifth Circuit said yes.

The court relied on the term “in any manner” to hold that “publication” was meant to be broadly interpretated.  The court further relied on dictionary definitions, i.e., the Oxford Dictionary defined publication as “[t]o make publicly or generally known; to declare or report openly or publicly.   According to the court, “exposing or presenting [information] to view” would satisfy the offense. 

The court also relied on offense (d), which contains the same publication language, to find a duty to defend.  The offenses required publication as follows:

(d) Oral or written publication, in any manner, of material that slanders or libels a person or organization ...;

(e) Oral or written publication, in any manner, of material that violates a person's right of privacy; reasoned

The court reasoned that publication must be construed coextensively in both offenses.  It noted that publication, in the context of defamation, “merely requires the transmission of information to another person.”  If that is good enough for offense (d), it was good enough for offense (e).   Finally, the court construed the term against the insurer. 

The court easily determined that the publication was in violation of the right to privacy because there is a right to privacy in connection with credit card information.  ICOSP argued that the policy only covered tort damages arising out of this offense.  It argued that if the victims of hacking brought suit, it would be obligated to defend, but it was not obligated to defend a claim by another company that sustained damages.  The underlying action sounded in breach of contract. 

The court, relying on Lamar Homes, Inc. v. Mid-Continent Casualty Co., 242 S.W.3d 1 (Tex. 2007) held “[t]he duty to defend must be determined under the eight-corners rule rather than by the labels attached to the underlying claims.”  The court reversed the district court and held that ICOSP had to defend the insured. 


Brian F. Mark
[email protected]

No newsworthy construction defect cases to report on this edition.


Eric T. Boron

[email protected]

07/26/21       Esurance Prop. & Casualty v. Michigan Assigned Claims Plan
Supreme Court of Michigan 
Reversal of State Court of Appeals; Insurer’s Equitable Subrogation Claim is Viable; Auto Insurance; PIP Benefits

Background:  Esurance Property & Casualty Insurance Company (Esurance) paid personal injury protection (PIP) benefits1 to the claimant, Roshaun Edwards (Edwards), pursuant to a no-fault automobile insurance policy, issued to another person, that was later declared void ab initio. Esurance later filed suit against defendants Michigan Assigned Claims Plan (MACP) and Michigan Automobile Insurance Placement Facility (MAIPF) seeking reimbursement from them under a theory of equitable subrogation for the PIP benefits that Esurance had paid to Edwards under Michigan's no-fault act, before the policy had been rescinded.

Analysis:  An insurer who erroneously pays PIP benefits may be reimbursed under a theory of equitable subrogation, when the insurer is not in the order of priority and the payments are made pursuant to its arguable duty to pay to protect its own interests. Supreme Court found that on the facts alleged in this case, Esurance has a legal right to stand in Edwards's shoes to pursue a claim for equitable subrogation.  This is because Supreme Court determined Esurance was not in the order of priority and was not a “mere volunteer” under Michigan law when it paid Edwards's PIP benefits.

Held:  The decision of the Court of Appeals is reversed, and the case is remanded to that court for further proceedings consistent with Supreme Court’s opinion.


Ryan P. Maxwell
[email protected]

Regulatory Wrap-Up

07/30/21       Risk-Based Capital Financial Statement Filings and Accounting Practices and Procedures
Department of Financial Services
DFS Issues Pre-Proposed Insurance Outreach Requesting Comments on Potential New Risk Based Capital NYCRR Part 77 And Amendment To Financial Statement Filings and Accounting Practices and Procedures Part 83

Last Friday, DFS issued a Pre-Proposed Outreach; a draft regulation that it is considering proposal of and requesting comments on. Specifically, this pre-proposed outreach proposes a new 11 NYCRR 77 that would govern risk-based capital and a sixteenth amendment to 11 NYCRR 83 concerning financial statement filings and accounting practices and procedures. Any comments should be submitted to Joana Lucashuk ([email protected]) no later than August 9, 2021.

Under the draft regulation, DFS is considering whether to add a new Part 77 to Regulation 220, which would contain the following provisions:

Section 77.2  Exchange traded fund RBC charge.

  1. Until January 1, 2027, the shares of an exchange traded fund shall be treated as bonds for the purpose of a domestic insurer’s RBC report if the exchange traded fund meets the following criteria: 
  1. the portfolio of the exchange traded fund consists entirely of investments in bonds;
  1. the exchange traded fund tracks a bond index (i.e., is not actively managed) and makes publicly available no less frequently than monthly a detailed list of its holdings;
  1. the exchange traded fund has a minimum of US $ 1 billion in assets under management;
  1. the exchange traded fund allows in-kind redemptions by its shareholders;
  1. the exchange traded fund is registered pursuant to the Investment Company Act of 1940, 15 U.S.C. §§ 80a-1 – 80a-64;
  1. the exchange traded fund is rated by a nationally recognized statistical rating organization; and
  1. the exchange traded fund is identified as qualifying for bond treatment by the Purposes and Procedures Manual of the NAIC Investment Analysis Office and has a preliminary or final NAIC Standard Valuation Office designation.


  1. A domestic insurer shall apply the applicable RBC charge as set forth in the RBC instructions to any shares of an exchange traded fund that meets the criteria set forth in subdivision (a) of this section.


  1. Nothing in this section shall affect the classification of shares of exchange traded funds as equity for legal purposes, including for the purposes of Insurance Law article 14. 

In addition to the newly created Part 77, amendments are proposed to 11 NYCRR 83, which would add 83.3(d) providing that “[a] foreign insurer shall calculate its risk-based capital consistent with Part 77 of this Title and shall report that risk-based capital in the New York supplement to the annual financial statement.”  The proposed changes would also include an amendment to 11 NYCRR 83.4(t), which would add the following underlined language:

  1. The guidance prescribed in [subparagraphs] subparagraph 4.a. [and 4.b.] of SSAP No. 26R, “Bonds”, and the third sentence of Footnote 1 of SSAP No. 97, are not adopted.  However, shares of an exchange traded fund that meets the criteria set forth in section 77.2(a) of Part 77 of this Title shall be accounted for in accordance with the accounting manual, including with respect to the asset valuation reserve and interest maintenance reserve, with the exception that the book adjusted carrying value of such shares shall be set equal to fair value (and not systematic value).


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

[email protected]

07/27/21       Cosmopolitan Shipping Co., Inc. v. Marsh USA, Inc.
United States District Court, Southern District of New York    
In New York Claims for Negligence Against an Insurance Broker Must be Brought Within Three Years of the Date the Injury Accrues

Plaintiff commenced this action against Continental Insurance Company (“CIC”) and Marsh USA, Inc. (“Marsh”) seeking insurance coverage from CIC in connection with certain seamen’s asbestos claims and seeking damages from Marsh for negligent advice Marsh allegedly gave in connection with that coverage. After a bench trial between Plaintiff and CIC solely on the issue of coverage, Plaintiff’s claims against CIC were dismissed. (See Coverage Pointers, vol. 22, no. 17, Feb 5, 2021). Marsh then moved for summary judgment seeking dismissal of the negligence claim asserted by Plaintiff.

Plaintiff contended that Marsh “erroneously compelled [Plaintiff] to cease all efforts to locate responsive protection and indemnity (“P&I”) policies. In the summer of 1995, Stanley Schiff, a claims advocate in Marsh’s Marine Division, had a single phone conversation with Granville Conway, Plaintiff’s owner, concerning possible insurance coverage for the asbestos claims. Schiff left Conway a voice message with his recommendations. In February 1997, Schiff sent an email (“February Email”) to colleagues at Marsh and an outside asbestos coverage lawyer summarizing his 1995 call and voicemail. Schiff mailed a copy of the February Email to Conway in March 1997. Schiff never heard from Conway again. The February Email is captioned “Cosmopolitan Shipping – Asbestos Coverage.” It states that Schiff “had previously researched this issue for Mr. Conway back in the summer of 1995. I had one conversation with him and provided him with a voice message with my recommendations.” The email describes insurance provided by the U.S. government during World War II, which was taken over by Fulton P&I after the war and for which the earliest records are from 1954. The February Email states, “Rather than rely on Fulton P&I, for which no coverage can be established two possibilities were discussed . . . .” The first was for Plaintiff to “attempt to tender the defense to the U.S. Government, since they appear to be the princip[al].” The second was for Plaintiff to assert that suits are time barred following Plaintiff’s anticipated dissolution. The email concluded suggesting it be forwarded to Conway and advising him of any subsequent developments since Schiff’s 1995 call with Conway. In June 2018, Plaintiff filed a second amended complaint adding Mash to this action and subsequently a third amended complaint which alleged hat Marsh provided erroneous advice to Plaintiff in 1995.

The court granted Marsh’s motion for summary judgement as plaintiff’s claims are time bared pursuant to CPLR § 214(4). Under New York law a claim against an insurance broker is governed by a three-year limitations period, meaning the claim must be brought within three years of accrual. Plaintiff’s negligence claim against Marsh accrued in 1995 when Schiff orally gave the allegedly erroneous advice to Conway. Based on these facts, it is difficult to say precisely when Plaintiff’s claim against Marsh accrued -- perhaps in 1995 when Plaintiff received the advice, or in 1997 when Plaintiff again received the advice, or some few years later in 1980 or 1982 given whatever difficulties or circumstances Plaintiff might have encountered. However, it is not difficult to conclude that the claim accrued years before 2012 when Plaintiff reasonably should have made inquiry of the Fulton Syndicate, particularly since Marsh had identified the syndicate as the most likely source of insurance coverage in 1995 and again in 1997.

The court also analyzed this motion under New Jersey law. Under New Jersey law, a professional negligence claim has a six-year statute of limitations. N.J. Stat. Ann. § 2A:14-1. The “discovery rule” may be applied to a professional negligence claim to determine when the six-year period begins. For statutes of limitations that commence when the cause of action accrues, “accrual occurs when a plaintiff knows or, through the exercise of reasonable diligence, should know of the basis for a cause of action against an identifiable defendant.” The Palisades At Fort Lee Condo. Ass'n, Inc. v. 100 Old Palisade, LLC, 169 A.3d 473, 485 (N.J. 2017). The court found plaintiff’s argument unconvincing, even under the more generous New Jersey because, as stated above, plaintiff could have made the proper inquiries to the Fulton Syndicate as early as 1995 but did not. 


Patricia A. Rauh

[email protected]

On staycation this week.


Mirna M. Santiago

[email protected]

Do you know the difference between the terms “diversity,” “equality,” “equity,” “inclusion” and “cultural competence/humility”? If you don’t, you’re not alone. That is probably THE question I get asked the most when I do diversity training. Why do we have all these different terms? And don’t they really all just mean the same thing? If so, why can’t we just stick to one? Turns out that most of us are simple folk—we want something that is easy to learn and easy to remember. Unfortunately, each of these terms is different and different nuances apply. But, yes, there is value to creating and understanding a common language when it comes to this space. That is what I will attempt to do here.

“Diversity” is what makes us different. The protected classifications are what make up diversity: race, gender, creed, national origin, age, gender identity, sexual orientation, disability, etc. That being said, people are not “diverse,” because that would mean that there is a default or “normal.” And we don’t want to continue to uphold white supremacy, heteronormativity, ableism, etc. Diversity “is relational. It’s about the differences between people within your teams, company and ecosystem.”  For that reason, focusing on “diversity” is quickly falling out of favor.

Similarly, demanding or attempting to impose “equality” in an inherently unequal system simply does not work. We have been trying to create an “equal” society since the Civils Right Act of 1964 was passed. But because of systemic bias and racism (slavery, segregation, redlining, etc.)—which was designed to reinforce inequality—simply declaring everyone equal, without “undesigning” the systems that were put in place is a losing proposition. When we speak about “equity,” it’s a recognition that people have individualistic needs. It means that everyone has a different starting point; that point may be due to how society treats race, gender, ability, identity, age, etc. “Equity asks us to acknowledge that everyone has different needs, experiences and opportunities.” Id. An “equity-inspired design” identifies where the barriers and inequities are, so that the marginalized groups can be elevated to that equal playing field. Id.

The article I am citing to compares “equality” to “equity” using a company swag analysis. A company can say it’s giving out swag and provide t-shirts to everybody in one size. Sure, some people will be able to fit into that shirt; others may also be able to modify the shirt (stretch it out, tuck it in, cut it, etc.), so that it suits them. But other people will not be able to fit into that shirt no matter what they do. That is “equality.” “Equity” is having the company special order shirts for each person, so that it is sure each shirt will fit the employee; or it could provide the single size shirts, but also provide other swag, so that the people who cannot fit into the t-shirts still get something of equal value and they don’t feel left out. Id.

That leaves us with “inclusion” and “cultural competence/humility.”

Verna Myers—a giant in the diversity, equity and inclusion space—has a saying that she uses to compare and contrast “diversity” and “inclusion”: “Diversity is being invited to the party; inclusion is being asked to dance.” It’s a great visual and all, but doesn’t that imply—in either circumstance—that marginalized groups are still “other”? Why do they have to be “invited” to the party or “asked” to dance? We know that organizations can have a lot of diversity and still not be inclusive. Shouldn’t inclusion be about feeling valued and like one belongs? How do we do that? How do we embed equity into our organizations so that people don’t have to perpetually be asked or invited, but feel like they are empowered to act in their own right? The only way to do that is through “cultural competence/humility.” Stretching Ms. Myers’ analysis, through cultural competence and/or humility, all members of that party would decide what food to serve and what music to play, so no one feels like they need permission to enter or engage in that space.

I do note that there is a fight brewing over the use of “cultural competence” versus “cultural humility.” Some experts say that no one can ever become culturally “competent” in another’s culture, so the term should only be “cultural humility.” Humility has the connotation that someone is always learning, which is what we should aspire to.

I hope this has been helpful and that we will be speaking a common language going forward.


Scott D. Storm

[email protected]

07/26/21       New York University v. Factory Mut. Ins. Co.
United States Court of Appeals, Second Circuit
Whether a Flood Sublimit Applied Only to the Buildings Specified by an "Address Clause" or Whether it Included All Buildings

This Policy's language unambiguously provided that additional coverages are subject to, not in addition to, the applicable limit of liability for loss or damage caused by flood.  The Court found the Policy to be ambiguous whether a flood sublimit applied only to the buildings specified by the "address clause" or whether it included all buildings at NYU Hospital Center and School of Medicine.  However, after examining available extrinsic evidence to ascertain the meaning intended by the parties during the formation of the contract it determined the policy limit applied broadly.  

Summary Order (rulings by summary order do not have precedential effect but citing to them is permitted, with the notation "summary order") of the 2nd Circuit affirming the judgment of the District Court.  New York University filed this declaratory judgment suit against its insurer, Factory Mut. Ins. Co. bringing five claims as to the scope and meaning of its 2011 insurance policy and one breach-of-contract claim. The parties filed cross-motions for summary judgment on NYU's declaratory judgment claims, and Factory Mut. also moved for summary judgment on NYU's claim for extra-contractual damages based on bad faith.  The Court denied NYU's motion and granted Factory Mutual's motion. 

The Court concluded that the Policy's additional coverages are unambiguously subject to the general property limit of liability for flood.  The Policy's limit of liability section clearly states that "[l]imits of liability in an occurrence apply to the total loss of damage at all locations and for all coverages involved[.]"  Further, the  Policy's section on additional coverages, such as costs incurred to remove debris, expressly states that the additional coverages "are subject to the applicable limit of liability[.]"  The Policy's language makes plain that any costs incurred from flood that would qualify as additional coverages are part of, not in addition to, the $250 million limit of liability for loss or damage from flood.

The Court also held that the 2011 Policy was ambiguous as to what property was covered by the $40 million flood sublimit of liability. On summary judgment, the determination of whether a contract term is ambiguous "is a threshold question of law for the court."  "[A]mbiguity exists where the terms of the contract could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire . . . agreement."

The 2011 Policy states that the $40 million flood sublimit is for property located at specified addresses.  The parties disagree as to whether the flood sublimit applies only to buildings with street addresses that fall within this "address clause."  In one literal reading of this "address clause" the flood sublimit applied exclusively to buildings with the specific street addresses. But the Court said that reading the "address clause" as referring to properties beyond those buildings with street addresses literally specified therein is the only way to reconcile the flood sublimit with the 2011 Policy as a whole and, specifically, with the 2011 Policy's Schedule of Locations. Indeed, the Schedule of Locations provided several addresses for one of the three properties at issue —some of which fall within the flood sublimit's "address clause" and some of which fall entirely outside the "address clause."  Because the text of the flood sublimit could be understood to be referring to all property located at the NYU Hospital Center and School of Medicine or to a subset of those buildings with street addresses that fall within the range of the "address clause," the flood sublimit could not properly be characterized as "capable of only one reasonable interpretation."  The District Court thus did not err in concluding, at the threshold, that the flood sublimit was ambiguous as to whether it applied to only the buildings specified by the "address clause" or whether it included other buildings listed in an Appendix.

"Once a court concludes that an insurance provision is ambiguous, ‘the court may accept any available extrinsic evidence to ascertain the meaning intended by the parties during the formation of the contract.'"   The Court went on to conclude that the parties intended that the 2011 Policy's flood sublimit of liability to apply to more properties than those literally specified by the "address clause."

Here, the extrinsic evidence indicates that the parties intended the flood sublimit in the 2011 Policy to operate the way it had in NYU's previous insurance policies with Factory Mutual—namely, to apply to properties identified by "Index 21374.00" in the Schedule of Locations. NYU took the position that the removal of the reference to Index 21374.00 in the 2011 Policy reflected the parties' mutual intent to remove the three disputed buildings from the $40 million flood sublimit (which would have the effect of increasing the flood limit of liability for those three buildings to $210 million), NYU adduced no evidence to this effect. In contrast, NYU's broker sent to NYU a summary of the 2011 Policy, which included a chart that compared each limit of liability in the 2010 insurance policy to the limit of liability in the 2011 Policy. That summary chart identified the flood sublimit as "$40,000,000" in 2010 and "$40,000,000" in 2011—and the chart also referred to Index 21374.00. The Court said that this summary was strongly indicative of the parties' intent that the flood sublimit in the 2011 Policy should continue to apply to a larger set of buildings than what the "address clause" literally identified, despite the removal of the reference to "Index 21374.00."


07/20/21       Nationwide General Ins. Co. v. Gary Dibileo, Jr., et al  
United States District Court, M.D. Pennsylvania
Negligence After an Intentional Act Can still Trigger Coverage.  Court Declined to Apply Broad Allegations of Conspiracy Against a Group to Find an Exclusion for Criminal Acts Applicable

In a case that garnered national attention when a fraternity pledge died after drinking excessively at a hazing (“the gauntlet”), the insurer of three fraternity brothers was denied summary judgment when it denied coverage under their parents’ homeowner’s policies.  Among other things, the Court held that negligence after an intentional act can still trigger coverage and the Court declined to apply broad allegations of conspiracy against a group to find an exclusion for criminal acts applicable.  Rather, the insurer was required to delineate between the actions of each defendant.

Nationwide commenced this declaratory judgment action for a judgment as to the scope of its duty to defend in an underlying personal injury lawsuit, Piazza v. Young.  The motion was denied without prejudice as the underlying action develops.  The Defendants were all insureds under their respective parents' policies.

The death of Timothy Piazza garnered local and national attention and stemmed from Timothy's prospective membership in the Alpha Upsilon Chapter of the Beta Theta Pi fraternity at The Pennsylvania State University. On February 2, 2017, Timothy attended the chapter's Bid Acceptance Night. Throughout that night, he and the other pledges were required to drink an excessive amount of alcohol as part of an event called "The Gauntlet." By the end of Bid Acceptance Night, Timothy had consumed eighteen alcoholic drinks. Some of the fraternity brothers put him on a couch on the first floor of the fraternity house, but Timothy apparently moved from the couch and fell down the basement stairs, suffering serious injuries and losing consciousness. Later in the evening, several of the Piazza defendants attached a backpack to Timothy's back and filled it with books to keep him from rolling onto his back and aspirating his own vomit.

Timothy became increasingly sick. Around 4:00 a.m., he tried to stand up but fell backward and hit his head on the floor.  One Defendant observed this, tried to shake Timothy awake and then exited the room, leaving Timothy alone and unattended. Over the next two hours, Timothy attempted several times to get up, but failed each time, ultimately falling head first into the house's front door after trying to leave the house.  At 5:52 a.m., a Defendant approached Timothy while he was lying on the floor but did not provide any aid and then left Timothy where he was.

At almost 11:00 a.m. the following day, an unidentified fraternity member called 911, and Timothy was taken to a hospital. The fraternity members spent the next two days trying to cover up their conduct, and Timothy died from his injuries one day later. Timothy Piazza's parents sued seeking damages for the conduct of the various defendants.

Determining the scope of the policy's coverage is a question of law.  The Court must endeavor "to ascertain the intent of the parties as manifested by the language of the written instrument."  The Court must read the policy as a whole and construe the contract "in accordance with the plain meaning of the terms."  If the language of a policy is clear and unambiguous, it must enforce that language; ambiguous language, however, must be construed against the insurer and in favor of the insured.

"After determining the scope of coverage, the court must examine the complaint in the underlying action to ascertain if it triggers coverage." The "question of whether a claim against an insured is potentially covered is answered by comparing the four corners of the insurance contract to the four corners of the complaint." This principle, known as the four-corners rule, holds that "[a]n insurer is obligated to defend its insured if the factual allegations of the complaint on its face encompass an injury that is actually or potentially within the scope of the policy."  Pennsylvania provides for no exception to this rule.

Nationwide asserts that there is no duty to defend the three Defendants in the Piazza lawsuit as coverage is excluded under either the criminal act, physical abuse, or intentional act exclusions in the policy; and is not an “occurrence” (an accident), as required in the insuring agreement. 

In regard to Defendants Coyne and DiBileo there are factual allegations and claims of negligence that implicate Nationwide's duty to defend. For example, Coyne and DiBileo, along with other Piazza defendants, are alleged to have committed negligence by failing to Timothy Piazza after he fell.  The Piazza Amended Complaint alleges that after The Gauntlet finished in the basement, some of the Piazza defendants helped Timothy to a couch on the first floor of the fraternity house.  At some point, Timothy left the couch and fell down the stairs.  Various Piazza defendants tried to bring Timothy (who was then unconscious) back up the stairs to the couch and sought to wake him up. DiBileo tried to stabilize and help Timothy while he was on the couch. Coyne, DiBileo, and other Piazza defendants placed a backpack filled with books on Timothy to weigh him down in order to keep him from rolling over and choking on his own vomit. In the Piazza litigation, the Court ruled that the Piazza  plaintiffs had stated a claim for negligence that took place after Timothy fell. It was plausibly pleaded that Coyne and DiBileo (and other Piazza defendants) assumed a duty of care and then breached it by failing to get professional medical aid. "And that failure, of course, could plausibly have been a substantial factor in Timothy's death."

The Court was not convinced by Nationwide that these allegations do not constitute a separate occurrence, or in the alternative, that the criminal act exclusion applies. First, the allegations in the Piazza Amended Complaint establish a claim for negligence. The allegations state that Coyne and DiBileo breached a duty of care by acting negligently, and this could have led to Timothy Piazza's death.  Nationwide's argument was essentially that any negligence after an allegedly intentional act should not be covered. The Court said that Nationwide's argument asks the Court to ignore standard insurance interpretation, as well as the text of its own insurance policies. Negligence after an intentional act can still trigger coverage under an insurance policy.  Thus, the court found that the complaint set forth allegations of negligence, and that those allegations qualified as occurrences that would trigger the duty to defend, subject to any exclusions.  Coyne and DiBileo's alleged negligence after Timothy's fall constitute occurrences that trigger Nationwide's duty to defend.

Nationwide further asserted that these allegations of Coyne and DiBileo's negligence do not "negate the application of the criminal act exclusion." Although some facts alleged against Coyne and DiBileo elsewhere in the Piazza Amended Complaint may well implicate the criminal act exclusion, this does not mean that the criminal act exclusion automatically applies to every allegation against them. The Court said that it is Nationwide's burden to show that the criminal act exclusion applies to the set of allegations.  The Court said that Nationwide did not convincingly argue that those allegations involve conduct that is "criminal in nature," which would be necessary to implicate that exclusion.   Nationwide's argument offers little to support its contention.

The allegations against Martines were fairly limited. There were a host of allegations that loop in essentially every defendant under the conspiracy claim, but do not delineate between the actions of each defendant. The Court said that Nationwide failed to direct it to any case where a court applied broad allegations of conspiracy against a group to find an exclusion applicable.

It seemed implausible to the Judge to say that those same allegations could justify denying coverage in this setting.  First, the physical abuse exclusion does not apply to any actions taken by Martines as his only interaction with Timothy Piazza involved him walking past Timothy and ignoring him. That was said not to constitute an abusive act. Second, Nationwide did not discuss the intentional act exclusion as to Martines. Finally, the criminal act exclusion also did not offer Nationwide an escape for the same reasons; namely, it was unclear what actions Nationwide claimed Martines himself took, rather than those broadly alleged through the conspiracy claim. And Nationwide had offered no support for its legal position on the conspiracy allegations delineating between the multiple Declaratory Judgment Defendants.


07/21/21       Tracy Starkey, et al. v. Nationwide Property and Cas. Ins. Co., Marnic Insurance Agency, Inc.
United States District Court, W.D. Pennsylvania, Pittsburgh
Motion for Removal to Federal Court on the Basis that the Insurance Agent was Fraudulently Joined for the Purpose of Avoiding Federal Diversity Jurisdiction

Defendants moved for removal on the basis that the insurance agent was fraudulently joined for the purpose of avoiding federal diversity jurisdiction.  The Court held that the Defendants failed to satisfy the standard of showing "there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendant or seek a joint judgment."  The Complaint described both pre- and post-contract formation conduct, which could give rise to a claim against the agent for the violation of Pennsylvania Unfair Trade Practices and Consumer Protection Law.

Plaintiffs bring claims for statutory bad faith (42 Pa.C.S. § 8371) against Nationwide (Count I) and for Violation of Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) against Nationwide and Marnic (Count II). The Plaintiffs moved to remand the case to State Court which was granted. 

The Starkeys reside in Pennsylvania. Nationwide is an Ohio Corporation with a principal business address in Ohio. Marnic is a Pennsylvania corporation with a principal place of business in Pennsylvania.  Defendants argue that the Plaintiffs have fraudulently joined Marnic, the lone Pennsylvania defendant, to defeat diversity jurisdiction.  The sole count against Marnic is for a violation of the UTPCPL.

In 2015, Mrs. Starkey was involved in a motor vehicle collision while operating a 2013 Chevrolet Malibu. She pursued a claim for underinsured motorists (UIM) coverage with Nationwide. The Complaint alleges that Marnic sold this Policy to Patricia Schupay and the Starkeys. The Starkeys allege that they purchased the Policy and made premium payments to Ms. Schupay and/or to the Defendants. The plaintiffs further aver that, in the course of selling the Policy, Marnic violated the UTPCPL: by misrepresenting that UIM claims would be paid fairly and timely; misrepresenting that the Policy would provide UIM coverage in the amount of $100,000.00 when there was no intention to do so; and in advertising and selling an insurance policy with a promise that UIM benefits would be paid when owed when there was no intention of providing such benefits. 

Defendants moved for removal on the basis that the UTPCPL claim against Marnic was fraudulently joined for the purpose of avoiding federal diversity jurisdiction. The Starkeys moved for remand on the basis that their claim against Marnic is viable. 

Under 28 U.S.C. § 1441, a defendant may remove an action brought in state court to federal district court when the claims fall within the federal court's original jurisdiction. A plaintiff may challenge removal for lack of jurisdiction by moving to remand the matter to state court. § 1447(c).  As the party asserting jurisdiction, defendants bear the burden of proving that the matter is properly before the federal court.

Specifically, Defendants contend that the Starkeys cannot maintain a colorable claim against Marnic for a violation under the UTPCPL because the Complaint does not set forth any specific misrepresentation that Marnic made to Plaintiffs at the time the Policy was sold and that the Starkeys were not named insureds under the Policy. Therefore, Defendants argue that, if any misrepresentation existed, it would not have been made to the Starkeys by Marnic. Defendants further contend that the Starkeys' UIM claim and Nationwide's claims handling arise from post-contract formation conduct and that the UTPCPL only applies to an insurer's pre-formation conduct.

In its Motion to Remand, the Starkeys contend that their Complaint alleges that while selling the Policy, Marnic made misrepresentations regarding the Policy, and that the UTPCPL recognizes the standing of an intended third-party beneficiary of a contract even where parties enjoyed no contractual relationship. Moreover, the Starkeys submit that Defendants attempt to mischaracterize their claims as solely based upon post-contract formation conduct; however, the Starkeys argue that the Complaint sufficiently pleads pre-formation conduct in its allegations regarding the advertising and selling the insurance policy.

When removal is based on diversity of citizenship, a proper exercise of federal jurisdiction requires satisfaction of the amount in controversy and complete diversity between the parties.  The fraudulent joinder doctrine is an exception to the requirement that removal must be predicated on complete diversity.  Where complete diversity is lacking, "the diverse defendant may still remove the action if it can establish that the non-diverse defendants were ‘fraudulently' named or joined solely to defeat diversity jurisdiction." A removing defendant who claims fraudulent joinder bears a "heavy burden of persuasion."  It must show "there is no reasonable basis in fact or colorable ground supporting the claim against the joined defendant, or no real intention in good faith to prosecute the action against the defendant or seek a joint judgment."  A claim is colorable if it is not "wholly insubstantial and frivolous."

In analyzing a fraudulent joinder claim, the district court must accept all factual allegations in the plaintiff's complaint as true and "resolve any uncertainties as to the current state of controlling substantive law in favor of the plaintiff." The fraudulent joinder inquiry is not governed by the Rule 12(b)(6) standard, which is "more searching than that permissible when a party makes a claim of fraudulent joinder."   "If there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that joinder was proper and remand the case to state court."

The Court held that the Defendants had not met their heavy burden regarding fraudulent joinder. First, Defendants have not shown that the Starkeys have no real intention in good faith to prosecute the action against Marnic. Defendants primary arguments are on the pleading sufficiency of the UTPCPL claim. Defendants cite to no conduct by the Starkeys or other evidence indicating that they do not intend to proceed against Marnic. Next, the Court examined whether the Starkeys have alleged a colorable UTPCPL claim against Marnic. The Court said that the gravamen of Defendants' arguments stem from whether the Starkeys have properly averred a UTPCPL claim against Marnic, an insurance agent. However, under a fraudulent joinder argument, the Court is not tasked with assessing the Starkeys' UTPCPL claim under a Rule 12(b)(6) standard. The pertinent inquiry is whether the UTPCPL claim is colorable. Courts have held that individuals may maintain a UTPCPL claim against an insurance agent.  Moreover, courts have denied fraudulent joinder challenges for UTPCPL claims against insurance agents or claims representatives.

Because UTPCPL claims against insurance agents were found to be colorable, the claim against Marnic was not "wholly insubstantial and frivolous." The Complaint described both pre- and post-contract formation conduct, which could give rise to a UTPCPL claim. Therefore, the Court could not conclude that Marnic was fraudulently joined and could not maintain diversity jurisdiction.


07/14/21       282 Mountainview Drive, LL v. Norguard Ins. Co. v. Skyscraper Ins. Services, inc.   
United States District Court, Southern District N.Y.
Material Misrepresentation Regarding a Sprinkler System Due to an Agent’s Negligence which then Attempted to Cover Up the Issue After a Fire, Breaching its Agency Agreement

This case involves a protective safeguard endorsement which required the Plaintiff to maintain automatic sprinklers.  The agent negligently represented that the sprinklers existed and then attempted to delete the endorsement after a fire, breaching its agency agreement.  The agency was liable to the insurer for breach of contract after the insurer settled with the insured.  The case offers a nice review of the law regarding material misrepresentations at the time of the application.  Although materiality of misrepresentations are typically proven through testimony of the underwriter supported by underwriting guidelines, in certain circumstances there is no need to introduce evidence of the insurer's underwriting rules or practices when common sense dictates that the policy would not have been written had the truth been disclosed.  Furthermore, rescission is an extraordinary remedy and an insurer may alternatively elect to issue a coverage denial instead. 

Norguard had an agency agreement with Skyscraper giving it the ability to solicit and bind coverage via an automated system. Under it Skyscraper had a “Duty to Investigate Insurability”, not to “withhold any material information pertinent to underwriting a policy,” and “diligently and to the best of its ability ensure that the facts set forth by any applicant in any application it solicits are true, correct and contain no misrepresentation or incorrect characterizations.”  Additionally, the Agreement required Skyscraper to “report promptly all losses or claims,” and contained an indemnification provision requiring Skyscraper to defend and indemnify Norguard “arising out of or resulting from any negligence, error, omission or intentional act of Skyscraper”.

Plaintiff's had been insured by Travelers.  The prior policy contained a protective safeguard endorsement (“PSE”) requiring Plaintiff to maintain automatic sprinklers in the Property, but the Property never had sprinklers.  The plaintiff provided Skyscraper with the Travelers Policy to replace the coverage.  Skyscraper believed the property had automatic sprinklers based on the Travelers Policy's inclusion of the PSE, and indicated in the submission to Norguard that the Property had such a system. Based on the representation that the property had automatic sprinklers, the system generated a $313 discount on Plaintiff's premium and added a PSE for automatic sprinklers to the insurance quote. 

Thereafter the property sustained a fire after which the principal of the plaintiff told a principal of Skyscraper (to whom he was related) to attempt to remove the PSE effective at inception of the Policy. On the day of the fire Skyscraper sent Norguard a “conversation” via the agency portal, to delete the PSE from inception.  The principal of Skyscraper falsely claimed that he had just found out about the absence of the sprinkler system because he quoted a personal homeowner’s policy. A Norguard employee removed the policy endorsement as of inception, despite lacking authority to do so because of Skyscraper’s aggressive insistence.  The employee knowingly violated Norguard's policies doing so because it was a busy day and was familiar with the underwriting guidelines and felt comfortable removing the PSE because the property “was not a building that we would have required a protective safeguard to continue on with the policy.”

Skyscraper’s principal told the adjuster he only learned of the fire later in the evening on the day of the policy change.  He later admitted that that statement was false, and he knew of the fire when he requested the policy change.  Norguard thereafter reinstated the PSE “to correct internal error” and denied coverage.  Plaintiff sued Norguard which commenced a third-party action against Skyscraper.  Norguard settled with the plaintiff and filed this motion against Skyscraper. 

Norguard contends that Skyscraper's efforts to remove the PSE from the Policy after the fire without informing Norguard of the Fire Loss violated the Agency Agreement and views the ensuing settlement of its dispute with Plaintiff to be a direct result of that breach. Norguard asserts that Skyscraper is responsible for defending Norguard in this action and to indemnify it for the settlement payment it made to Plaintiff.  Skyscraper contends that it did not breach its agency agreement with Norguard because Norguard would have insured the risk even without the PSE and that the PSE should never have been on the Norguard Policy to begin with, rendering any error on its part harmless. Skyscraper argues that the inclusion of the PSE in the Policy was a mutual mistake, meaning that reformation of the Policy backdated to inception was proper and therefore Skyscraper's omission was not “material”.  Norguard suffered no damages as a result of that breach other than the difference in premiums, $313. Alternatively, Skyscraper contends that the settlement payment to Plaintiff was a voluntary payment because either reformation to exclude the PSE was proper, meaning Norguard owed the full amount of coverage, or it was not, meaning Norguard owed nothing.  According to Skyscraper, because the Policy surely would have been reformed under the doctrine of mutual mistake to exclude the PSE,  Norguard would have been obligated to cover the claim for the fire damage, and Skyscraper's failure to advise Norguard of the Fire Loss when requesting the PSE be retroactively eliminated is irrelevant.

The Court disagreed with Skyscraper, saying that the only remaining issues in the case are: (1) whether Skyscraper breached the Agency Agreement by failing to notify Norguard of the loss when seeking to remove the PSE; and (2) whether, as a result of that breach, Norguard is entitled to compensation from Skyscraper for the sum paid to settle Plaintiff's lawsuit against Norguard.  The Court said that both of these issues are determined under the contract between Norguard and Skyscraper, not the contract between Norguard and 282 Mountainview.  As such, the Court need not decide whether reformation of the policy would have been appropriate.

Skyscraper argues that it did not specifically notify Norguard of the Fire Loss because it was under the impression that Plaintiff's public adjuster was going to do so, and again argues that because the PSE was not properly on the Policy to begin with and Norguard would have accepted the risk for a higher premium anyway, its omission was not “material information” that would bind Norguard to a “prohibited risk.”  The Court said that both of these arguments are beside the point. As to the first, Skyscraper provides no authority for the proposition that a party with a contractual obligation to notify is excused from that obligation because it surmises someone else might provide the same notification. As to the second, a misrepresentation is material if the insurer would not have issued the same policy at the same price, citing case law which states that “[I]f the true facts would have necessitated a higher premium, than the misrepresentations are material”.  Here it is undisputed that Norguard would have initially charged a higher premium had it known there was no sprinkler system at the Property. Thus, the misrepresentation regarding sprinklers was material and would permit Norguard to deny coverage.  But the misrepresentation regarding the sprinkler system at the time the Policy was issued is the not the misrepresentation on which Norguard sued here.  Norguard charged Skyscraper with the material omission of the fact of the fire at the time of the removal of the PSE.

A misrepresentation is material if “knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such [an insurance] contract.” N.Y. Ins. Law § 3105. To satisfy this standard, an insurer must show that it relied on the alleged misrepresentations, meaning the statements or omissions induced the insurer to take action that the insurer might otherwise not have taken, or would have taken in a different manner. “The question in such case is not whether the insurance company might perhaps have decided to issue the policy even if it had been apprised of the truth,” but rather “whether failure to state the truth where there was duty to speak prevented the insurance company from exercising its choice of whether to accept or reject the application upon a disclosure of all the facts which might reasonably affect its choice.”

To evaluate materiality, courts applying New York law consider evidence such as sworn statements and deposition testimony from the insurer's underwriters, so long as they are supported by the insurer's underwriting guidelines. Here, Norguard had submitted a sworn Declaration from its vice president of underwriting stating that “[Norguard] would not knowingly remove a PSE from a policy effective policy inception with knowledge that a fire had taken place at that risk” and “[t]he fact that a fire had occurred at an insured risk would be considered material information that Norguard would need to know in connection with its underwriting of a policy.” Further, she states that “[t]he fact that a fire had occurred at an insured risk would be material information that Norguard would need to know” to make a decision whether to remove a PSE effective as of policy inception.

While Norguard in its memoranda pointed to no specific provisions in its underwriting or backdating guidelines to support these statements, the backdating guidelines give substantial support to Rinehimer's assertions. Even absent this evidence, it seemed obvious to the Court that the fact that the property the risk of which is being underwritten has in fact already burned down is certainly information an insurer would need to know before issuing or changing a policy for that property, citing case law that “[I]n these circumstances there is no need ... to introduce evidence of the insurer's underwriting rules or practices”, it is simply what “[c]ommon sense dictates.”

Skyscraper argued that Norguard is not entitled to summary judgment on this issue because at no time did it seek to rescind the policy based on Skyscraper's misrepresentation.  The Court found this argument unpersuasive. While “New York law entitles an insurer to rescind an insurance policy – and the policy is deemed void ab initio – if it was issued in reliance on material misrepresentations,” there is no obligation that the insurer do so. Indeed, “a final decision to rescind [a] Policy cannot be made without strong evidence that such a remedy is necessary and appropriate. Rescission is a far more drastic step tha[n] disclaiming coverage”, an extraordinary remedy.  Rather than rescind the Policy, Norguard opted to disclaim coverage. Skyscraper provides no authority suggesting that an insurer's decision not to rescind a policy somehow prevents it from suing under a contract with an agent.  That Norguard might arguably have rescinded the Policy does not make Skyscraper's conduct any less of a breach of the Agency Agreement. The Court found Skyscraper's misrepresentations were material as a matter of law and that it therefore breached the Agency Agreement.

In regard to damages, Skyscraper argued that Norguard suffered no damages as a result of its breach other than a $313 difference in premium between the Norguard Policy with and without the PSE, because the PSE should have never been on the Norguard Policy in the first place and Norguard was therefore obligated to cover the fire loss.

The Court said that it strains credulity to now suggest that this matter does not arise out of Skyscraper's “negligence, error, omission or intentional act.” Had Skyscraper informed Norguard of the fire at the time it requested the PSE be removed, the PSE would not have been removed, and while there might have been ensuing litigation brought by 282 Mountainview, it would have been greatly simplified, in contrast to the complex, expensive litigation that in fact resulted.  This litigation is undeniably a result of Skyscraper  convincing Norguard to remove the PSE effective at inception without disclosing the fire.

The Court also disagreed with Skyscraper’s argument that Norguard's settlement payment to Skyscraper is a voluntary payment that Skyscraper cannot be expected to indemnify. The original action could well have resulted in a finding that the Policy should be reformed to exclude the PSE and thus that Norguard was required to cover the entire fire loss. That Norguard chose to settle before a definitive decision on that point was reached does not make its payment voluntary, given that it settled for half of what it might have had to pay had it lost its litigation with Plaintiff. Moreover, Skyscraper could have defended Norguard against Plaintiff's claims and taken them to trial, but it chose not to do so. Instead, Norguard, managing its own defense, opted for a safer route and settled with Plaintiff for a reasonable sum that split the difference between the all-or-nothing positions at the heart of the original dispute. Accordingly, Skyscraper had to reimburse Norguard for all costs and expenses arising out of Skyscraper's breach, including the settlement sum paid to Plaintiff and all legal fees, costs, and expenses occasioned by Skyscraper's breach.


Nicholas J. Heintzman

[email protected]

07/26/21        Meritage Hospitality Group v. North American Elite Ins. Co.  
New York Supreme Court, Albany County
Restaurant Chain, Seeking Insurance Coverage for Losses Caused by COVID-19 Governmental Shutdowns, Loses a Venue Argument

In this COVID-19 related action, Plaintiff Meritage Hospitality Group (“Meritage”), a large restaurant chain owner, obtained an “all-risk” commercial insurance policy (“the policy”) issued by defendant North American Elite Insurance Company (“NAE”). The policy was in effect from December 31, 2019, to December 31, 2020. Of note, the policy insured Meritage for: 1) “all risks of direct or physical loss or damage” to covered properties; 2) “Actual Loss Sustained” from “the necessary interruption of the Insured’s business during the Period of Liability”; and 3) losses related to “Communicable Disease Response.”

On March 24, 2020, Meritage submitted a claim to NAE for business interruption coverage, asserting that, due to COVID-19, its restaurants lost income due to “unprecedented state and local Closure Orders” and “restrictive reopening Orders.” NAE denied coverage on all grounds other than “Communicable Disease Response.” It advised Meritage that it would continue to evaluate the applicability of the Communicable Disease Response coverage. Over a year passed with no coverage decision from NAE, so Meritage commenced the present action seeking a declaration that governmental shutdown orders issued in response to COVID-19 caused “direct physical loss or damage” to its restaurants.

The policy contained a forum selection clause (“the clause”) which provided that the parties which signed the policy “do irrevocably submit to the exclusive jurisdiction of the Courts of the State of New York.” Meritage brought the declaratory action in Albany County, arguing that venue was proper because: 1) Albany County is a court in New York State and therefore a proper venue under the clause; and 2) NAE was a defendant in a different COVID-19 litigation pending in Albany County. NAE countered, arguing that the clause solely concerned jurisdiction—not venue.

The Court agreed with NAE and held that the forum selection clause had no bearing on venue and that venue should be chosen, as customary in New York, by the CPLR. It noted that jurisdiction and venue are separate concepts. Jurisdiction concerns a court’s authority to “hear and determine” a dispute, while venue concerns the proper location for a judicial proceeding within the court system. The Court held that the clause concerned only jurisdiction and that nothing in the clause fixed the venue. Since the clause only concerned jurisdiction, the Court turned to the CPLR for its venue analysis and found that since NAE resided in New York County, venue was proper in New York County.


Heather Sanderson

[email protected]

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