Coverage Pointers - Volume XXIII, No. 8

Volume XXIII, No. 8 (No. 600)
Friday, October 1, 2021
A Biweekly Electronic Newsletter
 

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

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

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

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

 

 Dear Coverage Pointers Subscribers:

Do you have a situation?  We love situations.  We love to help you reason through them, so they no longer ARE situations.

 

 

This is our 600^th issue of Coverage Pointers since we started publishing on July 8, 1999. That’s over 22 years of continuous publication, every two weeks.  Our coverage team has expanded since then, from five in Buffalo to 23 with our recent hires, with lawyers practicing in several different cities and states.  There are a few of you who have been with us since the beginning.  Electronic coverage newsletters were unheard of in 1999, and we were proud to be one of the first firms in the country (perhaps the first)  to publish an e-mail newsletter with a promise and commitment to regularity.  We are proud to serve our clients and provide our readers with our work product. My special thanks to our editorial and support staff, who put aside other responsibilities to provide you with this labor of love.

Our firm has expanded its newsletter offering as the “Pointers” family provides a varied selection of newsletters covering many areas of civil litigation and practice.  We offer you subscriptions to our other publications and hope you find them valuable.

 

Additional Insured Cases:

Just an editorial interjection. I am more and more annoyed with the number of cases that permit a party seeking additional insured coverage to plead itself into coverage.  In our most recent issue, the September 17^th offering, we wrote about the Axis Construction decision which supported the concept that a party seeking AI coverage against an employer’s insurer could include allegations of negligence that would trigger coverage.  I suppose a general contractor could simply assert that every single subcontractor on the job was responsible for the plaintiff’s injury and thus trigger, at least a defense, from all of them. I cannot imagine, with this rule in place, any general contractor ever having to look to its own coverage for primary protection from a construction-related lawsuit.  Simply t’aint fair.
 

Child Victim’s Act – Where are We and What Can We Imagine in the Future?

As a reminder, in August, the “look back” period for child sexual assault cases came to an end.  The Child Victims Act brought back to life lawsuits that had been dismissed on statute of limitations grounds, cases where the plaintiff was over the age of 55 and lawsuits where the plaintiff had failed to filed Notices of Claims against municipal defendants.

However, and this may be a surprise to some, the CVA also raised the statute of limitations for child sexual abuse to age 55.  Thus, if a plaintiff suffered abuse at the age of 15 and is now 45, he or she still has 10 years to bring a civil lawsuit:

CPLR 208(b) Notwithstanding any provision of law which imposes a period of limitation to the contrary and the provisions of any other law pertaining to the filing of a notice of claim or a notice of intention to file a claim as a condition precedent to commencement of an action or special proceeding, with respect to all civil claims or causes of action brought by any person for physical, psychological or other injury or condition suffered by such person as a result of conduct which would constitute a sexual offense as defined in article one hundred thirty of the penal law committed against such person who was less than eighteen years of age,… such action may be commenced, against any party whose intentional or negligent acts or omissions are alleged to have resulted in the commission of said conduct, on or before the plaintiff or infant plaintiff reaches the age of fifty-five years. …

Thousands of lawsuits have been filed, and we are being approached by institutional clients each and every day to protect them.  Many have little or no insurance coverage. 

So, we can expect the continued drumbeat of these cases for years to come.  One wonders what will happen to school districts and other public and private institutions when these cases reach the courts.  Insurance, if any, is scarce for most entities sued. The abusers are often judgment proof, or long deceased.

There will be a day of reckoning.

 

Our Commitment to Diversity Continues

Hurwitz & Fine, P.C. Announces Participation in National Midsize Mansfield Rule Certification to Expand Law Firm Diversity, Equity & Inclusion

Hurwitz & Fine, P.C., a Buffalo-based multistate corporate and litigation defense firm, announces its participation in the 2021 – 2023 Midsize Mansfield Rule Certification class. The law firm is the only Western New York law firm to participate in the national diversity law firm certification process, which will last a rigorous 18 months, with certification designated in March 2023.

The overall goal of the Midsize Mansfield Rule is to increase the representation of diverse lawyers in leadership by broadening the pool of women, LGBTQ+ lawyers, lawyers with disabilities, and/or racial/ethnic minority lawyers who are considered for entry-level and lateral attorney job openings, leadership opportunities, equity partner promotions, and opportunities to connect with clients. The certification process aims to achieve this goal by doing four key things:

• Establishing tracking and documentation norms

• Expanding mindsets around who could be a leader

• Bringing transparency to historically opaque processes

• Working together as a community and sharing knowledge

“Our participation actively demonstrates Hurwitz & Fine’s commitment to diversity, equity and inclusion within the firm’s culture, its client service teams, and in its recruiting efforts,” said Jody Briandi, President/Managing Partner and Chair of Hurwitz & Fine’s Diversity & Inclusion Committee. “Mansfield Certification is an important diversity certification for law firms, which more and more clients and businesses are looking for when selecting a firm.”

The firm has established a Mansfield Committee, which incorporates members of the firm’s’ leadership team in HR, Operations, Marketing and Board of Directors to spearhead this process.  

“Participation in Mansfield Certification will help us to act with intentionality in our recruitment and advancement efforts, track important related diversity metrics, standardize processes and increase transparency—much of what we are already doing today,” continued Ms. Briandi. “Mansfield Rule Certification will help to hold us accountable for our diversity actions and efforts.”

According to Diversity Lab, who administers the program, key outcomes for firms that have participated in all three certification years include:

• 96% of firms said that after adopting the Mansfield Rule, their teams of lawyers participating in formal pitch meetings have become more diverse.

• 65% of firms reported that more underrepresented lawyers were appointed or elected to their Management/Executive Committee than prior to adopting Mansfield.

• 63% of firms said they have increased the percentage of underrepresented lawyers promoted into equity partnership since adopting Mansfield.

• 58% of firms reported that their lateral partner hiring pool was more diverse following the adoption of Mansfield.
   

More information about Hurwitz & Fine’s diversity, equity and inclusion efforts can be found here.

About Mansfield Rule Certification – The Mansfield Rule, administered by Diversity Lab, addresses the lack of female and diverse attorneys in positions of law firm leadership by setting benchmarks to measure whether firms have affirmatively considered at least 30 percent female lawyers, lawyers of color, LGBTQ+ lawyers, and lawyers with disabilities for leadership and governance roles, equity partner promotions, formal client pitch opportunities, and senior lateral positions. The Midsize Mansfield Rule Certification was designed to increase the number of attorneys from historically underrepresented groups in leading U.S. law firms with 25 – 150 attorneys. The Mansfield Rule was named after Arabella Mansfield, the first woman admitted to the practice of law in the United States.

 

Risk Transfer Training:

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

We have now scheduled or are in the process of finalizing the scheduling of five private sessions of this program, each one specially modified and crafted to meet the particular needs of the companies who have asked for the training.  If interested, let me know.

 

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.

 

Newsletters:      

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

• Employment & Business Pointers aims to provide our clients and subscribers with timely information and practical, business-oriented solutions to the latest employment and general business law developments.  

• 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.

   

  A Shot and a Policy:

  Dunkirk Evening Observer
  Dunkirk, New York
  01 Oct 1921

  STILL OPERATORS ARE TAKING CHANCE

  Fire Resulting From Making Liquor Would Not Be
  Covered by Insurance Policies.

            What effect does the operating of a still have upon the insurance? This question has been raised here. It is said that there are fully a thousand stills perhaps many more stills being operated in Dunkirk.

            While there has been no special ruling on the subject of stills by the underwriters, all standard policies have a clause that in a general way covers the matter, which in substance says that any increasing of the hazard to the premises within the knowledge and control of the insured and without special agreement with the company, vitiates the insurance.

            Thus operating a still on one’s premises is turning a dwelling into a manufacturing plant and a fire resulting from the operating of the still doubtless would be one for which the insurance could claim no damage.

            It is the policy of the insurance companies to discourage illegal business and where companies have knowledge that such business is carried on, it has been the practice to cancel policies.

   

  Peiper on Property and Potpourri:

  Business is starting to pick up with the courts this week, so we have a few observations to offer you.  In particular, we’d ask that you take a moment to review the Second Department’s decision involving elevator maintenance contracts.  The Court ruled, in essence, that a party to an elevator maintenance contract could not be indemnified for its own negligence.  As you may know, at common law there is no such prohibition.  

  There is, however, a statutory rule that precludes indemnification if the loss arises out of a “contract or agreement relative to the construction, alteration, repair or maintenance of a building…”  That statute, GOL 5-322.1, is not mentioned in the opinion, but the precedent cited by the Court ties directly back to it.  As such, the Court’s ruling, albeit informally, acknowledges elevator maintenance contracts as protected by the terms of the GOL. 

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

  Steve
  Steven E. Peiper
  [email protected]

   

  KKK in the Spotlight:

  Buffalo Courier
  Buffalo, New York
  01 Oct 1921

  “Nothing Could Be More Un-American.”

            The heading here used is the concluding sentence of what the Nashville Banner recently said editorially of the Ku Klux Klan. The Banner says the Klan is “supposititious,” and makes clear that is means thereby ”fraudulently substituted, spurious, counterfeit,” so far as concerns the Klan’s claim that the organization is a revival of the Ku Klux of reconstruction days after the Civil War. Even if its revival were possible “there are no conditions today that would warrant such revival,” the Banner asserts, and continues:

            “In the south and throughout the country the people rule. They make their own laws and choose the men who shall enforce them. Whatever is evil in the government, federal, state or local, in any part of the country, can be remedied by the people in consonance with the wishes of the majority. There is no need of a secret, oathbound organization, no matter what its purposes, to aid in the conduct of government, and the mere conception of such a thing is repugnant to all ideas of a free and enlightened republic. Nothing could be more un-American.”

            There are still in Tennessee, as in other southern states, men who belonged to the original Ku Klux. But in this organization of “Emperor” Simmons they see none of the spirit that moved the organization of Forrest. They see, instead, outrages committed against men and women while the “Emperor” sits in his palace of Klan Krest in the “Imperial City” of Atlanta, counting the money that rolls in from deluded subjects of his “Invisible Empire.” And as the exposure of the Klan continues, they will see these things all the more clearly. There is, as the Banner says, sufficient government in this country without the additional rule of the “Emperor” and his “Kleagles.”

   

  Wilewicz’ Wide-World of Coverage:

  Happy October! This is my second favorite time of the year. Despite the cliché, I love everything pumpkin-spice, as well as cinnamon and apple and donut and more pumpkin. Decorating for Fall is one of the most fun times in my house and has become a tradition. We don’t go as all-out as we do for Christmas, but still try to get in the spirit of the season’s change. We get out leaves, gourds, and yes, mini pumpkins, along with our ever-present spice scented candles. Every year we also make a trek out to the pumpkin patch, loading up the car with way more than we ever use. This year, I think we will also try to make it out apple picking, since we have not done that in a while. Check back here next time for an update, and more from the Circuit Courts on coverage.

  Until next time, enjoy the Autumn!

  Agnes
  Agnes A. Wilewicz
  [email protected]

   

  Yankees Win American League Pennant in 1921:

  Santa Cruz Evening News
  Santa Cruz, California
  01 Oct 1921

  NEW YORK VICTORIOUS; WINS LEAGUE HONORS;
  RUTH MAKES NO HITS

  (By Associated Press)

  NEW YORK, Oct. 1.—New York captured the American league championship this afternoon, its first in history, when they defeated the Philadelphia Americans by a score of 6 to 2 before 25,000 people.

  The victory of the Yankees ended the tightest fought race ever made in the history of major league baseball. The New Yorkers needed one victory in their three games, the last of which was to be played on the closing day of the season, tomorrow.

  Mays had one bad inning when Philadelphia scored their three runs, after that he was invincible. The recent invalid, Ruth, returned to the game, but went hitless at the bat.

   

  Barnas on Bad Faith: 

  Hello again:

  In my last note I lamented the Bills’ poor start to the season and extolled the virtues of the Blue Jays as they were cruising towards the playoffs.  How the tables have turned.  Since that note, the Bills have won their last two games by a combined score of 78-21, and the Blue Jays have dropped out of playoff position.  It’s the unpredictability of sports that keeps us coming back, or something like that.

  I have one case in my column from the Second Department this week.  The plaintiffs filed a lawsuit in 2015 against their homeowners insurer and others after a fire alleging breach of contract and breach of the implied covenant of good faith and fair dealing.  The insurer moved to dismiss the lawsuit against it as time-barred by the policy’s suit limitation clause, and the court granted the motion.  A good decision in my book.

  That’s all for now. 

Brian
Brian D. Barnas
[email protected]

 

Gallows Songster:

The Oneonta Star
Oneonta, New York
01 Oct 1921

POPULAR SONG ON LIPS,
WANDERER GOES TO DEATH

Chicago, Sept 30.—Singing a popular song, Carl Wanderer, convicted on the murder of his wife, her unborn babe and a “ragged stranger” whom he hired to stage a fake holdup, was hanged at the Cook County jail at 7:19 o’clock this morning. Wanderer walked to the gallows with firm step and as he took his place on the scaffold, repeated a short prayer after a minister.

Asked if he had anything to say, he replied in the affirmative, and as a shroud was adjusted on his head started the song: “Old Pal, Why Don’t You Answer Me?” He was singing when the trap dropped.

 

Off the Mark:

Nothing new to report. Check back in two weeks for the latest in construction defect cases and news.

Until then,

Brian
Brian F. Mark
[email protected]

 

African Americans Strike so They are Arrested on Vagrancy:

The New York Age
New York, New York
01 Oct 1921

WANTED MORE WAGES; CONVICTED AS VAGRANTS

          Greenwood, Miss.—Because they refused to accept the wages offered them by the owners of the steamboat Choctaw, two members of the crew are now languishing in jail, having been convicted by the police on the charge of vagrancy.

Several days ago the cream, all Negroes, went on strike for a raise in salary…They asked for $3 a day. The steamboat officials offered them $2 and board.

Unable to reach an agreement the strikers left the boat, leaving word they could be found in a pool room if their terms were later complied with.

After a conference between Chief of Police Bonner and the boat officials it was decided to teach the “fresh darkies” a lesson for presuming too much. So a number of Mississippi “cops” swooped down on the pool room and arrested every member of the striking crew found in the place.

After remaining in jail three or four hours all agreed to return to work for the wages offered by the company except two. So for having the temerity to ask for a square deal they were fined $50 each and sentenced to thirty days in jail.     

 

Boron’s Benchmarks:

It has been said, “When it rains, it pours”.  And in downstate New York, it did rain (Henri).  And then it did pour (Ida).  And now, the first-party property damage claims needing coverage evaluations and disclaimers are pouring into our office.  Pun intended, of course.  “Ida” know about you, but I see myself spending many hours in the coming weeks analyzing whether policy exclusions for flood, surface water, and sewer, drain and sump overflows and backups apply to impact coverage of water damage claims.   

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 Illinois opinion issued September 23, 2021, affirming the ruling of an Illinois appellate court that the cost of labor may not be depreciated by State Farm in arriving at an actual cash value for a property loss.  This is an issue that has been a matter of considerable debate not to mention litigation around the country in recent years.  If you handle first-party property damage claims, this case is definitely worth checking out over in the Coverage Pointers section of our communication.

Have a healthy and happy next two weeks, folks.

Eric
Eric T. Boron

 

Proper Teacher Attire in 1921:

The Buffalo Enquirer
Buffalo, New York
01 Oct 1921

TEACHERS’ PAY IN ONE TOWN

LYNDHURST, N.J., has taken a place in the day’s news. The school board has decreed that teachers must wear longer skirts and no silks or satins.

          The order for long skirts is of course based on fear of corrupting influence on the young. The prohibition of silks and satins is due to apprehension that expensive dress for teachers might induce the children of parents in moderate circumstances to insist on corresponding attire for themselves.

If we should sympathize with the teachers for this regulation of the cut and quality of their garments we may congratulate them upon something else. They must be well paid if they must be restrained from attiring themselves too richly for the public good.

 

Ryan’s Capital Roundup:

          Hello Loyal Coverage Pointers Subscribers:

My Grandpa Vic passed away earlier this year on his 94th birthday. Due to the pandemic, we have not yet had an opportunity to hold a memorial service to celebrate his life. And what a life it was to celebrate. I look forward to sharing my fondest memories with family and friends, while listening closely to the stories that others hold near and dear themselves. In honor of this great man—a pillar of his community—I’d like to share a snippet of my prepared remarks for Saturday:

Grandpa Vic was the man that everybody knew. Everybody. And he was always very intentional about that because he wanted it that way. No matter who it was; no matter where he was; everyone was worthy of a conversation. And every conversation with him was extraordinary—because he was an extraordinary man.

You’ve heard of the most interesting man in the world? To me, that was my Grandpa Vic. And unlike that knockoff Dos Equis version, Grandpa Vic never had to leave the confines of Wyoming or Genesee County to experience the world. The way he saw it, his own backyard was filled with experiences worthy of experiencing. And largely because of this spirit of adventure, Grandpa Vic was a man of a million stories, each about seemingly everyday things that, on his canvas and through his brush, became wonders larger than life.

***

His laugh was as infectious as his spirit and ever sharp wit. And those qualities he kept from day one to day 34,332. 94 years on the nose. He made the most of every trip ‘round the sun because he made the most of every full rotation of the earth.

Love you, Grandpa. Say hello to Grandma for me.

I have had motions daisy-chained together like a barrel of monkeys the past two weeks, so I took a pass this week on the column. We’ll be back at full strength next edition.

Until next time,

Ryan
Ryan P. Maxwell
[email protected]

 

Folks Who Fear Minority Population Increases Should Fear No More (in 1921):

The Buffalo Enquirer
Buffalo, New York
01 Oct 1921

OUR POPULATION INCREASE.

IN 1910 the percentage of white population in the United States was 88.9. In 1920 the white percentage was 89.7.

Of the white race in 1910 the percentage of native-born was 74.3 and in 1920 it was 76.7.

In the decade the total population increased 14.9 per cent.; the white population 16 per cent.; Native white of native parentage 18.1 per cent.; negro population 6.5 per cent.; Indian, Chinese, Japanese, etc., 3.4 per cent.; native white 18.6 per cent.; foreign-born white 2.8 per cent.; native white of foreign parentage 21.5 per cent.; native white of mixed parentage 16.9 per cent.

The analysis of the increase of population should lessen fears of those who apprehend either a foreign or a color peril. The showing on the whole is stronger for the native-born white population in 1920 than in 1910.

 

CJ on CVA and USDC(NY):

Hello all,

It is my favorite time of year, mornings are crisp and cool, the temps dip down close to freezing at night, and winter is right around the corner. We have started back up with swim lessons for Charlie for the fall and he is doing great. He is just about to turn one, and while I do not see him competing for a gold medal in 2024, 2028 may be in the running. My wife is currently in full first-birthday party planning mode, and I am beginning to think that this party is going to rival our wedding. While Charlie will not remember any of it, I am sure his guests will be talking about it for years to come!

This week we revisit the questions of coverage for additional insureds who are seemingly pled into coverage by a third-party complaint. Not only is this an important concept for insurers to understand in order to adequately evaluate the risks they underwrite, I think it’s an important concept for anyone working in this space to understand as almost every loss arising from a construction accident will have additional insured questions.

As a preview for the next edition of CP, we will take a deep dive into the CVA. I will be talking about the lasting impact of the Child Victims Act and the effects it will have on insurers and their insureds for years to come.

See you in two weeks,

CJ
Charles J. Englert, III     

 

$30,000 Verdict too High for Wrongful Death of RR Worker:

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
01 Oct 1921

MAY REDUCE VERDICT

Judge Hazel requests woman to take lesser sum for damages.

Federal Judge John R. Hazel in an opinion handed down yesterday directed May Rebman, widow of Phillip Rebman, who was killed by a D.L. & W. train at North Darien last fall, to agree to a reduction of a $30,000 verdict awarded her in federal court for the death of her husband.

Attorneys for the railroad in an appeal declared that the verdict, judiciously invested, would amount to more than Rebman could earn for his family. Judge Hazel allowed the arguments and has directed the plaintiff to reduce her claims to $20,000 with $475 additional allowance for funeral expenses.

In the event that the plaintiff refuses to agree to a reduction of the verdict, Judge Hazel will set aside the award and grant attorneys for the railroad a new trial.

 

Dishing Out Serious Injury Threshold:

Dear Readers,

September is now over. How did that happen? I’ll be heading out to go apple picking this weekend before I wake up and there is snow on the ground. Hope everyone is able to get out and enjoy the fall activities.

In the Serious Injury Threshold world, there were only a handful of cases that dealt with Threshold law and each only had it as a peripheral issue. Therefore, there are not any cases that dealt with any substantive issues of Threshold law this issue.

Be well,

Michael
Michael J. Dischley

 

Four Russian Republics Seek Protection:

Star-Gazette
Elmira, New York
01 Oct 1921

Four Small Republics Dominated By
Soviets Send Plea To Geneva

New Caucasian Governments Desire Their Territory
Rid of Foreign Troops After Forming Political
Union—Would Change Headquarters of League.

Geneva, Oct. 1.—The assistance of the League of Nations against the Bolshevikl was asked today by representatives of the four Caucasian republics – Armenia, Azerbaijan, Northern Caucasus and Georgia—whose territory is now under soviet domination. They informed the league that they had joined their interests in a political and economic union, and asked the league’s aid in securing the evacuation of their territory by foreign troops.

Organization of the secretariat of the league, on which a committee has been working continuously for four weeks, was discussed by the Assembly of the League today. The committee’s report is generally favorable to enhancing the efficiency of the secretariat and provides for extension of the press publicity sections.

A change of the seat of the league, the report asserts, is a question that cannot be influenced alone by the high cost of living in Geneva and by the disparity in exchange rates but involves far more important considerations. Hence it has been decided to take no action on the suggestion of investigating committees that economy would be realized by such transfer.

 

Bucci on “B”: 

Hello friends,

I hope you are all happy (or at least not depressed) and healthy, and looking forward to a great autumn.  You deserve it.  I picked a trial court case to report on today because I found it interesting and because practically every Coverage B exclusion was discussed (that’s an exaggeration), and I wonder if you guys think they had to be or whether one or two of the exclusions would have sufficed.  Also, query whether there was a need to address Coverage A when the arguments relied upon analyzed Coverage B. 

I had the opportunity to visit an artist colony this weekend, which I used to hate until I realized it was just another way to shop! And online shopping has become a passion that I should do without.  It’s so much fun though.  Just a habit I picked up during this pandemic.  Overeating is another.  I saw a meme that said something like, I need to social distance from my refrigerator.  I’m thinking of hanging that on my refrigerator and giving up carbs.  Can you imagine?  A nice Italian (part) girl from the Bronx giving up pasta?   Pretty extreme.  Someone suggest some new habits that can replace shopping and eating.

And, for those who love Broadway, what will the first play since the shutdown you intend to see? I’m torn.    

Diane
Diane L. Bucci

 

Inmate Decides Sentence:

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
01 Oct 1921

CRIMINAL ALLOWED TO NAME
HIS OWN PRISON SENTENCE

Means little to him, however, as he is under life sentence in Illinois.

John Redmond, a criminal under life sentence in Illinois, was treated gently by Justice Louis W. Marcus in supreme court yesterday when he appeared for arraignment on charge of burglary and assault. Redmond was willing to plead guilty to anything, but expressed a desire to be sent back to Joliet.

“I am sorry, but I cannot accommodate you; the law requires me to send you to some institution in this state,” Justice Marcus told the criminal.

“All right,” said Redmond, “I’ll take Auburn.”

“Do you think a year is too much?” asked the court.

Redmond said no, and that was the sentence imposed.

Redmond broke into the home of Mrs. Rose Henrich in South Park avenue several weeks ago. When detected he attacked Mrs. Henrich, brutally beating her over the head with a bottle. Her cries attracted neighbors. Redmond shot himself when cornered. One bullet carried away an eye and another crippled an arm. Two deputies guided and half carried him into court yesterday. He will be sent to Joliet prison after serving a year at Auburn if he lives that long.

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsie:

Summer. Is. Officially. Over. In. Connecticut. We’ve quickly moved from 100° temperatures and 100% humidity, together with flash flooding and hurricane-like wind damage, to fall weather. Frigid mornings walking the dog, hot afternoons, and cool evenings. It’s the season of apple picking, pumpkin carving, hayrides, corn mazes, cable knit sweaters, and firepits—oh, and some New England Clam Chowder and hot Lobster Rolls, because that’s how we roll in Southern New England. Soon, the leaves will begin changing and Connecticut will be dressed up in the colors of fall.

But there’s still little reason to get dressed up for court. While the courts are rolling out decisions again, there is still limited to no in-person court appearances on the civil docket, and I’ve yet to see anything approaching a return to normalcy on the trial docket. Parts of Connecticut, including where I live, are again requiring indoor masking regardless of vaccination status. Reminder, Connecticut’s counties are nothing more than lines on a map; Connecticut is governed by its 169 independent towns and their limited purpose partnerships, such as the Farmington Valley Health District, which includes my town.

In this edition of the Connecticut Chronicles, a federal court deals with some smelly risk transfer issues and the statutory prohibition on any provision in ‘construction contracts’ which grants immunity to either party for acts of negligence. Risk transfer is important, even in Connecticut.

Stay safe and keep being smart.

Lee
Lee S. Siegel
[email protected]      

 

Huge Fine for 30 MPH Speeders in 1921: 

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
01 Oct 1921

AUTO DRIVER FINED $75

Other fast drivers also are soaked in city court.

His second conviction within a year for speeding cost Alvin Paschke of No. 451 Woodward Avenue $75 when he was arraigned yesterday in city court. Forbes Dougherty, assistant corporation counsel, asked that an example be made of the man and reminded the court that the maximum penalty for the second offence is $250. Paschke was fined $10 on May 3d for speeding without lights. Last night he was caught by Patrolman Hall of the motorcycle squad doing about 30 miles an hour in Main Street.

Theodore Bolton of No. 424 Riley street. Charged by Patrolman Cornelius Leary with driving while drunk, was allowed to plead to reckless driving when arraigned before Judge McLaughlin. The office could not prove his original charge. Judge Maul imposed a fine of $50.

 

Rauh’s Ramblings:

Hi all!

Fall has officially begun and I have really been enjoying the cooler temperatures and fall festivities.  This past weekend, we went to Becker Farms in Gasport, New York.  My son, Cayden, had a blast apple picking and taste testing all the different kinds of apples. He loved feeding the animals and playing on the playground.  Our time at Becker Farms ended with Cayden kicking and screaming the whole way back to the car, as do the end of most activities involving my three-year-old!  At least he slept the entire way home.  Now I have three huge bags of apples that I need to figure out what to do with.  I may try to bake an apple pie this weekend, who knows!

Have a great weekend everyone – see you on October 14^th!

Patty
Patricia A. Rauh

         

It’s Why We Require Football Helmets – but Not Then:

Buffalo Courier
Buffalo, New York
01 Oct 1921

BOB WITTER OF ALFRED
MAY BE FATALLY INJURED

Hornell, Sept. 30.—Robert Witter, star halfback of the Alfred university eleven was perhaps fatally hurt at Alfred this afternoon in the opening football game of the season with Mechanics’ Institute of Rochester. H was thrown in a scrimmage and sustained a serious concussion o the brain. His condition tonight is said to be critical.

The accident occurred toward the end of the last half just after Witter had carried the ball over the line for Alfred’s second touchdown. Alfred won the game by a score of 14 to 0.

 

Storm’s SIU Examen:

Hi Everyone:

I have five cases for you this week:

• A child's court ordered scheduled pattern of visitation at her father's household at the time of the accident established her residency at his home for purposes of SUM coverage. 

• The Court dismissed the Plaintiff’s first-party property claims for damages from the COVID-19 pandemic and related governmental restrictions on non-essential businesses but granted Plaintiff’s motion to amend the pleadings.

• Medical service provider’s suit for No-Fault benefits is dismissed based upon res judicata and prima facie proof of appropriate payments under the fee schedule. 

• Medical service provider’s suit for No-Fault benefits is dismissed as premature as it had not responded to the insurer’s timely request for verification, even though the provider amended the bills during the litigation to delete the disputed charges. 

• Nationwide’s policy obligations do not include payment of fees associated with replacing a total loss car (such as title fees), however, Depositors Ins. Co.’s insured was granted leave to amend his complaint as a question of fact existed whether the language of that policy in referring to ACV may include replacement fees.

  This week’s encouraging word: “You’ve gotta dance like there’s nobody watching, Love like you’ll never be hurt, Sing like there’s nobody listening, And live like it’s heaven on earth”.  ~ William W. Purkey 

  Time for a pumpkin spice latte!

  Talk to you soon,

  Scott
  Scott D. Storm
  [email protected]

 

Insurance Fraud ala 1921:

The Philadelphia Inquirer
Philadelphia, Pennsylvania
01 Oct 1921

18 MONTHS FOR FRAUD

Sentenced for Conspiracy to Cheat Auto Insurance Company

John Colozzi, 26 years old, of 243 Queen Street, was sentenced to eighteen months in the county prison yesterday by Judge Audenried. The defendant was convicted on an indictment charging him with conspiring, together with Charles Finkelstein and others, to defraud the Franklin Fire Insurance Company of $1629.

No comment was made concerning any prosecution of Finkelstein, owner of the car. In a similar case this week the District Attorney left such action to the insurance companies.

 

Heintzman’s Hideout:

Dear Readers,

It is officially Fall now. I’ve always found I enjoy Fall the most when I embrace it and don’t dwell on Summer’s demise. As such, I’ve enthusiastically worn a Fall jacket (even when I probably don’t need one), purchased Fall candles, and made plans for classic Fall traditions like pumpkin carving and Halloween parties. I really enjoy Buffalo in the Fall, and I plan on having a great time these next few months.

Two cases this week:  in the first, an insurer tries and fails to disclaim coverage on the ground that the insured failed to timely notify it of the subject defamation action. In the second, the Court holds that an insurer cannot disclaim no-fault benefit coverage to an assignee, despite the assignee’s failure to appear for an EUO, as the insurer failed to provide a reasonable justification for the EUO.

Nick
Nicholas J. Heintzman

 

Judges Have a Role in Improving the Court System:

The Kingston Daily Freeman
Kingston, New York
01 Oct 1921

NOW UP TO JUDGES

To Improve Court Procedure Under New Practice Acts.

In an editorial reviewing the summary by Judge Clearwater of the new civil practice act, with the revised rules of civil practice in the courts of New York state which went into effect today, which summary was printed in The Freeman Friday evening, the Albany Knickerbocker Press says:

“So the expected improvement is, after all, to be derived from the attitude of the judges, rather than from the code. It may be that it will be necessary to obtain a new generation of judges before all the fuss and feathers, redundancy and abracadabra of the other old code can be banished. It was, to speak of it as kindly as possible, a mumbled, jumbled sort of nightmare, in which one might wander for many months without catching so such as a glimpse of sunlight. An intelligent judge could be of great assistance, but the hands of even the best were often tied. What Roscoe Conkling’s judicial protégé did to the other noble structure erected by David Dudley Field is what the really able members of the bar have been trying for fifty years to get rid of. Now they have made a start at it. The law is sometimes an ass, but not forever.”

 

North of the Border: 

Alberta’s hospitals are in a vice grip as the unvaccinated are appearing on their doorstep in droves, stricken with the Delta variant. ICU admissions are close to 90% of surge capacity which may result in the implementation of a strict triage policy that will determine who will receive increasingly scarce medical resources. In the meantime, the 74% of the provincial population that is double vaccinated is carrying on with everyday life with public masking and a proof of vaccination requirement for access to recreational facilities and many work places. Where is this going and when will it end?  I don’t know. But I am getting on a plane at the end of the week. My first flight since the ‘before times’. Going to the Toronto area for a Canadian Defence Lawyers Board of Directors meeting. Looking forward to it. 

My column discusses a British Columbia trial decision released last week that denied a duty to defend injury caused by shaken baby syndrome under a CGL. What is unusual is that counsel for the insurer relied on a Notice to Admit Fact to narrow the allegations in the pleading and demonstrate than a defence was not owed -- an unusual tactic that worked in that case. Will it be appealed? We will see.

Regards,

Heather
Heather Sanderson
[email protected]

 

Headlines from this week’s issue, attached:

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

• Insurance Broker had Responsibility to Assure Policy was in Place before Representing Policy was in Place

• Right Decision on Risk Transfer by Philosophical Justice (where a Purist Approach Would have Worked as Well)

   

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

• Court Applies 5-322.1 Protections to Elevator Service Contract

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley

• Unfortunately, there were no cases that were decided based on the criteria of the Serious Injury Threshold in the last 2 weeks.

 

WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
[email protected]

• Nothing new to report.

 

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

• Breach of Contract and Implied Covenant of Good Faith and Fair Dealing Claims Dismissed as Time-Barred

 

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

• Risk Transfer—Connecticut Style

 

OFF THE MARK
Brian F. Mark
[email protected]

• Check back next time.

 

BORON’S BENCHMARKS
Eric T. Boron

• Affirmance of Illinois Appellate Court Ruling – Homeowner’s Insurance – Policy is Ambiguous as to ACV Calculation - State Farm May Not Depreciate Labor Costs in Determining the ACV of a Covered Loss

 

BUCCI ON “B”
Diane L. Bucci

• Numerous Exclusions Preclude Coverage for Insureds’ Bad Acts

 

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

• Nothing this time ‘round. I’ll catch you next time.

 

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

• A First-Party Complaint Cannot Limit An Additional Insured’s Coverage When The A Third-Party Complaint Provides a Reasonable Possibility of Coverage to the Additional Insured

 

RAUH’S RAMBLINGS
Patricia A. Rauh

• Insurance Policies Obtained by Plaintiff Do Not Meet Requirements to Qualify Under ERISA as Plaintiff Failed to Show that Policies Meet the Definition of “Employee Benefit Plan” Under the Statute

 

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

• A Child's Court Ordered Scheduled Pattern of Visitation at her Father's Household at the Time of the Accident Established her Residency at his Home for Purposes of SUM Coverage
• The Court Dismissed the Plaintiff’s First-Party Property Claims for Damages from the COVID-19 Pandemic and Related Governmental Restrictions on Non-Essential Businesses but Granted Plaintiff’s Motion to Amend the Pleadings
• Medical Service Provider’s Suit for No-Fault Benefits is Dismissed Based Upon Res Judicata and Prima Facie Proof of Appropriate Payments Under the Fee Schedule
• Medical Service Provider’s Suit for No-Fault Benefits is Dismissed as Premature as it had Not Responded to the Insurer’s Timely Request for Verification, Even Though the Provider Amended the Bills During the Litigation to Delete the Disputed Charges
• Nationwide’s Policy Obligations do Not Include Payment of Fees Associated With Replacing a Total Loss Car (Such as Title Fees).  However, Depositors Ins. Co.’s Insured Was Granted Leave to Amend his Complaint as a Question of Fact Existed Whether the Language of that Policy in Referring to ACV May Include Replacement Fees

 

HEINTZMAN’S HIDEOUT
Nicholas J. Heintzman

• Insurer Tries and Fails to Disclaim Coverage on Grounds that Insured Failed to Timely Notify it of the Subject Defamation Action
• Court Holds that Insurer Cannot Disclaim No-Fault Benefit Coverage to Assignee Despite Assignee’s Failure to Appear for EUO, as Insurer Failed to Provide a Reasonable Justification for the EUO

 

NORTH OF THE BORDER
Heather Sanderson
[email protected]

• British Columbia:  CGL Coverage for Injury Caused by Shaken Baby Syndrome

   

   

  Stay healthy.  Be careful.  Count every blessing.  Every day is a gift.  Rejoice in what we have.

  Stay tuned for the next 600.

  Dan

   

   

   

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

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]

ASSISTANT EDITOR
Patricia A. Rauh

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

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

Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Diane L. Bucci
Mirna Martinez Santiago
Scott D. Storm
Thomas Casella
Brian D. Barnas
Eric T. Boron
Ryan P. Maxwell
Charles J. Englert
Patricia A. Rauh
Nicholas J. Heintzman
Diane F. Bosse
Joel R. Appelbaum

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

Michael F. Perley
Scott D. Storm
Eric T. Boron
Brian D. Barnas

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

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

Mirna Martinez Santiago
Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri
Dishing Out Serious Injury Threshold

Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Off the Mark

Boron’s Benchmarks

Bucci on “B”

Ryan’s Capital Roundup

CJ on CVA and USDC(NY)

Rauh’s Ramblings

Storm’s SIU Examen

Heintzman’s Hideout

North of the Border

 

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

09/29/21       Alpha/Omega Concrete Corp. v. Ovation Risk Planners, Inc.,
Appellate Division, Second Department
Insurance Broker had Responsibility to Assure Policy was in Place before Representing Policy was in Place

In July 2015, Alpha/Omega Building Consulting Corp. (hereinafter Consulting) was awarded a contract to perform concrete work on a construction project involving a Queens residential high-rise apartment building.  Before beginning work on the project, Consulting, via its principal, Frascone, contacted Villano, the principal of Ovation Risk Planners, Inc., (“Ovation”) a retail insurance broker, to obtain liability insurance for Consulting. Villano, on behalf of Consulting, submitted a commercial insurance application to Scottish American Insurance General Agency, Inc. (“Scottish American”), a wholesale insurance broker, which transmitted the application to Prime Specialty, Inc. (“Prime”).  Prime, in turn, placed the CGL policy with the State National Insurance Company (“SNIC”), an insurance carrier. To pay for the policy, Consulting obtained a loan from nonparty Capital Premium Financing, Inc. (“CPF”). The policy was to remain in effect from July 13, 2015, until the earlier of July 13, 2017, or the end of the project.

Consulting's work on the project was terminated before the project was completed and the remaining concrete work was to be performed by the plaintiff, (unrelated) Alpha/Omega Concrete Corp. (“Concrete”).

After Consulting was terminated from the project and while in the process of forming Concrete, Campbell, a principal in Concrete contacted Villano from Ovation to arrange for the procurement of commercial liability insurance for Concrete through Ovation with respect to Concrete's work on the project. Villano prepared a policy change request to add Concrete to Consulting's policy with SNIC and, on August 20, 2015, transmitted the request to Scottish American. Scottish American confirmed receipt of the policy change request but failed to forward it to Prime or SNIC.

Villano, testified at his deposition that he was unaware that the policy change request had not been processed by Prime or SNIC, and informed Campbell that Concrete was insured for the subject project. In addition, an Ovation employee requested that CPF change the billing address for invoices for the SNIC premium loan to Concrete's address, and Campbell began making monthly payments on the CPF debt. Campbell eventually paid in excess of $1 million.

Two claims arose out of the construction and when presented to SNCC, it denied coverage on the basis that Concrete was not covered by the subject policy.  Litigation ensued with all parties being defendants.

To state a claim based upon violation of the insurance broker's common-law duty, the client must demonstrate that the broker failed to discharge its duty either by breaching the agreement with the client by failing to obtain the requested coverage or by failing to exercise due care in obtaining insurance on the client's behalf.  Ovation failed to establish, prima facie, that it did not breach its common-law or contractual duty to Concrete. The deposition testimony submitted by the Ovation defendants in support of their motion demonstrated that Ovation agreed to obtain insurance for Concrete and then represented that it had done so without verifying this fact. In light of this evidence, the Ovation defendants failed to establish, prima facie, the absence of a triable issue of fact as to whether Ovation undertook a duty to Concrete which it then failed to discharge.

09/20/21       Scottsdale Insurance Company v. Mt. Hawley Insurance
New York State Supreme Court (Hon. Arthur Engoron, JSC)
Right Decision on Risk Transfer by Philosophical Justice (where a Purist Approach Would have Worked as Well)

The decision starts out by offering somewhat poetic “Preliminary Thoughts”:

As has often been said, although probably not in these exact words, one major goal of law is to provide, and one major beauty of law is that it does provide, predictability in human affairs. Aside from the psychological benefit of avoiding uncertainty, predictability allows rational human beings and well-run businesses intelligently to choose how to run their affairs, and in the latter case to maximize their profits. Actors have the right to know that a certain course of action will end in a certain result if they follow all the rules.

In the instant case, the building owner, on behalf of itself and its own insurers, did everything it could not to be held ultimately financially responsible for any construction accidents that happened during the work of a general contractor. Had it been, otherwise, the owner might have made other arrangements, or simply opted not to have the work done. The owner and its own insurers had a right to rely on language that clearly placed the risk of loss on the general contractor and its insurers. Only in such a legal environment can businesses make intelligent decisions, benefitting themselves and society as a whole.

175 Broadway Hospitality LLC (“175”) was the building owner. It hired Dome Voyagers (“Dome) as the general contractor.  The trade contract agreement provided that Dome would indemnify 175 and name 175 as an additional insured in the amount of $1,000,000 for primary coverage and $5,000,0000 for umbrella coverage. 

Dome secured the $1,000,000 policy from First Mercury Insurance Company (“FMIC”) and as required, named 175 as an additional insured.  Scottsdale issued the excess policy, in the amount of $10,0000,0000 and also named 175 as an additional insured (“AI”).

Certain Underwriters issued 175 a $1,000,000 primary policy and Mt Hawley issued 175 an umbrella policy.

Cruz, a Dome employee, sustained injuries in a construction site accident. He sued 175.  175 tendered to FMIC, the carrier that issued the primary policy providing AI status to the owner.  FMIC accepted the tender.  In the underlying case, a motion to dismiss the third-party action based on anti-subrogation was denied because the parties were only co-insured under the same policy to the extent of the $1,000,000 underlying policy.

In 2014, Scottsdale learned that 175 was seeking indemnity but did not timely raise its cross-suits endorsement.  Thereafter, Scottsdale settled the underlying case for $3.75 million with FMIC paying the first $1,000,000 under its primary policy and Scottsdale paying the next $2.275 million out of its umbrella policy.  Scottsdale wanted Certain Underwriters and Mt. Hawley to chip into the settlement but both refused.

Scottsdale claimed that the next layer of primary coverage after the $1,000,000 FMIC policy issued by Certain Underwriters should have been reached before the Scottsdale umbrella policy. And that afterwards, the Scottsdale and Mt. Hawley policies should have been prorated.

Editor’s interim note – Scottsdale is absolutely right.

The court went on to dismiss the action, and was right to do so, but not on coverage principles, but because of the contractual indemnity agreement:

“Dome agreed to indemnify 175.  There is simply no way around this.  As defendants vociferously argue, any judgment against them resulting in a circuity of action wherein Dome, and thus Scottsdale, will be liable to 175, and thus defendants, leaving everyone where they started.”

The court conclude:

In the Final Analysis

When you play by the rules, when you obtain the right to indemnity from the party with whom you are contracting, when that party obtains insurance naming you as an addition insured, and when there is no evidence that you were negligent, you should not be blindsided by liability that you did everything in your power to foreclose and nothing in your power to assume.

Editor’s note: The court found 175 free from negligence and should have said simply said, as an insurance purist:

Horizontal exhaustion should be in play, with 175’s primary and excess polices reached as Scottsdale has suggested.  However, while that gives Scottsdale the battle-win, it ends up losing the war anyway.  Why?  Because every penny paid on behalf of 175, is passed right back to Dome and its carriers through trade contract indemnity.

That was exactly the ruling in our Fourth Department success:

[Harleysville --the primary carrier for the contractor] exhausted its primary policy of $1,000,000 in its settlement with Roberson's employee, and Travelers [the primary carrier for the owner] is thus obligated under the terms of its policy to reimburse plaintiff for the amount paid to Roberson's employee, on behalf of Savarino, in excess of that amount. We note that, in the underlying third-party action, Savarino was granted summary judgment against Roberson on its cause of action for contractual indemnification (Nicholas v. EPO–Harvey Apts., Ltd. Partnership, 31 A.D.3d 1174, 818 N.Y.S.2d 880). Travelers would therefore have a right of subrogation against Roberson in that third-party action (see Allstate Ins. Co. v. Stein, 1 N.Y.3d 416, 422, 775 N.Y.S.2d 219, 807 N.E.2d 268), and, as a practical matter, would be entitled to reimbursement from Roberson for the amount that Travelers is obligated to pay plaintiff as excess coverage for Savarino's liability to Roberson's employee (see generally United States Fid. & Guar. Co. v. CNA Ins. Cos., 208 A.D.2d 1163, 1165, 618 N.Y.S.2d 465).

Harleysville Ins. Co. v Travelers Ins. Co., 38 AD3d 1364, 1367 [4th Dept 2007]

Same result simply stated.

Editor’s Note:  Kudos to Michael Savett who represented Certain Underwriters and Tim Delahunt who represented Mt. Hawley.

 

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

09/28/21       Schwartz v. Post Imperial Ferry Corp.
Appellate Division, First Department
Third-Party Administrator’s Failure to Report Summons and Complaint is Deemed a Reasonable Excuse

Post Imperial moved to vacate a default judgment that was entered due to its failure to timely appear.  In affirming the trial court’s decision to grant the motion, the Appellate Division noted that Post Imperial demonstrated a reasonable excuse for its delay.  Specifically, it was able to establish that the Complaint was sent to its third-party administrator who, in turn, was responsible for providing notice to the broker and insurer.  It turns out, however, the administrator “lost track” of the pending lawsuit and never forwarded the papers to the carrier for review. 

Post Imperial also demonstrated a potentially meritorious defense regarding the ownership/responsibility for the premises where the injury occurred, and further outlined potential notice issues with plaintiff’s theory. 

On that Record, the Appellate Division noted that it was not an abuse of the trial court’s discretion in opening up the default.

09/22/21       Barcliff v. Schindler Elevator Corp.
Appellate Division, Second Department
Court Applies 5-322.1 Protections to Elevator Service Contract

Plaintiff sustained injury when an elevator at Brookdale Hospital allegedly improperly closed on her.  As a result, she commenced the instant lawsuit against Nouveau who served as the elevator maintenance company for the hospital.  Nouveau, in turn, commenced a third-party against the hospital seeking contractual indemnification pursuant to the terms of the maintenance contract. 

As an initial matter, the Court ruled that a question of fact existed as to whether Nouveau should have recognized a defective condition on the elevator due to its negligent inspection/maintenance of the door.  Where Nouveau faced some possible of an allocation of negligence, the Second Department affirmed the trial court’s denial of the contractual indemnity motion. 

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley

Unfortunately, there were no cases that were decided based on the criteria of the Serious Injury Threshold in the last two weeks.

 

WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz
[email protected]

Nothing this week.

 

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

09/15/21       Hallaren v. Geico Casualty Company
Appellate Division, Second Department
Breach of Contract and Implied Covenant of Good Faith and Fair Dealing Claims Dismissed as Time-Barred

On February 21, 2009, a home owned by the plaintiff Linda Avery in Mount Vernon was damaged by fire. The property was covered by a homeowners insurance policy issued by Charter Oak. In July 2009, Linda hired the defendant Tom F. Abillama, an architect, to prepare and submit building plans for the restoration of the property.

In June 2015, Linda and her son Kyle Avery who also lived at the property, commenced this action against Charter Oak and Abillama to recover damages for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, negligence, breach of fiduciary duty, and intentional infliction of emotional distress. The plaintiffs alleged, among other things, that Charter Oak breached the homeowners insurance policy and the implied covenant of good faith and fair dealing by issuing certain payments for repairs which were not performed adequately, and then notifying Linda that it would not renew her homeowners insurance policy in April 2012 due to excessive claims based on the fire loss.

Charter Oak moved to dismiss the amended complaint on the ground that the claims asserted against it were time-barred.

Charter Oak's motion to dismiss the amended complaint as time-barred was granted. Charter Oak established, prima facie, that the time to assert claims against it expired based upon a provision in the policy providing that the action must be commenced "within two years after the occurrence causing loss or damage.”  The court rejected the plaintiffs' contention that the time limitation provision to commence an action in the policy was not valid and enforceable. Accordingly, the court granted Charter Oak's motion to dismiss the amended complaint insofar as asserted against it as time barred.

 

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

09/22/21       Precision Trenchless, LLC v. Saertex Multicom LP
United States District Court, District of Connecticut
Risk Transfer—Connecticut Style

Connecticut, it seems, could use some of that federal infrastructure money to help fix its water pipes. Here, multiple litigations were consolidated following property damage claims caused by the failure of a newly installed pipe liner that was intended to rehabilitate sewer pipes in West Hartford, Connecticut. The Metropolitan District Commission hired Ludlow, a Massachusetts company, as the general contractor for a sanitary sewer rehabilitation project. Ludlow subcontracted with Precision, a New York company specializing trenchless rehabilitation of pipes. In less than five months, the liner installed by Precision collapsed, resulting is sewer blockages and backups into area homes.

MDC demanded indemnification from Ludlow, pursuant to the Prime Contract. Ludlow requested indemnification from Precision pursuant to their subcontract. The Project Manual was incorporated into both contracts and provided in part:

“A. To the fullest extent permitted by Laws and Regulations, Contractor [i.e., Ludlow] shall defend, indemnify and hold harmless Owner [i.e., MDC] …from and against all claims, costs, losses and damages… of the Work, This indemnity shall survive the termination or expiration of this Contract and shall cover all matters arising thereunder or in connection therewith, including but not limited to the following:

1. [B]odily injury, sickness, disease or death or to injury to or destruction of tangible property …. and caused or allegedly caused in whole or in part by any act, omission or negligence of Contractor, any Subcontractor…”

The subcontract, separately, provided: “To the fullest extent permitted by law, the Subcontractor shall indemnify, and hold harmless, and defend the Owner, Contractor, Architect, Architect's consultants, and the agents and employees of any of them from and against all injuries, claims, damages, losses and expenses…resulting from the performance of the Work” for bodily injury and property damage. The subcontractor also agreed to defend the owner and general contractor for all claims arising from the Work.

Ludlow, the general contractor, was insured under a Commercial General Liability Policy issued by Charter Oak and a Commercial Excess Liability (Umbrella) Policy issued by TPCCA—both Travelers subsidiaries. Travelers moved for judgment against Precision, the subcontractor, for failure to indemnify Ludlow for monies paid to MDC and property owners, and for defense costs, following the collapse of the sewer liner. In Connecticut, the general rule is that an insurer's right to subrogation attaches, by operation of law, on paying an insured's loss. Charter Oak paid almost $320,000 following the sewer liner collapse, not nearly exhausting its $2 million liability limit. 

The court granted Charter Oak partial summary judgment, finding that pursuant to their Subcontract, Precision owed Ludlow a duty of indemnification against claims, damages, losses, and expenses arising out of or resulting from performance of Precision's Work under the Subcontract, and as a result, Precision owed those duties to Charter Oak as Ludlow’s insurer. The court, however, denied the motion as to damages as premature and denied that TPCCA was owed a duty, as there was no proof it had made any payments.

MDC also sought summary judgment against Ludlow for failure to indemnify. MDC alleged that Ludlow agreed to indemnify it against all losses and damages arising out of Ludlow's performance of “the Work” under the Contract; that the liner installed by Ludlow's subcontractor failed and subjected MDC to damages and expenses, including the cost of remediating affected homeowners’ properties; and that Ludlow failed to respond to MDC's demands for defense and indemnification. MDC argues that it is entitled to summary judgment because the installation of the liner and its subsequent failure are unambiguously covered by “the Work” as it is used in the Contract’s indemnity provision.

In opposition, Ludlow argued that the definition of the Work was ambiguous, that the indemnity provision is unenforceable because it violates section 52-572k(a) of Connecticut General Statutes, which voids any provision in a construction contract that indemnifies a promisee against the promisee's own negligence, and that because MDC never demanded a defense.

Adopting Ludlow’s argument, the court wrote “the Contract contains multiple, differing definitions of “the Work” and that it is unclear to which definition the indemnity provision refers.” However, the court held that there is no need to decide which of three definitions of “the Work” is controlling for purposes of the indemnity provision because the undisputed facts demonstrate that the damages incurred by MDC arise] out of or relate to the performance of the Work, regardless of which definition of “the Work” applies.

The indemnity provision required Ludlow to indemnify MDC for loss “arising out of…the Work.” The court, giving the phrase its usual breadth, concluded that “it is sufficient to show only that the accident or injury was connected with, had its origins in, grew out of, flowed from, or was incident to” the particular event.” While the loss clearly arose out of the Work, the court found that the Contract’s indemnity provision violative of Connecticut law. The purpose of Conn. Gen. Stat. Ann. § 52-572k(a) is to nullify any provision in ‘construction contracts’ which grants immunity to either party for acts of negligence. “Plainly, this provision seeks to indemnify MDC against personal injury or property damage “caused in part by”, inter alia, MDC's own negligence. In so doing, it runs afoul of Section 52-572k(a).”

But did the court throw out the baby with the bathwater? No! “The court does not, however, agree with Ludlow's contention that Section 6.20 is void in its entirety as a result.” First, Section 6.20 is introduced by a savings clause that limits Ludlow's indemnity obligation “[t]o the fullest extent permitted by Laws and Regulations.” Section 6.20. This language weighs in favor of excising only the offending clause of the indemnity provision. Second, and more important, the Contract between MDC and Ludlow contains a severability clause. “Here, severance is possible because, absent the offending clause, Section 6.20 still expressly obligates Ludlow to indemnify MDC against damages “caused or allegedly caused in whole or in part by any act, omission or negligence of Contractor, any Subcontractor…”

 

OFF the MARK
Brian F. Mark
[email protected]

Coming up empty.

 

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

09/23/21       Sproull v. State Farm
Supreme Court of Illinois  
Affirmance of Illinois Appellate Court Ruling – Homeowner’s Insurance – Policy is Ambiguous as to ACV Calculation - State Farm May Not Depreciate Labor Costs in Determining the ACV of a Covered Loss

The insured brought a putative class action against State Farm, issuer of the insured’s homeowner’s policy, alleging State Farm improperly depreciated labor costs in determining actual cash value (ACV) of a covered loss, and concealing practice from policyholders. The certified question of “actual cash value” of a covered loss was first ruled on by an Illinois Appellate Court which held that State Farm could not include depreciation of labor in calculating “actual cash value.” The Supreme Court of Illinois held on appeal that in a matter of first impression, when calculating “actual cash value” of covered loss, property structure and materials were subject to a reasonable deduction for depreciation, but depreciation could not be applied to the intangible labor component.

A significant difference between an “ACV” policy and a “RCV” policy is that under a typical ACV policy, an insured is paid only the actual cash value of her/his/its loss. Period.  And it doesn’t matter if the insured repairs/replaces the damaged property or not.  However, under a typical RCV policy, the insured initially receives an ACV payment - but can also receive full replacement costs if she/he/it makes the repairs/replacement of the damaged property within a designated time.

After analyzing how other courts, both state and federal, have considered and addressed the issue at hand, the Illinois Supreme Court ultimately concluded the following.  The insured offered a reasonable interpretation of “actual cash value” and “depreciation.” State Farm also offered a perfectly reasonable interpretation of the policy. Because the Supreme Court of Illinois finds that the policy is ambiguous as to how to calculate ACV, and the insured has offered a reasonable interpretation of it, it found itself constrained and required to construe the ambiguity in the policy against State Farm, and rule that the Illinois Appellate Court had correctly concluded that  “[W]here Illinois's insurance regulations provide that the ‘actual cash value’ of an insured, damaged structure is determined as ‘replacement cost of property at time of loss less depreciation, if any,’ and the policy does not itself define actual cash value, only the property structure and materials are subject to a reasonable deduction for depreciation, and depreciation may not be applied to the intangible labor component.”

Notably, a footnote of the Illinois Supreme Court’s opinion indicates that “State Farm acknowledged that it had recently amended its homeowner's policy language in Illinois to explain that all components of replacement cost, including labor, are subject to depreciation in calculating actual cash value. However, State Farm argued that this revision could not be interpreted as an admission that the language in plaintiff's policy was ambiguous”.

 

BUCCI on “B”
Diane L. Bucci

09/15/21       Great American Insurance Company v. Beyond Gravity Media, Inc.
U.S. District Court, Southern District of Texas
Numerous Exclusions Preclude Coverage for Insureds’ Bad Acts

Insured Beyond Gravity, a California company, and its principal, Matalon, entered into a contract with Code Ninjas LLC, a Texas company, which developed a unique curriculum and operated and licensed centers using the curriculum to teach “computer programming, coding, math, logic, and teamwork to children.” Code Ninjas trademarked CODE NINJAS®. The contract permitted the Insured to open franchises using Code Ninjas trademarks and trade secrets. 

Subsequently, the Insured sought to avoid the franchise agreement allegedly because Code Ninjas breached California law.  Code Ninja’s brought suit against the Insured alleging that it obtained Code Ninjas's confidential and proprietary information while working with Code Ninjas and misappropriated this information as well as Code Ninja’s trademark and/or logo to create and advertise a competing company called “Dojo Tech” or “CoDojo.” Code Ninja’s also alleged that the Insured breached non-compete clauses. 

The two companies reached a settlement agreement.  Great American filed for a declaration that it did not owe defense or indemnification coverage in regard to this dispute. 

The court analyzed the Coverage B offenses of:

f. the use of another's advertising idea in your “advertisement”; or

g. infringing upon another's copyright, trade dress or slogan in your “advertisement.”

1. “Advertisement” was defined to mean a notice that is broadcast or published to the general public or specific marker segments about your goods, products, or services for the purpose of attracting customers or supporters. For the purposes of this definition:

a. notices that are published include material placed on the Internet or on similar electronic means of communication; and

b. regarding web sites, only that part of a web site that is about your good, products or services for the purposes of attracting customers or supporters is considered an advertisement.

Ninja had alleged the use of CODE NINJAS® trademark through a website, social-media pages, and a job listing on Simply Hired.  Great American argued that that the misappropriation complained of and the use of them to create a competitor business was not an advertisement even though it was on the Insured’s website and social media pages.  As an example, Great American noted that the Insured posted Code Ninjas's privacy policy on its website and argued that the privacy policy had no relationship to advertising because it was not used to promote a product.  Great American also alleged that Code Ninjas did not allege an injury arising out of an advertisement.

To the contrary, held the court, Code Ninjas specifically alleged that the Insured attended franchise conferences in order to obtain access to Code Ninjas marketing and advertisement strategies and advertised on the Insured’s website.  The court listed numerous reasons why the information obtained by the Insured was used to promote the Insureds new business. 

However, held the court, policy exclusions applied.  For one, the knowing violation exclusion for “‘[p]ersonal and advertising injury’ caused by or at the direction of the Insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury,” applied to defeat coverage for most of the claims asserted.  It further held that the breach of contract exclusion would defeat any claims for breach of the franchise agreement(s), non-compete contracts and the like. 

The court next examined the infringement exclusion, which precluded coverage for claims arising out of the infringement of “copyright, patent, trademark, trade secret or other intellectual property rights.” It contained an exception for infringing upon another's copyright, trade dress or slogan in your ‘advertisement. According to the court, the exclusion was inconsistent because it covered “the use of another's advertising idea in your ‘advertisement’” However, the inconsistencies involved infringement of copyright which were not at issue.  Thus, court was comfortable with applying the exclusion for trademark infringement as it pertained to allegations that the Insured misappropriated trade secrets and trademark infringement. 

The court examined the application of the unauthorized use exclusion which precludes coverage for “[p]ersonal and advertising injury” arising out of the unauthorized use of another's name or product in your e-mail address, domain name or metatag, or any other similar tactics to mislead another's potential customers.”  It was clear to the court that the claims involved unauthorized use of Code Ninjas trademark, website advertisements, and the like.  Consequently, this exclusion also applied. 

The policy also contained a disclosure exclusion as follows:

F. “Access or Disclosure of Confidential Information” Exclusion

“[p]ersonal and advertising injury” arising out of any access to or disclosure of any person's or organization's confidential or personal information, including patents, trade secrets, processing methods, customer lists, financial information, credit card information, health information or any other type of nonpublic information.

This exclusion also clearly applied. 

Ultimately, the court granted summary judgment to Great American declaring that it had no duty to defend or indemnify the Insured based on these various policy exclusions.  Query whether they were all necessary to completely defeat coverage. 

 

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

Nothing this time ‘round. I’ll catch you next time.

 

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

09/01/21       Axis Construction Corp. v. Travelers Indemnity Co. of Am. et al
United States District Court, Southern District of New York
A First-Party Complaint Cannot Limit An Additional Insured’s Coverage When The A Third-Party Complaint Provides a Reasonable Possibility of Coverage to the Additional Insured

Plaintiff Axis Construction Corp. (“Axis”) brought this action against Defendants Travelers Insurance Company of America (“Travelers”) and State National Insurance Company (“SNIC” and with Travelers, “Defendants”) seeking a declaration that each Defendant owes a duty to defend and indemnify Plaintiff on a primary and noncontributory basis in an underlying personal injury action.

On November 30, 2016, Axis became the general contractor of a construction project at 3635 Express Drive North, Islandia, New York (the “Project”). Axis engaged two subcontractors for work on the project: nonparties (i) American Wood Installers (“AWI”) for millwork installation, pursuant to a December 27, 2016, contract relating only to the Project, and (ii) ABC Contracting, Inc. (“ABC”) for flooring installation, pursuant to an evergreen contract entered January 1, 2016. Each subcontract required the subcontractor to procure commercial liability insurance coverage that included Axis as an additional insured on a “primary and noncontributory” basis “for claims caused in whole or in part by the subcontractor’s negligent acts or omissions.” Each subcontract also stated, “The subcontractor shall not be held responsible for conditions caused by other contractors or subcontractors.” AWI obtained commercial general liability insurance from Defendant Travelers, effective from August 8, 2016, to August 8, 2017. The policy’s “Blanket Additional Insured (Contractors)” endorsement makes Axis an additional insured “to the extent that injury or damage is caused by acts or omissions of [AWI] in the performance of [AWI’s] work” pursuant to its subcontract with Axis. Travelers’s policy does not insure Axis “with respect to [Axis or others’] independent acts or omissions.” When any “other insurance” covers Axis for the same loss that Travelers covers Axis, Travelers’s coverage is “primary” if Axis is a named insured in the “other insurance” and “excess” if Axis is an additional insured therein. When Travelers’s insurance is excess, it has “no duty . . . to defend [Axis] against any ‘suit’ if any other insurer has a duty to defend [Axis] against that suit.” ABC obtained commercial general liability insurance from Defendant SNIC, effective January 26, 2016, to January 26, 2017, that named Axis as an additional insured.

On January 19, 2017, nonparty Peter Filippone—an AWI employee—sustained personal injuries after tripping on Masonite sheets (flooring protection) left untaped to the floor of the Project jobsite. He filed a lawsuit on March 20, 2017, in New York State Supreme Court, Suffolk County against Axis, among others and asserted that Axis, ABC, and/or others’ negligence and New York Labor Law violations created the tripping hazard that proximately caused his injuries. On June 5, 2017, Axis tendered its defense to Travelers. Travelers denied the tender on June 28, citing the absence of evidence demonstrating that the loss “arose out of [AWI’s] work” and the absence of “any finding of negligence against” AWI. Travelers in, particular, noted Filippone’s accident involved Masonite flooring, which “was not the responsibility of” AWI. Axis seeks indemnification from AWI, asserting AWI’s negligence and New York Labor Law violations created the hazard and proximately caused Filippone’s injuries. In the instant action Axis moved for summary judgment on Traveler’s duty to defend, and Travelers has cross-moved on the same issue.

The motions concerned Travelers’s duty to defend Axis in two respects: (I) whether the allegations in the Filippone Action give rise to a reasonable possibility of coverage under Travelers’s policy, or whether Travelers has knowledge of facts which potentially bring the Filippone Action within its policy coverage, and, if so, (II) whether Travelers is nevertheless relieved of its duty to defend Axis because such coverage would be excess. Axis’s potential coverage is dependent on the Travelers’s Blanket Additional Insured (Contractors) endorsement. The issue is whether Filippone’s injuries were “caused by the acts or omissions of” Travelers’s named insured, AWI, “in the performance of [AWI’s] work” pursuant to its subcontract with Axis, or, alternatively, whether Axis’s (or others’) “independent acts or omissions” caused the harm. New York courts, and those applying New York law, law interpret this endorsement to trigger coverage where the named insured’s operations are alleged to have proximately caused the bodily injury for which coverage is sought. The court here held that Axis’s verified third-party complaint against AWI asserts AWI’s “carelessness, recklessness, and/or negligence . . . was the proximate cause” of Filippone’s injuries. Axis’s verified Bill of Particulars elaborates the allegations of its third party-complaint: AWI, “by and through [its] agents, servants and/or employees caused and created the situation by placing the loose Masonite flooring panels down without securing them.”

Travelers however contended that Axis’s “self-serving third-party complaint” is insufficient to trigger Travelers’ duty to defend and confines its view of the relevant allegations to those pleaded in the Filippone first-party complaint. The court here held that the underlying complaint should not serve as a basis to narrow an insurer’s duty to defend. As Fillipone was statutorily prohibited, under New York law, to name his employer AWI as a negligent party in the underlying complaint the analysis of Traveler’s duty to defend cannot be confined to the underlying first-party complaint.

 

RAUH’S RAMBLINGS
Patricia A. Rauh

09/07/21       Cay-Montañez v. AXA Equitable Life Ins. Co., et al.
U.S. District Court, District of Puerto Rico
Insurance Policies Obtained by Plaintiff Do Not Meet Requirements to Qualify Under ERISA as Plaintiff Failed to Show that Policies Meet the Definition of “Employee Benefit Plan” Under the Statute

Plaintiff, Julio M. Cay-Montañez (“Plaintiff”) brought this action against AXA Equitable Life Insurance Company (“AXA”), Disability Management Services Inc. (“DMS”), and UNUM Group (“UNUM”) (collectively, “Defendants”), under the civil enforcement provision of the Employee Retirement Income Security Act of 1974 (“ERISA”), for alleged denial of benefits and breach of fiduciary duty under certain insurance policies.  Plaintiff also brought state claims against the Defendants for breach of contract, tortious interference with a contract and general tort damages under Puerto Rico law, pursuant to the Court’s supplemental jurisdiction.  The Defendants moved to dismiss Plaintiff’s claims on the grounds that the policies in question do not meet the requirements to qualify under ERISA.

As background, the Plaintiff obtained two insurance policies from AXA for disability coverage (the “Policies”) while he was working at Metro Tech Corporation (“Metro Tech”).  In 2010/2011, Plaintiff suffered from depression and started receiving disability benefits under the Policies and he was continually evaluated to determine his ongoing eligibility.  DMS and UNUM were used as the investigators for evaluating the Plaintiff.  In March of 2016, based on DMS’s and UNUM’s determinations, AXA ceased the disability payments to the Plaintiff.  He then filed an administrative appeal, but the Defendants determined that they would continue to deny his disability benefits.  In one of the letters from Defendants to Plaintiff, he was notified that if he wanted to have the denial of benefits determination reversed, he should bring an action under ERISA.  This lawsuit was filed shortly thereafter.

In Defendants’ motion to dismiss, they argued that the Policies do not qualify under ERISA because they were not established or maintained by an employer for the benefit of its employees, as required by the statute, and as such, the Court lacks subject matter jurisdiction over these claims.  Plaintiff opposed the motion to dismiss on the theory of equitable estoppel, arguing that he had relied on Defendants’ representations that he could pursue an ERISA action if he wanted to appeal their benefits determination.

The Court granted Defendants’ motion to dismiss.  The Court reasoned that ERISA governs “employee benefit plans”, pursuant to 29 U.S.C. § 1001.  That term is defined in the statute as either an “employee welfare benefit plan” or an “employee pension benefit plan.”  Further, ERISA defines “participant” as an employee who is or may become eligible to receive benefits under the plan.  29 U.S.C. § 1002(7).  Therefore, an ERISA action may only be brought by a party that meets the definition of “participant” under a policy that meets the definition of “employee benefit plan.”

The Court ruled that Plaintiff’s allegations in the complaint failed to meet either definition.  He alleged that he purchased the Policies while working at Metro Tech, but he did not allege any facts indicating that he purchased the Policies through Metro Tech or that Metro Tech “established and maintained” the Policies for his benefit.  Thus, Plaintiff failed to allege a cause of action under ERISA and the Court thereby lacked subject matter jurisdiction to hear his claims.

In regard to the equitable estoppel claim raised by Plaintiff in opposition to the Defendants’ motion to dismiss, the Court stated that Plaintiff failed to show that the First Circuit had ever applied an equitable estoppel claim to allow a claim under ERISA to proceed when it would otherwise not qualify.  The cases cited by Plaintiff from other Circuit Courts that have interpreted ERISA’s civil enforcement provisions as allowing for equitable estoppel have done so only in the context of clarifying an ambiguous plan provision and have specifically recognized that the theory may not be used to interpret a clear provision and thereby modifying the plan term.  Since Plaintiff was not asking the Court to interpret an ambiguous term in the Policies, but rather asked the Court to apply ERISA protections to the Policies that do not meet the threshold requirements under the statute, equitable estoppel cannot save Plaintiff’s claims.

Finally, in regard to the state law claims, the Court reiterated that since it has no jurisdiction over the purported federal law claims, it also has no jurisdiction over Plaintiff’s state law claims.

 

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

09/10/21       Hilmer v. Esurance Property and Casualty Ins. Co.
United States District Court, E.D. Pennsylvania
A Child's Court Ordered Scheduled Pattern of Visitation at her Father's Household at the Time of the Accident Established her Residency at his Home for Purposes of SUM Coverage

Plaintiff, a sixteen-year-old, lived with her mother in Florida during the school year under a joint custody order requiring her to also live with her father in Pennsylvania on regular breaks and for extended summer weeks.  Walking to her high school in Florida, the Plaintiff suffered serious injuries. After the underinsured driver's insurer tendered policy limits, the Plaintiff sought coverage through her father's SUM policy. The insurer denied coverage arguing it does not cover the student living with her mother in Florida at the time of the accident since she could not be considered a “resident” of her father's household. The Plaintiff sued and the parties cross-moved for summary judgment. The issue is whether the parents' detailed joint custody order requiring the Plaintiff to stay in her father's Pennsylvania home at scheduled certain and extended times every year, along with other facts evidencing a set obligation to live with her father, is sufficient to find she resided in her father's household and is covered by his auto insurance policy as a matter of law. The Court granted the Plaintiff summary judgment.  The student's court ordered scheduled pattern of visitation at her father's household at the time of the accident established her residency at his home. Regular stays at fixed times of the year established her status as a member of her father's household entitling her to underinsured motorist coverage.

A child of divorced or separated parents may be regarded as a resident of the household of both parents but is not automatically rendered a resident of both her parent's households.  Based upon a review of the totality of undisputed facts the Court decided they confirm her residency in her father's household. But finding a child is a resident of both parent's households is "less compelling" where the child visits a parent and "occasionally" stays overnight and has not "spent significant amounts of time" at the parent's house. The Court did not mandate an "equal division" of time and contrasted the situation where a child divides her time between her parents with a child visiting a parent and "occasionally" staying overnight. A state court judge ordered the Plaintiff to stay with her father at certain scheduled times. Her family complied with the terms and spirit of the order. The Plaintiff's parents' regular routine and use of their custody agreement as a goal in scheduling their daughter’s time, created substantial contacts between the Plaintiff and her father's household despite the physical distance and time spent at her mother's household throughout the school year. The parents' routine visits and collective attempts to parent lead to an expectation of the Plaintiff's periodic return to her designated bedroom in her father's household during breaks from school.

09/15/21       The Chef’s Warehouse, Inc. v. Employer’s Ins. Co. of Wausau
United States District Court, S.D. New York
The Court Dismissed the Plaintiff’s First-Party Property Claims for Damages from the COVID-19 Pandemic and Related Governmental Restrictions on Non-Essential Businesses but Granted Plaintiff’s Motion to Amend the Pleadings

Plaintiff brought this breach of contract action against Defendant to recover losses it incurred as a result of the COVID-19 pandemic and related governmental restrictions on non-essential businesses. Plaintiff alleges that Defendant breached its insurance coverage obligations under the first-party property policy by denying coverage for these losses and seeks compensatory damages and declaratory relief.

Defendant moved for judgment on the pleadings under Fed. R. Civ. P. 12(c), on the grounds that Plaintiff has failed to allege any losses covered by the Policy, or in the alternative, that recovery for such losses is expressly excluded.  The Court granted Defendant's motion, though it also granted Plaintiff leave to file an amended complaint.  The Court held what the vast majority of courts all over the country have, “direct physical loss or damage” is not an ambiguous term; mere loss of use of insured property does not constitute “direct physical loss or damage”; Plaintiff has not alleged the actual presence of COVID-19 on the insured property; and Plaintiff failed to show coverage under the civil or military authority provision. 

However, the Court did grant the Plaintiff's request for leave to amend its pleadings.  Fed. R. Civ. P. 15(a)(2) provides that a court should freely give leave to amend "when justice so requires." However, it is "within the sound discretion of the district court to grant or deny leave to amend," and such leave may be denied if the amendment would be futile. Amendment is futile if the "amended portion of the complaint would fail to state a cause of action."  Although an amendment seems like an exercise in futility, the Court said that it understands that Plaintiff's focus on the threatened, as distinguished from the actual, presence of the virus on covered property is a strategic one. Pleading the actual presence of the COVID-19 virus on such property would seemingly implicate the Policy's contamination exclusion, which numerous other courts in this Circuit have cited as a basis for denying coverage in analogous factual settings. The Court added that it has reason to be skeptical that the Plaintiff will be able to thread the needle of alleging facts that implicate coverage under the Policy without simultaneously implicating the contamination exclusion. However, because the Court was unfamiliar with the evidence that Plaintiff currently possesses, it said that it is loath to find that any such effort would be futile. Accordingly, the Court granted Plaintiff leave to amend the Complaint, but cautioned Plaintiff to be mindful both of this Opinion and of the many decisions from courts in this Circuit that have issued since the instant motion was filed.

09/16/21       Tandingan PT PC AAO Hernandez v. State Farm Fire & Cas. Co.
Civil Court of the City of New York, Queens County
Medical Service Provider’s Suit for No-Fault Benefits is Dismissed Based Upon Res Judicata and Prima Facie Proof of Appropriate Payments Under the Fee Schedule

Defendant's motion for summary judgment was granted dismissing Plaintiff's complaint for unpaid No-Fault benefits for medical services provided to Plaintiff's assignor based upon res judicata and prima facie proof of appropriate payments under the fee schedule. 

On 5/21/18 Plaintiff sued to recover a total of $1194.17 in unpaid No-Fault benefits for medical services provided to Plaintiff's assignor Hernandez, plus attorneys' fees and statutory interest, alleging four separate claims.  Plaintiff sought to recover $308.36 for services provided on 5/24/17; $119.19 and $291.62 for services provided on 6/7/17; and $475.00 for services provided on 6/21/17.  On 12/29/17 Defendant had commenced an action against Plaintiff in S. Ct., Nassau County, seeking a judgment declaring Plaintiff had no right to receive No Fault benefit payments because Plaintiff failed to appear for examinations under oath on a number of claims.  Upon Plaintiff's failure to appear at an inquest, Nassau S. Ct. found that Defendant properly denied Plaintiff's claims for that reason. That court held that Defendant had "no obligation to pay any of the no-fault claims".  In the instant matter, Defendant now moved for summary judgment dismissing Plaintiff's complaint on the ground that the Order in the Nassau S. Ct. action precluded Plaintiff's claims in this action or that Plaintiff's claims were timely paid according to the applicable fee schedule.

As to Plaintiff's claims of $119.19 and $291.62 for services provided on 6/7/17, as well as $475.00 for services provided on 6/21/17, Defendant argued that those claims were barred by the Order.  The Court agreed.  Res judicata precludes a party from litigating a "a claim where a judgment on the merits exists from a prior action between the same parties involving the same subject matter".  Res judicata bars claims that were not actually litigated, but could have been raised, even if based on different theories and seeking different remedies.  The list of claims appended to the Supreme Court complaint included the claims Plaintiff now sought to recover in the amounts of $119.19, $291.62, and $475.00 for services provided in June 2017, but did not list Plaintiff's present claim in the instant case for $308.36. Therefore, the claims for services provided in June 2017 were barred by the determination in the Nassau S. Ct. Order, and those claims were dismissed. 

However, regarding Plaintiff's claim for $308.36 for the service provided on 5/24/17, the court held that automobile insurers must provide $50,000.00 coverage for "basic economic loss" (Insurance Law § 5102[a]).  Basic economic loss expenses are limited by Insurance Law § 5108 (Insurance Law § 5102[a]).  Charges for basic economic loss "shall not exceed the charges permissible under the schedules prepared and established by the chairman of the workers' compensation board for industrial accidents, except where the insurer or arbitrator determines that unusual procedures or unique circumstances justify the excess charge" (Insurance Law § 5108[a]).  No payment is due for services in excess of charges permitted by Insurance Law § 5108 (11 NYCRR 65-3.8[g][1][ii]).  Here, Plaintiff's claim for $308.36 was based on Defendant's payment of only $166.64 of Plaintiff's bill in the amount of $475.00.  Defendant argued that Plaintiff's claim for $475.00 exceeded the applicable fee schedules and that $166.64 was the proper allowed amount for the billed services. Although the court may take judicial notice of the fee schedules, they do not independently establish whether they were correctly applied. In this case Defendant supported its motion with an affidavit in which a certified professional coder concluded that the amount Plaintiff billed for the medical services should have been $166.64 based on the applicable fee schedules because Plaintiff applied an incorrect code for the services provided. This affidavit satisfied Defendant's obligation to present an expert to interpret the fee schedule.  Defendant also presented: an affidavit from Defendant's Claim Specialist; copies of a check issued to Plaintiff in the amount of $169.31; a denial of claim form acknowledging receipt of Plaintiff's claim in the amount of $475.00 and denying $308.36 of that claim because it exceeded applicable fee schedules; and an explanation of review approving payment of $169.31 ($166.64 plus $2.67 in interest) of Plaintiff's total claim of $475.00. Defendant's admissible evidence demonstrated timely payment of Plaintiff's claim in accordance with the applicable fee schedule. Here, Defendant has established its prima facie case by admissible evidence and is also entitled to summary judgment dismissing Plaintiff's claim in the amount of $308.36 for services provided 5/24/17.

08/27/21       A.C. Medical, P.C., as Assignee of Alan Bailey v. N.Y. Central Mut. Fire Ins. Co.
Supreme Court, Appellate Term, Second Department
Medical Service Provider’s Suit for No-Fault Benefits is Dismissed as Premature as it had Not Responded to the Insurer’s Timely Request for Verification, Even Though the Provider Amended the Bills During the Litigation to Delete the Disputed Charges

Civil Court of the City of N.Y., Kings County, had denied defendant's motion for summary judgment dismissing the complaint and granted plaintiff's cross motion seeking leave to amend its summons and endorsed complaint.  The 2^nd Dept. modified by granting defendant's motion for summary judgment dismissing the complaint. 

Provider sought to recover $3,268.16 for assigned first-party no-fault benefits.  Defendant moved for summary judgment on the ground that the action is premature. Defendant alleged that, on 11/28/16, it received two bills dated 11/12/16 from plaintiff totaling $3,268.16, for medical services provided to the assignor on 11/18/16. Each bill included a $241.50 electromyography service. Defendant timely mailed initial and follow-up requests for additional verification and plaintiff had since then not provided the requested verification with respect to the electromyography services.

Plaintiff served an amended cross motion seeking summary judgment and leave to amend the summons and endorsed complaint to now recover $2,785.16 for the services rendered on 11/18/16. In March 2017, Plaintiff had submitted two new bills dated 3/29/17 to defendant for the services rendered on 11/18/16, now in the total amount of $2,785.16 (having deducted the electromyography service). The sole explanation for the "amended bills" was a sworn statement by plaintiff's medical billing supervisor that she "was made aware that the defendant was…requesting verification for services that were mistakenly added to the bill." Copies of the March 2017 bills were attached to plaintiff's amended cross motion.  They are not labeled "amended bills," nor is there any indication that plaintiff previously communicated to defendant that it intended to replace the November bills with the March bills.

Defendant demonstrated that it had timely mailed initial and follow-up requests for verification upon receipt of plaintiff's bills on 11/28/16, and that its 30-day period to pay or deny those bills (see 11 NYCRR 65-3.8[a][1]) did not begin to run because verification remained outstanding. Defendant thus demonstrated, prima facie, that this action is premature.

This action was commenced to recover the principal sum of $3,268.16 (the amount sought in the November bills).  Plaintiff has now elected not to pursue payment for the $483 electromyography services that were the subject of the outstanding verification requests.  Plaintiff cannot retroactively create an obligation for defendant to have paid or denied the $2,785.16 bill, thereby providing a basis for this action.  The submission of the March 2017 bills did not create a new obligation for defendant to pay or deny plaintiff's duplicate claims for the remaining services, totaling $2,785.16, within 30 days, nor did it give defendant a new opportunity to request additional verification with respect to those services.  Plaintiff has not demonstrated that these bills were anything other than a nullity.

08/19/21       Sylvester, et al. v. Depositors Ins. Co. and Nationwide Mut. Ins. Co.
United States District Court, E.D. Pennsylvania
Nationwide’s Policy Obligations do Not Include Payment of Fees Associated With Replacing a Total Loss Car (Such as Title Fees).  However, Depositors Ins. Co.’s Insured Was Granted Leave to Amend his Complaint as a Question of Fact Existed Whether the Language of that Policy in Referring to ACV May Include Replacement Fees

Plaintiffs brought a putative class action alleging breach of contract because Defendants, in paying Plaintiffs' claims of total loss resulting from motor vehicle collisions, did not compensate them for fees associated with replacing a vehicle (such as title fees), estimated to be about $105.  Defendants moved to dismiss.  The Court initially granted Defendants' Motion to Dismiss, finding that the Complaint failed on the merits because the insurance policies clearly and unambiguously provided that the insurers must pay for the loss to the vehicle, not the replacement cost or the "actual cash value." Plaintiffs now move to alter the judgment and to amend their complaint. The Court granted the motion to alter the judgment as it pertains to Plaintiff Sylvester against Depositors Ins. and giving him leave to amend. However, it denied the motion as it pertains to Plaintiffs Edwards and Hill against Nationwide. 

The Third Circuit treats Fed. R. Civ. P. Rule 59 motions and motions for reconsideration as functional equivalents. A Rule 59(e) motion to alter or amend the judgment "must rely on one of three major grounds: (1) an intervening change in controlling law; (2) the availability of new evidence [not available previously]; [or] (3) the need to correct clear error [of law] or prevent manifest injustice."  In its prior ruling, the Court held, after determining that the language in the policies is clear and unambiguous, that Defendants only have a duty to pay for the loss to the auto in the case of a total loss. The Court now said this finding was clear error, and amendment of the Complaint would not be futile as it relates to the Depositors policy. However, amendment of the Complaint would still be futile in relation to the Nationwide policies.

The Depositors policy, states: "We will pay for direct and accidental loss to ‘your covered auto’ or any ‘non-owned auto’, including their equipment, minus any applicable deductible shown in the Declarations." The Court agrees that its prior Memorandum constituted clear error by interpreting the definition of "loss" to encompass a "total loss" and holding that it was clear and unambiguous that ACV is not owed in the event of a total loss. Although the Memorandum discusses coverage of "loss" at length, the relevant issue here is the coverage of a "total loss." The Depositors policy does not define "total loss" like it does "loss".  

The Depositors policy simply says it will cover "loss," which is also defined as "direct and accidental damage," but it does not state that "total loss" is included in that coverage. Since "total loss" is not explicitly provided for in the policies, the issue becomes whether the parties intended for a total loss to have the same coverage as a "loss" or to have different coverage. Given that (1) many policies implicitly distinguish between the two and (2) the term is given a distinct meaning in the insurance industry, it is not clear and unambiguous that the parties intended for "loss" to also encompass "total loss".  Thus, it was clear error for the Court to interpret coverage for "loss" as automatically including coverage for a "total loss."

Depositors argues that even if ACV was the appropriate amount to pay for a total loss, amendment of the Complaint would be futile because there are multiple reasons why the policy is clear that ACV does not include replacement fees. First, it argues that since the policy specifies the limit of liability as actual cash value of "the stolen or damaged property," Sylvester is only entitled to the value of the totaled vehicle, and not replacement fees. But ACV could mean either (1) "the fair market value of the property at the time of the loss" or (2) "the replacement cost of the vehicle less depreciation for age and condition."  If it means the latter, then replacement fees such as title and regulatory fees might be included.

Depositors also argues that since the policy states that the "limit of liability for loss will be the lesser of the: 1. Actual cash value of the stolen or damaged property; or 2. Amount necessary to repair or replace the property with other property of like kind and quality," including replacement fees in ACV would negate any difference between the two options and render the second option a nullity. This would not be true, however, if the Court finds that ACV is defined as replacement cost of the vehicle less depreciation for age and condition.

Under these circumstances, it was clear error to find that the language in the Depositors policy is clear and unambiguous that Depositors only has a duty to pay for the loss to the auto in the case of a total loss. Allowing Sylvester to amend the Complaint would not be futile.  He will be granted leave to amend to argue that it was necessarily implied in his contract that Depositors would pay ACV in the event of a total loss. 

However, amendment of the Nationwide policies would be futile because the language is clear and unambiguous that Nationwide does not have a duty to pay replacement fees if ACV is owed.

ACV is unambiguously defined in the Nationwide policies as follows: "To determine actual cash value, we will consider: 1. fair market value; 2. age; 3. condition of the property; and 4. betterment." The definition of ACV is unambiguous and does not include replacement fees in a policy that limits liability to "the lower of 1) the ACV, which is determined by the vehicle's market value, age, and condition, of the damaged vehicle, or 2) the cost of replacing the damaged vehicle." Plaintiffs Hill and Edwards-Gutzman argue that the phrase "we will consider" creates a material difference between the two cases, and that the phrase connotes a list of factors to consider in determining ACV, rather than a definition of ACV. Regardless, the fact remains that the list of factors is unambiguously exclusive and does not include replacement fees as a factor in determining ACV.  Replacement fees are not included in the list of factors to consider in determining ACV, and there is no language indicating that the list is not exhaustive (e.g., "such as"). Thus, common principles of contract interpretation demonstrate that replacement fees are not included as a factor when determining ACV under the Nationwide policies.

 

HEINTZMAN’S HIDEOUT
Nicholas J. Heintzman

09/23/21       Salvo v Greater N.Y. Mut. Ins. Co.
Supreme Court, New York County
Insurer Tries and Fails to Disclaim Coverage on Grounds that Insured Failed to Timely Notify it of the Subject Defamation Action

Plaintiff owned a condo in the Bronx, NY, and, while serving on the condo’s Board of Managers, allegedly made defamatory statements about another board member who was subsequently from the board. The board member sued Plaintiff for defamation in 2016. Plaintiff initially received coverage under a separate policy issued by a non-party, Wesco, to the condo board. However, Wesco disclaimed coverage and won a declaratory judgment action against Plaintiff in June 2020. So, Plaintiff sought coverage under a CGL insurance policy Defendant Greater New York Mutual Insurance Company issued to the board. Defendant argued that since Plaintiff sought coverage from Defendant four years after the initial defamation action commenced, Plaintiff failed to timely notify Defendant of the claim such that Defendant was deprived of its ability to participate in the defense. 

The Court held that there was no delay which prejudiced Defendant. First, the Court observed that the board—not Plaintiff—failed to secure the subject policy, and the Board never notified Plaintiff of the policy (although Plaintiff was on the Board, she played no role in procuring the policy). Additionally, for most of the four years, Plaintiff had no reason to look for coverage beyond Wesco because Wesco provided a full defense of the summary judgment claim (including a summary judgment action). Thus, the Court held that this was not a case where Plaintiff “sat on her duty to seek applicable insurance coverage.” Rather, Plaintiff initially obtained coverage, nearly had the entire case dismissed, and sought additional coverage from Defendant just three months after Wesco’s declaratory judgment action. Additionally, the Court found no prejudice to Defendant, as Defendant did not articulate any legal strategy that it could not employ as a result of Plaintiff’s delay. 

09/23/21       Kemper Independence Ins. Co. v Accurate Monitoring, LLC
Supreme Court, New York County
Court Holds that Insurer Cannot Disclaim No-Fault Benefit Coverage to Assignee Despite Assignee’s Failure to Appear for EUO, as Insurer Failed to Provide a Reasonable Justification for the EUO

Plaintiff, a no-fault insurer, sent Defendant, a medical provider and assignee of two no‑fault benefit providers, a letter requesting Defendant’s appearance at an EUO. After Defendant did not appear for the first EUO, Plaintiff sent a second EUO letter to Defendant. Defendant asked Plaintiff for a “reasonable justification” for the EUO. Plaintiff declined to provide a justification, so Defendant did not appear for the EUO, and Plaintiff commenced an action, seeking a declaration that it is not required to pay no‑fault benefits to Defendant.

The Court held that a no-fault benefits claimant must appear for an EUO upon the reasonable request of the insurer. Although justification for the EUO is not automatically required, if the claimant requests a justification for the EUO, the insured must provide a brief justification. Here, absent any justification from Plaintiff, Defendant had no obligation to attend the EUO.

 

NORTH OF THE BORDER
Heather Sanderson
[email protected]

09/21/21       Henderson v. Northbridge General Insurance Corporation, 2021 BCSC 1841
British Columbia Supreme Court
British Columbia:  CGL Coverage for Injury Caused by Shaken Baby Syndrome

In 2017, Theressa Henderson, who holds a certificate in early childhood education, operated the Dragonfly Daycare in Prince George, British Columbia.

Prince George, a city of about 74,000, is a supply and service hub for northern B.C. Despite its size, it has a small-town vibe but as Ms. Henderson found out, it also has ‘big city’ problems. Ms. Henderson was sued by the guardian of a child that was in her care in September of 2017 alleging that the child sustained a catastrophic brain injury with permanent cognitive deficits due to Ms. Henderson’s acts or omissions. The particulars in the pleading read:

(a) In shaking the Infant Plaintiff to such a degree that a brain injury resulted;

(b) In the alternative, in permitting other employees of the daycare to shake the Infant Plaintiff;

(c) In managing the Dragonfly Daycare when she was not adequately trained to do so;

(d) Failing to care for or adequately meet the needs of the Infant Plaintiff;

(e) Causing harm to the Infant Plaintiff by negligent and/or inappropriate physical handling of the Infant Plaintiff;

(f) Failing to protect the Infant Plaintiff from harm and danger;

In the alternative, it was alleged that these actions constituted an assault on the child.

Ms. Henderson tendered the claim to her CGL insurer, Northbridge, who denied coverage on the basis that the injury was not caused by an “occurrence” or an “accident” and that they are not within the abuse limitation endorsement as it excludes:

“bodily injury’…sustained by any person arising out of or resulting from: a) Claims or ‘actions’ alleging actual or threatened ‘abuse’ by or at the direction of an insured...”

“Abuse” is defined as “any act or threat involving molestation, harassment, corporal punishment or any other form of physical sexual or mental abuse.”

Ms. Henderson engaged counsel who commenced this coverage action. Through a Notice to Admit Facts issued by counsel of Northbridge, Ms. Henderson admitted that she did not have any employees on the day of this alleged assault – she was the only person working at the time.

Based on the pleading and the Notice to Admit, Northbridge alleged that the pleading described liability for an intentional assault, dressed up as a negligence claim: The allegations allege injury from a single shaking committed by the insured; both the negligence and intentional tort claim arise from the same facts; violent shaking is without doubt an intentional tort; there is no duty to defend injuries caused by intentional torts.

The Supreme Court of Canada stated in Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24 at para. 85:

The duty to defend will not be triggered simply because a claim can be cast in terms of both negligence and intentional tort. If the alleged negligence is based on the same harm as the intentional tort, it will not allow the insured to avoid the exclusion clause for intentionally caused injuries.

The Court in this case agreed with Northbridge, stating

…[Ms. Henderson].. has admitted that she was the sole operator of Dragonfly Daycare, and she was the only person working at Dragonfly Daycare on September 12, 2017, when the Infant Plaintiff suffered injuries …The underlying elements of the claims in negligence and of intentional assault … are not sufficiently disparate to render the two claims unrelated…The claim in negligence and assault arises from the same actions and cause the same harm… I find for the purposes of this hearing that the negligence claim is derivative and is subsumed into the intentional tort of assault and therefore fall within the Initial Exclusion Clause… [Northbridge]… is not obligated to defend … [ Ms. Henderson] ….

Thanks to Scalera , the companion decision of Sansalone and a previous Supreme Court of Canada decision Saindon, perpetrators of assault seldom have access to a defence under CGL policies for allegations of injury arising from an assault that they allegedly committed.  However, a defence is usually found for allegations of negligence that allowed the assault to occur. In this case, such allegations did not result in an obligation to defend as the court relied upon a Notice to Admit in a duty to defend case. The notice to admit negated the allegations of negligence in the management of the daycare as they demonstrated that the insured was the perpetrator and in sole charge of the daycare. In view of the notice to admit, the Court did not consider whether there was a duty to defend the alternative allegation of negligent management of the daycare. This is contrary to very established Canadian law that the duty to defend is defined by the pleadings and the pleadings alone. I will keep watch to see if this judgment is appealed.

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