Coverage Pointers - Volume XXIII, No. 9

Volume XXIII, No. 9 (No. 601)
Friday, October 15, 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.


Dear Coverage Pointers Subscribers

Do you have a situation?  We love situations.

I do love the calls that come in from subscribers, friends, and clients when they start, with a laugh in their voice, “I have a situation” and those calls come in with some regularity.

Happy October and thanks for all the nice notes following the publication of our 600th issue.  I promised you more, so 601 is attached.

I had the honour of spending time with the Board of Directors of the Canadian Defence Counsel at their annual retreat at Niagara-on-the-Lake in Canada and appreciate that organization’s kind invitation.

For those who are following the Child Victims Act in New York, you are aware that the “lookback” period has closed.  However, the CVA is alive and kicking and cases are continually being filed (as the statute of limitations for civil child victims’ cases is age 55).  See CJ Englert’s column in the attached issue for greater detail.

Hey, for all of our newer subscribers, let me introduce how we do things in CP.  This is our cover note – in it, you will find introductory notes for our wonderful insurance team.  You’ll also find my “100 years ago” stories, newspaper articles from 100 years ago today.  Coverage Pointers, our spectacular newsletter, provides summaries of every appellate coverage case from NY in the past two weeks, along with decisions from Connecticut (thanks Lee) and other states as well.


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

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

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

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

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

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


    OK, This One’s Just for Fun:

    Daily News
    New York, New York

    8 Jan 1970

    Caroler Gets Belated Gift

              The spirit of Christmas belatedly sweetened the air of Brooklyn Criminal Court Tuesday. A 16-year-old Brooklyn Tech High School student faced a $10 fine for singing carols with others on the subway on Christmas Eve. A Transit Authority cop had handed out the court summonses.

              Danny Kohane, one of the alleged culprits, of 5405 Beverly Rd., Brooklyn, pleaded guilty with an explanation before Judge Gerard M. Weisberg. Weisberg dismissed the summons with a chuckle, so all Danny lost was a day at school to go to court. Two buddies, Stephen Tasky and Robert Miller, both 17, have pleaded not guilty and are awaiting trial.

    Alleged Culprit’s Note:  I happened upon this Daily News article and thought I would share the humor.  Boys, as always, will be boys.  Just before Christmas in 1969, my buddies and I were ticketed by a New York Transit Authority officer for singing Christmas carols in the subway, on the way home from high school.  The headline at the time of our ticket was “Subway Scrooge Silencers Carolers” and the ordinance, long since repealed, prohibited any person “from entertaining any other passenger by singing, dancing or playing any musical instrument”.  When I appeared before City Court Judge Weisberg, I explained to him that I was singing but my singing was so awful, that I couldn’t be entertaining anybody.  I offered to serenade the judge but, instead, he took my word for it and dismissed the charges. 


    Peiper on Property and Potpourri:

    We start out this week with reference to an interesting decision involving the collapse provision of a policy.  The collapse “extension,” for lack of a better way to describe it, is usually limited to buildings.  What that means, however, has not been subject to a substantial amount of litigation. In fact, we’re not certain it has ever been squarely addressed by an Appellate Court in this State.  The Klein decision, reviewed herein, takes up the issue, and suggests that the contract means what it says.  A building is, in fact, just a building.

    On the home front, I am back from our first hockey tournament in nearly 20 months.  My son’s team prevailed in the Capital Cup in Washington, D.C. last week; although, it took them going to a shootout and delaying my arrival back home until nearly 11:00 pm Monday night.  A fun weekend watching kids be kids, no doubt.

    We also had an opportunity to visit the Mall and take a tour of the monuments/memorials from the Washington Monument to the Lincoln Memorial.  We nixed a trip over to the Jefferson Memorial, and I realized despite literally dozens of trips to the Mall I have only visited that site one time.  Growing up in Central Pennsylvania all field trips were to D.C., and apparently even then the Jefferson Memorial got short changed.

    We concluded the tour with a walk through of the Vietnam Memorial, and we decided to take a cue from our Editor.  As you may recall, several years ago Dan visited Normandy and spent time researching a young man from New York City who was killed in the campaign to free Europe.  His story is often published here in recognition of the bravery and sacrifice so many young men made.

    With this in mind, my son and I picked a name of another man fallen in the defense of his Country.   Our research is just getting underway, but it has already made the experience of visiting a war memorial much more palpable for him (and me).  I’ll update you here if our efforts are successful.  Even if we find nothing out, though, the experience to personalize something that happened, now half a century ago, was well worth the effort and made it much more real for my twelve-year-old. 

    That’s it for this week. Stay tuned and stay safe.

    Steven E. Peiper

    [email protected]

    Editor’s Note:  That is terrific!


    Only $1,000 Fine for Killing Spouse?:

    The Philadelphia Inquirer
    Philadelphia, Pennsylvania

    15 Oct 1921


    Compromise Verdict in Oklahoma May Set New Precedent

              PONCA CITY, Okla., Oct. 14.—Legal procedure, said by local attorneys to set a precedent, was recorded here when a jury in district court, which had heard evidence against Napoleon Buffalo-Head, wealthy Indian, charged with killing his wife, returned a verdict of guilty of manslaughter and assessed a fine of $1000.

              The jury is understood to have stood originally ten to two for acquittal. Unable after several votes to agree, the fine was accepted as a compromise, according to jurors.


    Wilewicz’ Wide-World of Coverage:

    This week, we introduce our newest coverage associates: Hannah Cominsky, Kyle Ruffner, and Franco Mirolo! As they transition into the busy world of private practice, we are getting their CP-feet wet, and they will be assisting a few of our regular columnists in the coming weeks. As below, Eric Boron’s columns will feature Hannah writing about the highest courts of the land, and in Brian Mark’s column on construction defect cases, we will have Kyle, who has an engineering background.

    For now, adding to the Wide World, is Franco Mirolo. He hails from Argentina, so we thought it a propos to put the two immigrants into this “global” column about coverage issues. Franco is a litigation and coverage associate with the Firm here, and we are thrilled to have him. He recently graduated Magna Cum Laude from the University at Buffalo School of Law.  While at UB, he was an associate on the Buffalo Law Review, a Law School Student Ambassador, and an Admitted Student Mentor. Franco had previously obtained an LLB in Cordoba, Argentina, where he practiced as an attorney until 2019.  His areas of practice in Argentina were criminal law and automobile insurance.

    So, with this edition, annexed is a Circuit Court case summary (from the 11th Cir.) where Franco discusses a recent bad faith case relative to an auto policy. There, the Court held that the company did not act in bad faith, when it gave the insured the possibility to review and strike certain provisions of the release agreement, even though the proposed agreement did not mirror the insured’s demand letter. Take a look! Then, Franco and I will be back in a couple of weeks with more.

    Until then,

    Agnes A. Wilewicz

    [email protected]


    Such Generosity:

    Buffalo Morning Express and Illustrated Buffalo Express
    Buffalo, New York
    15 Oct 2021


    Nyack. Oct 14 (Special).—The millions of John D. Rockefeller were reduced twenty cents today as a result of the impromptu singing of a five-year-old girl.

              The aged oil magnate, in his automobile, was crossing by ferryboat from Nyack to Tarrytown. The child and her aunt were crossing on the ferry, too. Rockefeller listened to the girl singing a popular air to the accompaniment of the ferryboat’s two musicians, who play for the odd change of passengers on the ferry. When the little girl had finished her song Rockefeller handed some money to his chauffeur and had him give it to the child. The coins were two brand new, shining little dimes. He overlooked the musicians.

              The girl singer was Virginia Denike, daughter of the Hastings garage owner. Her father sells Standard Oil products. Her aunt told Virginia she would have the dimes strung on a ribbon to wear around her neck.


    Barnas on Bad Faith:

    Hello again:

    We have been experiencing some unseasonably warm weather here in Buffalo.  I was in a wedding this past weekend, and it felt just like a summer wedding other than the sun setting on us as we took some pictures prior to the reception.  I love those cool and dry fall days, but you will see not complaints about the warm weather sticking around for an extra couple of weeks in this cover note.

    I have one case from the Kentucky Supreme Court this week where a bad faith case survived summary judgment.  The case has a lengthy procedural history, and the court made it pretty clear that it was unimpressed with Zurich’s handling of the insured’s UIM claim.  Check it out if you are so inclined.

    That’s all for now. 

Brian D. Barnas
[email protected]


I’d Pay $2.00:

Times Union
Brooklyn, New York

15 Oct 1921

I Should Say not!

Can you cook and serve a dinner consisting of

Oysters, Appetizers, Fish, Entrée or Roast Vegetables, Potatoes, A Salad, Ice Cream Pie, Pudding or Fruit, Coffee

In these days of high cost for


I can do it for you. Try me.

5 to 9 P.M. Daily. 12 to 9 P.M. Sundays.

Joe Schmidt’s



Off the Mark:

Dear Readers,

I enjoy the changes that each season brings, but hands down, the fall is my favorite time of the year.  The days are still warm, and the nights are cool and dry.  Between the moderate temps and the leaves changing colors, it’s tough to keep me inside.  Hopefully I can convince the kids to take a walk in the woods this weekend.  While it’s difficult to get me inside, it’s equally difficult to get them outside.  Dang electronic devices.

Speaking of changes, one of our newest associates, Kyle Ruffner, who, notably and appropriately for this column has a degree in engineering, will be assisting me with the case summaries.  By way of introduction, Kyle grew up in Lancaster, New York, and received a bachelor’s degree from the University of Rochester, where he studied biomedical engineering and ran on the cross country and track and field teams.  He attended law school at the University of Buffalo and recently began his legal career at Hurwitz & Fine, P.C.  He is an avid sports fan, and like most in our Buffalo office, is a huge Bills fan.  These days, he enjoys playing golf and softball.

This edition of “Off the Mark” brings you a recent construction defect case from the United States District Court for the Southern District of New York.  In Wentworth Group v. Evanston Ins. Co., the Court examined an insurer’s duty to defend and indemnify its insureds relative to underlying construction defect claims.  The Court, in finding the possibility that several of the underlying allegations involved negligent acts, as opposed to intentional acts, held that the insurer was required to defend its insureds.

Until next time …

Brian F. Mark

[email protected]


Musical Beef:

The Chattanooga News
Chattanooga, Tennessee

15 Oct 1921

Music Makes Cows Give More Milk!

By actual experiments made on the dairy farm of G. Sterchi, it has been discovered that phonographs give the thoroughbred jerseys sweeter dispositions, they are extremely fond of music. In turn, the cows produce considerably more milk per day.

          Mr. Sterchi is enlarging and remodeling his barns and will have his dairy farm a model of efficiency. The cows will stand on a composition cork floor, easy on the hoofs, and as a protection against extreme cold. Individual drinking cups are provided and they, of course, keep a constant supply of pure water at hand. The heating system regulates the temperature to a uniform degree day and night in order that the 150 head may maintain a contented disposition even on the bitterest days. Over each stall will be the nameplate of each cow, with the average amount of butter and milk the cow produces daily.


Boron’s Benchmarks:

I am delighted to introduce to you a new associate at Hurwitz & Fine, Hannah E. Cominsky, who will be working with me going forward on my Coverage Pointers beat that monitors and reports on insurance coverage decisions of the high courts of the 49 states not named New York.  Hannah is a first-year associate with Hurwitz & Fine and a Buffalo native. Hannah completed her J.D. at the University at Buffalo School of Law, where she was active as the Executive Publications Editor for the Buffalo Law Review, a teaching assistant, and a member of the Women’s Bar Association of Western New York. She received her Bachelor of Arts from the University at Buffalo as well, dual majoring in International Trade and Geography and minoring in Global Gender Studies. Her passions include her dog, Nellie, all things outdoors, and the Buffalo Bills. We are very lucky Hannah has chosen to work at Hurwitz & Fine!

For this edition of Boron’s Benchmarks, we offer for your consideration a Supreme Court of Ohio opinion issued October 6, 2021, reversing the ruling of an Ohio intermediate appellate court, and holding, as the trial court did, that damage caused by sewage that backs up into a building is excluded from property damage coverage under the standard water-backup exclusion.  This decision agrees with other courts around the country on the exclusion’s applicability when sewage backs up into a building.  The case writes up you will find in Coverage Pointers is primarily Hannah’s work.  Given the recent impact in the northeastern U.S. of Tropical Storms Henri and Ida, both the case and Hannah’s write up are certainly worth a read for any of you handling first-party water damage claims, especially those where sewage backed up into the insured’s building.

Have a healthy and happy next two weeks, folks!

Eric T. Boron

[email protected]


Firebugs Beware:

Yonkers Statesman
Yonkers, New York
15 Oct 1921


A fire insurance man of 30 years’ experience, and his wife, an editorial writer, took part after their kind in the fire prevention observance of their hometown. The man addressed a meeting of his fellow-citizens on the relation of fire hazard to cost of insurance. His wife wrote articles dealing with the danger of fire and all the approved methods for preventing it.

          Then they went cheerily back to their own house and the husband stacked a lot of kindling, boxes and excelsior under the cellar stairs where the draft was heavy and the danger of a dropped match considerable. His wife went right on throwing greasy papers and burnt matches (supposed to be out) into the same old kitchen waste basket. A two-gallon can of kerosene stood within six feet of the lighted furnace, and the oiled floor mops and dust cloths rested as always against the woodwork, as if spontaneous combustion were something to quench fire instead of an ever-present fire menace.

          It is in just these small, practical, everyday details that fire prevention falls short in the average household. One day devoted to correcting such evils is a good thing, but it takes 365 days of keeping them corrected to make fire prevention amount to anything.


Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

My youngest turns two today and it is amazing how fast two years goes by these days. I will never forget the day he was born, which I remember as vividly as the day his older brother was born. Over the past two years, I have gained a wealth of experience, as a father, friend, husband, attorney and otherwise. We all continue forward to the future with the lessons of the past in mind. But it’s on you to keep the past, present. Stay vivid in the present and create a past worth remembering in the future.

This week, the column focuses on a recently finalized regulation implementing certain continuing education requirements on insurance producers and public adjuster.

Until next time,

Ryan P. Maxwell

[email protected]


Ads – 100 Years Ago:

The Kingston Daily Freeman
Kingston, New York

15 Oct 1921

Wifie Yawns---Hubby Works

Someone told him that stenographers were hard to obtain, and he believed it.

If he had consulted the classified pages of this paper, he would have found out that his friend was wrong, and pleasant, restful evenings would have been at his disposal. Do not be influenced by the “bugbear” of labor scarcity; positions are being filled daily through the medium of this paper’s wonderful array of classified advertisements.


The Moral Is Obvious

Read the Want Ads in THE.FREEMAN


CJ on CVA and USDC(NY):

Hello all,

Every time I sit down to write my column, I am amazed at how quickly two weeks has passed us by. Life moves so fast that it is often hard to remember everything that I’ve done in the past two weeks. Party planning for our son’s first birthday continues.  Tonight, we’ll be putting up the tent in our back yard. Right now, it’s looking like we’ll have a chance of rain on Saturday, but our fingers are crossed that it will pass us by. As excited as I am to celebrate our little guy’s birthday, I will be very pleased when I no longer have decorations, cups, plates, and all sorts of party supplies littered around our house.

This week I depart from the usual case analysis and bring you a closer look at the lasting impact of the CVA. As I say below, I hope to be able to delve deeper into each aspect of the CVA in the future using case law to show how the Act is being interpreted in practice. If you have any CVA questions, please let us know.  Not only do we have a crack coverage team, but H&F is well versed in the defense side of these claims as well, and we’re always happy to help navigate this very unique area.

See you in two weeks,

Charles J. Englert, III
[email protected]      


Truant Officer Doing His Job:

Democrat and Chronicle
Rochester, New York

15 Oct 1921


Must Explain Why His Daughter Was Not Sent to School.

          More evidence of lack of respect for American law was produced in City Court yesterday was Salvatore Prizzi, 45 years old, of No. 11 Grape Street, failed to appear to plead to a charge of neglecting to send his daughter Mary, 15 years old, to school. The girl was in court, however, and said that her father was ill at home. The girl was so profuse in explaining how sick her father was that Judge Williams C. Kohlmetz decided that the case required investigation.

          He directed an officer to locate Prizzi, and if the man was not too ill to bring him into court. Motorcycle Officer James A. Doyle, of the Exchange Street station, learned that Prizzi was away at work. He was found and taken to City Court.

          Prizzi was required to put up $5 bail to insure his appearance in court on October 21st. The daughter is employed in a shoe factory.


Dishing Out Serious Injury Threshold:

Dear Readers,

October is already halfway over and there are Halloween decorations all over. I’m even starting to see Christmas decorations pop up.  It seems we’re just skipping over Thanksgiving this year. Hope everyone enjoys the fall months while they last and appreciate the time we have before winter is here.

In the Serious Injury Threshold world, we have two cases that both deal with the 90/180-day category. Each one, while resolved differently, shows that deposition testimony by the plaintiff is an intricate part of disputing plaintiff’s 90/180-day claim.

Be well,

Michael J. Dischley
[email protected] 

Libel Suit Dismissed:

Dunkirk Evening Observer
Dunkirk, New York

15 Oct 1921


Judge Upholds Demurrer in Action for $10,000,000 Damage Against Chicago Paper.

          Chicago, Oct. 15.—(United Press)—The suit for $10,000,000 brought by the city of Chicago against the Chicago Tribune for alleged libel was thrown out of court today by circuit court Judge Harry M. Fisher. Judge Fisher upheld the demurrer filed by the tribune to the suit.

          The suit was based on statements made by the Tribune that the city was bankrupt which officials held injured the financial status of the city and it was unable to dispose of bonds.

          “This suit is not in harmony with the genius spirit or object of our institutions,” Judge Fisher declared. “It does not belong to our day, but rather to the day when monarchs promulgated laws with the purpose of carrying out their lustful passion for undisturbed power.

          “Since no cause for action exists it is unnecessary to consider any of the other questions involved in the arguments.


Bucci on “B”: 

Hi all,

Another light Coverage B couple of weeks.  Oh well.  Maybe I should be grateful.  I can bill hours today ?.   I really don’t have much to say, which people who know me would never believe because I’m usually saying something.   I hope everyone has a great week.  The weather in my area is fantastic. Great for apple picking, visiting the beautifully colored trees, and eating all of the Halloween candy before Halloween and having to buy more.  Good weeks, my friends.

Diane L. Bucci

[email protected]


Rain Insurance, a Century Ago:

Democrat and Chronicle
Rochester, New York

15 Oct 1921

Rain Insurance Is Paid.

          Canandaigua, Oct. 14.—A check for $1,000 has been received by Jason B. Gates, treasurer of the Ontario County Agricultural Society, from an insurance company in payment of rain insurance which the society took out to protect its treasury from inroads that a serious rainfall would have made on the gate receipts. Rain fell on the last day of the county fair in sufficient quantity to make the rain policy effective, although the rainfall in reality assisted the gate receipts rather than diminished them. Hundreds of farmers who intended to remain home and work on their lands quit work when the rain came on account of it making the ground somewhat wet and attended the fair, thereby increasing the crowd in attendance on account of the rain. This year was the first time that the local fair society has ever held a policy guaranteeing its income as against rain.


Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Hamilton! Finally, we saw Hamilton. Go see it, any way you can. Come to New York, see it on tour, save up your bottle deposits and scalp tickets if you must. Even if you think you know it, even if your daughter has made you listen to the soundtrack over and over, find a way to see it. I thought I knew the show, I was afraid that having listened to the soundtrack repeatedly that there was the risk of letdown. Wrong! Live, in person, the show is funnier, more dramatic and emotional than I could have expected. We laughed, we cried, we were enthralled.

Broadway is definitely back, opening to packed houses of eager theater goers. Proof of vaccination was required, and masking enforced. There was something comforting knowing that each of the 1,319 ticketholders, plus theater staff and performers were vaccinated. Back home in Connecticut, COVID is on the run. Vaccination rates are up, boosters are being distributed, positivity is again down—way down; but Five Guys still has reduced hours due to staff shortages and store shelves are not full as we’ve come to take for granted. Normalcy is near, as long as everyone does their part.

Be smart, be safe.

Lee S. Siegel

[email protected]      


No Match for this Doctor:

Democrat and Chronicle
Rochester, New York

15 Oct 1921


          Atikokan, Ont., Oct. 14.—Dr. Graham Chambers, Toronto physician, rescued after being lost for two weeks in the woods, almost starved to death for lack of a match.

          Dr. Chambers arrived here last night on a litter strapped to the bow of a motorboat, weakened from cold and hunger. He said he had seen plenty of partridge and that he had not lacked for ammunition but refrained from shooting any birds because he was convinced, he could not eat them raw.

          When found by two Indians Dr. Chambers finally had shot a partridge and was sitting under a tree trying vainly to force himself to eat the raw flesh.

          His feet were blistered from tramping through the brush, though he said he had not done much tramping after the first day when he realized he was lost and was in danger of going further into the woods. He said one of the airmen engaged in the search for him had flown over the spot where he was standing but that he was unable to attract the flier’s attention.


Rauh’s Ramblings:

Hi all,

I can’t believe two weeks has already passed since our last Coverage Pointers edition!  This time of year, always flies by with all the upcoming holidays.  Halloween is just around the corner and my son is very excited to be a ghost this year and if it were up to him, he would wear his costume from now until Halloween.

Today, I write about a case decided in the Ninth Circuit in which the Court held that due to the insurer’s failure to follow the applicable provisions of the California Insurance Code, the two life insurance policies did not lapse, even though the policyowner had failed to pay the policy premiums prior to his death.

Until next time!

Patricia A. Rauh

[email protected]     


Police Abuse, 100 Years Ago:

Democrat and Chronicle
Rochester, New York

15 Oct 1921

Brutal Police Officer Draws Term in Prison

New York, Oct. 14.—Policeman Charles Tighe, convicted of assaulting a woman while making an arrest, today was sentenced to from two to four years in prison. Judge Crain in imposing the sentence, said it was in part a warning to other members of the police force that if they treated citizens brutally, they would be punished.

          Testimony was given that Mrs. Emma Leanon, returning home after a visit to a savings bank, was seized by Tighe, blackjacked and pushed into the backroom of a saloon where he and another officer were making arrests for gambling.

          Judge Crain said to Tighe in imposing sentence: “You ill-treated several other persons. In all likelihood you were mentally unbalanced from drink and ran amuck.”


Storm’s SIU Examen:

Hi everyone:

In the words of Professor Hinkle in “Frosty the Snowman”, I have been “busy, busy, busy” with motion practice and EUOing.  However, I promise to have several interesting case digests for you in the next edition of Coverage Pointers.  I look forward to it!

Scott D. Storm

[email protected]


UK Seeks to Please USA:

Press and Sun Bulletin
Binghamton, New York
15 Oct 1921


London, Oct 15.—Discussions of the relations between the United States and Great Britain filled much space in today’s papers. Aside from reference to the probable visit of Premier Lloyd George to Washington and arrangements for Monday’s ceremony in Westminster abbey, there was printed a long appeal from prominent persons interested in the Sulgrave institution, asking the public immediately to raise 50,000 pounds. This institution had been working to bring about closer relations between American and Great Britain and sponsored the work of restoring the ancestral home of George Washington which was recently rededicated.

          The sum asked for by the institution is desired as a “prelude to American armistice day, and as practicable evidence of British interest in the movement toward a better understanding.”

          Commenting upon the appeal the London Times remarked:

          “Though the moment may seem inopportune for an attempt to raise money, the importance of the object of the appeal forbids the withholdings of support for the great work the institution is doing—a work worthy of the fullest support which the patriotic munificence of both countries can give.”


Heintzman’s Hideout:

Dear Readers,

I’ve been diligently wading my way through Homer’s the Iliad. Set during the Trojan War, the Iliad is an ancient Greek epic poem which was written in the 8th century BC, about 2,800 years ago. That Homer’s epic is as vast in scope and as well written as just about anything else I’ve read is both impressive and slightly disheartening.

Two cases this week: 1) the Second Circuit sides with “reinsurer” insurance companies in decades-long asbestos coverage dispute involving question of whether defense costs fell within an umbrella policies’ limits; and 2) Bronx County Court grants an insurer’s summary judgment motion to disclaim coverage under the “Independent Contractors” exclusion. Our friend, Michael S. Savett of Clark & Fox, represented the winning party in the Bronx County case. Great work Mike!

All the best,

Nicholas J. Heintzman

[email protected]


Safe Deposit Box Required, Next Time:

Times Union
Brooklyn, New York

15 Oct 1921


          Dennis Levy, a shoe cutter, of 441 Marcy Avenue, had no faith in savings banks, so last night when he went to the synagogue to worship with his wife, he left $1,000 in cash and $690 in jewelry in a little box in the kitchen cupboard. When he returned home the cupboard was bare and Samuel Goodman, 25, a boarder, was missing from his room.

          Levy went around to the Clymer Street police station to tell of his loss, and Detective Greene was assigned to the case. Goodman came home about midnight and was promptly seized by the detective. The boarder denied any knowledge of the left, by Levy insisted it was an inside job.

          Goodman was arrested and arraigned before Magistrate McCloskey this morning in the Williamsburg Police Court. He still protested his innocence, and the Magistrate held him in $5,000 bail for examination next Wednesday.

          Levy says he will use a safe deposit vault in future.


North of the Border:

Thanksgiving weekend has come and gone, and we are now in the 12-week stretch to Christmas. The fully vaccinated from no more than two other households were allowed to gather this year and so we did by hosting this year’s edition of Thanksgiving dinner and it was, well, wonderful. The pandemic robbed us of this event last year and it was all the sweeter this year. All of our kids, our 18-month-old grandson and two dogs resulted in fun, noise and good times.  As the ad goes, it was priceless. For everything else there is Visa.

My column discusses a seminal Court of Appeal decision from last month declaring that physical damage does not include “loss of use.”  Enjoy.

Heather Sanderson

[email protected]


The Rat Ate My Homework Clothing:

The Yonkers Herald
Yonkers, New York

15 Oct 1921


So Says Boy Who Spent a Week in City Jail Charged with Truancy—Released on Probation with Judge

If only he had been able to get along with his teacher, 13-year-old Tony Disimone of 136 Oak Street, a pupil in Public School No. 13, would not have had to spend a week in the Juvenile quarters at the City Jail, and would have escaped all the attention his appearance before City Judge William F. Bleakley this morning brought him.

          The boy presented a sorry spectacle when he was arraigned in court. Although he had made an amateurish attempt to pin up two big holes in the knees of his trousers, it was not as successful as it might have been. He told a questioner that rats in the room in which he had been detained had eaten away section of his apparel while he slept.


Imperial Wizard, Defending KKK, Collapses in Effort:

The Yonkers Herald
Yonkers, New York
15 Oct 1921

Simmons Collapses Defending Ku Klux

Washington, Oct. 14th.—Closing an all-day defense of the Ku Klux Klan, William J. Simmons, its Imperial Wizard, toppled over in a chair yesterday while the chairman of the House Committee investigating the order was attempting to stop the applause which broke before the crowd knew the Wizard had collapsed.

          Friends of Mr. Simmons rushed to his side and supplied stimulants, but as it was evident that he was in no condition to continue the examination, the hearing, filled with many dramatic incidents during the day, was adjourned. Physicians later reported that Mr. Simmons’ condition was not serious.

          “If this organization is unworthy, then let me know and I will destroy it,” he exclaimed, “but if it is not, then let it stand.”


Headlines from this week’s issue, attached:

Dan D. Kohane

[email protected]

  • Discovery Denied in SUM Proceeding – Do Thousands Flee?


Steven E. Peiper

[email protected]

  • Swimming Pool is Not Considered a Building for Collapse Coverage to Trigger

  • Summary Judgment Fails and Premature and Not Properly Supported


    Michael J. Dischley

    [email protected]

  • Plaintiff’s Deposition Testimony Failed to Substantiate 90/180 Day Claim
  • Plaintiff’s Medical Records Were Necessary to Substantiate Plaintiff’s 90/180 Day Claim, Despite Testimony to the Contrary


Agnes A. Wilewicz

[email protected]

  • Eleventh Circuit Holds that Insurance Company Did Not Act in Bad Faith When It Gave the Injured Party the Possibility to Review and Strike Provision of the Release Agreement, Even Though the Proposed Agreement did not Mirror the Insured’s Demand Letter


Brian D. Barnas
[email protected]

  • Bad Faith Claim Survived Summary Judgment where Insurer Denied Coverage for UIM Claim after Previously Acknowledging Coverage Existed Internally


Lee S. Siegel

[email protected]

  • Formulaic Restating of Statutory Bad Faith Statute Insufficient


Brian F. Mark
[email protected]

  • U.S. District Court Finds Duty to Defend Due to Reasonable Possibility that Some of the Underlying Allegations were not Excluded


Eric T. Boron

[email protected]

  • Reversal of Ohio Appellate Court Ruling – Commercial Package Policy – Water Backup Exclusion Precludes Coverage of Loss Caused by Local Sewer System Backup into Insured Premises


Diane L. Bucci
[email protected]

  • A Simple Case, Easily Dispensed With


Ryan P. Maxwell

[email protected]

  • DFS Will Require CE on Flood Insurance as Well as Diversity, Inclusion and the Elimination of Bias


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

[email protected]

  • With The Look Back Window Closed, The CVA Will Still Have A Lasting Impact


Patricia A. Rauh

[email protected]

  • Despite Policyowner’s Failure to Pay Premiums on Two Life Insurance Policies Prior to his Death, the Policies Did Not Lapse Because State Farm Failed to Comply with Applicable Provisions of the California Insurance Code.


Scott D. Storm

[email protected]

  • Check back next edition for several cases digests. 


Nicholas J. Heintzman

[email protected]

  • Second Circuit Sides with “Reinsurer” Insurance Companies in Decades-long Asbestos Coverage Dispute Involving Umbrella Policies 
  • Insurer Wins Summary Judgment Motion to Disclaim Coverage under the “Independent Contractors” Exclusion


Heather Sanderson

[email protected]

  • “Physical Damage” in an All-Risk Policy means Damage that is a Distinct, Demonstrable, Physical Alteration of Property



Stay well, stay happy and write often.




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

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

Dan D. Kohane

[email protected]

Agnes A. Wilewicz

[email protected]

Patricia A. Rauh

[email protected]

Dan D. Kohane, Chair
[email protected]

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

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Diane L. Bucci

Mirna Martinez Santiago

Scott D. Storm

Thomas Casella

Brian D. Barnas

Eric T. Boron

Ryan P. Maxwell

Charles J. Englert

Patricia A. Rauh

Nicholas J. Heintzman

Diane F. Bosse

Joel R. Appelbaum

Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Scott D. Storm

Eric T. Boron

Brian D. Barnas

Dan D. Kohane

[email protected]

Jody E. Briandi, Team Leader
[email protected]

Mirna Martinez Santiago

Diane F. Bosse

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri

Dishing Out Serious Injury Threshold

Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Off the Mark

Boron’s Benchmarks

Bucci on “B”

Ryan’s Capital Roundup

CJ on CVA and USDC(NY)

Rauh’s Ramblings

Storm’s SIU Examen

Heintzman’s Hideout

North of the Border


Dan D. Kohane
[email protected]

10/08/21       Matter of Allstate Insurance Company v. Twomey
Appellate Division, Fourth Department
Discovery Denied in SUM Proceeding – where Carrier Allegedly Sat on its Hands

This was a proceeding to stay supplementary uninsured/underinsured motorist (SUM) coverage and to compel arbitration pursuant to that section of the CPLR allowing discovery in aid of arbitration. The court found further that Allstate failed to establish extraordinary circumstances necessary to warrant court-ordered disclosure in aid of arbitration.

The Fourth Department held that Allstate had ample time within which to seek discovery and failed to use that opportunity to secure the discovery it now sought. 

Editor’s Note:  This is an odd decision and an odd protocol.  We reviewed the underlying Petition, which was, as indicated, an application for Discovery in Aid of Arbitration under CPLR 3102(c).  What we don’t understand is why an application wasn’t brought under the Arbitration Article (75) for a temporary stay, the usual method to secure disclosure (which does not require an extraordinary showing for discovery.  I am not certain how discovery before the arbitration proceeding was commenced could have been secured. However, here, the court found that was no evidence that the carrier tried to secure information in the many months before the arbitration was demanded.  No hand sitting allowed/


Steven E. Peiper

[email protected]

10/13/21       Klein v. State Farm Ins. Co
Appellate Division, Second Department

Swimming Pool is Not Considered a Building for Collapse Coverage to Trigger

Plaintiffs’ in-ground pool failed resulting damage to the pool’s walls and the surrounding brick patio area.  Plaintiffs then sought coverage under their policy with State Farm, specifically asserting that the failure constituted a collapse under the policy and, as such, coverage should have been triggered.  State Farm denied the claim on the basis, apparently, of “various grounds.”  Among the coverage defenses identified, State Farm specifically pointed to the “collapse” exclusion found within the policy.  

Plaintiff then commenced the instant action asserting claims for breach of contract, bad faith, and a violation of GBL § 349.  State Farm moved for summary judgment based on the clear and unambiguous language of the “collapse” exclusion.  In affirming the trial court, the Appellate Division agreed that the exclusion was enforceable and applicable. 

In so holding, the Court rejected plaintiffs’ argument that the loss was subject to an exception to the broader collapse exclusion. As with most policies, the State Farm policy included an extension of coverage for collapses involving buildings where certain other circumstances were present.  Here, however, the loss involved a swimming pool which is not, by its terms, a “building.”  As such, the exception was not applicable and State Farm’s denial stood. 

In addition, the Appellate Division also affirmed the dismissal of plaintiff’s extra-contractual claims on the basis that they failed to state a cause of action.  The Court also noted that plaintiff would have been made whole had their breach of contract claim been successful.  Under such a scenario, the breach of contract claim was the appropriate remedy. 


10/12/21       Nick’s Poultry, Inc. v. Seaman Radio Dispatcher, Inc.
Appellate Division, First Department
Summary Judgment Fails as Premature and Not Properly Supported

Plaintiff leased a commercial space from defendant.  The leased property was part of a larger parcel owned by defendant.  When a retaining wall on the larger parcel collapsed, plaintiff sustained damage to his business.  The lawsuit was commenced against defendant and a neighboring property owner based upon their failure to properly maintain the wall.  Defendant cross-claimed against the neighboring owner, R&G, therein positing that R&G’s renovations undermined the wall’s structure. 

R&G then moved to dismiss the crossclaim which sustained damage when a retaining wall collapsed.  That motion was dismissed due to several procedural maladies. First, R&G failed to proffer evidence from anyone with personal knowledge of the wall’s ownership.  Secondly, R&G’s papers never addressed the allegations that its excavations and/or renovations weakened the wall.  Finally, the motion was rejected as premature where it was filed before any depositions were recorded.


Michael J. Dischley
[email protected]

09/28/21       Deborah Marie Coombs v. Fern Zelekowitz et al.
Appellate Division, First Department
Plaintiff’s Deposition Testimony Failed to Substantiate 90/180 Day Claim

This appeal was from an order of the Supreme Court, New York County (Adam Silvera, J.), entered May 8, 2020, which granted denied defendants' motion for summary judgment dismissing the claim of serious injury under the 90/180-day category of Insurance Law § 5102(d) and the claim for lost wages, unanimously modified, on the law, to grant the motion as to the 90/180-day claim, and otherwise affirmed, without costs.

The Appellate Court found that the defendants established that plaintiff did not sustain a 90/180-day injury by relying on her testimony that she returned to work within a few days of the accident and that she continued working despite her injuries, as well as the allegations in her bill of particulars that she was totally disabled for only 21 days and unable to work for only 15 days following the accident. The Appellate Court further found that plaintiff failed to raise a triable issue of fact in opposition, as she did not offer any evidence that she was disabled during the relevant time period.

However, the Appellate Court also found that defendants failed to establish that plaintiff's claim for lost wages should be dismissed. Although plaintiff does not claim that she lost wages owed to her, she testified at her deposition that she lost future compensation and an opportunity for promotion as a direct result of her injuries. Defendants did not demonstrate that plaintiff will be unable to establish her claims with reasonable certainty at trial.


09/28/21       Nana Kaakyire v. Angel D. Soto, et al
Appellate Division, First Department
Plaintiff’s Medical Records Were Necessary to Substantiate Plaintiff’s 90/180 Day Claim, Despite Testimony to the Contrary

This appeal was from an order of the Supreme Court, Bronx County (Mary Ann Brigantti, J.), entered May 8, October 8, 2019, which granted defendants' motion for summary judgment dismissing the claim of serious injury under the 90/180-day category of Insurance Law § 5102(d), unanimously reversed, on the law, without costs, and the motion denied.

The Appellate Court found that defendants established that plaintiff did not sustain a serious injury under the 90/180-day category by relying on plaintiff's allegations in her bill of particulars that she was confined to bed for just three weeks immediately following the accident and for approximately one month after her left knee surgery. However, in opposition, the Appellate Court found that plaintiff raised an issue of fact by submitting an affirmation of her physician opining that plaintiff was totally disabled and unable to work for more than 90 days following the accident, which corroborated her testimony that she was disabled from work for six months following the accident.

Therefore, the Appellate Court held that if plaintiff prevails on her 90/180-day or other serious injury claims, she will be entitled to recover damages to compensate her for all injuries caused by the accident, whether or not they meet the meet the serious injury threshold.


Agnes A. Wilewicz

[email protected]

09/29/21      Robles v. Geico Indem. Co.
United States Court of Appeals, Eleventh Circuit
Eleventh Circuit Holds that Insurance Company Did Not Act in Bad Faith When it Gave the Injured Party the Possibility to Review and Strike Provision of the Release Agreement, Even Though the Proposed Agreement did not Mirror the Insured’s Demand Letter

GEICO issued an automobile liability policy that provided bodily injury coverage for $10,000 per person to Aaron Swanson.  Mr. Swanson’s vehicle rear-ended a truck while Miguel Mercado was working in front of the truck.  GEICO determined that Mr. Swanson was at fault and that it would tender the Ms. Robles, Mr. Mercado’s widow, the $10,000 policy limit.  GEICO tried to contact the attorney for Ms. Robles, Ms. Franco, on eight separate occasions between November 2008 and April 2009 to request a letter of representation and offer to tender the $10,000.  On August 3, 2009, Ms. Franco mailed a letter of representation to GEICO and offered to settle the claims.  She required strict performance with her terms and specifically requested that the release do not contain any hold harmless or indemnification language for anyone other than Mr. Swanson.  On August 6, 2009, GEICO faxed an affidavit of coverage and a certified copy of the policy to Ms. Franco.  On August 7, 2009, GEICO faxed a blank affidavit a proposed release that included a hold harmless and indemnity agreement.  On August 11, 2009, GEICO advised Ms. Franco that the previously faxed documents were for her review to see if they would suffice her requirements.  On August 12, 2009, GEICO told Ms. Franco that the company had issued a check for the personal property and bodily injury limits and reminded Ms. Franco to notify GEICO if anything needed to be changed on the proposed release.  On August 17, 2009, GEICO faxed Mr. Swanson’s affidavit of coverage to Ms. Franco, asking if it was acceptable.  Ms. Franco never responded.  On November 12, 2009, GEICO received a rejection letter from Ms. Franco.  After obtaining a multimillion-dollar judgment against Mr. Swanson in a wrongful death action, Ms. Robles filed a bad faith action against GEICO. 

Affirming the district court’s decision granting summary judgment, the Eleventh Circuit held that GEICO did not act in bad faith.  Under Florida law, “a third-party bad faith cause of action arises when the insurer fails to act in good faith in handling a claim brought by a third party against an insured.” Macola v. Gov’t Emps. Ins. Co., 953 So. 2d 451, 457 (Fla. 2006).  Ms. Robles argued that GEICO acted in bad faith when it failed to accept the offer made on August 3, 2009, and when the company provided her with a release that was not in strict compliance with her demand.

The Court rejected this argument. According to the Court, even though the demand letter and GEICO’s proposed release were important, they had to be considered under the totality of the circumstances.  GEICO attempted to discuss settlement matters several times and specifically told Ms. Robles’ counsel to strike through any undesirable language on the proposed release.  The Court concluded that, even if the proposed release did not mirror her demand, under these circumstances, GEICO’s conduct did not amount to bad faith.

Editor’s Note: Thanks to one of our newest associates, Franco Mirolo, for this write-up!


Brian D. Barnas

[email protected]

09/30/21       Nichols v. Zurich American Insurance Company
Supreme Court of Kentucky
Bad Faith Claim Survived Summary Judgment where Insurer Denied Coverage for UIM Claim after Previously Acknowledging Coverage Existed Internally

Zurich issued a commercial fleet policy to Plaintiff Nichols’ employer, Miller Pipeline Corporation, with an effective date of April 1, 2002. The policy when issued provided UIM coverage of $1,000,000.

Following issuance of the policy, Nichols was severely injured, on June 4, 2002, in an automobile collision. Miller Pipeline signed and submitted forms rejecting UIM coverage from Zurich, but not until 16 days after the accident.  Over the ensuing two years and eight months, Nichols and his counsel negotiated with Zurich over the UIM coverage. During this period, as documented by Zurich's files, no fewer than seven Zurich employees examined the policy terms and acknowledged the policy included UIM coverage with $1,000,000 limits. Nichols relied on this representation in settling with the tortfeasor.  As late as November 2004, Zurich, through David Gusman, discussed reaching a settlement with Nichols.

In February 2005 did Zurich, through Gusman, advised Nichols’ counsel that the policy did not include UIM coverage. In response, Nichols requested a certified copy of the policy, which Zurich was initially unable to produce. Internal Zurich documents show that Gusman's request to Zurich underwriter Rummel produced the original policy indicating the UIM coverage. Rummel apparently refused to comply with Gusman's request for an endorsement showing no UIM coverage. Zurich ultimately produced an endorsement “effective 04/01/02” which was created in September 2005. The endorsement stated that it resulted in no additional premium and no return of premium.

Initially, Zurich defended the lawsuit by Nichols based on lack of UIM coverage.  After Zurich’s motion for summary judgment on lack of coverage was denied, Nichols filed a motion for summary judgment seeking to confirm UIM coverage.  Zurich argued in opposition to that motion that UIM coverage was included due to mutual mistake and the policy should be reformed.  The court eventually held that there was UIM coverage, and a defense of mutual mistake was not available to Zurich.

Nichols then sought to assert a bad faith claim against Zurich.  The UIM claim was settled for $1,000,000, but the bad faith claim remained.  In discovery, Nichols sought access to the entirety of Zurich's post-litigation communications and post-litigation conduct. The trial court granted Nichols’ discovery requests in part, limiting it specifically to Zurich's settlement conduct.  Zurich filed a motion for summary judgment to dismiss the bad faith claim, which was granted by the trial court and affirmed by the Court of Appeals.

The Kentucky Supreme Court reversed and concluded the bad faith claim could survive summary judgment.  First, it concluded Nichols had presented evidence that Zurich did not have a reasonable basis for denying the claim.  It reasoned that there was no reasonable dispute that the policy was in force and provided UIM coverage at the time of the accident.  Second, the court found that there was sufficient evidence that Zurich had acted with reckless disregard to survive summary judgment.  The court found that Zurich had been a constant source of delay in the claim and litigation process.  Zurich had initially reserved $400,000 on the claim and internally acknowledged coverage prior to taking the position there was no coverage.  The court also concluded that Zurich continued to litigate the UIM claim without a legal basis.

The court also ruled on the discovery issues in the bad faith case, holding that Nichols was entitled to internal Zurich documents related to Zurich’s initial denial of his claim.  However, Nichols was not permitted to the post-litigation discovery materials requested, which included the entire claim file for his case.

Lee S. Siegel
[email protected]

09/21/21       Bilyard v. American Bankers Ins. Co. of Florida
United States District Court, District of Connecticut
Formulaic Restating of Statutory Bad Faith Statute Insufficient

The Connecticut District Court gives us another good example of the pleading requirements for the various bad faith flavors in Connecticut. Ultimately, Judge Arterton granted the carrier’s motion to dismiss the plaintiff’s statutory bad faith causes of action (CUTPA/CUIPA) and breach of the implied covenant cause of action but let stand plaintiff’s common law bad faith count.

Here, Mr. Bilyard is the owner of three classic cars that allegedly suffered water damage as a result of a severe storm. Interestingly, although not germane to the court’s decision, the policy provided “stated value” coverage for the vehicles in the event of a total loss. Plaintiff claimed the storm irreparably damaged the cars, but the carrier denied coverage claiming that the damage was not a result of “hail, water, or flood.” Mr. Bilyard, unhappy with the coverage outcome, sued for breach of contract, statutory bad faith under CUTPA/CUIPA, breach of the covenant of good faith and fair dealing, and for bad faith. The insurer moved to dismiss the bad faith claims.

The court granted the carrier’s motion, dismissing the CUTPA/CUIPA claims, finding that a formulaic recitation of the statutory prohibitions was insufficient to meet the pleading standard. The Connecticut Unfair Trade Practices Act prohibits persons from “engag[ing] in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Conn. Gen. Stat. § 42-110b. For a contract dispute to form a CUTPA claim, like breach of an insurance policy, the plaintiff must allege proof of substantial aggravating circumstances. Violations of Connecticut Unfair Insurance Practices Act, Conn. Gen. Stat. § 38a-816(6), may be alleged as a basis of a CUTPA cause of action, but only if the conduct arises to a “general business practice.” As the court noted, “To prevail on a CUIPA claim, a plaintiff must present “enough facts to permit [ ] the reasonable inference that the unfair insurance practice occurred with enough frequency for it to be deemed a general business practice.” Kim v. State Farm Fire & Cas. Co., No. 3:15CV00879(VLB), 2015 WL 6675532, at *5 (D. Conn. Oct. 30, 2015). If a plaintiff brings a claim pursuant to CUIPA alleging an unfair insurance practice, and the plaintiff further claims that the CUIPA violation constituted a CUTPA violation, the failure of the CUIPA claim is fatal to the CUTPA claim. State v. Acordia, Inc., 310 Conn. 1, 31 (2013).”

Here, plaintiff’s complaint lacked specific allegations of a general business practice and instead summarized that the carrier’s failure to pay the claim “constituted a series of deceptive acts and practices within the meaning of [CUTPA] in the conduct of the trade or business of insurance, in that said conduct constituted a series of material misrepresentations or omission likely to mislead a consumer such as the Plaintiffs acting reasonably under the circumstances.” Plaintiff’s complaint cited two other suits brought against the carrier as support that it has a general business practice of compelling insureds to institute suit to collect benefits. This was insufficient, factually, especially as the plaintiff failed to plead facts as to how these business practices impacted him specifically.

The allegations, the court wrote, were simply a rephrasing of the statutory language. “Plaintiff is obligated to offer “something more than mere conclusions and the formulaic recitation of the elements of a CUTPA cause of action.” Gaynor v. Hi-Tech Homes, 149 Conn. App. 267, 277 n.10 (2014). Without more factual context in addition to Plaintiff's legal conclusions that Defendant's breaching conduct rises to the level of the practices prohibited by CUTPA and CUIPA, the Court need not accept the validity of those conclusions. Iqbal, 556 U.S. at 686–87 (“[T]he Federal Rules do not require courts to credit a complaint's conclusory statements without reference to its factual context.”)” The naked assertions without facts, labels, and conclusions are insufficient [at least in federal court] to plead a prima facie CUTPA/CUIPA cause of action.

The court also struck the plaintiff’s breach of the implied covenant cause of action, finding that it was redundant to the bad faith cause of action. Although breach of the covenant is a cause of action founded in contract, it necessarily includes bad faith conduct. Therefore, the causes of action were redundant. The court, however, let the claims of common law bad faith stand, finding that the plaintiff had stated a plausible claim of bad faith.


Brian F. Mark
[email protected]

09/30/21       Wentworth Group v. Evanston Ins. Co.
United States District Court, Southern District of New York
U.S. District Court Finds Duty to Defend Due to Reasonable Possibility that Some of the Underlying Allegations were not Excluded

This declaratory-judgment action arises out of an underlying construction defect action related to the repair of defective glass panels installed at the balcony rails of a condominium.

The plaintiff, FirstService Residential (“FSR”), served as a managing agent for a condominium in New York City and the plaintiff, FS Project Management provided management services to the Board of Managers of the condominium. The Board filed the underlying lawsuit against FSR and FS Project Management for fraud, breach of duty, and breach of contract, after FS Project Management’s repairs to glass panels were allegedly improper and exacerbated existing defects. 

Evanston Insurance Company issued a policy to the plaintiff, Wentworth Real Estate Services (“Wentworth”), under which FSR and FS Property Management were named as additional insureds. The policy provides coverage for damages resulting from a claim against the insured involving a Wrongful Act, defined as a “negligent act, error or omission”, in the performance of Real Estate Services or Property Management. The policy provides that coverage does not apply to any claim arising out of willful or intentional conduct of the insured.

Evanston Insurance Company (“Evanston”) initially acknowledged that the claims constituted Wrongful Acts that triggered coverage, but later disclaimed coverage, arguing the remaining claims involved intentional conduct. The Court held that Evanston was not entitled to disclaim coverage to the extent the remaining allegations constituted Wrongful Acts.  The Court found that there was a reasonable possibility that several of the underlying allegations involved negligent acts, as opposed to intentional acts, thus triggering coverage.  Accordingly, the Court granted Wentworth’s motion for summary judgment, holding that Evanston had a duty to defend.


Eric T. Boron
[email protected]

10/06/21       AKC, Inc. vs. United Specialty Insurance Co.
Supreme Court of Ohio
Reversal of Ohio Appellate Court Ruling – Commercial Package Policy – Water Backup Exclusion Precludes Coverage of Loss Caused by Local Sewer System Backup into Insured Premises

Procedural Overview: A contractor, AKC, Inc., as assignee of an insured bar owner's property damage insurance claims, brought a breach-of-contract action against the insurer, United Specialty Insurance Company (“United Specialty”) concerning United Specialty’s denial of coverage for damages caused when the local sewer system backed up into and flooded the bar. The trial court granted summary judgment in favor of United Specialty. The contractor appealed. The intermediate appellate court remanded.  United Specialty appealed.  Held: the Ohio Supreme Court ruled, in what it described as a matter of first impression, that the water-backup exclusion set forth in the United Specialty policy issued barred coverage for the property damage at issue because the property damage at issue was caused directly or indirectly by water that backed up or overflowed from a sewer, even here, where the damage was caused by a sewage backup.

Facts and Analysis:   The insured’s property was flooded with sewage caused by a backup of the local sewer system.  The insured’s property damage claim was denied based on a standard water-backup exclusion in the Untied Specialty policy.  The exclusion in the policy prohibits coverage for “loss or damage caused directly or indirectly by water that backs up or overflows from a sewer, drain or sump.” An issue focused upon by the Ohio Supreme Court’s opinion was whether or not sewage, from a sewer, fell within the intended definition of “water” under the policy’s exclusion. The contractor argued the court should find there to be a distinction between pure forms of water, like rainwater, and more impure forms of water, like sewage.  The contractor asserted that the exclusion was not meant to bar coverage for sewage, and by doing so United Specialty was relying upon a “hyper literal reading of the term water”.

In resolving the dispute, the Ohio Supreme Court utilized traditional contract interpretation methods, including applying the plain and unambiguous meaning of the terms in the policy as written.  Noting that the average person would assume water that backs up or overflows from a sewer would contain sewage, the Supreme Court rejected the reasoning of the intermediate appeals court below as well as the dissenting opinion. The majority chose not to follow an “anomalous” case which held that just because a similar exclusion did not specifically include the word sewage, it must be ambiguous.  Supreme Court noted that this anomalous case and the appellate court’s decision were outliers, as it cited cases from California, Massachusetts, and Missouri which had interpreted the water-backup exclusion as applying to sewage backups.

Dissent:  The dissent contended that the language of the water-backup exclusion is subject to more than one reasonable interpretation, and therefore should be construed in favor of the insured.  Agreeing with the intermediate appellate court opinion, the dissent argued that the insurer could have and should have made it explicitly clear that the water-backup exclusion excluded damage caused by sewage, just as it expressly excludes damage caused by mudslides or mudflow in a separate exclusion. The dissent also took issue with the majority’s failure to consider the pollution exclusion after deciding coverage was barred under the water-backup exclusion, calling it “disingenuous.” The dissent’s opinion raises further questions — if the pollution exclusion was considered, the analysis would have to change, and the majority would have been forced to reason with the possibility that sewage is better described as a “pollutant” than as “water.” 


BUCCI on “B”
Diane L. Bucci

[email protected]

10/05/21       Star Insurance Company v. Trinity Property Management, LLC
United States District Court, Western District of Arkansas
A Simple Case, Easily Dispensed With

Several insurers issued policies to Trinity Property Management, LLC, a property management company.  Trinity was sued in a class action brought by tenants who alleged that they had been sexually harassed by Trinity employee Cason, and although reports were filed, they were ignored by the building manager.  The United States Department of Housing and Urban Development ("HUD") filed three complaints against Trinity, only one alleging gender discrimination was being the court.  

The court held that there was no coverage under Coverage A because the acts complained of were intentional so there was no occurrence.  

Under Coverage B, the court examined whether the injury arose out of the “wrongful entry into a dwelling committed on behalf of the room's, dwelling's or premises' owner, landlord or lessor.” The first question was whether Cason’s conduct was imputable to Trinity in the HUD complaint.   The court held that because the building manager did not act, and Trinity put him in charge, there was a possibility that the claims could be imputed to Trinity.  However, the court also held that the Knowing Violation of Another’s Rights Exclusion would preclude coverage.  Reasoning that if Cason’s behavior can be imputable to Trinity, then so would the building manager’s failure to act upon the various complaints about Cason.  According to the court, “a reasonable person would have been aware that his inaction in the face reports and complaints, violated the complainants' rights and would cause injury.”  Therefore, held the court, the insurers had no duty to defend Trinity. 


Ryan P. Maxwell
[email protected]

Regulatory Wrap-Up

10/12/21       DFS To Require Continuing Education on Flood Insurance and Diversity
Department of Financial Services
DFS Will Require CE on Flood Insurance As Well As Diversity, Inclusion and the Elimination of Bias

This week, DFS made a final adoption of the Sixth Amendment to 11 NYCRR 20 (Insurance Regulations 9, 18, and 29), which updates continuing education requirements for insurance producers and public adjustors pursuant to the brand new 11 NYCRR § 20.7.

That section now provides as follows:

§ 20.7 Continuing education requirements.

  1. For purposes of this section:

  2. Diversity, inclusion, and elimination of bias instruction means courses or programs of instruction and seminars related to being a licensee that include implicit and explicit bias; equal access to justice; serving a diverse population; diversity and inclusion initiatives in the insurance industry; and sensitivity to cultural and other differences when interacting with clients, potential clients, or other members of the public.

  3.  Enhanced flood insurance instruction means courses or programs of instruction and seminars related to being a licensee and the sale of flood insurance through the NFIP that include instruction on NFIP coverage, limits, and rates, including coverage for dwellings in urban environments; annual updates to the NFIP; measures to improve flood insurance affordability; the impact of climate change on flood risk and the NFIP; and the NFIP claims process, including the role of adjusters. Enhanced flood insurance instruction shall not include the minimum training requirements of section 207 of the Flood Insurance Reform Act of 2004 or basic flood education as outlined or published by the Federal Emergency Management Agency.

  4. Ethics and professionalism instruction means courses or programs of instruction and seminars related to a licensee that includes a licensee’s professional obligations to clients and potential clients; the sources of a licensee’s professional obligations, such as the Insurance Law and regulations promulgated thereunder and court decisions; recognition and resolution of ethical dilemmas; the mechanisms for enforcing professional norms; substance abuse control; and professional values, such as professional development, improving the profession, and the promotion of fairness, justice, and morality.

  5. Flood insurance instruction means courses or programs of instruction and seminars related to a licensee and the sale of flood insurance through the NFIP, including the minimum training requirements of section 207 of the Flood Insurance Reform Act of 2004 and basic flood education as outlined or published by the Federal Emergency Management Agency.

  6. Insurance Law instruction means courses or programs of instruction and seminars related to a licensee that include an overview of the provisions of the Insurance Law and regulations promulgated thereunder that are relevant to a licensee, such as Insurance Law sections 2102, 2114, 2115, 2116, 2117, 2119, 2120, 2122, 2324, 4224, and 6409, Insurance Law Article 26, this Part, and Parts 25, 30, 34, 35, and 224 of this Title.

  7. Licensee means a person who or that is licensed under Insurance Law article 21 and subject to the continuing education requirements set forth in Insurance Law article 21.

  8. < > means the National Flood Insurance Program.

    Of the 15 credit hours of instruction that a licensee shall complete in accordance with Insurance Law article 21, the licensee shall satisfactorily complete courses or programs of instruction or attend seminars, as the superintendent may approve, that provide:

  9. at least one hour of Insurance Law instruction;

  10. at least one hour of ethics and professionalism instruction;

  11. at least one hour of diversity, inclusion, and elimination of bias instruction;

  12. at least one hour of flood insurance instruction, if the licensee is licensed to sell one or more lines of property/casualty insurance; and

  13. at least three hours of enhanced flood insurance instruction, if the licensee sells flood insurance through the NFIP.

  14. The requirements set forth in subdivision (b) of this section shall apply to a licensee whose license renews on or after April 1, 2022.


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

01/24/19       NY State Senate Bill S2440-The Child Victims Act
New York State Senate
With The Look Back Window Closed, The CVA Will Still Have A Lasting Impact

While the lasting impact of the Child Victims Act (CVA) will not be realized for a few years, we can begin to assess what that impact will be by having a better understanding of how the CVA changed how a victim can recover civil damages stemming from sexual abuse or assault. Below is a very basic assessment of the CVA, its three main components, and what these mean for insurers. We will dive deeper into each of these components in the coming editions of Coverage Pointers, hopefully with some cases to illustrate each aspect of the CVA in practice.

What did the Child Victims Act Do:

The CVA has three main components: 1) it opened a look-back window, allowing individuals who were sexually abused as minors the ability to make time barred claims for recovery against those who allowed or perpetrated the abuse; 2) it revised the statute of limitations for claims of sexual abuse against a minor, allowing those claims to be brought up until a claimant turns 55 years old; and 3) Municipal defendants, including school districts and district employees, will no longer be entitled to service of a Notice of Claim for lawsuits arising from the conduct covered by the CVA. The CVA was signed into law on February 14, 2019, and its most know aspect, the look-back window, went into effect six months later on August 14, 2019.

The Look-Back Window:

The CVA’s most publicized and known aspect is the creation of a one-year (extended by then Governor Cuomo for an additional year) window in which an individual who was sexually abused under the age of 18 could bring a claim against “any party whose intentional or negligent acts or omissions are alleged to have resulted in the commission of said [abuse]” N.Y. CPLR § 214-g. This allowed any individual who had been sexually abused as a child to bring a claim against the alleged abuser, the alleged abuser’s employer, school districts, churches, and a myriad of other organizations. The opening of the look-back window drove a rush of suits alleging abuse occurring decades prior and forcing insurers to reevaluate how they approach adjusting claims alleging sexual assault, especially when policies were hard to come by. The short period to file such suits seemed reasonable on its face, however this provision of the CVA was really only intended to provide judicial relief those individuals who were over the age of 55 on August 14, 2019. The CVA’s revision of the statute of limitations for sexual tort claims brought by a minor provides significantly expanded opportunity for these claims to be brought.

These “look-back” cases are being handled by a group of New York State Supreme Court Justices, who are assigned cases based on geographic location. These “look-back” cases are also given a trial preference and are subject to a variety of special orders controlling discovery, anonymity, alternative dispute resolution, etc. in an effort to move these cases towards resolution.

The Statute of Limitations Revision:

The most expansive change brought about by the passing of the CVA is the revision of the statute of limitations for the filing of a tort action by an individual who was an infant when the cause of action accrued (in the CVA context, the time of abuse). Prior to February 14, 2019, an aggrieved party had up to three years after reaching the age of 18 to bring a sexual tort action sounding in negligence. CPLR § 208, (1986). In effect, an aggrieved party had until they turned 21 to being a sexual tort action sounding in negligence. The CVA revised CPLR § 208, adding sub-paragraph (b), section 208 now provides that an action brought by a person alleging a sexual tort may be commenced against any party whose intentional or negligent acts or omissions are alleged to have resulted in the commission of the alleged abuse may be commenced on or before the claimant turns 55 years old. CPLR § 208(b), (2019).

This revision greatly expands the ability of a plaintiff to bring an action against a church, school district, or community organization for alleged sexual abuse that occurred upwards of thirty years ago. The CPLR now provides that any individual under the age of 55 can bring a timely claim alleging a sexual tort that occurred when that person was under the age of 18. What this means for insurers is that these long-tail sexual abuse claims will continue to be made for years to come. While the publicity of the look-back window caused a rush of filings, there will likely still be a considerable number of CVA cases filed in the coming years. One recommendation we have is to keep a library of older policy forms when they appear. Its become very evident that for many of these claims policies will have to be reconstructed, keeping a library of typical policy forms will not only help make the coverage assessment process more efficient and accurate, but it will reduce the chance that a second, third, or forth coverage position will have to be sent out and provide your insured’s with the most accurate information allowing them to have a better understanding of their own obligations and liabilities.

Revisions to General Municipal Law § 50:

The CVA also nullified the requirement for a claimant to file a notice of claim when making a claim against a municipal organization alleging that the organization either intentionally or negligently caused the alleged sexual abuse. This means that municipal organizations will no longer be notified of sex abuse claims within 90 days of the claim accruing. Further, school districts will no longer be able to assert the failure to serve a notice of claim or the late service of a notice of claim as a defense, and there will be no 50-h hearings allowed in claims arising from sexual abuse.


Patricia A. Rauh

[email protected]

10/06/21       Thomas v. State Farm Life Insurance Co.
U.S. Court of Appeals, Ninth Circuit

Despite Policyowner’s Failure to Pay Premiums on Two Life Insurance Policies Prior to his Death, the Policies Did Not Lapse Because State Farm Failed to Comply With Applicable Provisions of the California Insurance Code

Defendant, State Farm Life Insurance Company (“State Farm”) appealed the district court’s entry of summary judgment in favor of plaintiff, Sarah Aislinn Flynn Thomas (“Thomas”).

This case was brought by Thomas under California law and is based on State Farm’s failure to pay life insurance benefits to Thomas, the beneficiary of two life insurance policies held by her brother, James Flynn (“Flynn”).  State Farm argued that it did not breach its contractual obligations because the policies in question had lapsed prior to Flynn’s death as he had failed to pay the premiums.

The Court held that the policies did not lapse because State Farm failed to comply with two statutory requirements set out in the California Insurance Code, sections 10113.71 and 10113.72, respectively.  State Farm initially argued that these two provisions did not apply to the policies, but given an August 2021 California Supreme Court ruling in McHugh v. Protective Life Insurance Co., State Farm later conceded that the provisions did indeed apply here.

Nevertheless, State Farm argued that Thomas is still not entitled to summary judgment on her breach of contract action because she failed to establish causation as she did not offer any evidence that the policies would not have lapsed even if State Farm had complied with the applicable insurance statutes.  The Court disagreed with this argument and said that it was not necessary for Thomas to produce that type of evidence.  The Court stated that Sections 10113.71 and 10113.72 “create a single, unified pretermination notice scheme” (quoting McHugh).  This scheme required that: (1) new and existing policy owners have the opportunity to designate additional people to receive a notification of termination; (2) that policy owners and any designees receive notice within 30 days of a missed premium payment; and (3) that insurers send notice to these parties at least 30 days prior to termination for non-payment of premiums.  An insurer’s failure to comply with these statutory requirements means that the policies cannot lapse.

In this case, there was no evidence that State Farm communicated with Flynn about designating a third-party to receive notice of lapse or termination for non-payment of premiums.  As such, State Farm failed to comply with the applicable California Insurance Code provisions, which prevented the policies from lapsing.  Therefore, State Farm did breach its contractual obligations by failing to pay benefits to Thomas under the policies.  The Court affirmed the lower court’s grant of summary judgment.


Scott D. Storm
[email protected]

Check back next edition for several cases digests. 


Nicholas J. Heintzman
[email protected]

07/29/21       Utica Mutual Ins. Co. v.  Munich Reinsurance America, Inc.
United States Court of Appeals, Second Circuit
Second Circuit Sides with “Reinsurer” Insurance Companies in Decades-long Asbestos Coverage Dispute Involving Umbrella Policies 

Plaintiff Utica Mutual Insurance Company (“Utica”) had a 30-year insurance program with Goulds Pumps, Inc. (“Goulds”), a manufacturer of products containing asbestos. In 1973, Utica issued a $300,000 primary policy to Goulds for defense and indemnity of personal injury claims. Utica also issued an accompanying 1973 umbrella policy with limits of $25,000,000. The umbrella policy paid defense costs within the limits. A 1974 endorsement amended the umbrella policy to provide defense in addition to the limits for certain occurrences not covered by the primary policy. Pursuant to two 1973 reinsurance certificates, Defendants Munich Reinsurance America and Century Indemnity Company were reinsurers of the umbrella policy, with one-fifth of the policy ceded to Munich and one-fifth to Insurance Company of North America (“INA”), succeeded by Century. Another 1974 umbrella policy was also reinsured, pursuant to a 1975 reinsurance certificate, at one-fifth of the risk by either INA or a different insurer, “INA Re.”

From the 1990s-2000s Utica defended and indemnified Goulds under the primary policies for asbestos litigation claims. A coverage dispute arose between Goulds and Utica, which was settled in 2007. Utica turned to Defendants for reimbursement on liabilities it allocated to the 1973 umbrella policy. Defendants paid Utica $5,000,000 each under their undisputed one-fifth shares of the umbrella policy. However, they refused to pay defense costs in addition to limits when Utica billed them each an additional $2,760,543.

The Second Circuit heard three issues on appeal: 1) whether the Defendants reinsured Utica for defense costs in addition to the umbrella policy limits; 2) whether Century was entitled to a new trial to determine if it was the successor to INA Re and therefore liable for the 1974 umbrella policy; and 3) whether Century was entitled to a new trial on a counterclaim against Utica for breach of a duty of good faith based on Utica’s charging Century defense costs above the 1973 umbrella policy limits.

On the first issue, the Second Circuit held that the Defendants were only obligated to reinsure defense costs with policy limits, as opposed to defense costs in addition to policy limits. Utica presented three unpersuasive theories for why Defendants should reinsure defense costs in addition to policy limits. It first argued that the 1974 umbrella endorsement covered defense costs in addition to limits. The Second Circuit held that the endorsement unambiguously covered defense costs in addition to limits only for claims arising outside of the primary coverage. Since the subject asbestos claims fell within the primary coverage, they were not subject to the endorsement and, as such, any defense costs were reinsured solely within the policy limits.

Utica next argued that language in the 2007 settlement agreement required Defendants to pay the billed defense costs regardless of whether those costs were permissible under the umbrella policy. Unsurprisingly, the Court rejected this argument, as the settlement agreement specified that the subject umbrella policy had an aggregate limit of $25 million, and that defense costs were payable within limits. Finally, Utica argued that the 1973 reinsurance certificates obligated the Defendants to reimburse the disputed defense costs notwithstanding Utica’s own obligations under the 1973 umbrella policy. The Court also rejected this argument, as the reinsurance certificates limited Defendants’ liability such that it was commensurate with Utica’s liability under the 1973 umbrella policy.

Addressing the second issue, the Court held that Century was entitled to a new trial to determine if it was the successor to INA Re (as opposed to INA) and therefore liable under the 1975 reinsurance certificate. The district court denied Century from introducing evidence at trial showing that it was not INA Re’s successor. The evidence was excluded on the basis that Century waived its right to deny successorship when it failed to raise that argument as an affirmative defense in its pleading. The Court held that Century’s argument that it was not INA Re’s successor was not an affirmative defense but was rather a rebuttal of a necessary element of Utica’s claim. Thus, the Court remanded for a new trial to allow the evidence to be presented.

Finally, the Court held that Century was entitled to a new trial on its counterclaim of bad faith against Utica for improperly billing Century for defense costs in addition to limits. The district court instructed the jury that Century must establish that it did what it was obligated to under the 1973 reinsurance certificate. The Court held that Century did what it was obligated to do under the 1973 reinsurance certificate as a matter of law (Century paid defense costs within the limits), so there was no question of fact for the jury to decide. As such, the district court’s charge was inappropriate, and Century’s bad faith claim was remanded for a trial.


10/08/21       94 E 208 Street Partners v. Certain Underwriters at Lloyd’s
Supreme Court of the State of New York, County of Bronx

Insurer Wins Summary Judgment Motion to Disclaim Coverage under the “Independent Contractors” Exclusion

Defendant Certain Underwriters at Lloyd’s of London (“Certain”) moved for summary judgment against Plaintiff 94 E. 208 Street Partners LLC (“Plaintiff”), an LLC., on employee and contractor exclusion grounds. Certain insured Plaintiff, pursuant to a CGL insurance policy, for Plaintiff’s building located at 94 East 208th Street, Bronx, NY.

The Court held that Certain established that it owed no duty to defend Plaintiff against suits commenced by the underlying plaintiffs—regardless of whether the underlying plaintiffs were Plaintiff’s employees, Plaintiff’s contractors, or employees of Plaintiff’s contractors. The CGL, through an endorsement, excluded coverage for bodily injury to Plaintiff’s “employee[s]” or “any contractor, self-employed contractor, subcontractor or any ‘employee’ of the same.”

Plaintiff argued that despite the exclusions, the CGL clearly intended to provide Plaintiff coverage for the underlying action, as one provision read: “Contractors-subcontracted work – in connection with construction, reconstruction, repair or erection of buildings.” Plaintiff argued that if the exclusions applied as Certain intended, the CGL would provide Plaintiff no coverage because any person/entity working for any person/entity that Plaintiff hired to oversee the work would be excluded. The Court held that despite Plaintiff’s cited provision, the exclusions in the endorsement clearly applied to the CGL and excluded coverage.

Plaintiff also argued that Certain failed to establish the underlying plaintiff’s relationships to Plaintiff (whether they be contractors, employees, etc.), and, given the lack of established relationship, Plaintiff’s liability existed solely as a commercial landlord—not as employer or boss. The Court held that whether the underlying plaintiffs were hired by the Plaintiff, Plaintiff’s contractor, or the subcontractors allegedly hired by Plaintiff’s contractor, was irrelevant because in any case the underlying plaintiffs fell squarely under the subject exclusions. Thus, the Court granted Certain’s summary judgment motion.

The Court’s decision for this case is not publicly available yet. Please email me if you would like a pdf copy of the decision.


Heather Sanderson

[email protected]

09/03/21       MDS Inc. v. Factory Mutual Ins. Company, 2021 ONCA 594

“Physical Damage” in an All-Risk Policy means Damage that is a Distinct, Demonstrable, Physical Alteration of Property

On September 3, 2021, the Ontario Court of Appeal released its much-anticipated decision in MDS Inc. v. Factory Mutual Insurance Company.

The trial level decision, a 113-page opus, released in March 2020 and discussed in Volume XXI, No. 26 (No. 565) Friday, June 12, 2020, of this newsletter, sustained the hope of insureds that their commercial all risk policies would provide coverage for business interruption claims arising from the COVID-19 shutdowns. The Ontario Court of Appeal closed the door on that possibility.

MDS is a world-wide distributor of radioisotopes for cardiac imaging, cancer treatments, and sterilization of medical products. MDS had an agreement with Atomic Energy of Canada Limited (AECL) to supply those radioisotopes that were to be made at the Nuclear Research Universal (NRU) reactor in Chalk River, Ontario.  The NRU shutdown for 15 months beginning in May of 2009. The shutdown was unplanned. As a result of the shutdown, MDS lost its supplier of radioisotopes resulting in a loss of profits of approximately CA$121,248,000

MDS had a contingent business interruption policy with Factory Mutual. That policy would pay the lost profits that MDS sustained if AECL’s NRU reactor sustained physical damage that was covered by the MDS policy. The MDS policy was an all-risk policy covering all risks of physical loss or damage excluded corrosion (amongst other things). If physical damage that is not excluded by the policy results, then the resulting damage is covered.

The NRU reactor was shut down due to an unanticipated leak. The leak was caused by corrosion. The gradual weakening of the walls of a component of the reactor due to corrosion was known and had been monitored for 35 years.  However, on May 14, 2009 there was an unanticipated spontaneous rupture to the walls caused by this corrosion. The trial judge held :

  1. the term "corrosion" is ambiguous and should be interpreted in light of the dictionary definition of the term as modified by the "reasonable expectations of the parties;"

  2. the exclusion does not apply to unanticipated and "fortuitous corrosion"; it only applies to natural or "non-fortuitous anticipated corrosion"; and;

  3. the exception to the "corrosion" exclusion for "physical damage" should be interpreted broadly to include not just physical damage caused by the corrosion but economic loss caused by the inability to use the insured property during the shutdown.

The Ontario Court of Appeal disagreed.

Corrosion Means Corrosion from Any Cause

No Canadian court before the trial decision in this case had determined the meaning of “corrosion”. After looking at American and British authorities, that Court held that the excluded peril of “corrosion” applies to corrosion that is caused by any kind of wearing away, whether it is natural or unanticipated:

  • The policy was a standard form, non-negotiated policy; no evidence was before the court as to the parties’ intent when the policy was entered into.

  • The policy should be interpreted in accordance with its terms read in the context of the policy; the dictionary definition of corrosion is not modified or altered by other policy provisions.

  • < >The fact that two … employees …[of the insurer testified that they] …believed there might be coverage for unanticipated corrosion at the time the corrosion was discovered does not render the term ambiguous. As noted above, there is no coverage where the loss was caused by corrosion, as it was in this case. By contrast, there may be coverage if the damage is caused by an insured peril such as a sprinkler leakage and that damage in turn results in corrosion, to use the example provided by one of FM Global’ s witnesses. Moreover, opinions of employees many years after the agreement was signed, do not, of themselves, alter the reasonable expectations of the parties when the Policy agreement was entered into.”

    As the policy is a standard form contract used in many jurisdictions, consistency of interpretation is desirable; the American courts have consistently adopted a plain meaning approach to the term "corrosion" that includes both anticipated and unanticipated corrosion.

  • The policy only applies to fortuitous damage and not to damage that is expected. If the trial judge was correct that the corrosion exclusion only applies to expected corrosion, then this exclusion would be meaningless as that damage is not covered in the first place.

Having determined that the damage was caused by the excluded peril of corrosion, the court moved on to determine if the leak caused physical damage to the reactor.


“Physical Damage” Does Not Include “Loss of Use”

The trial judge determined that the leak did not cause tangible physical damage. The leak caused the shutdown as the hole in the wall of the component of the reactor meant that it was not safe to operate the reactor. The shutdown is a loss of use of tangible property and no more. The Ontario Court of Appeal held that loss of use is not physical damage as it is not a “distinct, demonstrable, physical alteration of the property.”

In keeping with my June 2020 criticism of the trial judgment, MDS was denied coverage under its contingent business interruption policy.  This result is in line with the June 10, 2021, decision of the British Columbia Court of Appeal in Prosperity Electric v. Aviva Insurance Company, discussed in the June 25, 2021, edition of this newsletter and other decisions of Canadian Courts of Appeal as well as significant trial judgments.

MDS has until November 3, 2021, to file an application for leave to appeal to the Supreme Court of Canada. We will monitor the leave applications to determine if an application is filed.

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