Coverage Pointers - Volume XXIV, No. 16

Volume XXIV, No. 16 (No. 637)
Friday, January 20, 2023
A Biweekly Electronic Newsletter

 

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


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


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


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

 

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Dear Coverage Pointers Subscribers:

Do you have a situation? We love situations.

Congratulations to our Brian Barnas on being awarded the Sheldon Hurwitz Young Lawyer’s Award at the New York State Bar Association Annual Meeting!  Truly a great honor, and named after our late-founding partner, Shelly Hurwitz.

From Scottsdale, we wish you a lovely day.  Today John Trimble and I did our first of three CGL overage Primer presentations to about 80 delightful guests.  Two more scheduled, one in February, one in March.  Actually, we did two of them, one for the general public and one for an insurer.  Think about whether your company needs some training!

Still no response from the Governor on the Grieving Families Act, the amendments to the Wrongful Death statute.  More and more newspapers and trade organizations lobbying against it and rumors suggesting that without chapter amendment making the changes proactive rather than retroactive, the Governor will veto the legislation.

But, those are rumors. 

 

Excess Carriers Duty to Disclaim – Read and Remember

For non-New Yorkers, we remind you that our general trial court is called the Supreme Court, above which sits the Appellate Division of the State Supreme Court, and above that court sits our highest court, the Court of Appeals.

Evan Gestwick’s column covers Supreme Court decisions, our lowest court of general jurisdiction.  He includes a December 23, 2022, decision from the state Supreme Court captioned New York City Housing Authority v. Admiral Insurance Company, which is an opinion worth reading (or remembering).  It does not state new law, but it provides an excellent reminder to excess carriers.

Insurance Law Section 3420(d)(2) requires prompt disclaimers by liability insurers to preserve their right to rely upon policy exclusions or breaches of policy conditions in lawsuits involving New York bodily injury and wrongful death accidents, with copying requirements to the injured party and other potential claimants. The case reminds us that the rule applies to excess carriers as well as primary carriers.

 

The excess carrier here argued that it should have the responsibility of sending out a coverage position letter until it knew that the claim might reach its liability limits, but the court rejected that argument:

Admiral argued that its duty to disclaim under the excess policy would only be triggered when it became aware of facts raising the possibility of coverage under said policy (e.g., a judgment rendered in excess of the limits of the CGL policy). However, as the Court noted, this is not the standard in New York. Rather, the New York standard for the time within which an excess liability carrier must issue its disclaimer is the same applicable to a primary liability insurance carrier—excess carriers, too, must issue their disclaimers “as soon as reasonably possible,” consistent with New York Insurance Law 3420(d)(2). As the Court wrote in its opinion “[A]lthough the excess insurer owes no obligation to pay a claim until the primary insurance is exhausted, the prospect of exhaustion does not factor in the obligation to disclaim timely.”

 

So, excess carriers, do not wait to send out a coverage denial if one is appropriate. Failure to do so can lead to a waiver of coverage defenses.

Recovered quickly from a touch of COVID, while on my vacation.  First time and the meds worked as promised.

 

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Registration is around the corner for the PLRB Claim Conference and Expo in Orlando where I will be speaking on Risk Transfer, this time with John Hanlon, Director, Complex Claims and Litigation at Kemper.

 

Training and More Training:

Schedule your in-house training for 2023.  Need a topic?  Here are 160 or so coverage topics from which to choose.

 

Need a mediator?

Coverage mediation is a thing!  Subject matter expertise may be useful.

Hey coverage lawyers.  Hey professionals. Have you and a friend, adversary, or lawyer for whom who have respect reached a stalemate on a coverage dispute?  Look, we know each other.  We know that.  We don’t want to litigate every coverage disagreement.  Why?   Because the position we oppose today may be the one we advocate tomorrow.  Face it.  We all understand that.

Let me help mediate your disagreement to see if there is some mutual agreement, we can reach that will not box us into a corner. Reach out to me.  I will be pleased to mediate your dispute.

My partners, Mike Perley and Ann Evanko, are also available to help resolve other challenges.

You don’t want adverse precedent that will bite you next time you might have a slightly different view on coverage issues. You don’t want to spend tens of thousands of dollars to litigate a coverage issue before a motion judge or appellate justice that knows as much about insurance coverage as you do about nuclear physics.  For those in the Western District of New York, I am certified by the Court and on the WDNY Mediation Panel as are Mike and Ann.

Try mediation.

 

Newsletters:      

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

 

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

     

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

     

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

     

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

 

Peiper on Property and Potpourri:

Lots of good things to celebrate this week.  Congratulations to Ryan O’Shea, Richelle Kloch and Evan Gestwick.  All three were formally sworn in to practice law in the Empire State last Wednesday.  They have been working with us full time since September, and Evan and Richelle have been with us longer due to their law clerk experiences with us.  We’re delighted to formally welcome them into the profession, look forward to their continued growth and development in the coming months and years, and, most importantly, cannot wait to send them on their first appearances. 

We also offer congratulations to CP’s own, Brian Barnas, who, as of the date you’re reading this, is still basking in the honor of accepting the Sheldon Hurwitz Young Lawyer Award from the New York State Bar Association. The award, named in recognition to the Firm’s founding partner, recognizes a young lawyer’s commitment and contribution to the practice of law. 

We’re delighted that Brian becomes the sixth Hurwitz Fine lawyer to achieve this recognition.  In particular, he joins our Editor, and yours truly, as award winners. Welcome to the club, Brian.  The grey hair is surely to follow. 

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

Steve
Steven E. Peiper

[email protected]

 

Talk About Great Genetics… – 100 Years Ago:

Times Herald
Olean, New York
20 Jan 1923

NEGRO WOMAN DIES
AT AGE OF 125; CHILD
99 IS STILL LIVING

(By the Associated Press)

          ATLANTA, Ga., Jan. 20.—Evelyn Booth, a negro woman of Oglethorn county, Georgia, is dead at the age of 125 years, 9 months, and 11 days, according to Dr. William A. Davis, director of the department of vital statistics of the state board of health, who said he found that the negro woman’s third child is still living at the age of 99, that she was the mother of sixteen children, and 45 grandchildren and 191 great grandchildren.

 

Wilewicz’ Wide-World of Coverage:     

No news is good news. After the last few years here, that’s a good thing indeed. So, not much new to report in the WWWofC here, just gearing up for a year of conferences, work, and travels. More on that, next time.

This week in the Wide World of Coverage we bring you the latest from our own Second Circuit. In the Court’s recent Admiral Insurance v. Niagara Transformer, we have quite a lengthy, but meaty brief. There, the Court addressed various jurisdictional issues and talked about the standards for analyzing duties to defend and indemnify. It’s a clear, well-written read – check it out in the attached.

Until next time,

Agnes
Agnes A. Wilewicz

[email protected]

 

Luck Timed Out – 100 Years Ago:

The Buffalo News
Buffalo, New York
20 Jan 1923

Found Good
Luck Illegal

  ST. CATHERINES, Ont., Jan. 20.—If Dominic Nazarine had not been so lucky in one way he would be $500 richer today.

         When picked up by the police with a keg of wine on board his wagon on his way home, he neglected to account at the time for a bottle of whiskey he had also in his rig.

As he was taking the wine home it was perfectly legal but the whiskey was another matter.

“I found the bottle on the road,” asserted Dominic in police court yesterday afternoon.

        “Oh, I don’t believe in luck like that,” said the magistrate. “You must do better. The fine is $500.”

 

Barnas on Bad Faith:

My note this week comes to you from the New York State Bar Association’s Annual Meeting in Manhattan.  Today’s programming from the Torts, Insurance and Compensation Law Section so far has featured an excellent presentation on mediation strategies and tactics, and this afternoon the programming will include a presentation on Labor Law defenses and motions in limine.  If anyone reading will be at the meeting today, please come up and say hello!

The Bills made it through to the divisional round of the playoffs by the skin of their teeth.  We will need a better performance against Cincinnati this weekend to move on to the AFC Championship.  I am hoping the Bills win and the Jaguars upset the Chiefs so that we can play that game at home, but I did book my travel plans for Atlanta in the event that the neutral site game comes to fruition.

Go Bills.

Brian
Brian D. Barnas

[email protected]

 

Beggers Can’t Be Choosers – 100 Years Ago:

The Buffalo Enquirer
Buffalo, New York
20 Jan 1923

ANNOYED HOUSEWIVES,
GETS YEAR IN JAIL

(Special Telegram to The Enquirer.)

          Olean, Jan. 20.—Carl Dale, forty-two-years old, was sentenced to a year in the county jail yesterday by Judge Keating in police court on a charge of disorderly conduct. He was arrested after he annoyed a number of housewives by asking for food at back doors, and then roundly abusing the donors because the food was not to his taste.

 

Kyle's Construction Column:

Dear Readers,

I am very glad that the Bills were able to walk away with a win last week, even if it was more stressful than any of us would have hoped. The best part is that now I actually get to use the tickets I bought for the divisional round game this week! Go Bills!

In this week’s case, a Louisiana Appeals court upheld a summary judgment ruling for the insurer, because the damage resulting from faulty workmanship and defective materials was not covered due to the policy’s exclusions.

Until next time,   

Kyle
Kyle A. Ruffner

[email protected]

 

Klan Kicked Out – 100 Years Ago:

The Kingston Daily Freeman
Kingston, New York
20 Jan 1923

BILLS IN ALBANY
TO CURB KLAN

 

By Telegraph to The Freeman

          Albany, Jan. 20.—No efforts are to be spared by Senator John A. Hastings, Democrat of Brooklyn, and Assemblyman Owen M. Kiernan, Democrat of New York, in having the legislature pass their measures aimed to curb the Ku Klux Klan in New York state by forcing the Klan to file with the secretary of state the names of all its members.

         Senator Hastings said today he was sure the bills would meet with the approval of a majority of the members of both the senate and assembly. It is understood several additional measures aimed at the Klan will be offered in both houses within the next few weeks.

          In addition to his fight against the Klan, Senator Hastings has offered a bill to repeal the present state anarchy statute.

          While it is believed the legislation aimed at the Ku Klux Klan has a good chance of passage, indications are that the measure to repeal the anarchy law will meet with considerable opposition, particularly on the part of Senator Clayton R. Lusk, Republican minority leader of the senate, and author of the Lusk anti-sedition laws.

 

Fleming’s Finest:

Hello Coverage Pointers Subscribers:

Time files when you are having fun. I recently celebrated my HF anniversary, and the HF Women’s Forum is back at it again this week with a golf simulator outing.

In this week’s case from the Bay State, the Massachusetts SJC considered whether an insurer must cover costs incurred by an insured to prevent imminent covered loss.

Go Bills,

Kate
Katherine A. Fleming

[email protected]

 

Distracting Delinquents – 100 Years Ago:

The Dayton Herald
Dayton, Ohio
20 Jan 1923

AMUSING THE CRIMINALS

          “Baseball, our national pastime, has now been suggested a possible crime preventative,” says the New York Herald. “President John Heydler of the National League of Professional Baseball Clubs said in an interview the other day that during the world series of last year there was practically no crime reported in the country. He asserts that this statement can be backed by irrefutable statistics.

          “The theory of Mr. Heydler seems to be that an amused criminal commits no crime. Absorbed by the drama of the world series through the ticker or at the baseball park the criminal forgets the call of the jimmy and the swag, and, as Mr. Gilbert remarked long before Mr. Heydler, ‘his capacity for innocent enjoyment is just as great as any other man’s.’

          “Can it be that Mr. Heydler actually has discovered the cause of crime? He seems to hint that he has, since he has found a preventative. The cause of crime, then, is that society does not keep its criminals amused. This would seem to be something of an indictment of our drama, spoken and silent, and of its allied arts. They may have progressed but they are not adequate to the needs of society, for they have failed to keep our criminals amused to the extent necessary to prevent them from engaging in their nefarious pursuits.

         “Great is Miss Pickford, great is Douglas Fairbanks and certainly great is Charles Chaplin. They have attained the heights; yet there is something lacking—they have not yet reached the distinction of being recognized crime deterrents. In this Babe Ruth must be admitted the greatest artist. Either there must be a continuous world series or we must make our theaters and cinemas more entertaining to the criminal classes. That is what Mr. Heydler lets us infer.”

 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

For those less initiated into Buffalo sports fandom, allow me to sing you a song:

The Bills make me wanna (SHOUT!),

Kick your heels up and (SHOUT!),

Throw your hands up and (SHOUT!),

Throw your head back and (SHOUT!)

C’mon now, the Bills are makin’ it happen now,

Stand up now c’mon and SHOUT!

Yey-ey-Yay-Yeah (say you will)

Shout it right now baby (say you will),

C’mon, c’mon (say you will),

C’mon and SHOUT! (say you will), YEAAHH (SHOUT!)

Buffalo’s happenin’ now (SHOUT!)

We’re on the move now (SHOUT!)

The Bills are happenin’ now (SHOUT!)

They’re makin’ it happen now (SHOUT!)

We’ve got the spirit (SHOUT!)

A lotta spirit yeah (SHOUT!)

We’ve got the spirit (SHOUT!)

JUST WATCH IT HAPPEN NOW

Hey-ey-ey-ey (hey-ey-ey-ey)

Hey-ey-ey-ey (hey-ey-ey-ey)

Let’s go Buffalo (let’s go Buffalo)

Let’s go Buffalo (let’s go Buffalo)

The Bills make me wanna (SHOUT!)

(Syracuse Alum and ESPN Legend Chris Berman, somewhere probably: “Nobody circles the wagons like the Buffalo Bills.”).

This week, I have summarized the findings of a DFS report regarding underwriting and rating of affordable housing developments and the work and data collection that remains.

Until next time,

Ryan
Ryan P. Maxwell

[email protected]

 

Fit for a Prince – 100 Years Ago:

The Buffalo Enquirer
Buffalo, New York
20 Jan 1923

Prince’s Marriage
a Love Affair

(By the United Press)

          New York, Jan 2.—When the Prince of Wales marries, it will be a love match, according to the Rev. Albert Victor Bailley, a spiritual advisor to the British royal family, who is here on a visit.

          “The day is past,” he continued, “when a government picks out an eligible bride, from a diplomatic point of view and instructs a prince that such a marriage would be advisable.”

 

Dishing Out Serious Injury Threshold:

Dear Readers,

Hope everyone is having a great start to the New Year. It feels like it is flying by already. 

It was a slow couple weeks from the Appellate Division, so I only have one case to discuss this issue. In pertinent part, the Appellate Division found that plaintiff raised a triable issue of fact on serious injury threshold grounds and defendant was unable to raise triable issues of fact as to alternate causation of subject injuries.

Enjoy,

Michael
Michael J. Dischley

[email protected]  

 

End of the World – 100 Years Ago:

Kennebec Journal
Augusta, Maine
20 Jan 1923

Mexican Monk Predicts
End of World in 1954

          Mexico City, Jan. 4.—Considerable anxiety is being shown by the Indian population of the village of Mixcoac, near Mexico City, following the recent declarations of Father Genaro Rivera, a Carmelite monk residing there, that the end of the world will come December 12, 1954.

          The monk bases his prediction on highly complex astronomical observations he has been conducting for years, and he asserts that the millennium is a certainty on the date mentioned. Inasmuch as he is a highly respected man of the village, his assertions have caused great excitement among the credulous Indians. Local newspapers have given much prominence to the predictions.

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

We had a great week at the beach in the Dominican Republic. Nothing but sun, sand, surf, and a bit too much of frozen rum drinks – but hey it was vacation. Coming back to the office this week felt a bit like:

 

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But after getting through a few hundred emails and returning a couple of dozen phone calls, the tan was already fading. So, I’m excited to get back to work and show all the judges that we really will resolve every case on the docket by Memorial Day. Right?

Keep keeping safe and a belated Happy New Year to everyone.

Lee
Lee S. Siegel

[email protected]

 

2023 Prediction: Affordable Air Fare – 100 Years Ago:

The Springfield News-Leader
Springfield, Missouri
23 Dec 1923

          Air travel, which is still expensive, may ultimately be the cheapest of all, for the distance covered. A century from now, anyone above the poverty level may be able to take an occasional trip to the other hemispheres or even around the world.

 

Rauh’s Ramblings:

Hello all!

I hope you are all having a good week!  I can’t believe we are already three weeks into the new year – the days seem to be flying by.  I am looking forward to Sunday to watch the Bills take on the Bengals in the playoffs!  I have no doubt we can get the win, but I don’t want to say too much and jinx us!

I searched through all the circuit courts, and quite a few of the district courts, and could not find one notable case on life insurance/ERISA that has been decided in the past couple of weeks.  Hopefully I have better luck in two weeks and will find an interesting case to report on.

Until then (and GO BILLS!),                      

Patty
Patricia A. Rauh

[email protected]

 

2023 Prediction: Witch or Human? – 100 Years Ago:

The Indianapolis Times
Indianapolis, Indiana
18 Oct 1923

          A scientist says a century from now the average length of human life will be 300 years. Quite a change. We of today have been living that long about once a month.

 

Storm’s SIU:

Hi Everyone:

Getting caught up from almost two weeks cruising the Caribbean - (Sigh) - Back to reality. 

My section of Coverage Pointers this edition includes an interesting case discussing:
 

  • RICO Suit by No-Fault Insurer Against Medical Providers.  May an Individual or Corporate Entity Invoke the 5th Amendment Right Against Self-Incrimination to Avoid its Discovery Obligations to Produce Corporate Records and Provide Interrogatory Responses?  Answer: yes and no. 
     

However, as held by the court in a case I was successful on for State Farm where insureds “plead the 5th” in lieu of answering questions regarding a prior claim (Eagley v. State Farm Ins. Co., 2015 WL 5714402 (W.D.N.Y. 2015)), it is well-settled that an individual or corporate insured or its agent may not refuse to cooperate during a claim investigation because of a contemporaneous criminal investigation or based upon on Fifth Amendment grounds without breaching the policy conditions.  See also, Allstate Ins. Co. v. Longwell, 735 F.Supp. 1187 (S.D.N.Y. 1990); and Dyno-Bite, Inc. v. Travelers Companies, 80 A.D.2d 471, 476 (4th Dept. 1981).

 

Other cases we look at this edition include:

 

  • Insureds Fail to Satisfy Their Burden that the Alleged Theft of One Million Dollars of Art from Their Barn Occurred During the Policy Period and Their 91-Day Delay in Reporting the Alleged Loss to the Insurer is Unreasonable as a Matter of Law. 

 

  • The Triggering Date that Begins the IME-Request Period is not Receipt of the NF-2 Benefits Application, but Instead Receipt of NF-3 Claims for Payment Submitted by Treating Providers.

    If a No-Fault Insurer Establishes that the Eligible Injured Person Failed Twice to Appear for an IME or EUO Scheduled Within 15 Days of Receipt of an NF-3 Bill, Summary Judgment is Properly Awarded to the Insurer with Respect to Further Coverage Obligations and Reimbursement of Outstanding Medical Bills with Respect to All Treating Providers.

     

  • Bringing Documents to an Examination Under Oath, But Not Allowing the Insurer to Copy any Such Documents, does not Constitute Providing Those Documents.

     

  • PIP Insurer Failed to Demonstrate that the Purported Misrepresentation as to the Garaging of the Vehicle Was Material as the Underwriting Eligibility Guidelines Included with Its Motion Papers Failed to Show that Defendant Would Not Have Issued the Same Policy if the Correct Information had Been Disclosed. 

 

I hope you have a productive two weeks until we report again in the next edition of CP

Go Bills!

Scott
Scott D. Storm

[email protected]

 

2023 Prediction: Advanced Medicine – 100 Years Ago:

The Anaconda Standard
Anaconda, Montana
01 April 1923

          “We are beating the game in our fight against death,” said Dr. Kober. “Within the next 30 years the average person in this country may reach the biblical three score years and ten. Half a century from now people may live 20 years longer than they do at present.

 

Gestwick’s Greatest:

Dear Readers,

Greetings from the other side of a wonderful Cancun getaway! Special congratulations to my mother and her now-fiancé, who got engaged on the trip.

More exciting news: I was admitted to the practice of law last week! This means that I am now officially licensed to practice law in any of New York’s 64 trial-level courts. As time goes on, I will eventually be admitted to New York’s federal courts, and perhaps beyond.

This week, I bring to you two no-fault decisions that serve as important reminders for us all. The first of which stresses the importance of subscribing to and returning one’s EUO transcripts, while the second reminds us that a no-fault insurer’s belief that the injuries alleged were not caused by the accident complained of can be based on circumstantial evidence.

In a “bonus case,” I bring to you an important lesson on the importance of specifically reserving the right to recoup expenses incurred that are not covered by the policy at issue.

In a very special (and important) “bonus bonus case,” we are reminded that an excess liability carrier’s duty to timely disclaim under New York Insurance Law 3420(d)(2) is the same as that of a primary liability insurance carrier, regardless of whether its duty to pay has become due.

Cheers and Go Bills,

Evan
Evan D. Gestwick

[email protected]

 

2023 Prediction: Missed the Mark – 100 Years Ago:

Free Press Prairie Farmer
Winnipeg, Manitoba, Canada
05 Sep 1923

          Whole armies put to sleep and taken prisoner in gas warfare is by no means an impossibility 25 years hence, say CoL Raymond F. Bacon, chief of the technical division of chemical warfare service, American Expeditionary force, in a paper made public by the American Chemical society.

          “I can easily imagine,” says CoL Bacon, “the official communique of the battle of Patagonia a quarter of a century from now, which would read as follows:

          “Last night at 10 o’clock our airplanes sprayed on the enemy’s position a new gas, soporite. This gas has the effect of putting a man to sleep for six hours. At 1 a.m. our troops advanced into the sections held by the enemy, and the whole enemy army facing this sector is now being sent to the rear as prisoners. The number of guns and other equipment captured is enormous. We suffered no casualties. (Signed) Blank, general in command.”

 

On the Road with O’Shea:

Hey You Guyyyys,

Ignore the reference if needed. I would like to extend congratulations to Evan and Richelle as we now enter the profession. I look forward to practicing with you both in the future.

For this issue, I also have a No-Fault case. However, this one looks to an arbitrator’s award that pushed past a policy’s No-Fault limit.

So Long,

Ryan
Ryan P. O’Shea

[email protected]

 

2023 Prediction: Advanced Technology – 100 Years Ago:

Messenger-Inquirer
Owensboro, Kentucky
31 Aug 1923

BY 2023

          One hundred years hence, in the opinion of Charles P. Steinmetz, electricity will have relieved the human race of all drudgery. Tasks now irksome will be so transformed that they will not only be attractive, but it will be necessary to work at them or at any other employment only four hours a day and 200 days a year.

          This is by all means the most hopeful expression of opinion as to the social and economic situation a century from now that has yet appeared. For a number of years the signs have indicated that the irksome tasks which the human race has to perform were taking on more, rather than less, of the aspects of drudgery. Everyone who is able raises himself out of the hard-handed occupations and unattractive employments to enter the professions or the callings which demand less the use of the body, and more that of the mind. Where the world was to turn a generation or two hence to secure its necessary ditch diggers and other day laborers has lately been the subject of much serious speculation, but no satisfactory answer has before been available.

          If Steinmetz is right the answer is simple. Electricity will so profoundly affect the processes of industry that employments now avoided as unattractive will no longer be the objects of discrimination. By a slight stretch of the imagination, perhaps, one may think the son of the lawyer or the physician a century from now turning to some trade that is now deemed undesirable, just as such son of tradesman now aspire to become lawyers and physicians.

          Improbable though these forecasts of conditions in 2023 now appear it is hardly fitting to quarrel with the opinions of so distinguished a scientist. The changes of the past century have been so marked that no one, however skeptical he may be, can with safety assert that Steinmetz is wrong.

 

North of the Border:

How is it possible that it is mid-January? The first two weeks of the year have just flown by. Perhaps it’s because I can’t tear myself away from a Netflix series, Money Heist. Watch it. Terrific writing. First class entertainment.

Take care,

Heather
Heather A. Sanderson
Sanderson Law, Calgary, Alberta

[email protected]

 

2023 Prediction: Posterity Does Laugh – 100 Years Ago:

Muncie Evening Press
Muncie, Indiana
22 Jan 1923

POSTERITY WILL LAUGH

          Perhaps the most valuable thing that could happen to humanity would be a permanent coal strike—one that would last forever and that would prevent the mining of all coal. If that were to happen, who can doubt that within a short time men of science would have found some way more cleanly, less cumbersome, less wasteful way of keeping the world warm and driving the wheels of industry?

          There is plenty of heat in the sun to give heat, light and power for all purposes to all the inhabitants of the earth for millions of years, but science has not yet harnessed it. The ocean and the winds and rivers waste enough energy every hour of the day to produce all the power and heat and light required to care for the ants of a hundred earths for twenty-four hours. But we have not harnessed these forms of energy.

          To become immediately practical, there are few communities that have not near them some stream that could be used for the production of all the electric power and lighting such community and many others might need if only the inhabitants were far-seeing enough to use the mighty power that lies at their door.

          One hundred years from now posterity will laugh heartily at the crude industrial methods of their ancestors—meaning us.

 

Headlines from this week’s issue, attached:
 

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

  • Ineffective Cancellation of Workers Compensation Policy Leads to Coverage – Two Insured Entities – Even with Interlocking Management and the Same Address – Requires Two Separate Notices

     

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

  • Coverage Dispute Over Policies Brokered and Issued in NY is Properly Litigated in a New York Court

For Purposes of RC Enhancement Endorsement, claimed “Value” of the Plaintiff’s Dwelling is Not the Same as its Replacement Cost

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley

[email protected]

  • ​Plaintiff Raised a Triable Issue of Fact on Serious Injury Threshold Grounds and Defendant Expert was Unable to Opine as to Alternate Causation for Injury

 

WILEWICZ’S WIDE WORLD of COVERAGE:
Agnes A. Wilewicz

[email protected]

  • Second Circuit Remands Declaratory Judgment Action for Further Proceedings on Jurisdiction and Issues of Defense and Indemnification

 

BARNAS on BAD FAITH
Brian D. Barnas

[email protected]

  • Nothing to report at this time.  Check back in two weeks.

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]

  • Court Stretches to Infer Sinister Motive

     

KYLE'S CONSTRUCTION COLUMN
Kyle A. Ruffner
[email protected]

  • Louisiana Appeals Court Holds that no Coverage Exists for Loss due to the Defective Installation of the Plaintiff’s Air Conditioning Unit and Insulation

 

RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell

[email protected]

  • DFS Completes Report on Increases in Insurance Premiums and Unavailability of Insurance Coverage for Affordable Housing Developments. Still More to Come.

     

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

  • No case to report on this time – check back in two weeks!

 

STORM’S SIU
Scott D. Storm

[email protected]

  • RICO Suit by No-Fault Insurer Against Medical Providers.  When May an Individual or Corporate Entity Invoke the 5th Amendment Right Against Self-Incrimination to Avoid its Discovery Obligations to Produce Corporate Records and Provide Interrogatory Responses?

  • Insureds Fail to Satisfy Their Burden that the Alleged Theft of One Million Dollars of Art from Their Barn Occurred During the Policy Period and Their 91-Day Delay in Reporting the Alleged Loss to the Insurer is Unreasonable as a Matter of Law

  • The Triggering Date that Begins the IME-Request Period is not Receipt of the NF-2 Benefits Application, but Instead Receipt of NF-3 Claims for Payment Submitted by Treating Providers

    If a No-Fault Insurer Establishes that the Eligible Injured Person Failed Twice to Appear for an IME or EUO Scheduled Within 15 Days of Receipt of an NF-3 Bill, Summary Judgment is Properly Awarded to the Insurer with Respect to Further Coverage Obligations and Reimbursement of Outstanding Medical Bills with Respect to All Treating Providers

  • Bringing Documents to an Examination Under Oath, But Not Allowing the Insurer to Copy any Such Documents, does not Constitute Providing Those Documents

  • PIP Insurer Failed to Demonstrate that the Purported Misrepresentation as to the Garaging of the Vehicle Was Material as the Underwriting Eligibility Guidelines Included with Its Motion Papers Failed to Show that Defendant Would Not Have Issued the Same Policy if the Correct Information had Been Disclosed

     

    FLEMING’S FINEST
    Katherine A. Fleming

    [email protected]
     

  • No Common-Law Duty for Insurers to Cover Costs Incurred by Insured to Prevent Imminent Covered Loss when Policy Did Not Provide Coverage and the Costs Are Otherwise Excluded

 

GESTWICK’S GREATEST
Evan D. Gestwick

[email protected]

  • Failure to Subscribe to and Return EUO Transcripts Can Void No-Fault Coverage

  • An Insurer’s Belief that the Claimant’s Injuries were not Causally Related to the Accident May be Founded in Circumstantial Evidence

  • An Insurer Must Specifically Reserve its Right to Recoup Past Defense Costs in its Reservation of Rights Letter

  • An Excess Liability Carrier Must Disclaim As Soon As Reasonably Possible, Regardless of Whether its Duty to Pay Has Become Due

 

ON the ROAD with O’SHEA
Ryan P. O’Shea

[email protected]

  • Arbitrators Exceed Authority When Granting Award in Excess of No-Fault Limit, Especially When Insurer Provides Ledger Showing Costs Paid

 

NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta

[email protected]

  • Homeowners’ Insurer has been Ordered to Defend a Premises Liability Claim Advanced by a Patron of an Undisclosed Home-Based Business

 

Stay healthy – you and your family -- because with good health, you have everything.

Dan

 

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

 

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


NEWSLETTER EDITOR
Dan D. Kohane

[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz

[email protected]

ASSISTANT EDITOR
Patricia A. Rauh

[email protected]

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

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

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Scott D. Storm

Thomas Casella

Brian D. Barnas

Eric T. Boron

Robert P. Louttit

Ryan P. Maxwell

Patricia A. Rauh

Diane F. Bosse

Kyle A. Ruffner

Katherine A. Fleming

Evan D. Gestwick

Ryan P. O’Shea

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

Michael F. Perley

Scott D. Storm

Brian D. Barnas

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

Alice A. Trueman

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

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri

Dishing Out Serious Injury Threshold

Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Kyle’s Construction Column

Ryan’s Capital Roundup

Rauh’s Ramblings

Storm’s SIU

Fleming’s Finest

Gestwick’s Greatest

On the Road with O’Shea

North of the Border

 

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

01/12/23       Ceja v. Manetta Enterprises, Inc.
Appellate Division, Third Department
Ineffective Cancellation of Workers Compensation Policy Leads to Coverage – Two Insured Entities – Even with Interlocking Management and the Same Address – Requires Two Separate Notices

Ceja filed a claim for workers' compensation benefits alleging that, while working for Manetta Enterprises, Inc. in June 2019, he slipped on a wet surface and sustained injuries. The State Insurance Fund (hereinafter SIF) controverted coverage on the basis that it had canceled its policy with Manetta in November 2018 for nonpayment of premiums. The Workers Compensation Board found the cancellation ineffective and awarded benefits.

In order to effectively cancel a workers' compensation insurance policy, the carrier must strictly comply with Workers' Compensation Law § 54 (5). To that end, when service is by mail, Workers' Compensation Law § 54 (5) requires that the carrier serve a notice of cancelation on the employer addressed to the employer at the employer's place of business. "The carrier has the burden of establishing its compliance.

As requested in the application for workers' compensation insurance coverage, the insurance policy at issue insured two entities — Manetta and Manco Enterprises of NY, Inc. — in one single policy. Manetta and Manco shared an address but were separate corporate entities. Due to nonpayment of premiums, SIF sent a certified notice of cancelation of the policy addressed to Manco, which referenced that the policy cancelation also applied to Manetta. The carrier admittedly did not separately serve Manetta with a notice of cancelation addressed to it.

The carrier maintains, however, that because the entities share an address and appear to be interrelated since one owner is listed for both, service upon Manco was sufficient to cancel the policy as to both entities but the court disagreed.

It was incumbent upon SIF, in accordance with the requirements of Workers' Compensation Law § 54 (5) (a), to serve a separate notice of cancelation addressed to Manetta.

 

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

01/17/23       Travelers Cas. & Sur. Co. v. Vale Can. Ltd.
Appellate Division, First Department
Coverage Dispute Over Policies Brokered and Issued in NY is Properly Litigated in a New York Court

Travelers commenced this suit seeking a judicial ruling on the extent of its obligations under several policies issued to Vale Canada over the course of several decades.  Vale Canada potentially triggered coverage under the Travelers policies when it made claims for environmental clean up damages at several locations around the world.  Some of the locations insured were in Canada, and others were in the United States; principally, New Jersey. 

Vale Canada moved to dismiss Travelers’ action on forum non conveniens, and sought an order compelling all litigation to be conducted in a court sitting in the Canadian Province of Ontario.  In reviewing the factors, the Appellate Division noted that the policies were brokered and issued in New York.  Moreover, several of the issues raised in the coverage dispute occurred in New York.  Ontario, on the other hand, did not have jurisdiction over at least one of the implicated insurance companies. There was also no showing that litigating the coverage matter in New York would be overly onerous on Vale Canada.  Finally, even if Canadian law applied (a fact very much in dispute), the Court noted that New York trial courts would be well equipped to render a decision in any jurisdiction. 
 

01/05/23       Lorens v. New York Central Mut. Ins. Co.
Appellate Division, Third Department
For Purposes of RC Enhancement Endorsement, claimed “Value” of the Plaintiff’s Dwelling is Not the Same as its Replacement Cost

This case brings us a very interesting dispute over the application of Replacement Cost policies, and when coverage enhancement endorsements trigger.  Plaintiff’s home was damaged due to a covered loss in December of 2017.  At the time of the fire, the policy included a coverage enhancement that raised the Replacement Cost limit to 125% of the stated limit when the premises underwent an alteration that increased the “replacement cost of the dwelling” by 5% or more.  The endorsement also contained an obligation for the insured to notify the carrier of any such alterations which took place during the policy period.

Here, the insured submitted an estimate for Replacement Cost that amounted to the enhanced policy limit.  It is appears as though NYCM accepted the estimate, and advised that coverage was available up to the revised 125% limit. 

At some point, the insured noted that it made unspecified alterations which increased the “value” of the home from $200,000 to $275,000.  Relying on this concession, NYCM noted that because no notice of the alterations was provided to it during the policy period, the endorsement’s conditions precedent had not been satisfied.  Accordingly, NYCM withdrew its offer of the enhanced limit and, instead, reduced the amount it offered to the originally scheduled liability limit. 

On summary judgment, NYCM moved for a declaration that the plaintiff failed to meet the conditions of the enhancement endorsement.  Plaintiff opposed by arguing that NYCM was estopped from reducing the limit where, as here, it conceded the 125% extension and plaintiff relied upon that estimate in effectuating repairs.  The trial court denied all motions on a question of fact.

On appeal, the Appellate Division noted that NYCM presented no evidence that there were, in fact, alterations which raised the Replacement Cost by more than 5%.  Without evidence of what alterations where done, and why they raised the Replacement Cost, accordingly NYCM failed to meet its burden.  In reaching this conclusion, the Court noted that plaintiff’s reference to alterations raising the value by $75,000 did not speak to Replacement Cost.  Rather, at best, plaintiff’s statement could only be used to infer that the Actual Cash Value (i.e., the value of the property on the date of the loss) was raised.  As ACV and RC valuations are entirely different, the Court ruled that changes as to ACV did not automatically include changes to the RC amount. 

With regard to the plaintiff’s estoppel appeal, the Court noted that questions of fact on detrimental reliance perdured and, as such, summary judgment was not appropriate.  The Court did note, however, that NYCM did agree to the 125% enhanced limit and that plaintiff did not begin repairs until after NYCM acknowledged the increased limit.  Further, because plaintiff did not cross appeal the trial court’s decision, there was no basis for the Appellate Division to address the merits of the estoppel claim.  Finally, it also appears that plaintiff did not actually plead estoppel as a Cause of Action in the underlying Complaint.  As such, while estoppel could be raised to defeat NYCM’s motion for summary judgment, absent an amended pleading plaintiff could not receive an estoppel determination. 

With respect to a companion dispute over additional living expenses (“ALE”), the Court noted that the endorsement provided enhanced ALE during the time necessary to make repairs following a loss.  NYCM estimated that the repairs should have been completed within one year of the loss.  Plaintiff argued that the time needed to be extended because of unforeseen weather delays and difficulties in obtaining a contractor to perform the work.  On this Record, the Court indicated that a question of fact existed as to how long ALE should have been extended by NYCM. 

 

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

01/11/23       Alexa Niciforo v. Vanessa M. Orellana, et al
Appellate Division, Second Department
Plaintiff Raised a Triable Issue of Fact on Serious Injury Threshold Grounds and Defendant Expert was Unable to Opine as to Alternate Causation for Injury

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Suffolk County (Martha L. Luft, J.), dated January 3, 2020. The order granted the defendants' motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

The plaintiff commenced this action to recover damages for personal injuries she allegedly sustained in a motor vehicle accident that occurred on December 7, 2016. The defendants moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. In an order dated January 3, 2020, the Supreme Court granted the defendants' motion, and the plaintiff appeals.

The Appellate Court found that defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine did not constitute serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). However, in opposition, the Appellate Court found that plaintiff raised a triable issue of fact as to whether she sustained serious injuries to the cervical and lumbar regions of her spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d).

Since the defendants' expert conceded that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine were caused by the accident, the burden never shifted to the plaintiff to raise a triable issue of fact regarding causation, or to explain any gap in treatment.

Accordingly, the Appellate Court found that the Supreme Court should have denied the defendants' motion for summary judgment dismissing the complaint. Based on the foregoing, the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is denied.

 

WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz

[email protected]

 

01/06/23       Admiral Insurance Co. v. Niagara Transformer Corp.
United States District Court, Second Circuit
Second Circuit Remands Declaratory Judgment Action for Further Proceedings on Jurisdiction and Issues of Defense and Indemnification

In this declaratory-judgment action, Admiral Insurance Co. (“Admiral”) sought a declaration that it need not defend or indemnify its historical insured, Niagara Transformer Corp. (“Niagara”), in potential litigation between Niagara and nonparties Monsanto Co., Pharmacia LLC, and Solutia Inc. (collectively, “Monsanto”) over harms caused by polychlorinated biphenyls (“PCBs”) that Monsanto had sold to Niagara in the 1960s and 1970s.  Admiral appealed from the order of the district court that had dismissed its action for lack of a justiciable “case of actual controversy” within the meaning of the Declaratory Judgment Act (the “DJA”), 28 U.S.C. § 2201(a).  In reaching this jurisdictional ruling, the district court relied principally on (1) the fact that Monsanto has not commenced or explicitly threatened formal litigation against Niagara, and (2) its assessment that Monsanto would not be likely to prevail in such litigation.  

The Second Circuit held that while the district court properly concluded that it lacked jurisdiction to declare Admiral’s duty to indemnify Niagara, it did not adequately distinguish between that duty (which is triggered by a determination of the insured’s liability to the third party) and the insurer’s separate duty to defend its insured (which is triggered by the third party’s filing suit against the insured).  Because a declaratory-judgment action concerning either duty becomes justiciable upon a “practical likelihood” that the duty will be triggered, the justiciability of Admiral’s duty-to-defend claim turned on the practical likelihood that Monsanto will file suit against Niagara – not on whether Monsanto has already in fact done so or explicitly threatened to do so. 

In the end, the Second Circuit affirmed the lower court’s decision, dismissing Admiral’s action to the extent that it sought a declaration of Admiral’s duty to indemnify Niagara. In a lengthy decision and discussion, the Court distinguished between the standards for the duty to defend rather than the duty to indemnify. They wrote “  Because “the duty to defend is triggered by the filing of a lawsuit while the duty to indemnify is triggered by a determination of liability,” a district court’s jurisdiction to declare an insurer’s duty to defend and its duty to indemnify turn on different inquiries – each involving the practical likelihood that the triggering event will occur. With respect to the duty to defend, the district court must find a practical likelihood that a third party will commence litigation against the insured.  With respect to the duty to indemnify, the court must find a practical likelihood that the third party will prevail in such litigation.  Accordingly, a district court “may” well have jurisdiction to “issue a declaratory judgment on [an insurer’s] duty to defend,” even “while holding that the duty to indemnify is not ripe for adjudication.” Here, the focus was on the “practical likelihood” of Monsanto’s taking actions that would resolve “contingencies” embedded in the coverage dispute between Admiral and Niagara. Since this could not be determined on appeal, the Court remanded this aspect of the matter for further proceedings below.

Further, it remanded back to the district court to determine – as relevant to its jurisdiction to declare Admiral’s duty to defend Niagara – whether there exists a practical likelihood that Monsanto will file suit against Niagara. Consistent with its practice, the Court wrote, “appellate jurisdiction will be restored to this panel after the district court has supplemented the record and reconsidered its prior decision on remand. Should the district court determine on remand that it has jurisdiction to declare Admiral’s duty to defend Niagara, it may nevertheless decline to exercise such jurisdiction.  To that end, we clarify the standard governing a district court’s discretion to decline jurisdiction under the DJA.” The Court noted that they had previously held that a district court must exercise jurisdiction if the issuance of a declaratory judgment would serve a useful purpose in settling the legal relations in issue or afford relief from the uncertainty giving rise to the proceeding.  But subsequent caselaw has treated the factors established as only two among other factors that district courts should balance in determining whether to exercise jurisdiction under the DJA. As such, the Court wrote, “our caselaw suggests, and we now clarify, that district courts have discretion to decline jurisdiction upon the application of an open-ended, multi-factor balancing test in which no one factor necessarily mandates the exercise of jurisdiction.”

 

BARNAS on BAD FAITH
Brian D. Barnas

[email protected]

Nothing to report at this time.  Check back in two weeks.

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]

01/02/23       Ferro v. CSAA Affinity Ins. Co.
Superior Court of Connecticut, New Haven
Court Stretches to Infer Sinister Motive

Ferro brought suit against his carrier, CSAA Affinity, for failure to pay an uninsured motorist claim. In his second cause of action, he alleged that the carrier acted in bad faith in its refusal to resolve the claim. The carrier moved to dismiss the bad faith claim, arguing that the complaint was devoid of any factual allegation of the requisite sinister motive. While the court recognized the failing of the pleading – “None of the subparagraphs of paragraph 14 allege these specific terms from the caselaw definition of bad faith – “fraud,” “design to mislead or deceive another,” “interested or sinister motive,” or “dishonest purpose.” – it nevertheless, was willing to bend in order to read those allegations into the complaint.

Here, the plaintiff merely alleged a negligent breach of contract, and the violation of “contractually mandated” terms of coverage without providing a “reasonable explanation.” The court, agreeing with the carrier, held that these assertions were inadequate. In contrast, allegations that the insurer deliberately and purposefully denied coverage were sufficient to establish the requisite sinister motive or dishonest purpose to sustain a bad faith claim.

[Ed. Note: Perhaps the court merely put expediency ahead of all else, assuming that if the plaintiff filed a second amended complaint, that this time it would figure out how to properly plead the cause of action. Still, while Connecticut remains a fact-pleading state, decisions like this demonstrate the evolution towards notice pleading.]

 

KYLE'S CONSTRUCTION COLUMN
Kyle A. Ruffner

[email protected]

 

12/22/22       Wilton & Sabena Crochet v. Nick’s Refrigeration Sales & Serv.
Court of Appeal of Louisiana, First Circuit
Louisiana Appeals Court Holds that no Coverage Exists for Loss due to the Defective Installation of the Plaintiff’s Air Conditioning Unit and Insulation

The plaintiffs hired Nick’s Refrigeration to install an air conditioning unit in their attic in connection with the renovation of their home. Shortly after the renovations were complete, the plaintiffs began experiencing issues with moisture, condensation, and sweating in their attic, causing mold and mildew. This ultimately caused a portion of their ceiling to fall due to the accumulated moisture. After filing a claim with their insurer, United Fire & Indemnity Company, the insurer notified them that there was no coverage under their policy for the loss. The plaintiff’s filed suit against the insurance company and Nick’s Refrigeration and filed a motion for summary judgment, contending that the policy provides coverage for ensuing damages that followed the faulty workmanship in the installation of the air conditioning unit.

The plaintiff’s policy provides coverage for direct physical loss to property but does not provide coverage for loss involving collapse caused by “(1) wear and tear, marring, deterioration; (2) inherent vice, latent defect, mechanical breakdown”. The policy specifies that if any of these cause water damage not otherwise excluded from an air conditioning system, there is coverage for loss caused by the water. Further, the policy excludes coverage for loss caused directly or indirectly for “faulty, inadequate or defective” design, workmanship, materials used in repair, or maintenance.

Plaintiff’s summary judgment motion included an expert report in which the expert opined that the air conditioning unit, insulation duct work, and repair measures by Nick’s Refrigeration caused increased humidity, condensation, and moisture in the plaintiff’s home. Further, the testimony of the owner of Nick’s Refrigeration established that the air conditioning unit played a role in causing the excessive moisture and ceiling collapse. The owner stated that the air conditioning system itself and the issues with the system caused the sheetrock to separate from the ceiling joints.

Therefore, the court found that the exclusions to the policy precluded coverage for the plaintiff’s loss. Under the plain language of the policy, damage resulting from faulty workmanship, as well as damage resulting from defective materials used in repair or renovation, is not covered. The court held that the policy may not make clear what ensuing or resulting loss is covered under the exclusion, but makes clear what losses are not covered. Therefore, the court determined that the plaintiffs did not prove their loss was covered under the policy, but that the insurer did establish the applicability of the policy exclusions. As such, the court granted summary judgment to the insurer.

In the dissenting opinion, the judges argued that summary judgment was inappropriate because there remained genuine issues of material fact. In particular, the judges disagreed with the majority’s interpretation of the policy’s exclusionary language and ensuing loss provisions. The dissent argued that certain damages sustained by the plaintiffs “ensued” or followed from the actions taken by Nick’s Refrigeration in the installation and repair of the AC system and insulation. Therefore, the judges argued that while the policy excludes the repair of faulty workmanship, the policy could be reasonably construed to provide coverage for some of the ensuing damages the plaintiff’s sustained as a result of the faulty workmanship and installation. As such, the dissent argued summary judgment should not have been granted.

 

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

11/22/22       DFS Report on Affordable Housing and Insurance
Department of Financial Services
DFS Completes Report on Increases in Insurance Premiums and Unavailability of Insurance Coverage for Affordable Housing Developments. Still More to Come

Pursuant to Chapter 790 of the laws of 2021 and Chapter 158 of the laws of 2022 (the “Act”), DFS was asked to “examine any increases in liability, fire and casualty insurance premiums or any lack of availability of liability, fire and casualty insurance coverage for affordable housing developments in New York state.” Specifically, in coordination with New York State Homes and Community Renewal (“HCR”), the Act required DFS and HCR to:

  1. “analyze any factors that have increased liability, fire and casualty insurance costs for such housing developments and analyze any factors that have limited insurers from offering liability, fire and casualty coverage for affordable housing projects; and

  2. identify the potential impact, over the next ten years, of the cost of liability, fire and casualty insurance and the unavailability of liability, fire and casualty insurance coverage for affordable housing development and preservation on the projected total reduction in affordable housing units by region, the inability to develop affordable housing in certain areas, and any other topic or issue that is determined to be relevant to the completion of the study by [DFS] and [HCR].”

 

According to the report,

 

“DFS and HCR met with developers, advocates, and insurance producers active in the affordable housing market. The developers conveyed that they had experienced difficulty in identifying insurance providers who were willing to underwrite policies for affordable housing developments. The developers further advised that, in some instances, insurers expressed that they were unwilling to do business in certain regions of the state, particularly the five boroughs of New York City. In other instances, the developers noted that insurers stated that they had limited appetite to underwrite policies for senior housing, or for buildings that contained affordable units or Section 8 units that exceeded a certain threshold of total units. In the context of renewals, developers noted that they had had policies nonrenewed due to the insurer’s affordable housing exposure. Affordable housing developers also stated that they had seen premiums rise, even in instances where there had been no previous claims made, to levels that they deemed prohibitively expensive.”

For purposes of the report, a sample was collected of “182 properties comprising nearly 24,000 housing units, the vast majority of which are affordable,” with a median premium per unit of $659 and average of $755. Notably,”[t]he highest per-unit premiums exceeded $1,000 and were concentrated geographically in New York City and its surrounding suburbs.”

The report details standard underwriting practices for an insurer’s calculation of premium, which implement actuarial science and are “intended to reflect the insurer’s expectation of loss based on loss incurred in prior policy periods.” The report recognizes that

“If actual losses increase, or if expected losses increase because of a change in risk conditions or a broadening of coverage, premiums should also increase to ensure that the rate is not inadequate. Although they may be less affordable for consumers, these increased premiums are often necessary to protect consumers from the consequences of an insurer’s insolvency. If an insurer becomes insolvent because of inadequate rates, it cannot pay claims. If the insurer cannot pay claims, an insured who purchased coverage – and more importantly the tort victims who were injured due to the potential negligence or recklessness of the insured – would not be compensated for the harm that they suffered.”

Despite this recognition, “New York, like many other states, has determined that it is against public policy for insurers to consider certain underwriting and/or rating factors even if they are predictive of loss.“  DFS outlines certain prohibited practices that are intended to prohibit insurers from geographic redlining through unfairly discriminatory practices “Specifically, Insurance Law § 3429 and Insurance Regulation 90 (11 NYCRR 218) prohibit insurers from refusing to issue, nonrenewing, or cancelling certain fire, fire and extended coverage, and private passenger automobile insurance policies based solely on the geographic location of the risk.” This prohibition in Insurance Law §3429, however, does not “preclude an insurer from refusing to issue or renew or from cancelling such policies based on sound underwriting and actuarial principles reasonably related to actual or anticipated loss experience.” DFS does indicate, for example, that “[n]othing in the Insurance Law prevents an insurer from asking current or prospective policyholders questions about development characteristics, such as location, occupancy, maintenance, safety, and security of any housing, including affordable housing, if those questions are reasonably related to future losses.”

Further, DFS advises that while “the Insurance Law explicitly prohibits the use of certain factors in underwriting or rating, such as race, color, creed, national origin, disability, and status as a victim of domestic violence,” it “does not explicitly prohibit consideration of whether a property is comprised of, in part, affordable, subsidized, or Section 8 units when making underwriting or rating determinations.” DFS expressly notes that “there is no basis in the Insurance Law or regulations promulgated thereunder to mandate that insurance companies insure either affordable or market-rate housing developments.” Still, DFS recognizes that underwriting and rating “inquiries about affordable housing raise legitimate concerns from stakeholders about the potential for unfairly discriminatory results.”

Overall, the report reflects a relative absence of data available in this space at the moment, while indicating that there are several legitimate factors that have led to increases of premiums, generally, industry wide over recent years—most of which were only mentioned in the context that those factors were outside the purview of the report requested by policymakers. There is also recognition that “insurance losses for affordable and market-rate housing developments in New York are either increasing or expected to increase for a variety of reasons, causing many insurers to increase the price of the commercial property and liability insurance policies purchased by these developments,” and that “[w]hile some insurers have taken steps to minimize their exposure by increasing deductibles, reducing limits of liability, or adding or expanding exclusions, others have exited the market entirely,” leaving these risks often times in the hands of excess lines insurers (often more costly), which are not directly regulated by DFS.

More data is required to provide a full assessment. In further addressing the issues posed in the insurance for affordable housing space for policymakers, DFS outlined the following action plan:

“DFS will issue a request for information asking all property and casualty insurers that are licensed in New York whether they insure housing developments. Insurers that provide coverage to housing developments will be subject to further inquiries, including but not limited to: whether they ask applicants or insureds what proportion of their developments are comprised of affordable, subsidized, or Section 8 units; an explanation of how those questions are used and what effect, if any, those questions have on the rating of such policies; and whether they refuse to provide insurance to affordable housing developments. DFS will also request information on restrictions or limitations on the underwriting of affordable housing, the rates being offered to affordable housing developments compared to market-rate housing with the same risk characteristics (e.g., same location and age), and the potential impact on premium and availability of insurance coverage for affordable housing if such underwriting and rate considerations were prohibited.”

HCR, on the other hand, proposed the following action of plan of its own:

HCR will obtain information from state-funded housing providers, including but not limited to the premiums that these developments pay to insurers, the declinations and non-renewals that they receive from insurers, and actions that affordable housing developments are taking to mitigate some of the losses giving rise to increasing insurance premiums. HCR will also convene periodic informational sessions for affordable housing developers and managers in which DFS will present on rights and obligations related to insurance for affordable housing, including the process for filing complaints with DFS where insurers are acting improperly by asking questions that are not reasonably related to future losses or do not comply with New York Insurance Law.

Notably, DFS advises that it has streamlined the complaint process for these types of complaints, “to specifically track complaints that are related to affordable housing so that it can investigate the facts, identify any patterns or practices that reflect misconduct by insurers, and take appropriate action.”

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

No case to report on this time – check back in two weeks!

 

STORM’S SIU
Scott D. Storm

[email protected]

01/05/23       Government Employees Ins. Co. v. Kalitenko
United States District Court, E.D. New York
RICO Suit by No-Fault Insurer Against Medical Providers.  When May an Individual or Corporate Entity Invoke the 5th Amendment Right Against Self-Incrimination to Avoid its Discovery Obligations to Produce Corporate Records and Provide Interrogatory Responses?

GEICO seeks an order compelling defendants Dr. Kalitenko, Kalitenko Sole Proprietorship and Kalitenko P.C. to provide interrogatory answers and to produce certain documents. The Kalitenko Defendants assert a Fifth Amendment privilege against self-incrimination arguing they are not required to provide the requested discovery.  The Court grants in part and denies in part plaintiffs' motion.

Plaintiff commenced this action alleging that Dr. Kalitenko, by and through his businesses, perpetrated a no-fault insurance-fraud scheme, in violation of the Racketeer Influenced and Corrupt Organizations ("RICO") Act.  The parties thereafter engaged in discovery. Plaintiff served discovery requests on all three Kalitenko Defendants, including numerous interrogatories and demands for document production. Defendants responded but did not provide substantive answers thereto, and instead invoked a Fifth Amendment privilege.  The Kalitenko Defendants argued that Dr. Kalitenko's Fifth Amendment privilege must be applied equally to himself, his sole proprietorship, and the corporate entity, in order to preserve his individual privilege against self-incrimination. Plaintiffs moved to compel disclosure. 

The Fifth Amendment provides, in relevant part, that “[n]o person . . . shall be compelled in any criminal case to be a witness against himself." To qualify for the Fifth Amendment privilege, a communication must be testimonial, incriminating, and compelled.  This constitutional right "can be asserted in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory."   The Fifth Amendment privilege has also "been found to extend not only to answers that are directly incriminatory but also to those that, while not themselves inculpatory, would furnish a link in the chain of evidence needed to prosecute the answering party."  "It need only be evident from the implications of the question, in the setting in which it is asked, that a responsive answer to the question . . . might be dangerous because injurious disclosure could result." 

In addition to protecting against compelled testimony, the Fifth Amendment "applies to any compelled incriminating communications . . . that are testimonial in character."  This protection does not ordinarily extend to business records, as they are created voluntarily and without compulsion. Nevertheless, "because the act of producing documents can be both incriminating and testimonial—such as when it confirms the documents' existence, possession, or authenticity—a party may be able to resist production of such documents on Fifth Amendment grounds." This is known as the "act of production doctrine."

"Under the long-established ‘collective entity rule,’ however, corporations cannot avail themselves of the Fifth Amendment privilege."  "The plain mandate of the precedents is that the collective entity rule applies regardless of the corporation's size." Thus, a corporate entity cannot invoke the right against self-incrimination to avoid its discovery obligations to produce corporate records and provide interrogatory responses. Notably, sole proprietorships are excluded from the collective entity rule: the Second Circuit has held that "sole proprietorships are covered by the Fifth Amendment's privilege against compulsory self-incrimination, because a sole proprietorship has no legal existence apart from its owner." 

Ultimately, where a party is entitled to and does assert the Fifth Amendment privilege against self-incrimination, "it is for the court to say whether assertion of the privilege is justified . . . and the party asserting the privilege bears the burden of establishing its applicability.

Kalitenko P.C.:

Plaintiffs seek to compel Kalitenko P.C. to provide substantive interrogatory responses and to produce the requested documents. The Kalitenko Defendants counter that the Court should deny plaintiffs' request because "the Fifth Amendment would be eviscerated if Dr. Kalitenko is constitutionally permitted to claim its protection as an individual, but forced to answer questions or produce documents related to Kalitenko P.C."  The Court disagrees.

"The Second Circuit has long held that even if a corporation is ‘essentially a one-man operation,' the Fifth Amendment privilege against self-incrimination is not available." Indeed, "there simply is no situation in which a corporation can avail itself of the Fifth Amendment privilege." Accordingly, with respect to document demands, a "custodian of corporate records, who acts as a representative of the corporation, cannot refuse to produce corporate records on Fifth Amendment grounds."  Where "no existing employee of a corporation could produce corporate records without incriminating himself by such an act, then the corporation may be required to produce the records by supplying an entirely new agent who has no previous connection with the corporation that might place him in a position where his testimonial act of production would be self-incriminating."  Here, plaintiffs have served document demands addressed to Kalitenko P.C.— a one-man operation, but a corporate entity nonetheless—and, as such, Kalitenko P.C. "must find some means by which to comply with this discovery obligation because no Fifth Amendment defense is available to it."  Accordingly, the Court grants plaintiffs' motion with respect to Kalitenko P.C.'s production of documents.

Likewise, the service of interrogatories obligates a "corporation to appoint an agent who could, without fear of self-incrimination, furnish such requested information as was available to the corporation."  To allow Kalitenko P.C. to avoid substantively answering plaintiffs' interrogatories on the basis of Dr. Kalitenko's Fifth Amendment privilege would, in effect, "secure for the corporation the benefits of a privilege it does not have." The Court therefore directs Kalitenko P.C. to amend its previous responses to plaintiffs' interrogatories to provide substantive answers.

Dr. Kalitenko individually:

Plaintiffs argue that Dr. Kalitenko cannot invoke the Fifth Amendment and must therefore comply with their document demands because the requested business records and communications were previously and voluntarily created, and the demands do not compel testimony.

Generally, the "contents of voluntarily prepared business records are not privileged unless the subpoenaed individual is compelled to ‘restate, repeat, or affirm' the contents' truth." Nevertheless, "the act of producing business records may in certain circumstances have a testimonial character and fall within the fifth amendment's coverage."  Here, even assuming arguendo that all of the documents requested from Dr. Kalitenko constitute business records that merit no Fifth Amendment protection as to their contents, the act of compelled production may "nevertheless have communicative aspects of its own, wholly aside from the contents" of the documents.  For example, Dr. Kalitenko's production of the demanded documents could communicate his knowledge of and control over those documents, as well as his "belief that the documents meet the specifications described in the request for production." 

In their civil complaint, plaintiffs allege that Dr. Kalitenko committed numerous predicate acts—i.e., criminal acts—in furtherance of a "massive" no-fault insurance-fraud scheme, in violation of the RICO Act. Based on these circumstances, it is readily apparent that requiring Dr. Kalitenko to compile and produce the requested documents, and thereby implicitly communicate his control over them and their authenticity, could furnish a link in the chain of evidence needed to prosecute him in a criminal action.  While not directly addressing the act-of-production doctrine, plaintiffs' submissions may generously be read to imply that the demanded documents fall within the doctrine's foregone-conclusion exception. For the foregone conclusion exception to apply, the party seeking to compel production must establish “with reasonable particularity” its knowledge as to “(1) existence of the documents, (2) the answering party's possession or control of the documents and (3) the authenticity of the documents."  Plaintiffs' showing in this case falls woefully short of establishing the applicability of this exception. The sole support for plaintiffs' "knowledge" that the requested documents exist and remain within Dr. Kalitenko's control is plaintiffs' representation that they possess "some" of his emails, which were obtained through a third-party subpoena. Plaintiffs' reference to a limited selection of emails does not, however, show with "reasonable particularity" that they have the requisite knowledge with respect to all of the documents sought in their sprawling 66 document requests. Accordingly, the Court declines to compel Dr. Kalitenko to further respond to plaintiffs' document demands.

Kalitenko Sole Proprietorship:

Finally, plaintiffs demand that Kalitenko Sole Proprietorship be ordered to substantively respond to plaintiffs' interrogatories and document demands, arguing that its invocation of the Fifth Amendment is improper. The Court concludes that the Fifth Amendment has been properly invoked in this context and therefore denies plaintiffs' request.

Pursuant to the collective entity doctrine, the Fifth Amendment privilege against self-incrimination does not extend to collective entities such as corporations. "A sole proprietor, however, stands on different constitutional grounds."  "Because a sole proprietorship has no legal existence apart from its owner, the compelled disclosure of a sole proprietor's private or business papers implicates his privilege against self-incrimination."  Therefore, the owner of a sole proprietorship is entitled "to show that his act of production would entail testimonial self-incrimination as to admissions that the records existed, were in his possession, and were authentic."  Dr. Kalitenko's act of producing the demanded documents on behalf of Kalitenko Sole Proprietorship could also entail testimonial self-incrimination, such as impliedly affirming the business' possession of the documents and their authenticity.

Similarly, Kalitenko Sole Proprietorship may invoke the Fifth Amendment privilege in response to plaintiffs' interrogatories to the same extent that Dr. Kalitenko may invoke his right as an individual: i.e., where there is a "real and substantial risk . . . that answers to questions might provide a link which would lead to incrimination of him."  The Court again concludes that it is readily apparent that Dr. Kalitenko's sworn answers to plaintiffs' interrogatories, which relate to alleged predicate acts of fraud and racketeering activity could subject him and his sole proprietorship to criminal penalties for the same criminal acts alleged in the Complaint.  Accordingly, Kalitenko Sole Proprietorship need not substantively answer plaintiffs' interrogatories.

Note:  However, it is also well-settled that an individual or corporate insured or its agent may not refuse to cooperate during a claim investigation without voiding the policy because of a contemporaneous criminal investigation or based upon on Fifth Amendment grounds.  Eagley v. State Farm Ins. Co., 2015 WL 5714402 (W.D.N.Y. 2015); Allstate Ins. Co. v. Longwell, 735 F.Supp. 1187 (S.D.N.Y. 1990); Dyno-Bite, Inc. v. Travelers Companies, 80 A.D.2d 471, 476 (4th Dept. 1981). 

 

12/29/22       Weintraub v. Great Northern Ins. Co.
United States District Court, S.D. New York

Insureds Fail to Satisfy Their Burden that the Alleged Theft of One Million Dollars of Art from Their Barn Occurred During the Policy Period and Their 91-Day Delay in Reporting the Alleged Loss to the Insurer is Unreasonable as a Matter of Law

This case relates to Weintraubs' insurance claim for about $1.5 million of art they claimed was found missing from their storage space in August 2019. The Weintraubs' insurer — the Great Northern Insurance Co., a/k/a Chubb — investigated the claim for about a year before finally denying coverage on three grounds: 1) that the Weintraubs failed to notify Chubb of the loss "as soon as possible," as required by certain "Y pages" putatively attached to the Weintraubs' 2019 insurance policy; 2) that the Weintraubs failed to provide a sworn proof-of-loss statement within 60 days of Chubb's request that they do so (as also required by these Y pages); and 3) that the Weintraubs failed to establish that the loss occurred during the coverage period.  The Court previously conducted a limited bench trial on the first of these issues — whether the Weintraubs were required but failed to notify Chubb of their claim "as soon as possible" — and found that Chubb was precluded from disclaiming coverage on this basis because the "Y pages" containing the "as soon as possible" requirement were not included in the 2019 policy delivered to the Weintraubs at the beginning of their policy term or available to them online.

Following this ruling, the parties jointly stipulated to the amount of damages and that the only remaining issues were 1) Chubb's proof-of-loss defense, and 2) Chubb's defense that the Weintraubs failed to establish that their loss occurred in a period covered by the 2019 policy.  The Court agrees with Chubb that the Weintraubs have failed to carry their burden to establish that their loss occurred during a period covered by the 2019 policy. While that ordinarily might not matter because the Weintraubs maintained continuous coverage in prior years, it is undisputed that the Weintraubs's 2018 policy included the Y pages' requirement that they notify Chubb of their loss "as soon as possible," which the Weintraubs failed to do. Nor, the Court concludes, is there any evidence that Chubb waived the notice of loss requirement. As such, the Court grants Chubb's motion for summary judgment.

Here, the 2019 policy under which the Weintraubs claimed coverage applied from August 18, 2019 to August 18, 2020. The Weintraubs discovered that their art was missing on August 25, 2019, i.e., one week after the 2019 policy's coverage began on August 18, 2019 — meaning that the loss occurred at some time between that date and the prior date of October 2018, when Philip Weintraub was last in the barn where the art was stored and found nothing missing. There is no evidence as to when in that range the art was lost.

Under New York law, an insured bears the burden of demonstrating that a loss occurred during the period covered by the relevant policy.  As described above, there is no evidence whatsoever that the Weintraubs' loss occurred between the renewal of their insurance coverage on August 18, 2019 and when they discovered their loss on August 25, 2019, as opposed to any time between August 18, 2019 and when the Weintraubs last observed their art intact in October 2018.

Plaintiffs makes several arguments as to why the absence of any evidence that their loss occurred during a period covered by the 2019 policy should not matter. One of these — that the Weintraubs maintained continuous coverage in prior years — might ordinarily have saved their claim, except that, as explained below, the Weintraubs failed to comply with the acknowledged requirement of prior years' policies that they notify Chubb of their loss as soon as possible after becoming aware of it. In addition, the Weintraubs argue 1) that the contractual term defining the 2019 policy's term was not included in their physical or online versions of the 2019 policy and is therefore unenforceable; 2) that in the case of an "all-risk" insurance policy such as theirs, they were not required to show when their loss occurred; and, 3) that Chubb waived any defense that the Weintraubs' loss fell outside the policy period. Each of these arguments fail.

The first of these arguments — that the coverage dates of the 2019 policy were not actually terms included in the 2019 policy because they were included in the "Y pages" not physically delivered to The Weintraubs or easily available to them online — is wholly at odds with facts the Weintraubs stipulated to in this case. Compare Pretrial Consent Order at 11 (stating, as a stipulated fact, that the relevant policy "was in place for the policy period August 18, 2019 to August 18, 2020" and that it "incepted on August 18, 2019."), with Weintraubs Mem. Supp. Mot. for Summary Judgment ("Weintraubs Mem.") at 15, Dkt. 62 (arguing that "[t]he Date of Policy Period Provision is Not Part of the 2019 Policy").

Setting aside this contradiction, the Weintraubs' argument would strip from their policy any coverage period limitation at all and would thereby theoretically allow them to submit claims for losses occurring at any past or future point. The Weintraubs cite no case construing a policy's coverage period to be unlimited in this way. Moreover, whether or not the term Chubb contends defined the policy period was actually included in the relevant 2019 policy delivered to the Weintraubs, nothing in the policy pages that were delivered suggests any intention by either party that coverage should extend to losses that predate the policy's inception. As such, there can be no genuine dispute that the policy's coverage did not extend to losses occurring before it was in place.

The Weintraubs' second argument — that an "all-risk" policy such as theirs relieved them of any responsibility to show when their loss occurred — fails for similar reasons. The Weintraubs' may be right that their "all-risk" policy relieved them of the responsibility to "prove or show the particulars of how a mysterious loss occurred."  But "the plaintiff in a suit under an all-risks insurance policy must nonetheless show a relevant loss in order to invoke the policy, and proof that the loss occurred within the policy period is part and parcel of that showing of a loss."

The Weintraubs cite language from a case from this district stating that "unlike a flood or a fire, the precise date of the happening of a mysterious disappearance is not easily ascertainable, if at all" and that "given that the Policy provides coverage for all risks, including mysterious disappearance, the phrase ‘date of the happening of the accident' is reasonably susceptible to more than one meaning depending on the underlying risk to which it is being applied."  However, here it makes eminent sense to conclude that an insured seeking coverage under a policy must make some showing that the loss occurred during a period in which the relevant policy was in place, not before.

Finally, this Court agrees that there is no factual dispute as to whether Chubb waived its policy period defense because "where the issue is the existence or nonexistence of coverage ... the doctrine of waiver is simply inapplicable."  As described above, it was the Weintraubs's burden under New York law to demonstrate that a loss occurred in a period as to which the 2019 policy applied. As the Weintraubs failed to show that coverage existed in the first place, Chubb's putative waiver cannot retroactively create such coverage.

The Weintraubs' best argument against summary judgment as to the policy period issue is that because they maintained continuous coverage with Chubb since the 1990s and because their loss occurred at some point between October 2018 and August 25, 2019, it does not matter whether their loss was covered by the 2019 policy or the prior year's policy because it was indisputably covered by one of them. Chubb resists this continuous coverage argument on two grounds: first arguing that any lawsuit seeking to evince a claim under the prior year's policy would be untimely, and second, arguing that the Weintraubs failed to submit any notice of loss "as soon as possible" as required by the 2018 policy. The Court disagrees with the first of these arguments but agrees with the second. As to timeliness, Chubb points out that the 2018 policy (which was in place from August 18, 2018 through August 17, 2019) contained language requiring the insured to bring suit "within two years after a loss occurs," and the Weintraubs' August 24, 2021 commencement of this action falls more than two years later than the expiration of the 2018 policy. However, as the Second Circuit noted in Fabozzi v. Lexington Ins. Co., 601 F.3d 88 (2d Cir. 2010), the "phrase `after the inception of the loss' is regarded, in essence, as a term of art which fixes the limitations period to the date of the accident," while "[o]ther generic language ... does not carry this same meaning [and] instead[] ties the limitations period to the moment when a claim accrues." Id. at 91. Chubb does not address the Second Circuit's reasoning in Fabozzi or make any argument that the seemingly generic language in the Weintraubs' policy requiring suit to be brought within two years of a loss refers specifically to the date of the underlying loss, rather than the moment at which their claim accrued. As such, the Court believes a claim under the 2018 policy would likely not be barred by the policy's two-year limitation period for bringing suit.

However, it is undisputed that the 2018 policy contained the Y-Pages, including the requirement on page Y-5 that the insured "notify [Chubb] or [the insured's] agent of [the insured's] loss as soon as possible. The Court earlier concluded that because this requirement was not included in the version of the 2019 policy delivered to the Weintraubs or readily available to them online, it did not bind them as to losses occurring in the period covered by that policy. But, as just noted, no party disputes that this requirement was included in the 2018 policy, and this Court has already held in resolving Chubb's motion to dismiss that the Weintraubs' 91-day delay between discovering his loss and notifying Chubb about it was "unreasonable as a matter of law." 

Of course, this Court also held in resolving Chubb's motion to dismiss that the Weintraubs had plausibly alleged that Chubb waived this late notice defense by "propounding numerous burdensome, costly, and embarrassing demands for information while continually telling the Weintraubs that Great Northern would adjudicate the claim on its merits and in good faith."  Indeed, this issue of whether Chubb waived its late notice defense is one of the two questions as to which this Court conducted a limited-scope bench trial, although it declined to resolve the waiver issue after concluding that the "as soon as possible" language was not included in the 2019 policy.  Since this issue is once again relevant because the Weintraubs seeks to excuse their failure to show their loss was covered by the 2019 policy's coverage period by instead relying on the 2018 policy, the Court addresses the waiver issue now and concludes that Chubb did not waive its late notice defense.

In denying Chubb's motion to dismiss, this Court noted that "there is ample authority that, in general, an insurer's letter expressly reserving its right to deny coverage for late notice of loss permits the insurer to later obtain dismissal of a coverage lawsuit on a late-notice defense."  Since Chubb explicitly raised a late notice defense in a letter immediately following the Weintraubs's claim, such authority might have conclusively demonstrated that there was no waiver — except that the Weintraubs's allegations "gave rise to the plausible inference that the insurer abandoned its late-notice defense by allegedly engaging in a twenty-month investigation of the claim's merits before denying coverage for untimely notice of loss."  The Court found particularly notable the Weintraubs' allegation that Chubb had represented to them that their "claim would be resolved in good faith and on the merits." 

Contrary to the allegations in their complaint, however, the Weintraubs have not introduced any evidence that Chubb ever made any representation that their claim would be resolved "on the merits," rather than denied by reason of late notice. In fact, the jointly stipulated facts demonstrate that Chubb not only initially reserved rights on the late notice issue in its first communication with the Weintraubs but continued to reassert its reservation of rights in general terms in repeated communications in terms that specifically mentioned the late notice issue.

Moreover, some significant part of the delay owed to the Weintraubs' conduct and events such as the COVID-19 pandemic that were not attributable to either party, rather than Chubb's investigation. The undisputed facts demonstrate that about one year of Chubb's delay was caused by the Weintraubs' requests or the COVID-19 pandemic.  While Chubb perhaps could have made efforts to conduct an EUO earlier than it did had it agreed to restrict the subject of the EUO solely to the late notice issue, the Weintraubs cite no authority suggesting that Chubb was required to conduct this kind of piecemeal investigation that might have required a further EUO later in time should Chubb have determined that the Weintraubs' late notice was excused but other grounds existed for denying coverage.

As such, the Weintraubs have failed to offer evidence supporting waiver of the sort this Court contemplated in denying Chubb's motion to dismiss. Importantly, they have not introduced any evidence showing that Chubb represented to them that it would adjudicate their claim on the merits. Moreover, much of the 20-month delay this Court assumed at the pleading stage was entirely attributable to Chubb was in fact attributable to the Weintraubs or to events, such as the COVID-19 pandemic, that were plainly not Chubb's fault. As discussed in this Court's Opinion and Order denying the Weintraubs's motion to dismiss, there may be situations where — notwithstanding an express reservation of rights letter along the sort Chubb sent here — an insurer subsequently waives an explicitly raised defense, whether by explicitly or implicitly leading the insured to believe it would adjudicate the claim on the merits or by putting the insured to extreme expense and delay in investigating other issues.  But that is plainly not the situation here. As such, the Court concludes that the Weintraubs have failed to establish or raise any issue of material fact as to whether Chubb waived its late notice defense.

 

12/20/22       Country-Wide Ins. Co. v. Duff, et al 
Supreme Court, New York County
The Triggering Date that Begins the IME-Request Period is not Receipt of the NF-2 Benefits Application, but Instead Receipt of NF-3 Claims for Payment Submitted by Treating Providers

If a No-Fault Insurer Establishes that the Eligible Injured Person Failed Twice to Appear for an IME or EUO Scheduled Within 15 Days of Receipt of an NF-3 Bill, Summary Judgment is Properly Awarded to the Insurer with Respect to Further Coverage Obligations and Reimbursement of Outstanding Medical Bills with Respect to All Treating Providers

This is a no-fault-insurance-coverage action. Country-Wide Insurance Company moves without opposition for default judgment against non-appearing defendants, all medical-provider assignees of the eligible injured person, defendant Duff.  It also moves for summary judgment against appearing defendants Duff and the remaining medical-provider assignees. Both motions are granted.

A party moving for default judgment must establish proper service, default, and the facts constituting the moving party's claims. Country-Wide has established proper service and has provided affidavits from its employees, supported by attached documentation, establishing that Country-Wide timely and properly requested that Duff appear for an independent medical examination (IME), and that Duff twice failed without justification. That suffices to establish Country-Wide's claim for default judgment purposes.

Country-Wide's summary-judgment motion papers established prima facie that Country-Wide is entitled to judgment as a matter of law.

Defendants, relying on an outdated and boilerplate affirmation of counsel, raise three principal legal arguments, and one factual one. None of defendants' legal arguments has merit—indeed, they are foreclosed by controlling appellate precedent that counsel for defendants does not even acknowledge, much less address.

First, defendants contend that Country-Wide has not shown that Country-Wide's initial IME request was timely relative to when Country-Wide received Duff's NF-2 application for no-fault benefits. But the triggering date that begins the IME-request period is not receipt of the NF-2 benefits application, but instead receipt of NF-3 claims for payment submitted by treating providers. (See 11 NYCRR 65-3.5[a]-[b]).  A timely request for an IME must be made within 15 days of receipt of an NF-3 medical-provider claim.
 

Second, defendants assert that Country-Wide has failed to meet its (putative) obligation to show that its initial IME request was timely relative to the first bill it received from each treating medical provider. But Country-Wide is not required to make that showing. Rather, as the Appellate Division, First Department has held, the nonappearance coverage defense applies to any claim received by a no-fault insurer, rather than being "determined on a bill-by-bill basis."  The insurer is required only to show that a request for an IME or examination under oath (EUO) is made within 15 days of receipt "of a medical provider claim (NF-3)."  If an EUO was timely and properly requested of an assignee relative to a claim, the failure to appear for the EUO will void the policy ab initio as to all claims" by the assignee.

 

Third, defendants claim that Country-Wide's motion fails because it has not shown when it made its initial IME request relative to receiving NF-3 claims from defendants. Again, that showing is not required. As the First Department held in 2020, if a no-fault insurer establishes that the eligible injured person failed twice to appear an IME scheduled within 15 days of receipt of an NF-3 bill, "summary judgment is properly awarded to the insurer with respect to further coverage obligations and reimbursement of outstanding medical bills with respect to all treating providers." This rule follows from the basic principle that medical-provider assignees stand in the shoes of their eligible-injured-person assignor. If an assignor's claim is properly denied due to IME nonappearances, then the claims of all assignees are subject to denial, whether or not the IME was requested based on a given assignee's requests for payment.

In addition to the legal arguments discussed above, defendants also raise the factual argument that Country-Wide has not properly authenticated the NF-3 forms on which Country-Wide relies to show the timeliness of its IME request. This court disagrees. Country-Wide has provided an affidavit from its no-fault supervisor that identifies several claims it has received from different providers, specifying the provider, the date received, the dates of service, and the amount of the bill. Country-Wide has provided copies of those bills. And Country-Wide's affirmation of counsel represents that the documents are copies of the bills that Country-Wide received. These sworn representations, taken together, are sufficient.

Finally, defendants contend that Country-Wide's summary-judgment motion is premature under CPLR 3212 (f) because discovery remains outstanding. This court is not persuaded. To be sure, in some circumstances it may be the case that an insurer's early summary-judgment motion in a no-fault-coverage action is premature because it forecloses the provider defendants from obtaining discovery necessary to oppose the motion. But here, the record reflects that defendants served discovery requests on Country-Wide in November 2021 (simultaneous to their filing of the answer); and that within a week of service, defendants had not only received responses to those requests, but written back to Country-Wide objecting to them as incomplete. A year then elapsed before Country-Wide moved for summary judgment.  This court is not aware of any effort by defendants during that year to obtain additional discovery from Country-Wide—for example, through moving to compel, or simply requesting a discovery conference with the court. Given defendants' ample opportunity to obtain discovery in these circumstances, Country-Wide's summary-judgment motion is not premature.

 

12/09/22       Burke Physical Therapy, PC v. State Farm Mut. Auto. Ins. Co.
Supreme Court, Appellate Term, Second Department
Bringing Documents to an Examination Under Oath, But Not Allowing the Insurer to Copy any Such Documents, does not Constitute Providing Those Documents

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appeals from an order of the Civil Court denying, as moot, plaintiff's motion to dismiss defendant's affirmative defenses and granting defendant's cross motion for summary judgment dismissing the complaint on the ground that plaintiff failed to provide requested verification.

Contrary to plaintiff's contention, the affidavit by plaintiff's owner submitted in opposition to defendant's cross motion was insufficient to raise a triable issue of fact as to whether plaintiff provided the requested verification.

Contrary to plaintiff's remaining contention as to defendant's cross motion, the exhibits annexed to defendant's reply papers do not demonstrate that plaintiff "did, in fact, respond" to the verification requests. Among other things, as stated by defendant, bringing documents to an examination under oath, but not allowing the insurer to copy any such document, does not constitute providing those documents.

 

12/02/22       Concord Direct, Inc. v. Ameriprise Ins. Co.
Supreme Court, Appellate Term, Second Department
PIP Insurer Failed to Demonstrate that the Purported Misrepresentation as to the Garaging of the Vehicle Was Material as the Underwriting Eligibility Guidelines Included with Its Motion Papers Failed to Show that Defendant Would Not Have Issued the Same Policy if the Correct Information had Been Disclosed

In this action by a provider to recover assigned first-party no-fault benefits, defendant appeals from an order of the Civil Court denying defendant's motion which had sought summary judgment dismissing the complaint on the ground that plaintiff's assignor had procured the subject insurance policy by making a material misrepresentation as to the garaging of one of the three vehicles covered under the insurance policy, and as to the address of one of the two drivers covered under the policy.

"A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application".

Upon a review of the record, we find that defendant failed to establish as a matter of law that it would not have issued the policy in question, as neither the examination under oath testimony of the assignor nor the declaration page of the insurance policy establish that the assignor made a misrepresentation on her application for insurance. In any event, defendant did not demonstrate that the purported misrepresentation was material, as the underwriting eligibility guidelines included with its motion papers fail to show that defendant "would not have issued the same policy if the correct information had been disclosed". 

 

FLEMING’S FINEST
Katherine A. Fleming

[email protected]

 

01/09/23       Ken's Foods, Inc. v. Steadfast Ins. Co.
Massachusetts Supreme Judicial Court
No Common-Law Duty for Insurers to Cover Costs Incurred by Insured to Prevent Imminent Covered Loss when Policy Did Not Provide Coverage and the Costs Are Otherwise Excluded

After a wastewater treatment system at its manufacturing facility malfunctioned, Ken's Foods, Inc. (Ken's Foods), sought recovery from Steadfast Insurance Company (Steadfast) for various costs it incurred, claiming coverage under its pollution liability policy. When the wastewater treatment system malfunctioned, the facility’s storm water pond overflowed, and wastewater flowed into a Georgia tributary. Ken's Foods cleaned up the wastewater pollution, incurring around $1 million in cleanup costs and containing the pollution source.

In addition, Ken's Foods took actions to allow it to continue operating the facility despite the faulty wastewater treatment system. Ken's Foods implemented a temporary wastewater treatment process that involved ongoing reprocessing of water from the stormwater pond with newly installed equipment, and pretreatment before releasing the water. As these releases still exceeded acceptable levels, Ken's Foods also agreed to pay a predetermined schedule of fines via a settlement with the local county. Ken's Foods alleged that it spent $2 million on these measures, which allowed it to avoid a suspension of operations that would have otherwise cost it over $10 million per month in expenses and lost profits.

Ken’s Foods sued Steadfast in Federal District Court for $3million in unpaid insurance claims. The parties cross-moved for summary judgment on the issue of "whether Ken's Foods can recover from Steadfast the costs that it says it incurred to avoid suspending its operations after the pollution discharge." The Federal District Court judge ruled that the costs incurred to prevent the business interruption were not recoverable.

On appeal from the United States District Court for the District of Massachusetts, the United States Court of Appeals for the First Circuit certified the following question to the SJC: "To what extent, if any, does Massachusetts recognize a common-law duty for insurers to cover costs incurred by an insured party to prevent imminent covered loss, even if those costs are not covered by the policy?"

Ken's Foods's policy covered necessary cleanup costs, including "emergency expenses" incurred to avoid "actual imminent and substantial endangerment to the public health or welfare or the environment." Steadfast paid the costs of cleaning up the illegal wastewater discharge. The policy also covered business interruption losses resulting from a covered pollution event, including mitigation expenses incurred to reduce the costs of the business interruption. No such costs were paid here, as there was no business interruption.

The dispute centered on costs Ken's Foods incurred that were not cleanup costs or costs necessary to avoid imminent endangerment to public health or welfare or the environment but were necessary to avoid a business interruption. These costs included the temporary wastewater treatment process that involved ongoing reprocessing of water from the stormwater pond and pretreatment before releasing the water, and agreed-upon fines for such releases, as they still exceeded acceptable levels, although they apparently did not rise to the level of a danger to public health or welfare or the environment. These costs were less than the losses that Ken's Foods would have sustained if it had experienced a business interruption.

The SJC concluded that the costs at issue were not recoverable. The costs at issue fit within neither of the relevant coverages in the insurance policy. They were not cleanup costs or costs necessary to prevent imminent endangerment to public health or welfare or the environment, and they were not the result of a business interruption, as business was never suspended. Nor were they mitigation necessary to reduce the costs of business interruption, as, again, there was no business interruption whatsoever. The mitigation provision also did not require incurring expenses necessary to prevent a business interruption. And finally, the costs fell within the policy's exclusion for costs, charges, and expenses associated with maintenance and process improvements, which expressly excluded from coverage the costs, charges, and expenses of maintenance and process improvements, even if such maintenance and process improvements were required by a government authority as a result of a cleanup. In sum, the plain language of the insurance policy controlled, and consequently, there was no basis to impose a common-law duty inconsistent with the coverages and exclusions contained in the policy.

 

GESTWICK’S GREATEST
Evan D. Gestwick

[email protected]

01/06/23       Unitrin Safeguard Ins. Co. v. Etienne
New York State Supreme Court, New York County
Failure to Subscribe to and Return EUO Transcripts Can Void No-Fault Coverage

Three foul moves were made by the no-fault insured in quick succession: (1) attempting to illegally pass between a parked vehicle and another moving vehicle; (2) fleeing the scene of an accident; and (3) failing to subscribe to and return their EUO transcripts.

Luckily, no injuries were reported as a result of the accident in which Unitrin’s insured was involved—at least not at the scene. After the fact, however, the claimants made a claim under the no-fault scheme of the Unitrin policy, alleging that they sustained significant bodily injury and began receiving treatment from various medical providers as a result of the accident. Given the low-impact nature of the collision, coupled with the fact that no emergency medical services were needed on-scene, Unitrin found this chain of events to be quite peculiar.

New York State’s no-fault scheme includes a grant allowing the insurer to conduct an examination under oath, to which the insured must submit as a condition precedent to coverage. Not only that, but after the EUO is conducted, the insured must then receive the EUO transcript, subscribe to it (i.e., sign off that all statements are true and accurate, unless they are not), and send it back to the insured.

Under New York’s mandatory no-fault scheme, which is codified at 11 NYCRR 65-1.1, a no-fault claimant must fully comply with the terms of no-fault coverage in order to be entitled to said coverage. One of these conditions requires the claimant to subscribe to and return any EUO transcripts taken of them in connection with the accident. Stated differently, if a no-fault claimant is examined under oath in connection with their no-fault claim, and fails to subscribe to and return their EUO transcript, they are no longer entitled to no-fault coverage because they breached a no-fault condition.

This was the holding of the court, when Unitrin brought a declaratory judgment action against the no-fault claimant, seeking a declaration of no no-fault coverage on the ground that the claimant never returned their EUO transcript. Since the claimant failed to do so, the Court held, the claimant was not entitled to no-fault coverage under the policy.

Moral of the story: Make sure the insured subscribes to and returns their EUO transcript.

 

01/09/23       Plymouth Rock Assur. Co. v. BKC Chiropractic P.C.
New York State Supreme Court, New York County
An Insurer’s Belief that the Claimant’s Injuries were not Causally Related to the Accident May be Founded in Circumstantial Evidence

This case serves as a reminder of the long-standing rule in New York and beyond: an insurer’s assertion of a lack of coverage, when based on facts or a founded belief that the claimant’s injuries did not arise out of a covered incident, may be based on circumstantial evidence and the reasonable inferences that may be drawn therefrom.

In this case, the insured vehicle was rear-ended. The police report that came as a result of the accident states that the occupant of neither vehicle required any medical attention, that the airbags did not deploy, and that both vehicles were drivable after the collision took place.

However, after the fact, both occupants of the insured vehicle filed no-fault claims for “medically-necessary” and “causally-related” medical expenses as a result of the collision. The total amount of the claims exceeded $40,000. This raised Plymouth’s proverbial brow, given the nature of the collision; naturally, it launched a deeper investigation.

Plymouth’s investigation of the claimants included an EUO of each of them. During their respective EUO’s, each claimant alleged that they received chiropractic treatment for months following the accident; however, neither claimant was able to describe what this treatment entailed, or even say what exactly a chiropractor was. In addition to conducting the EUO’s, an accident reconstruction specialist was retained, who concluded that the accident occurred at a speed of less than 10 miles per hour, and that there was very little likelihood that such a collision would cause such significant bodily injury.

Plymouth decided that the lack of physical injuries reported at the scene, coupled with the lack of physical damage to the vehicle, the oddities in the EUO transcripts, and the accident reconstruction expert’s conclusions were enough to disclaim coverage. The Court agreed, upholding the long-standing rule in New York: that an insurer can use circumstantial evidence, such as this, to show that the claimant’s injuries were not causally related to the accident.

 

01/09/23       Peleus Ins. Co. v. RCD Restorations Inc.
New York State Supreme Court, County of New York
An Insurer Must Specifically Reserve its Right to Recoup Past Defense Costs in its Reservation of Rights Letter

It was a classic risk-transfer situation: the claimant was employed by the subcontractor, got injured while working on a construction site, and sued the general contractor and property owner. The general contractor then filed a third-party complaint against the subcontractor for indemnification, and the general contractor’s insurer tendered its defense to the subcontractor’s insurer.

After the subcontractor’s insurer denied the tender, the general contractor’s insurer brought a declaratory judgment action, seeking a declaration that it was not obligated to defend or indemnify the subcontractor in the underlying action, that it may withdraw its defense in the underlying action, and that it may recoup the costs it incurred in defending the underlying action.

The subcontractor’s insurer prevailed on its first two causes of action. However, its recoupment cause of action is where things went sideways. When Peleus, the general contractor’s insurer, picked up the defense of its own insured in the underlying action, it did so under a standard “reservation of rights.” Essentially, this means that Peleus agreed to defend its own insured in the underlying action, unless and until it was determined that doing so was the responsibility of the insurer for the subcontractor—upon such a determination, the reservation of rights would not only allow Peleus to disclaim coverage against its insured, but also withdraw its defense of its insured.

However, the standard reservation of rights does not cut the mustard when it comes to the recoupment cause of action. Indeed, as this Court held, Peleus was required to specifically reserve its right to recoup expenses that it incurred in defending its insured that are not covered by its policy.

 

12/23/22       New York City Housing Authority v. Admiral Ins. Co. et al
New York State Supreme Court, New York County
An Excess Liability Carrier Must Disclaim as Soon as Reasonably Possible, Regardless of Whether its Duty to Pay Has Become Due

In another typical risk-transfer situation, a man was injured while working in the scope and course of his employment with a subcontractor of a construction project. The subcontractor maintained both a commercial general liability (CGL) policy, as well as an excess liability policy, with Admiral Insurance Company. Each policy contained an identical exclusion endorsement, called the “New York Action Over Exclusion Endorsement.” In relevant part, this exclusion endorsement bars from coverage any bodily injury sustained by an employee of the subcontractor.

Since the underlying claimant was the subcontractor’s employee, Admiral disclaimed coverage under the CGL policy, pursuant to the exclusion endorsement. Interestingly, Admiral did not, however, cite the exclusion endorsement in its disclaimer under the excess policy, until almost two years after the date of loss.

The New York City Housing Authority, which served as the general contractor in connection with the construction project (and which was entitled to coverage as a named additional insured under both Admiral policies), brought a declaratory judgment action against Admiral, in relevant part, on the ground that its disclaimer as to the excess policy was untimely under New York Insurance Law 3420(d)(2). Specifically, the Housing Authority argued that, since Admiral was aware, for nearly two years, that the claimant was an employee of the subcontractor, it should have disclaimed under both policies “as soon as reasonably possible;” however, it waited for nearly two years to disclaim under the relevant exclusion as to its excess policy.

Admiral argued that its duty to disclaim under the excess policy would only be triggered when it became aware of facts raising the possibility of coverage under said policy (e.g., a judgment rendered in excess of the limits of the CGL policy). However, as the Court noted, this is not the standard in New York. Rather, the New York standard for the time within which an excess liability carrier must issue its disclaimer is the same applicable to a primary liability insurance carrier—excess carriers, too, must issue their disclaimers “as soon as reasonably possible,” consistent with New York Insurance Law 3420(d)(2). As the Court wrote in its opinion “[A]lthough the excess insurer owes no obligation to pay a claim until the primary insurance is exhausted, the prospect of exhaustion does not factor in the obligation to disclaim timely.”

Let this case serve as an excellent reminder of the principle that the time within which an excess liability carrier must disclaim coverage is exactly that applicable to a primary liability carrier—as soon as reasonably possible.

 

ON the ROAD with O’SHEA
Ryan P. O’Shea

[email protected]

01/17/23       Matter of DTR Country-Wide Ins. Co. v Refill Rx Pharmacy, Inc.
Appellate Division, First Department
Arbitrators Exceed Authority When Granting Award in Excess of No-Fault Limit, Especially When Insurer Provides Ledger Showing Costs Paid

This decision involved an arbitration award to Refill in the amount of $2,715.48. Country-Wide was the No-Fault insurer who paid out an No-Fault benefits totaling $50,00 to a Ms. Rosas. Ms. Rosas assigned her rights to Refill. After the master arbitrator affirmed the award Country-Wide petitioned the Kings County Supreme Court to vacate the master arbitrator’s award. However, the Supreme Court denied the request and affirmed the award.

In response, Country-Wide filed an appeal. County-Wide supported its position with an affidavit of County-Wide’s No-Fault/Litigation Supervisor. Notably, the affidavit contained a ledger reflecting all the dates that claims by various medical providers that exhausted Ms. Rosas’s policy. This provided the evidence the First Department needed to reach its decision.

The First Department found vacatur of the award was warranted under CPLR 7511(b)(1)(iii). It determined that the lower arbitrator exceeded his power be issuing an awarded that exceeded the No-Fault limits of $50,000. The Appellate Division also concluded that Country-Wide was not precluded from raising the issue of policy exhaustion, even if it was not before the arbitrators in the underlying arbitration.

The First Department got this right and for the right reasons. As cited in the opinion, 11 NYCRR 65-3.15 requires that when No-Fault claims aggregate to more than the $50,000 limit the claims will be paid in order received. If the insurer pays the $50,000 before receiving the claim, then the insurer will not be liable to pay such a claim. This provides a practice note, when confronted with the same issue ask if the insurer has a ledger of claims.

 

NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta

[email protected]

01/13/23       Kennedy v. Intact Insurance Company, 2023 NLSC 7,
Newfoundland and Labrador Supreme Court
Homeowners’ Insurer has been Ordered to Defend a Premises Liability Claim Advanced by a Patron of an Undisclosed Home-Based Business

Home-based offices and businesses have flourished as consequence of the public health measures imposed by reason of the COVID-19 pandemic. Some personal lines insurers, who are now exposed to commercial risks under their personal lines policies, trust that their business risk exclusions are robust enough to keep those risks outside their coverage. Other personal lines insurers have embraced those risks and have agreed to cover them. This trial level, duty to defend decision from the Newfoundland and Labrador Supreme Court, is one the first cases that I am aware of that addresses the premises risk under a homeowners’ policy for a home-based business.

William Kennedy and, his wife, Susan Kennedy, jointly own and occupy a home insured under a homeowners’ policy issued by Intact that is located just outside of St. John’s at 37 Neils Line Extension, in Conception Bay South, Newfoundland. Judy Kennedy, whose relationship to the homeowners is not explained, operated a counselling business from the Kennedy home. There is no suggestion that Judy lived or lives in the home. Kimberley Lake came to the home with her son for a counselling session with Judy. Kimberley slipped, fell, and injured herself on a step leading to the door to the home.

Text Box: Photo 137 Neils Line Extension, Conception Bay South, NLKimberley sued William and Susan Kennedy alleging that she was injured due to their joint failure to keep the premises reasonably safe. William and Susan tendered the action to Intact for a defence. Intact denied any liability to defend.

William and Susan Kennedy each operated their own businesses from the premises. They disclosed those businesses to Intact.  They did not disclose that Judy Kennedy also operated a business.

Intact’s policy covered the personal liabilities of William and Susan Kennedy, the relatives of either who live in the same household, and anyone under 21 under their care.  While the policy covered their joint liability arising anywhere in the world that arises out of their ownership, use and occupancy of the insured property, their liability arising out of “business pursuits or any business use of the premises” was excluded. However, there was an extension that covered “…business conducted from your home and operated by you, or a member of your family residing in the same household as you.”

Intact argued that Judy was not an insured as she did not reside in the household of William and Susan Kennedy. As a result, Judy’s business was not covered under the Intact policy and there was no liability to defend Kimberley Lake’s claim.  Further, Judy Kennedy’s business was a material change in the risk that the insureds’ failed to disclose.

William and Susan Kennedy contested Intact’s denial and brought this duty to defend application.

The Court hearing the matter dismissed Intact’s arguments. The Court agreed with Intact that Judy Kennedy is not an insured under the Intact policy. However, Kimberley Lake had sued William and Susan Kennedy in their personal capacity as homeowners who allegedly failed to maintain their premises.  Neither of them had not been sued as business owners or operators. In view of those allegations, William and Susan Kennedy could be found liable as homeowners “…irrespective of the fact that the Plaintiff attended at the Premises to patronize the business of Judith Kennedy.”

Further, the Court held that Intact had not proven that Judy’s business use of the insured premises was material and dismissed that argument.  The Court ordered that Intact must defend the Lake claim.

It is interesting that Intact failed on the argument that the policy should be void for failure to disclose a material change in the risk. It is likely that Intact lacked evidence that the policy would not have been issued or alternatively Intact would have stipulated a higher premium had they known that Judy Kennedy operated a business in the home.

It is also interesting that Kimberley Lake just sued the homeowners. That seems to have been a strategic move to avoid the very application that ensued.

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