Coverage Pointers - Volume XXIV, No. 2

Volume XXIV, No. 2 (No. 624)
Friday, July 8, 2022
A Biweekly Electronic Newsletter

Hurwitz Fine P.C.
The Liberty Building
424 Main Street, Suite 1300
Buffalo, New York 14202
Phone: 716-849-8900
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© Hurwitz Fine P.C. 2022
All rights reserved
 

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

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

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

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

Dear Coverage Pointers Subscribers:

Hurwitz Fine PC

Do you have a situation?  Everyone seems to have one these days.  Have no fear, we LOVE situations.
 

Risk Transfer Program:

I want to thank the close to 500 people, claims professionals and attorneys alike, who attended the Risk Transfer programs that John Trimble and I conducted over the past two months.  The feedback has been phenomenal.
 

Grieving Families Act:

We are still awaiting news about the Grieving Families Act, the amendments to the Estates, Powers and Trusts Law that would expand the scope of recovery in Wrongful Death Actions.  The Governor has not yet called for the bill, although it passed both houses of the legislature in early June.  We wait and see.
 

CIDA Experience and CIDA Checklist:

The Comprehensive Insurance Disclosure Act (CIDA) has been in effect since January 1.  I am wondering whether (a) folks are complying with its disclosure provisions and (b) whether anyone knows of any litigation surrounding its provisions.  We have seen no reported decisions.  For those who are unfamiliar with the statute, or who may need a refresher, we offer a checklist for compliance:

 

CIDA Effective Date: December 31, 2021

Applies to: All civil actions thereafter commenced.

Requirements

Initial disclosure and timing [CPLR 3101(f)(1)]:
 

No later than 90 days after service of an answer, whether it be to a complaint, counterclaim, cross-claim, or third-party complaint, a defendant or third-party defendant shall provide to all parties in the litigation, proof of the existence and contents of any insurance policy, in the form of a copy of the insurance policy in place at the time of the loss, or if agreed to in writing by such plaintiff or party in writing, a declarations page, under which any person or entity may be liable to satisfy part or all of a judgment that may be entered in the action or to indemnify or reimburse for payments to satisfy the entry of final judgment.

If a party accepts the declarations page in lieu of a copy of the policy, the party can thereafter request a copy of the policy, which must be provided.

Production shall include information on all applicable policies
[CPLR3101(f)(1)(i)]:

All primary, excess, and umbrella policies, insofar as such documents relate to the claims being litigated.

If policies, rather than declarations pages, are being produced, complete policies are to be provided [CPLR 3101(f)(1)(ii)]:

A complete copy of the policy shall be provided, including declarations, insuring agreements, conditions, exclusions, endorsements, and similar provisions. The application for insurance is not required to be produced. see CPLR 3101(f)(3) below.

Initial production shall include information about the person adjusting the claim [CPLR 3101(f)(1)(iii)]:

The contact information, limited to the name and email address, of the individual responsible for adjusting the claim at issue.

Initial production shall also include available policy limits [CPLR 3101(f)(1)(iv)]:

The total limits of liability available under the policy, which shall mean the actual funds, after considering erosion and any other offsets, which can be used to satisfy a judgment or reimburse the payments made to satisfy a judgment.

Subsequent disclosures [CPLR 3101(f)(2)]:

A defendant, third-party defendant, crossclaim defendant, or counterclaim defendant, must make “reasonable efforts” to ensure that the information provided remains accurate and complete and provide updated information to any party to whom disclosures have been made:

  • At the filing of the note of issue;

  • When entering into any formal, court supervised, settlement negotiations;

  • At a voluntary mediation;

  • When the case is called for trial; and

  • For 60 days after any settlement or entry of final judgment in the case, inclusive of all appeals.

    Policy production detail [CPLR 3101(f)(3)]:

    The production of the policy shall not include the policy application.

    The production of the policy shall not constitute an admission that the policy covers the injury or damages.

    Disclosure rules do not apply to actions seeking to recover No-Fault (Personal Injury Protection) benefits [CPLR 3101 (f)(5)]:

    The rules adopted by CIDA do not apply to lawsuits seeking to recover PIP benefits.

    Dual certifications [CPLR 3122-b]:

    The information provided under 3101(f)(1) shall be accompanied by a “certification” by the defendant, third-party defendant, cross-claim defendant, or counterclaim defendant, and a certification by any attorney appearing for the disclosing party, sworn in the form of an affidavit or affirmation where appropriate, stating that the information is “accurate and complete, and that reasonable efforts have been undertaken, and in accordance with [CPLR 3101(f)(2)] will be undertaken, to ensure that this information remains accurate and complete."

    Sample certification:

    “I,____________, hereby affirm that reasonable efforts have been undertaken and accordingly, upon information and belief, that the policy information being provided is, to the best of my knowledge, accurate and complete and that reasonable efforts will be taken, under CPLR 3101(f)(2), to ensure that the information remains accurate and complete.”

    New York Coverage Protocols:

There is a good discussion of New York coverage rules in a Second Circuit case reviewed in Agnes Wilewicz’s column. However, since we get so many questions on the New York approach to coverage letters, we have posted, on LinkedIn, a summary of New York coverage protocols, including a discussion of the Draconian penalties for non-compliance.  For those interested in a formal presentation for a claim group, let me know.

 

Baseball Debuts – 100 Years Ago:

Only one played had his first game 100 years ago today, Buffalo born Walt “Jabby” Lynch.  He played his first game in the Major Leagues on July 8, 1922, y.  He played a total of three games, as a relief catcher, batted .500 (one single in two plate appearances) for the Boston Red Sox, and then returned to the minors.  After retiring from baseball, he became a physical education teacher in the Buffalo school system.  He married at age 40, and he and his wife never had children. He is buried in Oakwood Cemetery in East Aurora, New York.
 

Expert Witness and Mediation Services:

By the way, if you are looking for an expert witness or a mediator to help resolve coverage or risk transfer issues, feel free to reach out.  For insurers battling with each other over coverage issues and justifiable concerned about developing precedent that may work against them in their next case, mediation is an excellent alternative.
 

Need a mediator?

Hey coverage lawyers and claims 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 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 know 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.
 

Training, Training and More Training:

Schedule your in-house training for 2022.  Need a topic?  Here are 160 or so coverage topics from which to choose.

 

Newsletters:      

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

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

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

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

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

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

     

    A Hot Date – 100 Years Ago:

    Buffalo Evening News
    Buffalo, New York
    08 July 1922

    Lad, Too Popular with Girl,
    Is Tied to Stake, Set Afire

    Agonized Cries from Woods Bring Rescue—Tells Story
    of Youthful Rivals’ Jealous Act.

              KINGSVILLE, Ont., July 8,—Eddie Sanderson of Bellingham, Wash., came here visiting and promptly became popular with a little Kingsville girl. They went walking together, they bought ice cream together, and the girl pretty generally showed the hometown boys that the visitor was her ideal.

              But three boys—all between 10 and 12—liked the little girl and they did not like Eddie’s popularity. They became frankly jealous. So, they got together and planned to end Eddie’s visit and his popularity at one stroke.

              Men, passing the town, heard a boy’s agonized cries. They smelled smoke and rushed into the woods. Tied to a stake, with a fire eating its way up his legs, was Eddie Sanderson. They cut the rope and freed him. They threw water on his feet and rushed him into the town.

              Eddie at first refused to tell what had happened. Finally, he told the story of his popularity and said the three boys had chased him, caught him, carried him into the woods, and there kindled a fire of paper and sticks, tied him to a stake as the flames started to leap up—and left him. His condition is not serious.

     

    Peiper on Property and Potpourri:

    A little summer treat this issue, as we have two interesting property disputes.

    The first, Birnkant, addresses the often-seen issue of ambiguity in insurance language.  In that case, the Court was reviewing a limitation to coverage and where two plausible constructions were offered the insurer came out on the short end.  Remember, when it comes to an exclusion or limitation, any rational construction of the clause that differs from the insurer’s interpretation automatically creates ambiguity; and, that ambiguity is construed against the drafter of the contract. 

    The second case comes from the Third Department and is the third decision under this caption since 2016.  The issues are complex, but the Appellate Division’s decision appears spot on.  The primary issue is what is the appropriate measure of damages under an insurance policy.  It is not, as claimed (and Ordered by the trial court) diminution of value. That is a tort damage.  The damages under an insurance policy are, invariably, the lessor of the cause to repair/replace, the acv at the time of the loss or the policy limit.  The Court followed the language of the policy that was contractually obligated to respond and issued a rational and correct decision in our opinion. 

    We also have yet another reminder of how difficult it is to overcome a default judgment in the Second Department.  One thing is for certain, blaming the insurance company for the delay will not be an acceptable reason. Don’t do it. 

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

    Steve
    Steven E. Peiper

    [email protected]

     

    Coolidge Speech from Rochester is a First – 100 Years Ago:
     

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
08 July 1922

COOLIDGE SPEECH
FIRST RADIO FROM
EASTMAN STATION

          Rochester, July 7 (A. P.).—The first words to be sent out by the great radio station of the Eastman School of Music of the University of Rochester, which has been presented to the university jointly by the Democrat and Chronicle and Times Union, daily newspapers here, will be those of Vice President Calvin C. Coolidge when he speaks in the city next Tuesday night. Secretary Herbert Hoover of the commerce department today informed the university authorities that a license would be issued to broadcast on a wavelength of 360 meters and to use the call letters WHAM.

 

Wilewicz’ Wide-World of Coverage:

         I hope that everyone had a wonderful Fourth of July! Ours was relatively low-key this year, though the weather could not have been better. This summer is now gearing up to be quite busy, so it was a nice calm-before-the storm kind of weekend.

Now, jumping right in this week, we bring you Golden Insurance v. Ingrid House out of our own Second Circuit. In a fairly lengthy decision, the Court here provided a primer on Insurance Law 3420 and the cardinal rule of coverage practice in New York: Disclaimers must be express (reservations of rights don’t hold any water here) and they must be issued within a reasonable period of time from when you learn of the grounds for disclaimer – i.e., 30 days or less. Where a carrier issued a reservation of rights letter and then waited two years before formalizing its coverage position with a disclaimer, the Court held that was not reasonable as a matter of law. Take a look at the summary annexed, with a link to the full decision.

 

Until next time,

 

Agnes
Agnes A. Wilewicz

[email protected]

 

Interesting Lottery – 100 Years Ago:
 

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
08 July 1922

LONDON AUTO BUS
FIRM RUNS LOVE
LOTTERY PARTIES

          London, July 7 (Special).—A human lottery in which every man holding a ticket draws a female companion has been launched by a motor bus concern which is arranging outings called “general post socials.” At an appointed hour, a motor bus containing twelve woman passengers proceeds to a certain spot on the outskirts of London. A few minutes later another motor bus carrying a dozen man passengers arrives. The passengers then take seats, each man with the woman holding a ticket with a number corresponding to his own. The coaches then proceed to a secret destination in a forest where there are picnics, dancing, and other amusements.

 

Barnas on Bad Faith:

Hello again:

The flip of the calendar to summer has not been particularly kind to my Blue Jays.  We have slipped to fourth place in the American League East and are barely clinging to the final wild card spot in the expanded postseason.  It seems like when we get good pitching, we can’t hit and when we get hits, we can’t pitch.  It is very frustrating to see a team with so much talent get such middling results.  There is still a lot of season left though.  Hopefully, we get some help at the trade deadline.

Turning to the ice, the NHL Draft is coming up tomorrow night, and the Sabres have three picks in the first round.  Us Sabres’ fans have spent a lot of time dreaming about possibilities in the draft in recent years and not much time enjoying any actual success on the ice.  Hopefully, that will start to change this year.  I still think the Sabres need to find a better option in goal for that to potentially happen.

I have a case from the Eleventh Circuit in my column today.  A jury found in favor of the insurer in a bad faith trial after a jury verdict against the insureds of over $12 million in the underlying action.  On appeal, the court concluded that the failure to give the jury instruction proposed by the underlying plaintiff in the bad faith trial was an abuse of discretion warranting a new trial. 

Brian
Brian D. Barnas

[email protected]

 

Drunk and Disorderly – 100 Years Ago:
 

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
08 July 1922

SOBER ENOUGH TO FINE

Prisoner pleaded for another
chance, having wasted many.

          A fine of $10 was yesterday paid by John Mesch of No. 819 Seneca Street, who was arrested early on Wednesday morning while trying doors along Seneca Street near Smith Street. The man was too drunk to be tried when he was arraigned and was committed to jail to sober up.

          “Give me another chance,” pleaded Thomas Fagan, who was before Judge Keeler the day before, “and I’ll do it up right.”

          “Well, I see you got a shave since yesterday,” remarked the court, “Pay $10, then start and do it up right.”

          The fine was too much for Fagan and went to the pen.

 

Kyle's Construction Column:

          Dear Readers,

I hope everyone had a great Fourth of July weekend! My girlfriend and I started out the day by running a 10k race in Lancaster, which always seems like a better idea when we sign up than the day of, which for some reason always ends up being one of the hottest days of the year. After winding down and enjoying a couple Bloody Mary’s, we attended the Independence Day parade in the Village, got to visit with family and friends all afternoon, and watched fireworks in the distance from the comfort of the back patio at night (at that point we were a bit tired to make any special trip for fireworks).

In this week’s Construction Column, I discuss a recent coverage case from the District Court for the Eastern District of Pennsylvania. The court considered whether an insurer had an obligation to defend and indemnify an insured against claims of faulty workmanship asserted in the underlying action and whether a default judgment against the defendant was appropriate.

Until next time…

Kyle
Kyle A. Ruffner

[email protected]

 

Lynching Still a Thing – 100 Years Ago:

The New York Age
New York, New York
08 July 1922

LYNCHING RECORD FOR
FIRST SIX MONTHS OF 1922

(Special to The New York Age)

          Tuskegee Institute, Ala.—Twelve of thirty lynchings in the United States during the first half of the year were recorded in Texas, according to a statement of the Department of Records and Research of Tuskegee Institute, issued June 30. Mississippi was second to Texas with seven lynchings, while four were reported from Georgia. Arkansas had two lynchings and one each was reported from Alabama, Florida, Louisiana, Oklahoma, and South Carolina.

          The number lynched during the period is six less than for the first half of 1921 and eighteen more than the number recorded for the first six months of 1920.

          Of those lynched two were white and twenty-eight Negroes. Eleven of those put to death were charged with attacks upon women and nineteen were charged with other offenses. Five were burned at the stake and three were first put to death and then their bodies burned. Four of those lynched in the year 1921 were burned at the stake and three were first put to death before their bodies were burned.

 

Fleming’s Finest:

        Hi Coverage Pointers Subscribers,

Hope everyone had a good long weekend. My family and I took advantage of the beautiful weather and roamed around Cambridge, MA. Much to our delight, we found vegetarian haggis and marmite in an international market. We also toured a chocolate factory and learned about chocolate production. If you don’t hear from me again, know that I’m living out my Legally Blonde fantasy at a certain middle-tier MA university (think crimson).

This week’s case comes from the Louisiana Supreme Court. The court considered whether an insurance policy, by its own terms, excluded coverage for damages arising out of a kidnapping resulting in death. Check out the column for more info.

Catch you later,

Kate
Katherine A. Fleming

[email protected]

 

Police Brutality Under Observation – 100 Years Ago:

The New York Age
New York, New York
08 July 1922

Police Brutality Is
Subject of Criticism

Caustic Comment Concerning Alleged
Brutal Police Methods in Handling of
Prisoners in 135th Street
Station House

          The death of Hubert Dent, a prisoner in the 135th Street police station, as a result of blackjacking at hands of three detectives, has aroused much condemnatory criticism of alleged brutalities as is said to be practiced by police in New York City against men and women under arrest.

          The opinion is freely expressed that there is too much brute force used on prisoners after they have been arrested. That many of these prisoners have police records is no reason they should be subjected to the brutalities which are alleged to be commonly practiced by the police officers, both uniformed and plain clothes men.

         There has from time to time been caustic criticism of police methods, and this criticism has taken the form of protests at times. Only recently a delegation of Harlem citizens, made up voluntarily, called on Police Commissioner Enright and registered objections to the manner in which prisoners were treated in the Harlem station house.

 

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

Last minute on Tuesday, I came out of retirement at my cousin’s request to fill a roster spot on his bar league co-ed 4s beach volleyball team—for playoffs. A shell of my NCAA self, I held my own and helped will the team to the finals. Albeit unsuccessful in the end, complete with receiving a hard-driven cross-court swing to the face (I got “packed” is the term), I managed to keep my pride and put forth quite the defensive effort for someone who has not stepped foot on the beach since last summer. Happy to have played, although my body hates me for it. Oh well…I’ll be pain free this time next week (or at least the week after that).

In Ryan’s Capital Roundup, I have outlined the new insurance regulations regarding car sharing that were published this week on the State Register. These regulations implement recent laws promulgated by the New York State Legislature regarding minimum financial responsibility requirements for car sharing.

Until next time,

Ryan
Ryan P. Maxwell

[email protected]

 

Rain Claims Soak Insurers – 100 Years Ago:

Buffalo Courier
Buffalo, New York
08 July 1922

INSURANCE COMPANIES HARD
HIT RESULT OF HEAVY RAINS

          New York, July 7.—Rain insurance companies that warranted fair weather for baseball clubs, resort hotels, hot dog vendors, golf players, and vacationists, got an awful wallop throughout the month of June and an even worse blow during the recent prolonged weekend.

          The four big companies engaged in this business paid out more than $500,000, to policy holders protected against bad weather over the Independence Day period.

          On Sunday, July 2, the government charts reveal, almost every square mile of land within 200 miles of the Atlantic coast, from Florida to Maine was rained upon. July fourth was almost as bad. Baseball games were postponed, people who would have visited resorts abandoned their plans, open air amusements were drenched, and umbrella dealers were the only ones who had a kind word for the weatherman.

 

Dishing Out Serious Injury Threshold:

Dear Readers,

Hope everyone had a Happy and Healthy 4th of July. I was thankfully able to spend time with my family on the water and enjoy the beautiful weather we had down here.

The case selected this issue was a straightforward case where defendants were able to establish, with competent medical evidence, that plaintiff did not sustain injuries to the cervical and lumbar regions that constituted serious injuries under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d).

Enjoy,

Michael
Michael J. Dischley

[email protected]
  

 

What Marriage?  – 100 Years Ago:

Times Union
Brooklyn, New York
08 July 1922

MOTHER SEEKS TO ANNUL
MARRIAGE OF DAUGHTER

          Margaret L. MacLeod, 20, 13 Osborne Avenue, East Norwalk, Conn., through her mother, Mrs. Ella Muir, brought suit in the Supreme Court of Manhattan today to have her marriage to Malcom MacLeod, of 253 Amboy Avenue, this borough, annulled on the grounds that the defendant never consummated the marriage.

          According to the complaint, the couple were married in Brooklyn a year ago.

Editor’s Note – Margaret never remarried, dying in 1996 at age 95 in Bridgeport, Connecticut.

 

Lee’s Connecticut Chronicles:

 

Dear Nutmeg Newsies:

Well, I guess it was inevitable—I got COVID. I should really say, my house got COVID. All five of us. Despite masking and distancing, this newest strain is super contagious, and numbers are up everywhere. Luckily, we all had mild sicknesses, but of course, I got the worst of it. Thankfully, the vaccines and boosters did their job, preventing any serious sickness. With five negative tests, we are now back at it. Jill and I had a “covidmoon” (we made up that word) on the beach in Cape Cod. It’s always nice to curl your toes in the sand and there is just something curative about sea air.

In Connecticut insurance news, it was a light fortnight for decisions. I found particularly interesting a first-party property case where the court held that a vacancy provision was a condition not an exclusion and therefore the burden to establish compliance lays with the insured.

Keep keeping safe. COVID is no fun.

Lee
Lee S. Siegel

[email protected]

 

Bricklayers Demand Fair Compensation – 100 Years Ago:

The Yonkers Herald
Yonkers, New York
08 July 1922

BRICKLAYERS
WANT $10 DAY

Building Employers Have
Refused Demand of Dollar
More—Situation Regarded
as a Delicate One

A delicate situation in the building business of Westchester County has arisen over the recent demand of the bricklayers, masons and plasterers of Yonkers, Mount Vernon and the Greenburgh and Mount Pleasant districts for $10 a day, one dollar more than the present scale of wages. This demand has been rejected by the Building Trades Employers’ Association in the several districts.

          The representatives of the bricklayers claim they are receiving $10 a day from contractors in most places and their idea, it is said, is to protect themselves with an agreement covering the winter months. This would also have the effect of establishing a $10 scale which would mean a strike should the builders wish to reduce the wages. The builders hold that the granting of a $10 scale to the bricklayers would have the same effect as the New York City agreement had on all other trades. They demanded and received a dollar a day more.

 

Rauh’s Ramblings:

          Hello everyone!

I hope you all had an enjoyable 4th of July and long weekend.  I was feeling a little under the weather, so I didn’t partake in the usual 4th of July festivities, but it was still relaxing and nice to have a few days off.

Unfortunately, I could not find any notable life insurance/ERISA cases this week, but I am hopeful I will have something to report in the next issue of Coverage Pointers.

Until next time,

Patty
Patricia A. Rauh

[email protected]

 

It’s in the Bag – 100 Years Ago:

Times Herald
Olean, New York
08 July 1922

Lawyers Brief Cases

All genuine leather with one, two and three pockets. Solid
handles, straps, and locks.

$4.00 to $8.75

Genuine Seal at

$8.75

F. R. BROTHERS & CO.

         

Storm’s SIU Examen:

Hi everyone:

Happy belated 4th!  Some interesting cases this week involving the DFS, UIM claims and the NHL. 

  • Medical providers of prescription medications being investigated by the DFS for insurance fraud related to PIP claims denied a writ of prohibition under CPLR § 7803 alleging the DFS is proceeding in excess of its jurisdiction.
     

  • Plaintiff’s claim under Pennsylvania's bad faith statute (42 Pa.C.S. § 8371) with respect to uninsured motorist claim survives motion to dismiss but not a claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Law.
     

  • Considering motions as to the amount of credit to which UIM insurer is entitled, court interprets "Any" to mean "All" in the UIM Exhaustion Clause, and finds insurer is entitled to a credit for the liability limits of the tortfeasors against whom the insureds received settlements. Fair Share Act does not apply in cases such as this one, where the plaintiff's negligence is not in Issue.
     

  • Insurance coverage for lawsuits against the NHL by NHL players in concussion litigation

    “You can’t blame anyone else if you fall in your driveway.  That’s your own asphalt.”

    We appreciate every opportunity we receive to work with you.  Thank you!

    Have a nice two weeks!

    Scott
    Scott D. Storm

    [email protected]

 

Can I Have Mustard with that Rye? – 100 Years Ago:

New York Herald
New York, New York
08 July 1922

12 Bottles Canadian Rye
For $18—Husks Still In

          MAYOR VICTOR MRAVLAG of Elizabeth, N. J., and other prominent citizens there received letters two weeks ago from a man in Toronto, offering Morgan’s pure Canadian rye for $18 a dozen quart bottles. The mayor turned his letter over to Samuel Cone, Prohibition Enforcement Agent at Newark, and Cone sent $18 of the Government’s money for the rye, which it was promised would be delivered through “our American agency.” Many other citizens also sent $18 for a dozen bottles of Canadian rye.

         Yesterday, Mr. Cone got his package. He found in the case twelve bottles wrapped in tinfoil and filled with rye—but not rye whiskey. It was just rye, the grain, good for making flour if the husks are removed.

 

North of the Border:

This past Canada long weekend I had the pleasure of going to Quebec to visit my in-laws in Montreal and a favourite Aunt who lives in Quebec’s Eastern Townships. All of them are now north of 90. Here’s hoping I will have the opportunity to reach that age and see how my family has turned out.

The past two years have been very hard on all of them. The pandemic rendered them involuntary shut-ins and deprived them of seeing their great-grandchildren and other friends and relatives. However, we are now trying to make up for lost time and the visit allowed us to enjoy some beautiful country and take in some terrific meals.

Let me know if anyone near the Quebec/Vermont border are looking for ideas for a get-away. It is a beautiful part of the world.

My column this week discusses whether a CGL offers a defence for the intentional privacy tort of intrusion upon seclusion. 

Heather
Heather A. Sanderson

[email protected]

 

Breach of Promise to Marry – 100 Years Ago:

New York Herald
New York, New York
08 July 1922

PASSION PLAY ACTOR
MUST PAY GIRL $250

She Wins Verdict for Breach
of Promise

         John Pauls, aged 24, of 112 Lewis Street, Union Hill, who for several years has taken part in the Passion Play in the Holy Family Church, Union Hill, was ordered to pay $250 to Miss Mary Sterner, 422 Lewis Street, Union Hill, by a jury in the Jersey City Supreme Court last night. The young woman brought suit for damages for alleged breach of promise to marry.

         Miss Sterner, who is of German birth and came to this country a few years ago, testified that she met Pauls in night school, and became engaged to him in 1918. She testified that he kept putting off the marriage until finally he told her that he wanted a trip abroad and would meet her in Vienna and marry her. It was brought out that before Miss Sterner sailed she signed an affidavit before a notary that their relations were merely friendly. She sailed, but Pauls did not follow her as she testified, he planned to do so.

         When she returned to this country Miss Sterner learned that Pauls had married.

 

Headlines from this week’s issue, attached:

KOHANE’S COVERAGE CORNER

Dan D. Kohane

[email protected]

  • On Contractual Risk Transfer Claim, Owner Failed to Prove it was Free from Negligence, so Application for Summary Judgment on Cross Claim for Both Defense and Indemnity are Denied

  • For Purposes of a “Construction or Renovation-Related Activity” Exclusion, Replacing Lightbulbs and Light Fixtures Falls within Maintenance Exception and is Covered

  • Plaintiff Demonstrated, prima facie, an Entitlement to No Fault Benefits and Carrier Did Not Deny Coverage Timely or Justify Denial

  • State Farm Establishes that Insured Staged Accident and Failed to Appear for EUO’s or Cooperate

     

    PEIPER on PROPERTY (and POTPOURRI)

    Steven E. Peiper

    [email protected]

 

DISHING OUT SERIOUS INJURY THRESHOLD

Michael J. Dischley
[email protected]

  • Plaintiff Failed to Raise a Triable Issue of Fact in Opposition to Defendant Motion

 

WILEWICZ’S WIDE WORLD of COVERAGE

Agnes A. Wilewicz
[email protected]

  • Second Circuit Holds that Disclaimer Issued Two Years after Carrier Learned of Underlying Lawsuit, with No Explanation for the Delay, Was Untimely as a Matter of Law in New York
     

BARNAS on BAD FAITH

Brian D. Barnas
[email protected]

  • Failure to Instruct Jury on Failure to Advise Bad Faith Theory Warranted Reversal of Jury Verdict in Favor of Insurer on Bad Faith Claim

 

LEE’S CONNECTICUT CHRONICLES

Lee S. Siegel
[email protected]

  • A Vacancy Condition is not an Exclusion

  • Contamination Exclusion Defeats COVID BI Claims

     

    KYLE'S CONSTRUCTION COLUMN

    Kyle A. Ruffner
    [email protected]

  • Faulty Workmanship Not Covered Under CGL Policy

 

RYAN’S CAPITAL ROUNDUP

Ryan P. Maxwell

[email protected]

  • Emergency Rule Making Published to State Register Implementing Minimum Financial Responsibility Requirements for Car Sharing
     

RAUH’S RAMBLINGS

Patricia A. Rauh
[email protected]

  • No case to report this week

 

STORM’S SIU EXAMEN

Scott D. Storm
[email protected]

  • Medical Providers of Prescription Medications Being Investigated by the DFS for Insurance Fraud Related to PIP Claims Denied a Writ of Prohibition Under CPLR § 7803 Alleging the DFS is Proceeding in Excess of its Jurisdiction
  • Plaintiff’s Claim Under Pennsylvania's Bad Faith Statute (42 Pa.C.S. § 8371) with Respect to Uninsured Motorist Claim Survives Motion to Dismiss but Not a Claim Under Pennsylvania's Unfair Trade Practices and Consumer Protection Law
  • Considering Motions as to the Amount of Credit to Which UIM Insurer is Entitled, Court Interprets "Any" to Mean "All" in the UIM Exhaustion Clause, and Finds Insurer is Entitled to a Credit for the Liability Limits of the Tortfeasors Against Whom the Insureds Received Settlements. Fair Share Act Does Not Apply in Cases Such as this One, where the Plaintiff's Negligence is not in Issue
  • Insurance Coverage for Lawsuits Against the NHL by NHL Players in Concussion Litigation

 

FLEMING’S FINEST

Katherine A. Fleming
[email protected]

  • Policy Barred Coverage for Damages Arising from Kidnapping Resulting in Death

 

NORTH of the BORDER

Heather A. Sanderson

[email protected]

  • The Ontario Court of Appeal Confirms that an Allegation of Direct Liability for the Canadian Privacy Tort of Intrusion upon Seclusion is not Covered Under a CGL Policy as it Does Not Allege Bodily Injury Caused by an Occurrence, nor Does it Allege Conduct Outside the Reach of the Intentional Act Exclusion

 

We wish you continued good health and hope that your summers prove, at least in part, relaxing and enjoyable.

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]ne.com

 

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
Ryan P. Maxwell
Patricia A. Rauh
Diane F. Bosse
Joel R. Appelbaum
Kyle A. Ruffner
Katherine A. Fleming

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 Examen

Fleming’s Finest

North of the Border

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

07/06/22       Rodriguez v. Waterfront Plaza, LLC
Appellate Division, Second Department
On Contractual Risk Transfer Claim, Owner Failed to Prove it was Free from Negligence, so Application for Summary Judgment on Cross Claim for Both Defense and Indemnity are Denied


Rodriguez was employed as a laborer by Jara Services, LLC (“Jara”) on a construction site.  Waterfront Plaza was the owner (“Waterfront), and ZNKO was the general contractor.

According to the plaintiff, during the course of the project, he was assigned to transport 20-foot-long metal beams from the ground level to the third floor of the partially constructed building. To accomplish this, the plaintiff stood the beam up vertically while his partner secured the other end of the beam with his foot. A rope was then tied around the beam, and the beam [was pulled onto the third floor. The only device supplied for the task was this rope. The plaintiff testified at his deposition that as he was getting ready to raise one of the beams, his partner asked him to move backwards, and he fell into an unprotected, 15-foot-deep opening in the concrete, which led to the basement. The plaintiff was able to hold onto the sides of the opening so that he did not fall to the ground below, but he let go of the beam, which hit him in the head.

So, plaintiff commenced a Labor Law, 240(1) suit against Waterfront and ZNKO, and Waterfront asserted a cross claim for contractual indemnification against ZNKO.

After the completion of discovery, the plaintiff moved successfully for partial summary judgment against Waterfront.

Waterfront moved for summary judgment on the contractual claims against the general contractor but failed to eliminate triable issues of fact as to whether it was free from negligence with respect to the plaintiff's accident, as was required to obtain summary judgment on its cross claim for contractual indemnification against.  Thus, since Waterfront is not entitled to indemnification at this juncture, it also is not entitled to a defense.
 

06/30/22       Cookies on Fulton, Inc v. Aspen Specialty Insurance
Appellate Division, First Department
For Purposes of a “Construction or Renovation-Related Activity” Exclusion, Replacing Lightbulbs and Light Fixtures Falls within Maintenance Exception and is Covered

Apparently, Aspen had a New York State Labor Law exclusion in its policy that eliminated coverage for “construction or renovation-related activity. In this case

plaintiffs demonstrated conclusively that the underlying injuries arose out of a maintenance-related activity, which falls within the exception to the policy exclusion. The testimony, affidavits, and invoice show that the plaintiff in the underlying personal injury action was only replacing the lightbulbs and light fixtures, using the existing wiring, to restore the lights to their former condition. This activity fits the definition of the word maintenance.
 

06/29/22       Hernandez v. Merchants Mutual Insurance Company
Appellate Division, Second Department
Plaintiff Demonstrated, prima facie, an Entitlement to No Fault Benefits and Carrier Did Not Deny Coverage Timely or Justify Denial

In 2008, a vehicle operated by the Hernandez and insured by the defendant, Merchants Mutual Insurance Company, was struck in the rear by a sanitation truck owned by the City of White Plains. The plaintiff subsequently underwent surgery to remove his L5-S1 disc and replace it with an artificial lumbar disc.

Merchants denied the claims on the ground that the surgery was not medically necessary, and this lawsuit ensued 

A plaintiff makes a prima facie showing of entitlement to judgment as a matter of law by submitting evidence that the prescribed statutory billing forms were mailed and received, and that payment of no-fault benefits was overdue.  Here,  

the plaintiff submitted, inter alia, the disputed claims, the defendant's form denials, the affidavit of his surgeon, Richard Peress, and the affidavit of Christine Taylor, assistant director of patient accounts for Phelps Memorial Hospital.

The court found that Hernandez demonstrated, prima facie, that the prescribed statutory billing forms relative to the medical services provided by Peress were mailed and received, and that the defendant failed to pay or validly deny the claims within the permissible 30 days. In opposition, the Merchants failed to submit evidence in admissible form sufficient to raise a triable issue of fact as to whether the claimed benefits were properly denied on the ground of lack of medical justification.

 

06/28/22       State Farm Mutual v. All City Family Healthcare Center, Inc.
Appellate Division, First Department
State Farm Establishes that Insured Staged Accident and Failed to Appear for EUO’s or Cooperate

This action concerned claims for no-fault insurance benefits made in connection with an automobile crash that occurred on February 5, 2019. State Farm established that the individual claimants, who assigned their claims for no-fault insurance benefits to the defaulting medical service provider defendants, failed to appear for properly-noticed examinations under oath. The 15-business day timeframe to schedule an EUO is not measured based on receipt of the NF-2 application, but on the receipt of the verification and the failure to appear was a breach of a condition precedent to coverage and voids the policy ab initio.

Moreover, the State Farm established that the crash was intentional or staged and thus submitted sufficient evidence warranting entry of a default judgment and also proved that the named insured's failed to cooperate with the investigation of the claim, plaintiff also submitted sufficient evidence warranting entry of a default.

 

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

Property

06/30/22       Imrie v. Ratto
Appellate Division, Third Department
Mortgagee’s Rights to Recovery under an Insurance Policy are Defined by the Terms of the Policy, but are Independent of the Named Insured’s Rights

This dispute has been long litigated with two previous appellate decisions having been issued since 2016.  https://www.hurwitzfine.com/news/coverage-pointers-volume-xxii-no-10.  At the time of the last decision, the Appellate Division determined that Mr. Imrie, as mortgagee of the property, was entitled to have defendant’s property policy reformed to protect Imrie’s interest.  The Court, in reaching that decision, also ruled that Imrie was entitled to damages “to the extent of his rights under the policy.” 

Upon returning to the trial court, Mr. Imrie submitted a letter seeking the amount of defendant’s debt which was secured in the mortgage.  Erie Insurance, who issued the subject policy, objected, and requested a trial on damages.  The trial court denied Erie’s request for a trial, and instead ordered Mr. Imrie was entitled a sum certain alleged to have been the “diminution of value of the mortgaged property.” 

The Appellate Division, again, reversed the trial court.  In so holding, the Appellate Division noted that the insurer was obligated to provide coverage for the value of the loss of property.  However, per the terms of the policy, the appropriate measure of damages was the lower of (1) the face value of the policy (2) the actual cash value of the property or (3) the amount of the mortgaged lien.  The Court also referenced the longstanding rule that the purpose of property insurance is to “put him or her in as good a condition so far as practicable as he or she would have been had no fire occurred.” 

This required, at a minimum, that plaintiff prove “the nature, extent and amount of its loss under the policy to a reasonable degree of certainty.”  Here, plaintiff only submitted a letter to the Court outlining the basis for his claims.  There was no proof adduced, and the matter was remanded for trial accordingly.  Thus, not only was the measure of damages (i.e., diminution of value) not an appropriate measure of damages under the policy, but also plaintiff failed to meet his evidentiary burden in establishing said damages. 

In addition to its argument with Imrie, Erie also sought to reinvigorate its crossclaim against defendant Ratto’s agent/broker for indemnification.  The trial court appears to have refused to revive the previous crossclaims because its 2019 decision denying those very same claims was undisturbed by the Appellate Division’s decision on reformation to create rights for the mortgagee. 

Essentially, the trial court the ruled that the agent had no duty to Erie and, even if it did, the inability for Imrie to recover was caused by the actions of the named insured, Ratto. What the trial court appeared to be saying was the actions of Ratto in failing to cooperate with the investigation was the proximate cause of the loss of coverage, and, as such, the failure of the agent to name the mortgagee was not a proximate cause of the loss. 

Again, the trial court erred.  The Appellate Division noted that a mortgagee is entitled to an “independent insurance interest” in the policy, and, as such, its rights cannot be prejudiced by the actions of the named insured.  Quite directly, Ratto’s actions, as the named insured, had utterly no impact on the rights of Imrie. 

Nevertheless, the Appellate Division affirmed the trial court’s decision to deny Erie’s application to reinstate claims against the broker because Erie was unable to show that it would not have accepted the risk to add Imrie.
 

06/29/22       Birnkant v. Automobile Ins. Co. of Hartford, Connecticut
Appellate Division, Second Department
Temporal Restriction on Business Purpose was Deemed Ambiguous and, as such, Not Enforceable

Plaintiff commenced this action after sustaining a loss due to theft of certain property from his home.  Upon submitting the claim to the insurer, a denial was issued based on a limitation which precluded coverage for “property used at any time or in any manner for any ‘business’ purpose.  It was determined that the stolen item was “uniquely created” by plaintiff decades earlier and was presumably part of plaintiff’s business operations at that time.

Plaintiff, nevertheless, challenged the insurer’s interpretation on the basis that the limitation was ambiguous where it did not define the terms “business purpose,” “use” or “at any time.”  It was the final clause, “at any time,” that caught most of the court’s attention. 

In particular, the Appellate Division noted that the limitation was not clear if “at any time” simply meant the policy term or literally “at any time” in history.  Finding that both interpretations were plausible, the Court found the provision to be ambiguous.  As such, where the claimed item was not used as part of a business purpose during the active term of the policy, coverage was affirmed.

Potpourri
 

06/29/22       Goldstein v. Ilaz
Appellate Division, Second Department
Delay by Insurer is Insufficient Reason for Untimely Answer

On November 27, 2018, plaintiff established service of her Summons and Complaint upon defendant.  Defendant appeared, by way of an Answer on January 9, 2019.  Thus, 43 days past from service until appearance. At the earliest, the Answer would have been within twenty days of receipt; to wit, December 17th.  At most, then, defendant’s answer was served 23 days late. 

Nevertheless, upon receipt of the Answer plaintiff rejected it and moved for a default judgment.  Defendant cross-moved to have the Answer accepted.  The trial court granted defendant’s application. 

The Appellate Division reversed the trial court because it was determined defendant did not make an adequate showing of both a reasonable excuse and/or a meritorious defense.  In particular, the Appellate Division rejected the proffered excuse that delays by the insurance company caused the late appearance. 
 

06/23/22       Perez v. 76th & Broadway Owner, LLC
Appellate Division, First Department
After Fourth Blown Order to Appear for Deposition, Judgment is Entered Against Defendant

The actions of defendant, General Glass, resulted in its pleading being struck and judgment entered against it.  The opinion advises that General Glass violated no less than four specific court orders requiring that General Glass appear at a deposition.  The repeated failure to comply with the Court’s instructions evinced a pattern that its president “willfully refused to comply with the court’s mandates.”

In so holding, the Court noted that General Glass had a “full and fair opportunity to fully litigate the underlying merits…but affirmatively chose not to by [its] own failure to comply with court orders.”

 

DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley

[email protected]

06/22/22       Monvil v. Craig O. Perlman
Appellate Division, Second Department
Plaintiff Failed to Raise a Triable Issue of Fact in Opposition to Defendant Motion

In an action to recover damages for personal injuries, the plaintiffs appeal from an order of the Supreme Court, Suffolk County (Carmen Victoria St. George, J.), dated August 4, 2020. The order granted the defendants' motion for summary judgment dismissing the complaint on the ground that neither plaintiff sustained a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

The plaintiffs commenced this action to recover damages for personal injuries that each of them allegedly sustained in a motor vehicle accident on January 29, 2015. The defendants moved for summary judgment dismissing the complaint on the ground that neither plaintiff sustained a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. In an order dated August 4, 2020, the Supreme Court granted the defendants' motion, and the plaintiff’s appeal.

The defendants met their prima facie burden of showing that neither plaintiff sustained 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 each plaintiffs' 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).

In opposition, the Appellate Court found that plaintiffs failed to raise a triable issue of fact.

Accordingly, the Appellate Court held that the Supreme Court properly granted the defendants' motion for summary judgment dismissing the complaint.

 

WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz

[email protected]

06/14/22       Golden Insurance Company v. Ingrid House LLC
United States Court of Appeals, Second Circuit
Second Circuit Holds that Disclaimer Issued Two Years after Carrier Learned of Underlying Lawsuit, with No Explanation for the Delay, Was Untimely as a Matter of Law in New York

In December 2015, Luis Alberto Pomboza Chicaiza was working on a construction project at a building owned by Ingrid House when a wall collapsed, causing him to fall to his death from the fourth floor of the building. The construction project – which involved adding two stories to an existing four-story apartment building located at 356 East 8th Street, New York, New York – was covered by a general commercial liability policy issued by Golden Insurance (the “Policy”).

Under the Policy, Golden Insurance agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies.” The Policy then specified that the insurance “applied” to claims for damages arising out of bodily injury or property damage occurring at 356 East 8th Street after the Policy’s retroactive date, so long as the claim was made and reported during the policy period. The Policy provided that Golden Insurance had the right and duty to defend Ingrid House against any suit seeking such damages. A separate section of the Policy contained various exclusions to coverage – two of which are relevant to this dispute. “Endorsement #10” excluded coverage for “subsidence, settling, expansion, sinking, slipping, falling away, caving in, shifting, eroding, consolidating, compacting, flowing, rising, tilting or any other similar movement of earth or mud or expansion of soils, regardless of whether such movement is a naturally occurring phenomena or is man-made.” “Endorsement #30” excluded coverage for “[b]odily injury or property damage arising out of [Ingrid House’s] work on the exterior of any building which its highest point is over three (3) stories in height.”

In December 2017, representatives of Mr. Chicaiza’s estate filed a lawsuit in New York State Court against Ingrid House for damages arising out of Mr. Chicaiza’s injuries and death. Golden Insurance was notified of the lawsuit, and on January 24, 2018, it issued a letter acknowledging its obligation to provide Ingrid House with a defense but reserving its right to disclaim coverage based on Endorsements #10 and #30 (the “January 2018 Letter”). The January 2018 Letter noted that the construction project involved the exterior of a building that was over three stories in height – such that Endorsement #30 likely barred coverage – but that it was “unknown at th[at] time” whether the injury “arose out of [Ingrid House’s] work on the exterior of the building.” The letter also stated that Endorsement #10 potentially barred coverage because the accident “may have been cause[d] by a full or partial building collapse.”

Over two years later, on February 10, 2020, Golden Insurance filed a declaratory judgment action in federal court seeking a declaration that, based on Endorsements #10 and #30, there was no coverage under the Policy for any liability arising from Mr. Chicaiza’s injuries and death; that Golden Insurance could withdraw from the defense of the underlying lawsuit; and that Ingrid House must reimburse Golden Insurance for all fees, costs, and expenses incurred in providing a defense.

New York Insurance Law § 3420(d)(2) requires a timely disclaimer of coverage in “insurance cases involving death and bodily injury claims arising out of a New York accident and brought under a New York liability policy.” To the extent that section 3420(d)(2) applied here, Golden Insurance was precluded from denying coverage because its two-year delay in disclaiming liability was unreasonable as a matter of New York law. Its initial reservation of rights letter was not sufficient notice of its intent to disclaim. Section 3420(d)(2) provides: If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant. The purpose of section 3420(d)(2) is to “expedite the disclaimer process, thus enabling a policyholder to pursue other avenues expeditiously.” “If the insurance carrier fails to disclaim coverage in a timely manner, it is precluded from later successfully disclaiming coverage.”

Here, Golden Insurance waited two years after learning of the underlying lawsuit to disclaim coverage for damages arising out of the accident, even though the record reflects that “the basis for the disclaimer was, or should have been, readily apparent” by January 2018 – if not earlier. Golden Insurance was first notified of the accident in January 2016 and had ample time to investigate the facts relevant to coverage. By the time it learned of the underlying lawsuit in January 2018, it knew that the construction project involved the exterior of the building and that the building was over three stories high. It also knew that the accident “may have been cause[d]” by a wall collapse. Moreover, following the accident, various governmental agencies issued violations and reports, on which Golden claimed to rely in making its coverage determination. Again, its earlier reservation of rights letter was not sufficient to meet the standards of a disclaimer in New York. Moreover, Golden could not explain away its delay in issuing its disclaimer and had no explanation for why it took two years to issue one. Accordingly, it was held untimely and invalid as a matter of law.

 

BARNAS on BAD FAITH
Brian D. Barnas

[email protected]

06/28/22       Brink v. Direct General Insurance Company
United States Court of Appeals, Eleventh Circuit
Failure to Instruct Jury on Failure to Advise Bad Faith Theory Warranted Reversal of Jury Verdict in Favor of Insurer on Bad Faith Claim

Brink was injured when his motorcycle collided with a car driven by Pereles and insured by Direct.  He was airlifted to a hospital and was in a coma for several weeks.  Direct learned about the accident three weeks later and interviewed Pereles and his father the policyholder.  Direct learned that Brink had hired a lawyer, and it immediately faxed counsel a letter.  However, communications stalled thereafter.

Four months after the accident, Direct sent letters to the policyholder explaining the policy and asking about any other insurance coverage that might apply.  Direct decided to pay the policy limit for the accident, and it attempted to contact Brink’s new lawyer Clem.  After two months of trying to reach Clem, Direct sent Claim a letter detailing its attempts to contact him, offering to tender the policy limits, and enclosing a check.  The check was not cashed and Direct did not hear from Clem for seven months.

Fourteen months after the accident, Clem sent a letter to Direct advising that he needed more information verifying total coverage.  Direct responded with an affidavit of no other coverage, but it did not satisfy Clem.  Direct continued to push for settlement, but Clem did not respond.  Clem did respond approximately eight months later.  The letter indicated that the claim would be settled if Clem received a release, requested insurance disclosure documentation, and all insurance proceeds within the next couple of weeks.

However, Clem did not hear back from Direct.  It does not appear that Pereles or his father were advised of the settlement offer.  After the third week, Clem sent a letter advising that Brink would sue because Direct had not responded.  Brink brought a lawsuit, and he obtained a verdict of $12,679,837.17 after a jury trial.

Brink then brought an action against Direct for bad faith towards its insureds.  Summary judgment motions were denied, and the case proceeded to a jury trial.  Brink requested jury instructions on the definition of bad faith that covered both failure to settle and failure to advise theories.  Rather than giving Brink’s proposed instructions, which included numerous references to Florida bad faith precedent, the court gave a standard instruction on failure to settle.  During deliberations, the jury asked the court if bad faith was based on the length of time from the accident or from the time-limited letter.  The court responded by advising that bad faith was based on the totality of the circumstances.  The jury returned a verdict in favor of Direct.

Brink appealed arguing that the jury instructions and response to the jury question during deliberations were an abuse of discretion.  The Eleventh Circuit concluded that the answer to the jury question was not an abuse of discretion.  However, it concluded that the failure to instruct the jury on the failure to advise bad faith theory was an abuse of discretion and required reversal of the jury verdict.

A refusal to give a proposed jury instruction amounts to an abuse of discretion if the proposed instruction correctly states the law, deals with an issue properly before the jury, and the failure to give the instruction results in prejudicial harm.  First, the court concluded that the proposed instruction properly stated the law, as each statement of the law in the instruction was supported by binding Florida precedent.  Second, the issue of Direct’s failure to advise its insureds of a settlement opportunity was properly before the jury and had been presented at each stage of the case.  Third, the instruction was prejudicial because it limited the basis for bad faith to a failure to settle.  While failure to advise the insured is not an independent theory of liability, it is a way that bad faith liability can be triggered.  Thus, the court determined that the failure to instruct the jury on Direct’s duty to advise its insured was prejudicial.

Judge Anderson wrote a dissenting opinion.  Judge Anderson would have held that court’s decision not to give Brink’s instruction was not an abuse of discretion.  The dissent would have found that the instruction did not correctly state the law or result in prejudicial harm.

 

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

06/28/22       Congregation Bikur Cholim-Shevah Achim v. Selective Ins. Co. of S.C.
Superior Court of Connecticut (New Haven)
A Vacancy Condition is not an Exclusion

A burst pipe and busted coverage. Finding for Selective, the trial court held that a vacancy condition precluded coverage for water damage to a dwelling located on the synagogue grounds. The synagogue insured both the sanctuary building and a dwelling on one policy, with the dwelling listed separately. The Rabbi vacated the dwelling and it remained unrented for more than 60 days when a pipe burst, causing water damage.

Selective denied the claim, relying on the vacancy provision. The synagogue claimed that the provision is an exclusion, meaning that Selective had the burden to establish the lack of a material question of fact, of which the synagogue claimed there were many. The court disagreed. “Despite the plaintiff's characterization, however, the vacancy provision is a condition, not an exclusion…. The distinction is significant because “the insured bears the burden of proving that it complied with the [policy] conditions.””

Despite the synagogue’s many protestations the court found that the provision was clear and unambiguous and that none of the vacancy exceptions applied. The court dispensed with the arguments that the dwelling and sanctuary were one building and the alternative argument that the dwelling was an outdoor fixture.

Most interestingly was the court addressing the “Customary Operations” provision. The plaintiff argued that the dwelling was not vacant, because plaintiff was engaged in the customary operations of a landlord preparing the dwelling for new tenants. It claimed it was using the dwelling (1) to show it to prospective tenants, (2) preparing for the next tenant, (3) used it as storage, and (4) it was monitored by congregants. Selective argued that because the dwelling was not rented to a new tenant, which was the dwelling's customary operation, the exception was not satisfied. The activities, Selective urged, were merely interim activities, not customary operations. The court sided with Selective.

“Here, the policy language suggests the parties considered the dwelling to be a rental residence because the insurance policy delineates the building in question as a dwelling in the Schedule of Locations and because the policy contemplated the plaintiff leasing its insured property, both in the vacancy condition provision and under the definition of “operations.” Thus, housing one or more tenants would have been the logical understanding of the dwelling's customary operations in the context of the policy” Because the dwelling remained unrented for more than 60 days before the loss, there is no coverage, the court held.

[Ed. Note: The decision is currently only available on Westlaw: 2022 WL 2314722]
 

06/27/22       Westport Capital Partners LLC v. Am. Guarantee and Liability Ins. Co.
Superior Court of Connecticut (Hartford)
Contamination Exclusion Defeats COVID BI Claims

Sidestepping whether COVID can cause a ‘direct physical loss or damage,’ a Connecticut trial court granted a motion to dismiss in reliance on the policy’s contamination exclusion.

In a very detailed complaint, filled with scientific references asserting that COVID molecules cause actual, direct physical damage to surfaces, the plaintiff alleged that it lost over $12 million in the operation of its commercial real estate business. The complaint alleged further that “[n]one of the losses has occurred as the direct or indirect result of pollution-type releases of viruses or any other foreign substances.” The plaintiff alleged that it incurred: remediation and replacement damages for real and personal property due to the physical presence of the virus; business shutdowns due to the presence or suspected presence of the virus and its associated disease; the suspension of business activities due to pandemic conditions in general geographic proximity to insured locations; and extra expenses for out-of-the-ordinary steps taken to render its properties safe for continued operations based on the presence of the virus at its locations or nearby. The plaintiff also claimed coverage for losses it incurred due to governmental orders restricting travel, closing businesses, limiting commercial activity, and requiring individuals to quarantine.

The carrier argued that the complaint failed to allege a covered cause of loss, relying on the myriad of decisions holding that the alleged presence of COVID is not a direct physical loss or direct physical damage. The court, while noting that eight federal circuit courts of appeals, dozens of states, and many federal courts construing Connecticut law have all held that the virus does not cause of physical damage, opted not to address this issue. “The question whether virus and pandemic related losses constitute direct physical loss of or damage to property is presently before the Connecticut Supreme Court. Connecticut Dermatology Group v. Twin City Fire Ins. Co., Connecticut Supreme Court, Docket No. SC 20695.”

Notwithstanding how the Supreme Court may rule, the court held that the Contamination Exclusion precluded coverage in any event. “The policy excludes coverage for “Contamination and any cost due to Contamination including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy....” The policy defines “contamination” to include “[a]ny condition of property due to the actual presence of any foreign substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or pathogenic organism, bacteria, virus, disease causing or illness causing agent, [fungus], mold or mildew.” (Emphasis added).

Westport claimed that the exclusion was inapplicable because the policy did not include the ‘absolute virus exclusion’ that other policies contain. “The plaintiff alleges that it paid a higher premium to the defendant, a “high-end” property insurer, to obtain a policy that “did not include a specific ‘virus’ exclusion” and that “adopted a much-reduced exclusion that barred coverage for virus-related losses only when they resulted from classic pollution-type events.”” In addition, Westport argued that the language of the contamination exclusion “has a literally unlimited scope” and the court must apply a limiting principle that the exclusion applies only to traditional environmental pollution.

The court noted, however, that the exclusion specifically references “virus.” “The plaintiff's argument that the exclusion is ambiguous because it also references “foreign substance” is one that asks the court to find ambiguity in the abstract, which is counter to the rules of construction applied to insurance policies.” The court concluded that the contamination exclusion applies to “any condition of property due to the actual presence of any ... virus.” Stated so clearly, the exclusion unambiguously excludes the plaintiff's claims. The exclusion of any “virus” is not so broad that a limiting principle is required.

 

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

06/22/22       Am. Western Home Ins. Co. v. Salamander Stucco, LLC
United States District Court for the Eastern District of Pennsylvania
Faulty Workmanship Not Covered Under CGL Policy

The court in American Western Home Ins. Co. v. Salamander Stucco, LLC, considered whether the insurer had an obligation to defend and indemnify the defendant insured against claims of faulty workmanship asserted in the underlying action, as well as whether a default judgment against the defendant was appropriate due to failure to answer the Complaint.

The plaintiffs in the underlying action had purchased homes constructed in the Mill Creek real estate developments. The plaintiffs sought to recover for alleged property damage caused by the faulty workmanship by Mill Creek in the construction of buildings in the developments. Mill Creek then filed a Complaint against the defendant, Salamander Stucco, alleging they were responsible for damages allegedly caused by the deficient installation of Stucco at the properties. The defendant sought insurance benefits from American, but the insurer issued a Denial of Coverage and filed a Complaint for Declaratory Judgment against the defendant. The insurer later filed a motion for Default Judgment against the defendant for failure to answer the Complaint.

It is well settled that claims of faulty workmanship in construction defect cases and property damage actions do not constitute an occurrence under the terms of Commercial General Liability policy. The definition of accident required to establish an occurrence is not satisfied by allegations of faulty or defective workmanship. In this case, the court held that the insurer adequately pled there is no duty to defend or indemnify the defendant against the claims asserted against it for purposes of a default judgment. The insurer pled that the claims in the underlying action do not trigger coverage because faulty workmanship does not constitute an occurrence under the policy. Further, the insurer adequately alleges that exclusions in the policy preclude coverage for the repair and replacement of stucco.

Since the insurer met the general requirements for default judgment, the court considered the “Chamberlain factors” to decide whether to grant a default judgment. The court held that the first factor, whether there would be prejudice to the plaintiff if the default is denied, weighed in favor of the plaintiff because the defendant completely failed to respond. Therefore, the plaintiff would have no way to vindicate its rights if the default was denied. With regard to the second factor, the court held that because the defendant failed to respond, the court is unable to determine whether it has a litigable defense. Third, the court considered whether the defendant’s delay was due to culpable conduct. The court found this factor weighed against Default Judgment, because in the complete absence of any contact from the defendant, the court held it cannot find that the defendant is anything more than negligent.

After weighing these factors, the court found that default judgment was warranted. Two of the three factors weighed in favor of Default and the defendant failed to appear entirely so there was no possibility of a decision on the merits. Accordingly, the court held that the plaintiff adequately stated a claim for declaratory relief and found that the Chamberlain factors supported the entry of a Default Judgment against the Defendant.

 

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

Regulatory Wrap-Up

07/06/22       New Insurance Regulations Regarding Car Sharing
Department of Financial Services
Emergency Rule Making Published to State Register Implementing Minimum Financial Responsibility Requirements for Car Sharing

Last month, the Department of Financial Services (“DFS”) enacted an emergency regulation in order to implement Chapters 795 of the Laws of 2021 and 129 of the Laws of 2022, which became effective on June 20, 2022. These regulations established the minimum financial responsibility requirements of General Business Law Article 40 and updated existing regulations to ensure that minimum insurance requirements were in place prior to these new laws to ensure appropriate protections for vehicle owners, drivers, and the public. Chapter 795 and Chapter 129 established a new General Business Law Article 40 regarding peer-to-peer car sharing (“car sharing”) programs, and amended and added other laws, such as Insurance Law section 3458, to implement General Business Law Article 40. The Governor signed into law Chapter 795 on December 22, 2021, and Chapter 129 on February 24, 2022.

As indicated in DFS’ Statement of the Reasons for the Emergency Measure:

“A car sharing program is a program that facilitates the sharing of a motor vehicle. A car sharing program administrator (‘administrator’) is a person or entity who, for financial consideration, is responsible for operating, facilitating, or administering the means, digital or otherwise, by which a business platform facilitates a car sharing program. Under the new law, an administrator must, among other things, procure a group insurance policy that provides financial responsibility insurance when a vehicle is being used or operated through a car sharing program and that group policy, and not the owner’s policy of liability insurance, will provide primary coverage when the vehicle is being shared.”

In accomplishing this goal, the emergency adoption made a laundry list of changes to various provisions of Title 11 of the New York Codes, Rules, and Regulations, including:

  • Sixteenth Amendment to 11 NYCRR 27 (Insurance Regulation 41)

  • Eleventh Amendment to 11 NYCRR 60-1 (Insurance Regulation 35-A)

  • Tenth Amendment to 11 NYCRR 60-2 (Insurance Regulation 35-D)

  • New 11 NYCRR 60-4 (Insurance Regulation 35-F)

  • Fourth Amendment to 11 NYCRR 65-1 (Insurance Regulation 68-A)

  • Ninth Amendment to 11 NYCRR 65-3 (Insurance Regulation 68-C)

  • Seventh Amendment to 11 NYCRR 65-4 (Insurance Regulation 68-D)

  • Seventh Amendment to 11 NYCRR 169 (Insurance Regulation 100)

  • Nineteenth Amendment to 11 NYCRR 216 (Insurance Regulation 64)

By far, the largest change through this Emergency Rule Making from DFS is the addition of a new Subpart 11 NYCRR 60-4 Peer-to-Peer Car Sharing Programs: Minimum Provisions for Group Policies and Other Requirements. Of the various Subsections contained therein 60-4.3 Mandatory Liability Provisions and 60-4.4 Exclusions set forth the required scope of coverage:

§ 60-4.3 Mandatory liability provisions.

A group policy shall contain in substance the following minimum provisions that are equally or more favorable to the insured and judgment creditors, so far as such provisions relate to judgment creditors:

(a) insurance against loss from the liability imposed by law for damages, including damages for care and loss of services, because of bodily injury to or death of any person, and injury to or destruction of property arising out of the ownership, maintenance, use, or operation of a specific motor vehicle or vehicles within this State, or elsewhere in the United States in North America or Canada, subject to a limit, exclusive of interest and costs, with respect to each such occurrence, of at least $1,250,000 because of bodily injury to or death of one or more persons, and injury to or destruction of property;

(b) with respect to such insurance as is afforded, the insurer, subject to the policy terms, shall: defend any suit, with the right to make such investigation, negotiation and settlement as it deems expedient; pay all premiums on attachment bonds and appeal bonds; pay all expenses incurred by the company, all costs taxed against the insured in any such suit, and all interest accruing after entry of judgment until the insurer has paid or tendered or deposited in court such part of such judgment as does not exceed the applicable policy limits; pay expenses incurred by the insured for first aid to others at the time of accident; and reimburse the insured for reasonable expenses other than loss of earnings, incurred at the company’s request. The amounts so incurred under this subdivision, except settlement of claims and suits, shall be payable by the company in addition to the applicable policy limits;

(c) a provision insuring as insured, during the peer-to-peer car sharing period:

  1. the named insured, his or her spouse if a resident of the same household with respect to the motor vehicle or vehicles;

  2. and any other person using the motor vehicle; and

  3. any other person or organization but only with respect to his, her or its liability because of acts or omissions of an insured within subparagraph (1) or (2) of this subdivision. As respects any person or organization other than the named insured the policy need not apply:

    (i) to any person or organization, or to any agent or employee thereof, employed or otherwise engaged in operating an automobile sales agency, repair shop, service station, storage garage or public parking place, with respect to any accident arising out of the maintenance or use of a motor vehicle in connection therewith;
    (ii) to any employee with respect to injury, sickness, disease, or death of a fellow employee injured in the course of his or her employment in an accident arising out of the maintenance or use of the motor vehicle in the business of their common employer; or

        (iii) to any person or organization, or to any agent or employee thereof, with respect to bodily injury, sickness, disease or death, or injury to           or destruction of property arising out of the loading or unloading of the motor vehicle. The insurance shall apply separately to each insured           against whom claim is made or suit is brought, provided the inclusion of more than one insured shall not operate to increase the limits of               the insurer’s liability;

(d) a provision that the group policy shall afford bodily injury and property damage liability insurance for:

  1. any other vehicle of which the insured acquires ownership, leases, or otherwise is authorized to use provided it replaces the insured’s shared vehicle described in the policy;

  2. any motor vehicle, used with the permission of the owner, and not owned by the insured or his or her spouse or any resident of the same household, which is temporarily substituted for the shared vehicle while withdrawn from service because of breakdown, servicing, repair, loss, or destruction; or

  3. the incidental use of a motor vehicle not owned by the named insured or a member of the insured’s household, nor furnished or available for their regular use, provided the actual operation or other actual use thereof is with the permission of the owner and is within the scope of such permission;

     

(e) a provision required by subdivision (d) of this section need not apply to any accident arising out of the maintenance or use of a motor vehicle by a person employed or otherwise engaged in the business of a motor vehicle sales agency, repair shop, service station, storage garage or public parking place;

(f) a provision that when a motor vehicle is used or operated in any other state or Canadian province, a policy currently in effect or hereafter issued shall provide at least the minimum amount and kind of coverage that is required in such cases under the laws of such other jurisdiction. Any policy not containing such provision shall nevertheless be deemed to provide such coverage. This provision is not intended to create a duplication of coverage or benefits to the extent that a New York insured carries additional coverages under any automobile or motor vehicle insurance policy or is covered under an automobile or motor vehicle policy of a resident of the jurisdiction wherein an injury occurs;

(g) a provision that the insurer will not provide coverage for any insured who intentionally causes, or directs another person to cause, bodily injury or property damage;

(h) a provision that the insurance afforded by this policy is primary insurance during the peer-to-peer car sharing period; and

(i) a provision that if the insurer cancels the group policy, then the insurer shall provide written notice in conformance with Insurance Law section 3458.

§ 60-4.4 Exclusions.

A group policy may contain in substance the following exclusions:

(a) While the shared vehicle is used as a public or livery conveyance or transportation network company vehicle, unless the peer-to-peer car sharing program permits a shared vehicle driver to use the shared vehicle as a public or livery conveyance or transportation network company vehicle during the peer-to-peer car sharing period;

(b) Liability assumed by the insured under any contract or agreement;

(c) Bodily injury to or sickness, disease or death of any employee of the insured arising out of and in the course of:

  1. domestic employment by the insured, if benefits therefor are in whole or in part either payable or required to be provided under any workers’ compensation law; or

  2. other employment by the insured;

(d) Any obligation for which the insured or the insured’s insurer may be held liable under any workers’ compensation, unemployment compensation or disability benefits law, or any similar law;

(e) Injury to or destruction of property owned by the insured or property rented to or in charge of the insured or property as to which the insured is for any purpose exercising physical control;

(f) Bodily injury, sickness, disease or death, or injury to or destruction of property due to war, whether or not declared civil war, insurrection, rebellion or revolution, or any act or condition incident to any of the foregoing; and

(g) To the extent the Federal Tort Claims Act provides coverage and protection when the insured shared vehicle is being operated in the course of employment by an agent, servant, or employee of the United States government, its territories, possessions, political subdivisions, agencies or other independent governmental corporations.

Among other requirements, Subpart 60-4.7 Additional Requirements includes the following:

***

(d) No group policy or certificate shall contain any deductible or self-insured retention with respect to liability, no-fault or supplementary uninsured/underinsured motorist coverage.

(e) No group policy or certificate shall be subject to a group or sub-group aggregate liability limit of any kind at any time, and any liability limit applicable to a group member shall:

  1. be separate and apart from any liability limit to which any other group member insured under the group policy may be subject; and
  2. operate unaffected by the experience of any other group member or the overall experience of the group itself.

***

(g) Except with respect to requiring a shared vehicle driver or shared vehicle owner to be insured under the group policy required by General Business Law article 40, no insurer shall provide coverage in regard to a group program that:

  1. requires the purchase of insurance as a condition of group membership; or

  2. imposes any penalty upon a group member if insurance is not purchased.

(h) No insurer shall provide coverage in regard to a group if:

  1. the purchase of any good or service from the group or sponsoring entity is a condition of purchasing insurance by a group member; or

  2. the purchase of insurance by a group member is a condition of purchasing any good or service from the group or sponsoring entity.
     

Also, just as important in implementing Chapters 795 and 129, below are highlights from the necessary changes to existing Subparts of Parts 60, 65, 169, and 216 (there are many others):

  • Section 60-1.2 Exclusions was amended in pertinent part to add the following permissible exclusion in New York automobile insurance policies:

Such an “owner's policy of liability insurance” may contain in substance the following exclusions:

***

(j) while the motor vehicle is being used through a peer-to-peer car sharing program during the peer-to-peer car sharing period
 

  • A new 11 NYCRR 60-1.9 Peer-to-peer Car Sharing Vehicle was added indicating the following:

     

(a) An owner’s policy of liability insurance shall not be required to provide excess coverage over a group policy issued pursuant to article 40 of the General Business Law until February 1, 2024, where the insurer that issued the owner’s policy of liability insurance has filed with the department a coverage exclusion under section 60-1.2(j) of this Subpart.

(b) Every insurer writing an owner’s policy of liability insurance shall provide an annual written notice to the named insured under such a policy advising the named insured whether, or to what extent, it provides coverage under the policy while the vehicle is being used as a shared vehicle pursuant to General Business Law article 40. The notice shall also state whether the insurer makes such coverage available on an optional basis.

 

  • Section 60-2.1 Basics of SUM Coverage was amended to include the following requirements:

***

                     (g) Notwithstanding subdivisions (e) and (f) of this section:

***

3. an insurer providing coverage in satisfaction of the financial responsibility requirements of General Business Law article 40 shall provide SUM coverage in the amount of $1,250,000 because of bodily injury to or death of one or more persons in any one accident, while the motor vehicle is used or operated under a peer-to-peer car sharing program during the peer-to-peer car sharing period.

  • Subsection (f) of Section 60-2.3 Requirements For SUM Endorsements was amended to include the following requirements:

                     (f) Prescribed SUM endorsement:

SUPPLEMENTARY UNINSURED/UNDERINSURED MOTORISTS ENDORSEMENT-- NEW YORK

We, the company, agree with you, as the named insured, in return for payment of the premium for this coverage, to provide Supplementary Uninsured/Underinsured Motorists (SUM) coverage, subject to the following terms and conditions:

***

EXCLUSIONS

This SUM coverage does not apply:

***

5. bodily injury to an insured incurred while the insured motor vehicle is used through a peer-to-peer car sharing program during the peer-to-peer car sharing period pursuant to article 40 of the General Business Law.4

***

[FN 4]: This exclusion may be deleted by the Company, except that a Company that issues a group policy pursuant to article 40 of the General Business Law shall delete this exclusion.

  • Subsection (d) of Section 65-1.1 Requirements For Minimum Benefit Insurance Policies For Personal Injuries was amended to include the following requirements:

(d) Mandatory personal injury protection endorsement.

MANDATORY PERSONAL INJURY PROTECTION ENDORSEMENT
(New York)

The Company agrees with the named insured, as follows:

Section I

***

Exclusions

This coverage does not apply to personal injury sustained by:

***

(m) any person who is injured while the insured motor vehicle is being used or operated by a shared vehicle driver pursuant to article 40 of the General Business Law.6

***

[FN 6]: An insurer may not include this exclusion in a policy used to satisfy the requirements under article 40 of the General Business Law.

  • Subsection (c) of Section 65-1.3 Requirements For Additional Personal Injury Protection Coverage was amended to in similar fashion to Section 65-1.1 above.

I encourage you to review these emergency regulations in their entirety, as there are many additional nuances that may apply to your particular circumstance.

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

No case to report this week – see you next time!

 

STORM’S SIU EXAMEN
Scott D. Storm

[email protected]

06/22/22       Allergan Finance, LL, et al. v. N.Y. State Department of Financial Services, et al  
Supreme Court, New York County
Medical Providers of Prescription Medications Being Investigated by the DFS for Insurance Fraud Related to PIP Claims Denied a Writ of Prohibition Under CPLR § 7803 Alleging the DFS is Proceeding in Excess of its Jurisdiction

Petitioners contend that the DFS is acting in excess of its authority by investigating potential insurance fraud alleged to have been committed by petitioners and, if fraud should be established, imposing civil penalties. N.Y. Insurance Law § 403(c) empowers DFS to impose civil penalties against any person who has committed a fraudulent insurance act. New York Penal Law § 176.05 defines a fraudulent insurance act as an act:

committed by any person who, knowingly and with intent to defraud present [or] causes to be presented ... to or by an insurer ... or any agent thereof: ... any written statement ... as part of, or in support of ... a claim for payment, services or other benefit pursuant to [a health insurance] policy, contract or plan that he or she knows to: (a) contain materially false information concerning any material fact thereto; or (b) conceal, for the purposes of misleading, information concerning any material fact thereto

Accordingly, Insurance Law § 403(c) and Penal Law § 176.05 provide the DFS with jurisdiction to investigate insurance fraud and impose penalties. Furthermore, it is beyond cavil that the cost of prescription medications is regularly paid by insurance providers, and petitioners concede that DFS properly exercises jurisdiction over insurance claims based upon fraudulent acts or misrepresentations. Consequently, DFS is not acting in excess of its jurisdiction in the instant matter, nor is it impermissibly regulating pharmaceutical companies, as petitioners allege.

A writ of prohibition under CPLR § 7803 is an extraordinary remedy and requires a petitioner to establish: "(1) a body or officer is acting in a judicial or quasi-judicial capacity, (2) that body or officer is proceeding or threatening to proceed in excess of its jurisdiction, and (3) petitioner has a clear legal right to the relief requested".  The petitioner must further show that there is either no other remedy at law or that any available remedies are inadequate. Writs of prohibition are issued only in "sound discretion in clear-cut situations when there is no other remedy". Even where the writ may be technically appropriate, the court must consider other facts such as gravity of the potential harm caused by the threatened excess of power or whether other proceedings in law or equity could correct the flaw, in determining whether a petitioner's request should ultimately be granted.

To the extent that petitioners contend that they lack a remedy following DFS proceedings, this Court does not so find. Following proceedings before DFS, petitioners may bring an Article 78 proceeding seeking review of those proceedings. A writ of prohibition is, therefore, inappropriate under these circumstances.  Case dismissed. 

 

06/21/22       Booker v. USAA General Indemnity Co.
United States District Court, E.D. Pennsylvania
Plaintiff’s Claim Under Pennsylvania's Bad Faith Statute (42 Pa.C.S. § 8371) with Respect to Uninsured Motorist Claim Survives Motion to Dismiss but Not a Claim Under Pennsylvania's Unfair Trade Practices and Consumer Protection Law

Plaintiff made a claim for uninsured motorist benefits under a policy issued to him by his insurer, but no offer in settlement of the claim has been extended. Plaintiff sues for benefits for himself and his wife and asserts both a claim for statutory bad faith and a claim under the Unfair Trade Practices and Consumer Protection Law, which the carrier now moves to dismiss. As to bad faith, the motion will be denied. As to the UTPCPL, the motion will be granted.

On 5/14/19 Booker was rear-ended by a vehicle in a hit-and-run accident.  Plaintiff and his wife were insured by USAA and made a demand for Uninsured Motorist benefits.   Plaintiff alleges that because the tortfeasor was "unidentified" the person was "therefore was Uninsured under the terms of the policy. . ."  In addition to seeking benefits under the policy, Plaintiffs allege that the failure to pay manifests bad faith and violates the Unfair Trade Practices Act and Consumer Protection Law (UTPCPL). Defendant moves to dismiss these two counts for failure to state a claim.

Plaintiff brings a claim for bad faith in violation of Pennsylvania's bad faith statute, 42 Pa.C.S. § 8371. To "recover in a bad faith action, the plaintiff must present clear and convincing evidence (1) that the insurer did not have a reasonable basis for denying benefits under the policy and (2) that the insurer knew of or recklessly disregarded its lack of a reasonable basis." "Bad faith" on the part of the insurer is any "frivolous or unfounded refusal to pay proceeds of a policy, it is not necessary that such refusal be fraudulent." 

"Conclusory, boilerplate assertions are insufficient to state a claim for bad faith against an insurer."  Many district courts have dismissed bad faith claims under Rule 12(b)(6) on the basis that the complaint set forth only conclusory allegations insufficient to provide a factual basis for an award of bad faith damages.  Other district courts have held plaintiffs to a less rigorous pleading standard. 

Here, Plaintiff's allegations can be faulted as broad and conclusory. The Complaint alleges that USAA acted in bad faith by:

a) failing to properly investigate the claims; b) failing to act promptly upon written or oral communications; c) failing to implement reasonable standards for the prompt investigation of claims; d) refusing to pay claims without conducting a reasonable investigation; e) failing to affirm or deny coverage of claims within a reasonable time; f) not negotiating in good faith; g) compelling Plaintiff to institute litigation to recover amounts due under the insurance policy; h) attempting to settle a claim for nothing and/or far less than an amount to which a reasonable person would believe he is entitled to; i) targeting the Plaintiff's claims so as to pay less UM benefits; j) bad faith refusal to pay the required due and owing UM benefits; and k) failing to promptly provide reasonable explanations.

The Complaint pleads and attaches what appears to be a valid policy covering the time of the accident with no limitation on tort recovery. Three years have elapsed since the accident. The Complaint pleads that it was a rear-end collision, which would seemingly eliminate issues of liability, unless USAA disputes Plaintiffs' underlying factual narrative. The Complaint further pleads that there were significant injuries, and unreimbursed medical expenses, but no offer in any amount has been forthcoming. It also alleges a refusal to negotiate. The court is not persuaded that such allegations are insufficient at this stage, and the motion to dismiss Count II of the Complaint will therefore be denied. Count III of Plaintiff's Complaint asserts a claim under Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. §§ 201-1 et seq., arising from USAA's "conduct and handling" of his UM claim. This claim will be dismissed with prejudice because the UTPCPL does not extend to claims arising out of the handling of insurance claims.

To establish a claim under the UTPCPL, a plaintiff must prove: (1) he or she purchased or leased goods or services; (2) the goods or services were primarily for personal, family or household purposes; and (3) the plaintiff suffered an ascertainable loss as a result of the defendant's unlawful, deceptive act. 73 P.S. § 201-9.2(a). The UTPCPL applies to conduct surrounding the insurer's conduct in forming the contract. As a result, "the UTPCPL applies to the sale of an insurance policy, it does not apply to the handling of insurance claims."  "Hence, an insured cannot bring an action under the UTPCPL based on the insurer's failure to pay a claim or to investigate a claim." 

The allegations here all relate to USAA's handling of an insurance claim, with no allegations as to misconduct in the sale of the policy. Count III of the Complaint will therefore be dismissed with prejudice.

 

06/22/22       Douglas J. Anderson, et al. v. Motorist Mutual Ins. Co.
United States District Court, W.D. Pennsylvania
Considering Motions as to the Amount of Credit to Which UIM Insurer is Entitled, Court Interprets "Any" to Mean "All" in the UIM Exhaustion Clause, and Finds Insurer is Entitled to a Credit for the Liability Limits of the Tortfeasors Against Whom the Insureds Received Settlements. Fair Share Act Does Not Apply in Cases Such as this One, where the Plaintiff's Negligence is not in Issue

Plaintiff files this partial motion for summary judgment as the administrator of the Estate of Theresa R. Anderson, and in his own right.  Motorists Mutual also files a motion for summary judgment.  Anderson settled with third party tortfeasors following a motor vehicle accident in which Theresa Anderson was killed. He then filed a claim for underinsured motorist ("UIM") benefits with Motorists Mutual. Motorists Mutual denied it on the basis that the value of the claim did not exceed the combined $5,100,000 liability limits of the third-party tortfeasors. The motions focus on the amount of credit to which Motorists Mutual is entitled.

Anderson's Partial Motion for Summary Judgment is granted in part with respect to the fact that Motorists Mutual is not entitled to a $500,000 credit pursuant to the Pennsylvania Political Subdivision Tort Claims Act and denied in all other respects.  Motorists Mutual's Motion is granted entering a declaratory judgment that Motorists Mutual is entitled to a credit of $5,100,000 on Anderson's UIM claim.

Motorists Mutual's counterclaim requests a declaratory judgment that it is entitled to a credit of $5,600,000 against any award in the UIM case.

Wendy Meyers was operating the vehicle in which Theresa Anderson was a passenger at the time of the accident.  The other vehicle involved in the accident was a truck driven by Austin Rummel and owned by M&C Trucking Company. Meyers was insured by State Farm on a policy providing $100,000 in liability coverage.  Austin Rummel and M&C Trucking Company had primary liability limits of $1,000,000 on a policy with Liberty Mutual and an umbrella policy written by Liberty Mutual with liability limits of $4,000,000.  Theresa Anderson was insured by Motorists Mutual on a policy providing $100,000 of UIM. She elected stacking of UIM coverage for the two vehicles covered under the policy.  As a result, Ms. Anderson has $200,000 of UIM coverage.

Following the accident, Mr. Anderson filed three actions related to the accident.  State Farm paid its policy limit of $100,000 in settlement of Mr. Anderson's claim.  Mr. Anderson also settled his claim against Austin Rummel and M&C Trucking for $550,000.  Upon being informed of the settlement with the defendants, Motorists Mutual consented to the settlement in accordance with the terms of the Motorists Mutual Policy.

The "UIM Exhaustion Clause” in Motorists Mutual's UIM endorsement provides that it will pay UIM benefits if "the limits of liability under any applicable bodily injury liability bonds or policies have been exhausted by payment of judgments or settlements...".

Motorists Mutual seeks summary judgment regarding the amount of credit it should receive on Mr. Anderson's UIM claim.  Motorists Mutual contends that it should receive $5,100,000 — that is, the sum of the policy limits of (1) Meyers' State Farm Policy ($100,000) plus (2) Austin Rummel and M&C Trucking Company’s Liberty Mutual Policies (a primary liability policy of $1,000,000 and an umbrella policy of $4,000,000). 

Mr. Anderson seeks partial summary judgment that unless Motorists Mutual can prove that the Rummel Tortfeasors' percent of fault equal or exceeded credit 60%, Motorists Mutual is entitled to a credit equal only to the amount Plaintiff was legally entitled to recover from the joint tortfeasors, i.e. $650,000 — that is, the sum of the amounts actually paid in settlement of the claims (1) Meyers' State Farm Policy for $100,000 plus (2) Austin Rummel's and M&C Trucking Company's Liberty Mutual Policies for $550,000. 

Based on the parties' briefing and the Court's own research, it appears that "[t]here is no controlling Pennsylvania Supreme Court decision on the issue of enforcement of exhaustion clauses concerning UIM benefits," however, the "Pennsylvania Superior Court has decided a number of cases concerning exhaustion clauses in the context of UIM benefits." 
Motorists Mutual argues that it is entitled to a credit equal to aggregate amount the tortfeasors policy limits — $5,100,000.

Mr. Anderson's first argument is that the enactment of the Pennsylvania Fair Share Act in 2011 (42 Pa. C.S. § 7102) a joint tortfeasor is only liable to pay for damages caused by the negligence of another joint tortfeasor if the former tortfeasor's liability equals or exceeds 60%. Following such logic, Mr. Anderson contends that Motorists Mutual must prove that the Rummel Tortfeasors' liability equals or exceeds 60% to claim the full credit of $5,000,000 under the Liberty Mutual Policies. If unable to do so, Motorists Mutual should only be entitled to a credit of the amount paid pursuant to the settlements ($650,000 in total), because Mr. Anderson would have been unable to recover the full amount of damages from the Rummel Tortfeasors under the Pennsylvania Fair Share Act in 2011.  Mr. Anderson's argument fails because it is not clear that the Pennsylvania Fair Share Act applies where the plaintiff's negligence is not in question, as is the case here.

The Court predicts that because the decedent's negligence is not at issue in this case, the Pennsylvania Supreme Court would find that the Fair Share Act does not apply in cases such as this one, where the plaintiff's negligence is not in issue, and, as a result, that the traditional principles of joint and several liability would control.

Having found that the Fair Share Act is not implicated by this case, the Court turns to Mr. Anderson's remaining argument regarding the text of the UIM Exhaustion Clause. Specifically, Mr. Anderson highlights the UIM Exhaustion Clause in this case, which requires the exhaustion of "any" policy. The parties dispute the meaning of the word "any" without any citations to case law or principles of interpretation.

The Court finds that the meaning of "any" in the UIM Exhaustion Clause, when read in the overall context of the UIM Exhaustion Clause, unambiguously means "all."

Having reviewed the plain language of the Motorists Mutual Policy and the UIM Exhaustion Clause, and the meaning of the term "any" in context, as instructed by the Pennsylvania Courts, the Court predicts that the Pennsylvania Supreme Court would interpret "any" to mean "all" in the UIM Exhaustion Clause, and finds that Motorists Mutual is "entitled to a credit for the liability limits of the tortfeasors against whom the insureds pursued claims and received settlements." 

Mr. Anderson's Partial Motion for Summary Judgment is granted in part, such that Motorists Mutual is not entitled to a credit of $500,000 based upon the limit of the City of Pittsburgh's liability under the Pennsylvania Political Subdivision Tort Claims Act and denied in all other respects.  Additionally, for the same reasons, and having viewed the facts in the light most favorable to Mr. Anderson as the non-moving party, Motorists Mutual's Motion for Summary Judgment, is granted, such that court will enter declaratory judgment that Motorists Mutual is entitled to a credit of $5,100,000 on Mr. Anderson's UIM claim.

 

06/24/22       National Hockey League, et al v. TIG Insurance Co. F/K/A Transamerica Ins. Co., et al
Supreme Court, New York County
Insurance Coverage for Lawsuits Against the NHL by NHL Players in Concussion Litigation

This action concerns insurance coverage for various underlying personal injury lawsuits and other proceedings that former National Hockey League players brought alleging that they sustained concussion-related injuries during their careers (collectively, Concussion Litigation). The insurer-defendants at issue on this motion provided the NHL plaintiffs with 31 primary commercial general liability policies (Policies) spanning from 1982-2013. Generally, each of those policies provided the insured with coverage for a limited period of one year. NHL was uninsured for most of the years prior to the issuance of those policies.

Plaintiffs National Hockey League, NHL Board of Governors, and NHL Enterprises, Inc. (collectively, NHL) move for partial summary judgment declaring that: (1) the insurers have a contractual duty to defend the underlying Concussion Litigation; (2) the insurers' duties to defend require payment of all reasonable defense costs incurred in NHL's defense of the Concussion Litigation; and (3) the insurers cannot allocate or recover any defense costs from NHL. In the alternative, NHL seeks (4) a declaration that allocation of defense costs must exclude NHL from paying, even for the years it was self-insured. NHL directs this motion against defendants Chubb Insurance Company of Canada, Federal Insurance Company, Vigilant Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., American Home Assurance Company, and TIG Insurance Company (collectively, defendants).

The court orders that NHL's motion for a declaratory judgment is granted to the extent that defendants are required to pay reasonable defense costs incurred in NHL' s defense of the Concussion Litigation, provided that the defense costs must be allocated between the insurers and NHL using a method to be determined after further motion practice.

 

FLEMING’S FINEST
Katherine A. Fleming

[email protected]

06/29/22       Kazan v. Red Lion Hotels Corp.
Supreme Court of Louisiana
Policy Barred Coverage for Damages Arising from Kidnapping Resulting in Death

Lia Kazan (“Lia”) visited an Alexandria motel to meet some friends. During the course of her visit, she went to the motel parking lot to retrieve something from her vehicle. Anthony Murray, another motel guest, exited his room and approached the vehicle with Lia inside. Given the positioning of the motel’s video surveillance system, the entirety of subsequent events is not visible on camera. Audio from the camera footage records Lia screaming “stop,” “no,” and calling for help accompanied by repeated honking of the vehicle’s horn. Murray then starts the ignition and, with Lia in the passenger seat, reverses out of the parking lot onto the service road. The vehicle was later found submerged in Lake Dubuisson – the bodies of Murray and Lia were recovered in the water. Lia’s death was classified as a homicidal drowning.

Ali Kazan and Ebony Medlin filed suit, individually, and on behalf of their daughter, Lia (collectively “Plaintiffs”) against several parties, including the motel’s owner, Vitthal, LLC, and its insurer, Great Lakes Insurance Company SE (“Great Lakes”), seeking damages for Lia’s kidnapping and death. In response, Great Lakes filed a petition for declaratory judgment, averring it had no obligation under the operable commercial general liability policy (“the CGL Policy”) to defend or indemnify the other defendants.

Great Lakes moved for summary judgment on its petition, arguing the CGL Policy contains an exclusion – specifically defining “assault,” “battery,” and “physical altercation” – which barred coverage for Lia’s kidnapping and death. Plaintiffs opposed, arguing Great Lakes failed to meet its evidentiary burden to show that Murray’s conduct fell within the definitions of the exclusion. Plaintiffs further argued that pursuant to the court’s decision in Ledbetter v. Concord General Corp., 95-0809 (La. 1/6/96), 665 So.2d 1166, the language of the CGL Policy exclusion should not bar coverage because it did not unambiguously exclude kidnapping. The trial court denied Great Lakes’ motion and the court of appeal denied writs.

On appeal, the Louisiana Supreme Court considered whether Great Lakes was entitled to summary judgment based on the language of the CGL Policy exclusion. The CGL Policy exclusion, in relevant part, provided: “This insurance does not apply to ‘bodily injury,’ property damage,’ or ‘personal and advertising injury’ arising out of an ‘assault,’ ‘battery,’ or ‘physical altercation.’” “Physical altercation” means a dispute between individual [sic] in which one or more persons sustain bodily injury arising out of the dispute. Based on the plain meaning of “physical altercation,” the court found the CGL Policy exclusion applied to the facts at hand: Lia is clearly overheard to be in a “dispute” with Murray wherein she is taken against her will and ultimately “sustain[s] bodily injury” in her death by drowning. The court distinguished Ledbetter, in which the policy was ambiguous as applied to damages arising from kidnapping, since the exclusion “claims arising out of Assault and Battery” did not further define those terms in that case. The court found that Great Lakes was entitled to summary judgment based on the clear and unambiguous language of the CGL Policy exclusion.

 

NORTH of the BORDER
Heather A. Sanderson

[email protected]

06/30/22       Demme v. Healthcare Insurance Reciprocal of Canada
2022 ONCA 503
Ontario Court of Appeal
The Ontario Court of Appeal Confirms that an Allegation of Direct Liability for the Canadian Privacy Tort of Intrusion upon Seclusion is not Covered Under a CGL Policy as it Does Not Allege Bodily Injury Caused by an Occurrence, nor Does it Allege Conduct Outside the Reach of the Intentional Act Exclusion

Until December of 2016, Catharina Demme was a registered nurse, employed at the Brampton Civic Hospital, in Brampton Ontario on the day surgery unit. Demme was summarily dismissed from her employment when it was discovered that for ten years - from 2006 to 2016 - she had stolen 24,000 Percocet tablets from the Automatic Dispensing Unit (ADU) at the Hospital. Percocet is a combination of oxycodone and acetaminophen. It is a Schedule 1 controlled substance under the federal Controlled Substances Act, SC 1996, c 19.

The pills that she took were from patients who had been prescribed Percocet. Over ten years she accessed 11,358 on-line patient records to which she had access, briefly viewing their names, identification numbers, hospital units, medications, and allergy information. She accessed each record for less than a minute.[1]  She also accessed the paper charts of those patients that were in her circle of care.  Demme falsely recorded the dispensing of the pills to the patient for whom they were prescribed.  Once recorded, Demme could then move on to have the machine dispense medication to her without letting anyone know that it was for her own use. Demme used some of the stolen tablets to deal with her opioid addiction and sold the others on the street.

When the theft of the Percocet was discovered, Demme was arrested, charged and upon entering a guilty plea, convicted of theft under the Canadian Criminal Code. The College of Nurses of Ontario was on the verge of revoking her license prior to receiving her resignation. The William Osler Health System that manages the Brampton Civic Hospital where the thefts occurred conducted a full investigation and notified each of the patients who records were improperly accessed and falsified advising them that this had occurred.

In 2017, 2018 and 2019 eight civil actions were started by patients against Demme, the Brampton Civic Hospital and the William Osler Health System. One such action, was initially certified as a class action, but the certification was overturned on appeal to the Divisional Court: Stewart v. Demme, 2022 ONSC 1790, 81 C.C.L.T. (4th) 64 (Div. Ct.).  Similar, but not identical, allegations were made against Ms. Demme in all eight actions.

The Hospital is a subscribing member of the Healthcare Insurance Reciprocal of Canada (“HIROC”), which insures hospitals and their employees. The Brampton Hospital was insured under Composite Healthcare Insurance Master Policy 2016/1. Employees of the Hospital may be additional insureds under the Policy under certain conditions.  HIROC appointed counsel to defend the hospital in the underlying actions but denied any duty to defend Demme.

Demme filed an action against HIROC demanding a defence under the HIROC policy. Demme then filed an application in that action requesting a declaration that she was entitled to a defence. A motions judge of the Divisional Court dismissed her application and awarded costs against her and in favour of the Hospital of $20,000. Demme appealed to the Ontario Court of Appeal. On June 20, 2022, that court upheld the Divisional Court judgment and dismissed the appeal. The Hospital was awarded additional costs against Demme of $15,000.

The duty to defend in Ontario (and in common law Canada) is determined by the pleadings rule. If the allegations admit of a mere possibility that the insurer would indemnify the claim, then the insurer must defend. The motions judge reviewed the pleadings to determine the true nature of the claims that were properly pleaded; next, he considered whether any claims were wholly derivative in nature; finally, he considered whether any of the properly pleaded, non-derivative claims could potentially trigger the insurer’s duty to defend.  The pleadings rule required the motion judge to fully separate the extensive facts of liability and look solely to the allegations made against Demme.

The motion judge concluded that the true nature of the claims against Ms. Demme is the intentional tort of intrusion upon seclusion. He stated there can be no liability for the tort of intrusion upon seclusion unless there is a finding that the defendant intended to intrude upon the seclusion of another.  The motion judge determined that the claims in negligence pleaded in some of the Underlying Actions are entirely derivative of the intentional tort of intrusion upon seclusion.  The Court of Appeal found no fault in this part of the analysis:  It properly focused on considering the nature of the claims asserted against Demme within the terms of coverage provided by the Policy, rather than on her pleaded explanations for what she did or why she did it.

The policy in issue was a typical occurrence-based CGL. The first coverage issue was whether the claims fell within the coverage agreement. That depends upon whether the claims are claims for bodily injury caused by “an occurrence” - a defined term.  The motion judge held that the claims against Demme are not an occurrence as Ms. Demme’s conduct did not result in bodily injury that was “neither expected nor intended from the standpoint of the Insured”; it was both expected and intended. On appeal, Demme argued that reckless conduct could render equally liable for the tort of intrusion on seclusion. The Court of Appeal rejected that argument: The tort of intrusion upon seclusion is an intentional tort and requires intentional, deliberate conduct. Further, in Canadian jurisprudence, recklessness is akin to criminal negligence where the actor is aware that there is danger that his conduct could bring about the prohibited result, but, nevertheless persists, despite the risk. Recklessness is the conduct of one who sees the risk and takes the chance. The Court of Appeal continued:

… reckless conduct stands very close to the intentional end of the conduct spectrum, far away from the unintentional end where Ms. Demme tries to place it.

Finally, stepping back from the consideration of the definitional elements of the tort and the concept of recklessness, Ms. Demme’s duty to defend application proceeds against the background of allegations that she unlawfully accessed patient records thousands of times over the course of a decade. For Ms. Demme to contend that in the face of such claims there exists a “mere possibility” that her alleged conduct could be characterized as causing injury that was neither expected nor intended from her standpoint simply lacks any air of reality.

The Court of Appeal agreed with the motion judge that if the conduct did constitute an occurrence, the intentional act exclusion applied. For these reasons there was no obligation on HIROC to defend Demme.

As it was not in issue, neither level of the courts commented on the coverage available to the Hospital. The Hospital would be entitled to a defence notwithstanding the denial of a duty to defend Demme.

Presumably there was a separation of insured clause in the policy. Further the criminal act exclusion contained the following language exempting the alleged liability of the Hospital from the application of the exclusion:

Bodily injury, sickness or disease, including death at any time resulting therefrom, arising out of the performance of a criminal act, except in respect of the coverage provided in C1. This exclusion shall not apply to any Insured’s not having knowledge of or being a party to such a criminal act.

The intentional exclusion was the typical language that limits it to the conduct of the perpetrator of the intentional act and excepts self-defence.

Bodily Injury or Property Damage expected or intended from the standpoint of the Insured. This exclusion does not apply to bodily injury resulting from use of reasonable force to protect persons or property;

There are more and more Canadian decisions on whether specified conduct falls within the Canadian privacy torts. This is the first decision that I am aware of where the issue is whether those torts give rise to insurance coverage.

This decision is correct, but the underlying facts are very sad.

There are multiple reports of disciplinary decisions, labour arbitrations and court rulings that reveal a small but troubling minority of nurses in Canada and the United States with opioid addictions who alter patient documents, forge prescriptions and raid medicine cabinets to obtain their fix of opioids. The cases read like real-life embodiments of Nurse Jackie, the American TV series about a New York City nurse with a weakness for oxycontin and Percocet.  Not only are these cases causing issues for regulatory bodies, as this case illustrates, they are permeating the area of insurance coverage. The unsupervised use of opioids and the addictions they fuel both kill and leave those left standing with ruined careers and lives.


[1]           Stewart v. Demme, 2020 ONSC 83, at para 6 and para 12.

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