Coverage Pointers - Volume XXIV, No. 20

Volume XXIV, No. 20 (No. 641)
Friday, March 17, 2023
A Biweekly Electronic Newsletter

 

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

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

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

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

 

 

Dear Coverage Pointers Subscribers:

Do you have a situation? We love situations. We do, we do!  Bring them on.

Heading to Orlando for the PLRB Claims Conference and Expo, hope to see you there.

 

Happy St. Patrick’s Day:

It’s been a bit quiet over the past couple of weeks in our appellate courts, but we bring you the best we have.  In Mike Dischley’s column there’s a rare high court case relating to no fault serious injury that was handed down on Thursday, March 16.  Favorable to the defense, it held that the defendant’s expert report finding no post-accident substantial changes to a plaintiff’s pre-existing condition was enough to pass the baton to the plaintiff to try to refute the lack of serious injury.  The conclusory affidavit from the plaintiff’s expert did not refute the defense expert and the lawsuit was tossed on lack of serious injury.  The Court of Appeals affirmed a 3-2 dismissal at the Third Department.  The dissenters at the Third Department thought that the defense doc didn’t define “substantioal” and therefore those two justices thought the defendant did not meet the burden of proof.  Anyway, a helpful case for future motions on this very prolific topic.

 

Vertical v. Horizontal Exhaustion:

Because of a recent case we discussed on that subject in this newsletter, Law360 asked me to craft an article on that subject for publication.  Watch for it in that valuable publication.

 

Back Seat Sex and Coverage:

If you have followed the saga of the lawsuit against GEICO seeking coverage for an STD that alleged arose from sex in the back seat of a car, you’ll be happy (perhaps) to know that the US District Court for the Western District of Missouri ruled in GEICO’s favor:

Upon review of the parties’ arguments, the Court finds that consensual sexual relations inside a car do not constitute a “use” of the automobile within the meaning of the subject policy.  If the Court applied a mere “foreseeability” concept such as what Brauner advocates for in his reply suggestions to his summary judgment motion, all manner of injuries would become covered injuries despite having no real relationship between the use of an auto as an auto. Here, there is no real causal connection between the transmission of HPV and Brauner’s vehicle; instead, the vehicle is the mere situs of the transmission of venereal disease. Accordingly, the Court finds that summary judgment must be granted in GEICO’s favor. 

The court rejected the argument that back-seat relations, fairly common over the years since autos were invented, doesn’t change the outcome. Lots of double entendres in a LinkedIn discussion on this case, and I thank Roy Mura for posting the decision. The court denied “oral argument” and did not need to deal with questions of “loading and unloading”.

 

Training and More Training:

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

 

Need a mediator?

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

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

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

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

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

Try mediation.

 

Newsletters:      

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

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

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

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

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

   

Peiper on Property and Potpourri:

This week’s column brings a few interesting cases for your perusal.  The first, involving an Allstate subrogation claim in the Second Department, addresses the distinction between an employee and an independent contractor.  Putting aside your coverage brain for a moment, unless there is a non-delegable duty otherwise in play (think Labor Law) a subcontractor is generally not responsible for the negligent acts or omissions of its subcontractors.   So, if you’re ever looking for a recovery, tis’ always better to sue more than pockets than less.

The other case, out of the First Department, reminds us that how evidence is submitted still matters.  If you’re introducing deposition exhibits, you need to produce copies of the documents actually marked (i.e., the copy with the depo sticker on it). 

That’s it for this week.  For those of you attending PLRB’s annual conference next week, we hope to see you in Orlando.  And, if your itinerary is not yet completely full, do consider joining us at the Work Product Work Shop.

 

Steve
Steven E. Peiper
[email protected]

 

Pick Your Poison – 100 Years Ago:

The Buffalo News
Buffalo, New York
17 Mar 1923

 

WOMAN CONVICTED OF MURDERING HUSBAND

 

            CASSOPOLIS, Mich., March 17,--Mrs. Maud Cushing Storio was convicted of killing her first husband, Claude Cushing, by a jury in circuit court here today and immediately sentenced to life imprisonment by Judge L. Burget Des Voignes.  The jury had deliberated since yesterday afternoon.  The state charged the woman with causing Cushing’s death by poison.

 

Wilewicz’ Wide-World of Coverage:    

Under the weather this week. See you in two weeks!

 

Agnes
Agnes A. Wilewicz
[email protected]

 

Is it the “Babe’s” Baby? – 100 Years Ago:

Daily News
New York, New York
17 Mar 1923

 

DIXON GIRL FILES $50,000 SUIT AGAINST “BABE” RUTH

 

             The complaint in the suit of Dolores Dixon, a minor, through Barbara V. Escoe, her legal guardian, for $50,000 damages from George H. Ruth, at times known as the King of Swat and generally called “Babe,” was filed yesterday in the County Clerk's office here by George Feinberg, the girl’s attorney.

It is a brief document and sets forth that during July and August 1922, at various places, events occurred between Miss Dixon and “Babe” Ruth, which, she alleges, shortly will result in her becoming a mother.

Charges Cruelty.

Incidentally she alleges that Mr. Ruth treated her with great cruelty at various times and that as the result of this treatment and her present condition she is unable to resume her vocation of making a living as a salesgirl.

For all of this she demands damages of $50,000.

Lawyer Feinberg said yesterday that the girl, whose age is said to be about nineteen, is remaining in seclusion at an address which he does not care to disclose. Her guardian, Mrs. Escoe, said to be the wife of a city employe, formerly lived at 583 Riverside Drive with Miss Dixon, but since March 1 they have both disappeared for parts unknown.

Repeat Denial.

Mr. and Mrs. Ruth still maintain their contention at the Yankee training camp near New Orleans that he does not know Miss Dixon and will fight her suit to a finish.

It may take a long time to bring the case to trial, for the Supreme Court calendar is much overcrowded.

Editor’s Note:  Several months later, the mother recanted, just before she was about to take the stand.  Folks still wonder about whether or not she was paid for her silence, but we’ll never know.  One more article on the subject, below.

 

Barnas on Bad Faith:

Welcome to March Madness.  I can’t remember a year where I feel like I know less about college basketball and the bracket than this year.  My level of interest in college basketball generally is pretty tied to how good Syracuse is most years, so it is hardly surprising that I know nothing this year.  March Madness just does not have the same buzz for me when the Orange are not in.  Hopefully, my bracket can survive until at least the weekend.  If not, I am sure there will be plenty of action on the Tournament to be had on FanDuel, for entertainment purposes only, of course.

I have a New York trial court case in my column involving a no fault and SUM benefits.  The court denied State Farm’s motion to dismiss the bad faith and General Business Law § 349 causes of action based upon the factual allegations pled in the Complaint.  However, the common law fraud and declaratory causes of action were dismissed.

 

Brian
Brian D. Barnas
[email protected]

 

The “Babe”, Accused – 100 Years Ago:

Daily News
New York, New York
17 Mar 1923

 

RECORDS—AND MR. RUTH

Last year "Babe Ruth tried to grab off the home run record in baseball and failed. This year, before the home run reason is opened, a nineteen-year-old girl, aided and abetted by a lawyer, is trying to hand the “Babe” the “home ruin” record. That effort, too, is likely to fail.

Ruth says he doesn't know the girl. His lawyer says :  “If you say anything for me say it’s blackmail.” Which we shall not say, because we don’t know.

But we know that “Babe” Ruth has made a lot of money and that the chances are good that he’ll make a great deal more. We know that men with plenty of money and some weaknesses are excellent targets for society’s snipers.

The law assumes a man to be innocent until he is proved guilty. In “Babe” Ruth’s case we stand with the law and predict that the only record which will be hung on him in the coming year will be the home run record.

Editor’s Note:  He had editorial support.

 

Kyle's Construction Column:

This week’s case involves an action brought by Allstate, as subrogee of its insured, against a contractor to recover damages arising from a fire at the property that was said to have occurred due to the negligent work of a subcontractor. The court granted the contractor’s motion to dismiss, applying the general rule that a party that retains an independent contractor is not liable for his negligent acts.

           

Kyle
Kyle A. Ruffner
[email protected]

 

School Board to Attain Financial Freedom in Buffalo – 100 Years Ago:

The Buffalo Commercial
Buffalo, New York
17 Mar 1923

 

GIBBS BILL TO PASS, FORECAST

Opposing City Counsel Sees  Financial Freedom for School Board

 

            Present indications are that the Gibbs-Freiberg bill, giving financial independence to the Buffalo school board will be passed, according to Andrew P. Ronan, assistant corporation counsel, who returned from Albany today.

            Mr. Ronan who has been fighting the measure admitted that the outlook wasn’t any too bright for him.  Unless there is a decided change of atmosphere in political circles at Albany the Gibbs bill is going to pass.  Whether Governor Smith would sign it is another question,

            The Gibbs bill was framed to do away with the continual quarrelling of the city council and the school board at the expense of the schools here.  It would allow the education department an appropriation not to exceed 35 percent of the city budget but would make a deduction for the money allowed by the state for education.

            Mr. Ronan said that he had not slackened his efforts to have the Gibbs bill defeated despite the unfavorable outlook for him.  The Gibbs bill recently came out of committee.  It is expected that legislators will act upon it come time next week.

 

Fleming’s Finest:

Dear Coverage Pointers Subscribers:

With the changing of the clocks, Spring is right around the corner. Suddenly, working in the afternoon and running outside after work are infinitely easier. Looking forward to not stepping foot on a treadmill until next September.

This week’s case comes from the North Dakota Supreme Court and involves a seed potato deal gone wrong. The seed potatoes were damaged prior to sale and subsequently failed to grow into a new plant. In this case, the policy’s “seed performance” or “failure to conform” exclusion was dispositive, so there was no coverage for the losses due to the spuds.

Until next time,

 

Kate
Katherine A. Fleming
[email protected]

 

Basketball Rules Changed – 100 Years Ago:

Times Herald
Olean, New York
17 Mar 1923

 

DISCUSS COURT FOULS
By the Associated Press

 

            NEW YORK, March 17 – Elimination of the 17 foot zone in determining the degrees of fouls was anticipated at the annual meeting today of coaches representing the six teams in the intercollegiate basketball league.  A change in jump ball play also was under consideration.

            Under the present rule, if a member of the attacking team in possession of the ball is fouled within the 17-foot zone, his team is allowed two free throws.  If the fouled player is not holding the ball, one free throw is given, and the man fouled is on the defensive his team is allowed one throw.

            The proposed change would abolish the zone and allow two free throws only when the player in possession of the ball is fouled when he is preparing to try for goal.

            For all other personal fouls only one free throw would be permitted.

           

Ryan’s Capital Roundup:

Hello Loyal Coverage Pointers Subscribers:

My oldest son has started taking karate lessons—something I never did. As an athlete and former coach, I am always intrigued to learn how experts in their particular athletic discipline trains the necessary skills from the ground up, and this has been no exception. Watching the stacking of each concept from class to class—complete with lightbulb moments for my son—has been amazing. Balance, confidence, attentiveness, details. I find myself wondering what sort of transferable skills I may have learned had I started karate myself at a young age. For now, I’ll have to live vicariously through my son and his training.

This edition of my column homes in on the Assembly’s passage of a bill (again) that proposes a repeal of New York’s anti-arson application requirement. It has died in the Senate the past several years. Is this the year?

Until next time,

 

Ryan
Ryan P. Maxwell
[email protected]

 

Not Many Cars on the Road, but Still Many Stolen – 100 Years Ago:

Yonkers Statesman
Yonkers, New York
17 Mar 1923

 

STOLEN AUTOMOBILES

            The record made by Yonkers last year in the recovery of stolen automobiles is not an enviable one.  To stand last among the second class cities in the State in the percentage of recoveries of stolen cars may make our city a paradise for auto thieves, but it is not going to add to the peace of mind of the residents or visitors who have machines.

It must be remembered that we have unusual conditions here, conditions that are not met with in any other second-class city in the State. Our proximity to New York City makes recovery of stolen automobiles peculiarly difficult.  The police are pitted against a problem such as the police of the other cities do not have to meet—superior organization of the criminals, greater numbers of criminal, and greater facilities for hiding the stolen cars.

As it is, 61 cars were recovered out of a total of 109 stolen last year—that is just a shade under 56 per cent of recoveries. The best record made by a second-class city, Albany, was 65 per cent of recoveries.

Yonkers has one gleam of satisfaction from the report from the State Conference of Mayors.  We had the lowest number of cars stolen of any second-class city, at least.

 

Dishing Out Serious Injury Threshold:

Dear Readers,

Happy St. Patrick’s Day everyone. I hope everyone is able to get out, enjoy a pint of your favorite beer and enjoy the festivities.   

I only have one Second Department case to discuss this issue. This case deals with medical experts opining as to if a CT scan of plaintiff’s back revealed a fracture. Thereby, creating a triable issue of fact. 

Enjoy,

               

Michael
Michael J. Dischley
[email protected]  

 

Editor’s note:  a late add to Michael’s column was Thursday’s Court of Appeals decision, discussed above and report in the issue attached.

 

St. Patrick – 100 Years Ago:

The Buffalo Times
Buffalo, New York
17 Mar 1923

 

ST. PATRICK’S DAY.

COMMEMORATION of the great man whose anniversary is celebrated this day is homage to spiritual, intellectual, civic and moral greatness.

            A fact which must impress every student of the life of St. Patrick is the rounded completeness of his character.

            Many a man has become a national hero because of some special phase of patriotism, some signal achievement.  But there is a wide difference between the deed which stands forth in history as commanding admiration, and that quality, which typifies the genius of a nation, identified itself with it, and thus not only wields potent influence upon contemporary events, but represents the aspirations of a race.

            St. Patrick united in his career and individuality, what was of direct appeal and necessity to the Ireland of his day, and the vision which looked adown the vista of coming ages and foresaw the Ireland of the future.

            The sequel is that although fourteen centuries interpose their abyss between his era and the present, the cham is bridged by his personality and work.

            Each successive recurrence of his anniversary finds his memory a living ideal in the minds of living men.

            We feel, instinctively, that were St. Patrick in the world today, he would deal with the hope, achievements, joys, problems, griefs, ambitions, necessities and progress of the Ireland of the twentieth century, in the same spirit of truth, peace, forbearance, justice, vigor, encouragement, optimism, with which he dealt with the problems of the Ireland of the fifth century A.D.

            It is a wonderful thing to leave upon the heart of a nation and the soul of mankind so deep an impression as that.

            The observance of St. Patrick’s Day brings with it many lessons.  One of the greatest of them is the deathlessness of the upright man.

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Today I am coming to you live from Berlin, Germany! You’re probably still asleep, but here the sun is up and shining, so we’ll make this brief. Earlier this week I had the pleasure of presenting at the DRI Sexual Torts seminar in Indianapolis, discussing coverage issues that are unique to abuse and molestation claims. Together with a great panel, led by John Trimble, we discussed the varied approach to the number of occurrences issue, the applicability of deemer and other provisions attempting to limit abuse and molestation claims to a single limit, the enforceability of sublimits, as well as the trend in certain states that prohibit burning limits policies for sexual tort claims.

Most interesting in the seminar, to me at least, was the presentation by a psychology professor from John Jay College of Criminal Justice in New York on human memory. Dr. Strange in a powerful presentation demonstrated how fallible human memory is and how susceptible it is to suggestion and the creation of false memory. I experienced this firsthand. Earlier in the week I visited my alma mater, Indiana University in Bloomington, which I hadn’t been to in, well, too long. In walking the campus, I saw a tower in the middle of the green near the library. Convincing myself that I not only remembered it but had climbed it during my college years.  I was stunned to find out that that it hadn’t been built until several years after I graduated. False memories feel real—and the hardest part for litigators is that it can be difficult to discern an intentional lie from a false or corrupted memory.

At least, that’s how I remembered the presentation.

Keep keeping safe.

 

Lee
Lee S. Siegel
[email protected]

 

Assault Charges – 100 Years Ago:

The Buffalo Commercial
Buffalo, New York
03 Mar 1923

 

DEBONAIR YOUNG MAN DENIES ASSAULT CHARGE

Welland Court Scene of Arraignment of Attack Suspect.

 

            WELLAND, Ont., March 17.—Harold Smith, 22 years old, of Brantford, pleaded not guilty in Police court to charges of breaking into the residence of Colonel L. Clarke Raymond, K. C., the night of March 7, and assaulting Lee Lun, Colonel Raymond’s Chinese servant, and elected summary trial.

            There were no ear marks of the criminal about the debonair young man who faced Magistrate Goodwin.  Well dressed, hair slicked back and with sideburns he had more the appearance of the “collar ad” type of young chap than one confronted by the serious charge.

            He was unrepresented by counsel and offered his own plea, his bearing cool and collected, although indicating he realized his position.  The police state that he has a record.

            Rewards aggregating $800 are standing for the conviction of these guilty of the murderous assault upon Colonel Raymond’s servants.

 

Rauh’s Ramblings:

Hello Readers:

Only a few more days until the start of Spring, and I hope the weather around here finally starts to reflect that!  I’m ready to spend more time outdoors and not be stuck in the house all the time.

I have no life insurance/ERISA case to report on this week, but perhaps I will find one next time around.

Have a great rest of the week.

                                   

Patty
Patricia A. Rauh
[email protected]

 

How Much was Beauty Worth? – 100 Years Ago:

Buffalo Morning Express
Buffalo, New York
17 Mar 1923

 

BEAUTY WORTH $2,000

 

Young widow gets verdict against Automobile driver.

 

            A Supreme Court jury yesterday decided that Mrs. Lena Constant, the twenty-year-old Greek widow, of No. 870 Broadway, is entitled to $2,000 for loss of her beauty as a result of an injury suffered in an accident.

            Mrs. Constant was rising in an automobile driven by Jacob Goldman of No. 848 Fillmore avenue, which collided with a trolley on Forest avenue last September.  She claimed that her muscles of expression were paralyzed.  She sued Goldman and the I.R.C.

            The jury reported a verdict of no cause of action against the International Railway company and a verdict of $2,000 against Goldman.

 

Storm’s SIU:

Hi Everyone:

A couple interesting cases for you this week, one civil and one criminal:

• Although the Insurance Law Allows for Retroactive Cancellation After a Cancellation Notice has Been Sent Out and the Delinquent Premium is Not Paid Within the Requisite 15-Day Grace Period, Cancellation Was Not Effective as the Policy Did Not Also Specifically Provide for Retroactive Cancellation and, Therefore, Insurer Had to Provide Coverage for a Property Fire Loss Which Occurred Within the Grace Period. 

• In a Scheme to Defraud State Farm and Progressive in Staged Auto Losses, opsy-Turvy Tale Featuring a Diverse Cast of Characters That Includes Fraternal Fraudsters, Drug Addicts, Prostitutes, and a Mysterious Man Known only as "Black".

Good things are happening.  Having played lacrosse in high school, I’m a devoted Bandits fan.  Fun to see they are doing awesome again this year.  All together…Let’s Go Bandits!  Is it Spring yet?  Soon, MLB opening day March 30^th!  Can’t wait!

Talk to you again in two weeks.

 

Scott
Scott D. Storm
[email protected]

 

DWI Penalty – 100 Years Ago:

 

Buffalo Morning Express
Buffalo, New York
17 Mar 1923

 

Tipsy Woman Driver Gets Prison Term

 

            San Francisco, Cal., March 16.—Mrs. Etta Chappell, No. 344 Third Avenue, the first woman in San Francisco to be convicted on a charge of driving an automobile while intoxicated was sentenced to serve 250 days in the county jail or pay a fine of $2,500, by Judge Louderback.

            The woman will in all probability take the jail sentence, her attorney said, as she has not the money to pay the fine.  The charge grew out of an accident here when the automobile driven by Mrs. Chappell crashed into one driven by John Bertschinger, injuring him seriously.  C. F. Eckert, a pedestrian, was fatally injured and died soon after. 

 

Gestwick’s Greatest:

Dear Readers:

Spring may be just around the corner, but we are still facing very cold temperatures here in Buffalo, New York. While our Buffalo Sabres appear to be out of contention for the NHL playoffs and our Buffalo Bills are losing some studs to free agency, our Buffalo Bandits indoor lacrosse team appears to be a front-runner to win its fifth NLL championship. Currently, the Bandits are tied for first place in the Eastern Conference with the Toronto Rock, who have identical records of 10-2.

This week, I have two cases for you. The first is a case that reminds us of the importance of the distinction between “not covered” and “covered but excluded.” In that one, the insurer made two distinct arguments: (1) that the loss fell outside the grant of coverage; and (2) that the loss fell into an exclusion. The Court rejected the insurer’s first argument, but found in favor of the second argument, with the result being a no-coverage determination. The second one examines the difference between the duty to defend and the duty to indemnify in the context of a tendered defense in a risk-transfer situation.

That’s all for this time! Until next time, stay safe, stay warm, and stay happy.

 

Evan
Evan D. Gestwick
[email protected]

 

Guns and Roses – 100 Years Ago:

The Buffalo News
Buffalo, New York
17 Mar 1923

 

ACCUSED OF PULLING GUN IN COURTROOM

Brother of Prisoner Nabbed by Detective During Preliminary Trial.

 

            Detective Sergeant Michael Murphy today in City court arrested George Conrad, 23 years old, car conductor, 1110 Main Street, when the man, according to the detective, attempted to draw a revolver on him.  A charge of carrying weapons without a permit, will be placed against him.

            Conrad will be held with his brother, Norman E. Conrad, 24 years old, and Frank R. Lynch, 28 years old, of 1110 Main Street, who were arrested by detectives on petit larceny charges, following reports by neighbors of wild parties in the Main Street address.  A number of fare tokens and unpunched tickets were found on the men, according to the policy.

            Detective Murphy was looking for the third man said to be in the gang and answering to the description of George Conrad.  He saw the man at the arraignment of the other two in court and was questioning him when he attempted to draw the gun.  Agnes Hannah, 28 years old, 1110 Main Street, is also being held pending investigation of the case. 

 

On the Road with O’Shea:

Subscribers, Readers, and Third-Party Observers,

I have a small confession to make, I am an Ottawa Senators fan and had a brief moment of happiness when the Senators eclipsed the Sabres in the NHL Standings, and we acquired Jakob Chychrun. However, that joy has slipped away. On an even lower note, Mr. Barnas and I have friendly wager on who will finish higher in the standings between the Senators and Sabres, and the Senators has one of the hardest remaining schedules in the league.

Moving past my sports depression, I have a case from the New York State Supreme Court in the County of New York involving the arbitration of a non-fault claim. The arbitrator found the tortfeasor 100% liable but awarded $0 in damages in error. The arbitrator fixed his mistake, but the tortfeasor’s insurer petitioned to vacate the decision.

See you in a few,

 

Ryan
Ryan P. O’Shea
[email protected]

 

Insurance Fraud – 100 Years Ago:

The Buffalo News
Buffalo, New York
17 Mar 1923

 

INDICTMENT OF NIAGARA LIFE MEN CONFIRMED

 

True Bills Reported Against Former Officials of Wrecked Insurance Concern—Were Among Score of Secret Indictment.

 

            At least a dozen indictments, the NEWS learned today, have been returned against former officials of the Niagara Insurance company.

            These indictments were included in 20 secret indictments handed up yesterday by the March grand jury in a partial report made to county Judge Thomas H. Noonan.

            Officials of the district attorney’s office would neither deny nor affirm the statement that indictments had resulted on the grand jury’s investigation of the affairs of the Niagara Life company, which was completed this week.  Neither would they discuss what might be the procedure in connection with these indictments, in case persons against which they were found are now in other states.

            It is understood that no local residents are included among those against whom indictments were returned. 

 

North of the Border:

I have had a ‘week’ and its only Wednesday. I discovered late on Monday that my work email had been hacked. It took most of a day to change the password, install MFI on the email separate and apart from everything else and fix the damage caused by the hacker. It seems that only email was affected. Since then, I have received hundreds of bounce-back messages (for a while they were coming in every minute) in which someone posing as me was collecting on unpaid invoices. The whole thing is embarrassing, creepy and maddening.

Don’t rely on your system password to protect your Microsoft 365 email account. Change your email password monthly and install MFI!

My column this week contains short snippets on the impact of climate change on the Canadian P&C industry.

 

Heather
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
[email protected]

 

Headlines from this week’s issue, attached:

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

• In Pre-Prejudice State Late Notice Case, Insurer Loses Coverage by Failing to Notify Insurer of Accident until Three Months after it Occurred
• Claim Against Risk Retention Group May Proceed

 

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

• Negligence of Independent Contractor is Not Imputed to General Contractor Absent a Non-Delegable Duty

• Motion for Contractual Indemnity Fails Were Supporting Documentation was Not Properly Authenticated

 

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

• In a Rare decision from New York’s Highest Court, a Split Decision from Third Department Granting Summary Judgment on Serious Injury was Affirmed.  Finds that Plaintiff Failed to Demonstrate that the Exacerbation of Significant Pre-Existing Injuries Qualify as a “Serious Injury”.
• Defendant Expert and Plaintiff Experts Came to Different Conclusions when Examining CT Scan, Creating a Triable Issue of Fact

 

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

• Under the weather this week. See you in two weeks!

 

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

• Motion To Dismiss Bad Faith and Consequential Damages Claims Denied

 

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

• Insurer Owes A Duty to Explain UM/UIM Insurance

 

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

• Contractor Is Not Held Liable for the Negligent Acts of Subcontractor, Who was an Independent Contractor

 

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

• Bill Passes Assembly (Again) That Would Repeal Anti-Arson Application Requirements Under Insurance Law §3403

 

RAUH’S RAMBLINGS
Patricia A. Rauh
[email protected]

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

 

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

• Although the Insurance Law Allows for Retroactive Cancellation After a Cancellation Notice has Been Sent Out and the Delinquent Premium is Not Paid Within the Requisite 15-Day Grace Period, Cancellation Was Not Effective as the Policy Did Not Also Specifically Provide for Retroactive Cancellation and, Therefore, Insurer Had to Provide Coverage for a Property Fire Loss Which Occurred Within the Grace Period
• In a Scheme to Defraud State Farm and Progressive in Staged Auto Losses, Federal Criminal Insurance Fraud Conviction in a Topsy-Turvy Tale Featuring a Diverse Cast of Characters That Includes Fraternal Fraudsters, Drug Addicts, Prostitutes, and a Mysterious Man Known only as "Black"

 

FLEMING’S FINEST
Katherine A. Fleming
[email protected]

• No Coverage For Losses Arising Out Of The Failure Of Defective Seed Potatoes Due To “Seed Performance” Or “Failure To Conform” Exclusion

 

GESTWICK’S GREATEST
Evan D. Gestwick
[email protected]

• The Same Argument Can Fail When Applied to the Grant of Coverage But Succeed When Applied to the Policy Exclusions
• The Difference Between the Duty to Defend and the Duty to Indemnify Applies Equally in the Context of a Tendered Defense

 

ON the ROAD with O’SHEA
Ryan P. O’Shea
[email protected]

• Arbitrator Finds 100% But Awarded $0 Damages, Amended Decision Follows and Liable Insurer Appeals

 

NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
[email protected]

• Will the filing of a Climate Rights lawsuit against Shell PLC in the UK result in Copycat Litigation in Canada?
• OSFI Publishes New Mandatory Expectations for the Management of Climate Risks
• New Brunswick Caps Disaster Financial Assistance for Homeowners

 

That’s all there is and there is no more.  Hope to see you in Orlando.  P.S., thanks for the many birthday wishes on a significant one earlier this month.

Dan

 

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

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]

 

ASSISTANT EDITOR
Patricia A. Rauh
[email protected]

 

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

 

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

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Scott D. Storm

Thomas Casella

Brian D. Barnas

Eric T. Boron

Robert P. Louttit

Ryan P. Maxwell

Patricia A. Rauh

Diane F. Bosse

Kyle A. Ruffner

Katherine A. Fleming

Evan D. Gestwick

Ryan P. O’Shea

 

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

Michael F. Perley

Scott D. Storm

Brian D. Barnas

 

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

Alice A. Trueman

 

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

Diane F. Bosse
 

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri

Dishing Out Serious Injury Threshold

Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Kyle’s Construction Column

Ryan’s Capital Roundup

Rauh’s Ramblings

Storm’s SIU

Fleming’s Finest

Gestwick’s Greatest

On the Road with O’Shea

North of the Border

 

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

 

03/16/23       ZL v. Zurich American Insurance Company
Appellate Division, Second Department
In Pre-Prejudice State Late Notice Case, Insurer Loses Coverage by Failing to Notify Insurer of Accident until Three Months after it Occurred

On November 21, 2007, the infant plaintiff, who was then six years old, allegedly sustained personal injuries when he fell from a slide in a playground located at a school owned and operated by the defendant Educational Institute Oholei Torah of Brooklyn, Inc. (“Oholei Torah”). On the date of the alleged incident, employees of Oholei Torah prepared an accident report. On that date, Oholei Torah was insured under a policy issued by the defendant Zurich with obligations under the policy to notify Zurich) "as soon as practicable" of an "occurrence" or "an offense which may result in a claim."

In December 2007, the plaintiffs commenced an action against Oholei Torah (“the 2007 action”), inter alia, to recover damages for personal injuries allegedly sustained by the infant plaintiff on November 21, 2007. On February 1, 2008, Oholei Torah was served with the summons and complaint in the 2007 action. On February 13, 2008, Zurich received notice of the 2007 action. By letter dated February 22, 2008, Zurich disclaimed coverage because Oholei Torah's notice of claim was untimely under the terms of the policy.  This policy involved was issued prior to the “notice/prejudice statute” being applicable.

Ten years later, on March 1, 2017, the plaintiffs commenced another action against Oholei Torah, entitled ZL v. Educational Institute Oholei Torah of Brooklyn, Inc., in the Supreme Court, Kings County, under Index No. 504063/17 (“underlying action”), inter alia, to recover damages allegedly sustained by the infant plaintiff on November 21, 2007. The defendant did not appear and a default judgment was entered against it.

"Insurance Law § 3420(a)(3) requires the injured party to demonstrate that he or she acted diligently in attempting to ascertain the identity of the insurer, and thereafter expeditiously notified the insurer" (The subject insurance policy was issued and provided coverage prior to an amendment to Insurance Law § 3420 that requires an insurer to show prejudice in order to disclaim coverage based on untimely notice. Therefore, Zurich was not required to show that it was prejudiced by the plaintiffs' untimely notice.

Zurich established its prima facie entitlement to judgment as a matter of law by demonstrating that the plaintiffs did not act diligently in attempting to ascertain Zurich's identity as the insurer, and thereafter did not expeditiously notify Zurich of their claim.

Zurich demonstrated, prima facie, that Oholei Torah did not provide notice of the plaintiffs' claim until nearly three months after the incident occurred, despite Oholei Torah's knowledge of the alleged incident at the time it occurred. In opposition to Zurich's prima facie showing, the plaintiffs failed to raise a triable issue of fact as to the existence of a reasonable excuse for Oholei Torah's delay.

 

03/14/23       Joseph, as Administratrix v. Saint Joseph's Medical Center
Appellate Division, First Department
Claim Against Risk Retention Group May Proceed

The motion court improvidently exercised its discretion in denying plaintiff's unopposed motion to vacate an order staying this action, based on an order of a Montana court enjoining all litigation against the Kingsbridge defendants' insolvent risk retention group, CareConcepts Insurance, Inc. This action involves the same Montana order and includes the same Kingsbridge defendants as in Givens v Kingsbridge Hgts. Care Ctr., Inc. (171 AD3d 569 [1st Dept 2019]), in which this Court lifted the stay imposed in that action. For the reasons explained in Givens, the stay in this action must also be lifted.

 

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

 

03/08/23       Allstate Veh. & Prop. Ins. Co. v. Glitz Constr. Corp.
Appellate Division, Second Department
Negligence of Independent Contractor is Not Imputed to General Contractor Absent a Non-Delegable Duty

Allstate commenced this action in subrogation after it paid a fire loss at a residential property it insured. The loss arose out of work that Allstate’s insured had contracted to be performed at the premise’s garage.  During the process of “roughing in” new electrical wire, a subcontractor damaged existing live wires.  That damage eventually resulted in a short which caused the fire. 

Allstate, apparently, only elected to sue the primary contractor, Glitz Construction Corp.  No suit, or claim, was ever pursued against the unnamed subcontractor who actually performed the electrical work. 

At the conclusion of Allstate’s proof at trial, Glitz moved for a directed verdict on the basis that Allstate had proved no liability against it.  Essentially, Glitz argued that the proof adduced at trial only showed the subcontractor to have been negligent.  Because he was an independent contractor, who’s work was not supervised, directed or controlled by Glitz, Glitz argued it should not be held vicariously liable for the loss.

The trial court granted the application, and the Second Department affirmed.  In reaching its conclusion, the Court noted the long standing rule that a party is not liable for the actions of an independent contractor unless it was exercising direct supervision or input over the means and methods of the job.  Absent direct supervision, a duty could be created where there was a specific non-delegable duty attached to the work that was subcontracted.  Here, because there was no evidence of supervision and because electrical/renovation work does not create a nondelegable duty, it was determined that the dismissal of Allstate’s case was appropriate.

 

03/02/23       Dorset v. 285 Madison Owner, LLC
Appellate Division First Department
Motion for Contractual Indemnity Fails Were Supporting Documentation was Not Properly Authenticated

Madison, among other main-party defendants similarly situated, moved for summary judgment seeking contractual indemnification against third-party defendant Penava.  In addition, Madison also asserted a claim for failure to procure insurance against Penava. 

Their motion failed, however, due to a number of evidentiary issues:

• The subcontract and purchase order with Penava were not properly introduced.

• Madison defendants offered the deposition transcript of a witness who supposedly authenticated the documents.However, the copies produced did not bear the deposition sticker affixed at the time of the deposition so there was no way to determine if the documents offered into evidence were the same as the documents reviewed by the witness.

• An earlier indemnity agreement was not properly authenticated.

• The indemnity agreement did have a sticker attached, but this document was not submitted until the reply papers were submitted from the Madison defendants.As such, it was insufficient to support the initial motion for summary judgment.

• Additional contractual documents were not produced at the time of the initial moving papers

• Madison defendants attempted to rely upon a management agreement and another contract that were submitted by Penava in opposition to the summary judgment motion.Madison could not rely on documents produced in opposition to their motion to cure defects in its initial production.

• Further, even if the Madison defendants could use the documents introduced by Penava, there were insufficiently authenticated. The witness who allegedly verified the documents was simply shown them at his deposition.There was no effort to explore the accuracy of the documents during the witness’ testimony.

In addition to the failure of the contractual indemnity motion, the application for failure to procure was similarly rejected due to evidentiary gaps.  To establish a claim for failure to procure, the movant must establish a contractual obligation and evidence that an insurer denied the claim.  Here, because the purchase order involving Penava was not properly introduced into evidence, the Madison defendants could not meet their initial burden of proof.

Further, even if the purchase order containing insurance procurement language was properly introduced in support of the motion, the motion still failed where, as here, the tendered to insurer had acknowledged a defense under a reservation of rights.  Thus, because the insurer had not formally denied the claim, the Madison defendants failed to establish that Penava failed to procure the appropriate coverage. 

 

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

03/16/23       Lemieux v, Horn
New York State Court of Appeals
In a Rare decision from New York’s Highest Court, a Split Decision from Third Department Granting Summary Judgment on Serious Injury was Affirmed.  Finds that Plaintiff Failed to Demonstrate that the Exacerbation of Significant Pre-Existing Injuries Qualify as a “Serious Injury”.

Back in October of 2022, the Third Department decided this case. There was a 2016 rear-end accident with the plaintiff seeking to recover for his injuries, claiming a serious injury under the No Fault law.  The Third Department split on a 3-2 vote, against the plaintiff, thus giving him a free ride to the Court of Appeals.

Defendants had the burden, initially in establishing that the plaintiff did not sustain a serious injury, in its motion for summary judgment.  

Plaintiff claimed that he had sustained a serious injury to his lumbar spine in the November 2016 accident. Defendants established via plaintiff's medical records, however, that he had been diagnosed with degenerative changes to his lumbar spine in 2002 and had long complained of lower back pain and radiculopathy that required medical treatment. Indeed, plaintiff's medical records show that he was undergoing treatment at the time of the November 2016 accident for what the records described as "debilitating" and "severe" back and radiating leg pain, including physical therapy to address difficulties walking and performing his usual activities that arose following a May 2016 golf injury.

Thomas R. Haher, an orthopedic surgeon who reviewed plaintiff's medical records and radiological studies. Haher opined that, in light of plaintiff's documented lumbar spine problems prior to the accident and the fact that the August 2016 and February 2017 MRIs showed neither any "significant change" in his condition nor "any new or exacerbated injury to his lumbar spine," the medical proof reflected that "the subject accident did not cause or exacerbate [p]laintiff's pre-existing low back conditions."

The burden then shifted to the plaintiff to raise a triable issue of fact regarding the existence of a serious injury via objective medical evidence distinguishing [his] preexisting condition from the injuries claimed to have been caused by [the November 2016] accident. Plaintiff endeavored to do so through his testimony as to how his daily activities were impaired after the November 2016 accident, and additionally pointed to medical records reflecting that he had back pain after the accident that required medical treatment and, in June 2017, decompression surgery on his lumbar spine. He further provided the report of physical medicine and rehabilitation specialist who recited how he had reviewed plaintiff's medical records and conducted a March 2021 physical examination of plaintiff. Guy then opined, in conclusory fashion, that plaintiff's prior preexisting conditions were "pushed . . . over the edge" by the accident and necessitated the surgery.

What plaintiff did not provide was objective medical evidence distinguishing his preexisting back condition from its purported exacerbation in the November 2016 accident. He failed to raise a material issue of fact as to whether any exacerbation of his preexisting condition caused by the November 2016 accident constituted a serious injury,

The dissent judges at the Third Department did not believe that the defendant’s motion was sufficient to establish the lack of a serious injury.  The judges argued that Dr. Haher, opined in his affidavit that plaintiff's pre- and post-accident MRIs of the lumbar spine were "substantially the same" and that there are "no significant change[s]" in the findings of both. Without the terms “significant” or “substantial” being defined, the judges argued that does not address the differences, and instead focuses on plaintiff's preexisting injuries.

However, even if defendants met their burden, the dissenting judges argued that that plaintiff's expert, physical medicine and rehabilitation specialist Ali E. Guy, found the more recent accident caused exacerbation of these pre-existing injuries and opined that the accident caused new, distinct and identifiable injuries to plaintiff in the form of an L2-L3 herniation and T12-L1 disc protrusion; and further opines that "this accident of November 3, 2016, pushed [plaintiff] over the edge, which necessitated the lumbar surgery."

 

03/15/23       William Scully v. Mark J. Stephens
Appellate Division, Second Department
Defendant Expert and Plaintiff Experts Came to Different Conclusions when Examining CT Scan, Creating a Triable Issue of Fact

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Rockland County (Robert M. Berliner, J.), dated October 9, 2020. The order granted the defendants' motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

The plaintiff commenced this action to recover damages for personal injuries that he allegedly sustained when he was struck by a motor vehicle owned by the defendant Laura Casper and operated by the defendant Mark J. Stephens. The defendants moved for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. In an order dated October 9, 2020, the Supreme Court granted the motion. The plaintiff appeals.

After the accident, the plaintiff was transported to Good Samaritan Hospital (hereinafter the hospital), where various diagnostic procedures, including a CT scan, were performed. The hospital records from that visit include a radiology report in which a radiologist, Arlette Shvartzman, noted that "[t]here are fracture of the left transverse process of L2 axial image 74; fracture of the transverse process of L3 axial image 80." The hospital records also include a notation by Charles A. Fleischner stating that the CT scan, "as interpreted by me[,] demonstrates L2 L3 spinous process fracture. My findings were corroborated by the radiologist's interpretation." A fracture of the transverse process of the vertebrae constitutes a serious injury within the meaning of Insurance Law § 5102(d) (see Bonner v Hill, 302 AD2d 544, 545).

In support of their motion for summary judgment, the defendants submitted, inter alia, a report authored by John T. Rigney, a board certified radiologist, who reviewed, among other things, the images produced by the CT scan performed at the hospital on the day of the subject accident and concluded that, notwithstanding the findings of the "initial interpreting radiologist," the plaintiff had not sustained fractures of the left L2 and L3 transverse process. The defendants also submitted reports by two other medical experts, which were consistent with Rigney's report. In opposition to the defendants' motion, the plaintiff submitted the certified hospital records, which included the radiology report by Shvartzman and the notation by Fleischner.

Contrary to the defendants' contention, the plaintiff's submissions did not fail to address the findings of the defendants' medical experts. Under the circumstances of this case, the relevant finding made by the defendants' experts was that the CT scan did not reveal a fracture of the plaintiff's spine, and the materials submitted by the plaintiff in opposition to the motion contained findings by physicians that the CT scan did reveal a fracture of the plaintiff's spine. The conflicting medical opinions expressed in the parties' submissions present a triable issue of fact that cannot be resolved on a summary judgment motion.

Accordingly, since there is a triable issue of fact as to whether, as a result of the subject accident, the plaintiff sustained a serious injury in the form of a spinal fracture, the defendants' motion for summary judgment dismissing the complaint should have been denied.

 

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

Under the weather this week. See you in two weeks!

 

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

03/07/23       Thrall v. State Farm Mut. Auto. Ins. Co.
New York Supreme Court, Saratoga County
Motion To Dismiss Bad Faith and Consequential Damages Claims Denied

Thrall was involved in an automobile accident in December 2013.  At the time he was insured by State Farm under a policy with Personal Injury Protection (“PIP”) coverage for no fault benefits in the amount of $125,000 and SUM coverage in the amount of $100,000.

Thrall alleged that State Farm improperly denied insurance benefits based on the results of an IME conducted in May 2016.  Thrall alleged the IME was conclusory and incomplete, and that the doctor injured him during the examination.  Thrall alleged the denial was part of a larger conspiracy to defraud accident victims in a scheme that denies insurance coverage and limits claim payouts.

Thrall commenced a lawsuit against State Farm. The complaint included causes of action for breach of contract, bad faith, fraud, and violation General Business Law § 349 against State Farm.  Thrall also sought a declaration that State Farm’s claim handling process is unlawful, and that State Farm’s procurement and provision of IMEs violates Public Health Law Article 45.  State Farm moved to dismiss.

The court denied the motion to dismiss the causes of action for bad faith and consequential damages.  Thrall alleged that State Farm did not conduct a complete or fair investigation, had no meritorious reason for denying the claim, and denied the claim pursuant to a business policy.  Thrall also alleged that State Farm’s denial was part of a consumer-oriented pattern and practice aimed at the public at large for wrongfully denying benefits.  In addition, the complaint alleged that Thrall could not obtain necessary additional medical treatment and care due to the denial.  The court concluded these allegations were sufficient to survive the motion to dismiss.

Next the court dismissed Thrall’s fraud claim against State Farm as duplicative of the breach of contract claim.  The allegations of fraudulent conduct were based on the same allegations as the breach of contract claims.  The misrepresentations alleged by Thrall arose, if at all, out of State Farm's contractual obligation to honor its policy and pay SUM and no-fault benefits. 

However, the court declined to dismiss the § 349 claim.  Thrall alleged that State Farm engaged in a consumer-oriented pattern and practice aimed at the public at large of wrongfully denying claims for no-fault benefits by providing financial incentives/pressure on the physicians hired to perform IMEs to provide medical reports that would support the denial of benefits and, further, that he suffered injury as a result of that practice.  The court found these allegations were sufficient to survive a motion to dismiss.

Turning to the declaratory causes of action, the court dismissed the claim seeking a declaration that State Farm’s claim handling processes are unlawful.  The court noted that Thrall had other adequate remedies to redress the claim handling process he claims he was subjected to through his breach of contract, bad faith, and § 349 causes of action.  Thrall’s cause of action seeking a declaration that State Farm’s procurement of IMEs violates Public Health Law Article 45 was dismissed because there is no private cause of action for violation of that article.

 

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

 

03/10/23       Perry v. GEICO
United States District Court, District of Connecticut
Insurer Owes a Duty to Explain UM/UIM Insurance

Under Connecticut law, an insurance agent owes an insured a duty to explain UM/UIM insurance, including the adequacy of coverage. Here, Perry was a long-time GEICO customer who alleged that the inadequacy of his coverage was the fault of GEICO. The court allowed the suit to proceed, rejecting GEICO’s claim that it owed Perry no such duty.

Perry alleged that for more than 20 years he carried auto, renter’s, and umbrella covers with GEICO. In 2020, Perry moved from New York to Connecticut [been there, done that] and needed to reregister his car. He contacted GEICO, discussed his coverages with a GEICO agent, and after being assured that he had the correct and adequate coverages, proceeded to purchase the Connecticut coverages recommended by the agent. Perry also alleged that GEICO advertises that it allows customers to customize their insurance “to fit you” and that its agents are “here to help you” get the necessary coverage. Only a few months into the coverage period, Perry was involved in an accident, suffering serious injuries caused by an underinsured driver. Even after the payment of GEICO’s UIM limits, Perry was still undercompensated.

Perry blamed GEICO, suing for negligence and breach of fiduciary duty. GEICO moved to dismiss the two counts, arguing that there was no duty to Perry to advise him as to the adequacy of his insurance coverage. The court found that Connecticut appellate law holds otherwise. “Plaintiff contends that Connecticut courts have recognized that an insurance agent owes a client of duty of care to explain uninsured/underinsured motorist coverage as articulated in Byrd v. Ortiz, 136 Conn. App. 246 (2012). The Court agrees that Byrd forecloses Defendant's argument.” Under Byrd, an insurance company is liable for its captive agent’s failure to properly advise the customer. “With respect to uninsured/underinsured motorist coverage, an insurance agent has a “duty to explain underinsured/uninsured motorist coverage to the [client], to explain the consequences of not having a sufficient amount of such coverage, to recommend the proper amount of coverage based on the [client's] individual circumstances and to attempt to procure that amount of coverage and offer it to the [client].” (Citations omitted).

The court, therefore, denied GEICO’s motion to dismiss; however, the court granted the breach of fiduciary duty claim finding that there was no allegations of the requisite “special relationship” necessary to sustain a cause of action for a fiduciary relationship.

 

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

 

03/15/23       Allstate Veh. & Prop. Ins. Co. v. Glitz Constr. Corp.
Supreme Court of New York, Appellate Division, Second Department
Contractor Is Not Held Liable for the Negligent Acts of Subcontractor, who was an Independent Contractor

Allstate commenced an action to recover damages for injury to property allegedly sustained due to a fire at the insured’s house. The fire started in a ceiling space in the garage, where new electrical wiring had recently been installed. The insured had recently hired the defendant, a home improvement contractor, to convert the garage area into a bedroom and an office. The defendant hired a subcontractor to do the electrical rough-in of the new wires, which allegedly damaged an existing wire, causing an electrical fire.

The contractor moved for judgment as a matter of law, pursuant to CPLR 4401, to dismiss the plaintiff’s complaint, contending that it could not be held liable for the alleged negligence of the subcontractor because he was an independent contractor. The lower court granted the contractors motion and dismissed the complaint.

To be awarded judgment as a matter of law under CPLR 4401 there must be no rational process by which the fact trier could base a finding in favor of the nonmoving party upon the evidence presented at trial. The court explained that a party who retains an independent contractor, as distinguished from a mere employee or servant, is not liable for the independent contractor’s negligent acts. Control of the method and means by which the work is done is a critical factor in determining whether one is an independent contractor or employee. Minimal or incidental control over the work product, without direct supervision or input over the means used to complete the work is insufficient.

The court determined that there was no rational process by which the jury could find that the subcontractor was the defendant’s employee, rather than an independent contractor. The defendant testified that the subcontractor was not an employee and the plaintiff presented no evidence that the defendant had any control over the means by which the subcontractor performed his work.

One exception to the general rule, that a party who retains an independent contractor is not liable for his negligence, is instances where the employer is under a specific nondelegable duty. This occurs when the responsibility is so important to the community that the employer should not be permitted to transfer it to another. However, the court determined that the plaintiff failed to establish that the performance of the electrical work was a nondelegable duty, as the plaintiff presented no evidence that the defendant assured the insured that it would perform the work itself. Therefore, the court granted the defendant’s motion for a judgment as a matter of law, dismissing the plaintiff’s complaint.

 

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

03/09/23       Anti-Arson Applications
New York State Assembly
Bill Passes Assembly (Again) That Would Repeal Anti-Arson Application Requirements Under Insurance Law §3403

On March 9, the New York State Assembly passed bill no. A02811, which proposes to repeal New York laws and regulations that mandate submission of an anti-arson application for insurance coverage to insure any building against the peril of fire or explosion. This bill currently resides with the Senate in its Insurance Committee. Notably, this repeal has passed the Assembly every year since 2019 but has always died in the Senate. Will this be the year?

According to the Sponsor Memorandum:

“In 1981 when New York first enacted its anti-arson application law . . ., arson for profit was a significant economic and societal problem. New York's anti-arson application law was enacted to give insurers ownership and property valuation information to assist in the investigation of arson for profit and to require property owners to sign a fraud statement. However, present-day arson investigation techniques no longer rely on the anti-arson application form to determine ownership and property valuation and fraud statements are collected through other means when adjusting a loss. Insurers have access to a multitude of third-party sources to determine ownership and property values. Since the information collected on the form is no longer used, completing and collecting the form (which is required for both new and renewed insurance policies) creates a significant burden for both consumers and insurers. Consumers suffer because completing the form is burdensome and insurance carriers must cancel in force policies when the form is not returned, which means that the policyholder may be without coverage. Furthermore, consumers hear the ultimate administrative cost of having insurers reinstate policies that have been cancelled when they fail to renew the anti-arson application.  Insurers are burdened by the inordinate amount of time spent tracking down the anti-arson application from property owners. Recognizing that the reason that this law was originally enacted no longer exists, both Rochester and Buffalo repealed the law in recent years.”

Under Insurance Law §3403, as it stands today, “the use of the anti-arson application shall be mandatory for all property insurance policies covering the peril of fire or explosion,” and requires a two-tier application form to be submitted when applying for an insurance policy or renewal. Given that anti-arson applications have outlived their usefulness and, in fact, result in unnecessary gaps in coverage where they are not submitted, this bill would eliminate the burdensome requirement altogether.

 

RAUH’S RAMBLINGS
Patricia A. Rauh
[email protected]

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

 

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

 

02/08/23       Jimenez v. Occidental Fire & Cas. Co. of No. America
United States District Court, E.D. New York
Although the Insurance Law Allows for Retroactive Cancellation After a Cancellation Notice has Been Sent Out and the Delinquent Premium is Not Paid Within the Requisite 15-Day Grace Period, Cancellation Was Not Effective as the Policy Did Not Also Specifically Provide for Retroactive Cancellation and, Therefore, Insurer Had to Provide Coverage for a Property Fire Loss Which Occurred Within the Grace Period

A fire occurred at plaintiff Jose Jimenez's home on July 25, 2020, approximately a week after the expiration date of the policy, issued by the defendant.  But it occurred during a fifteen-day grace period mandated by New York law for late payment. Jimenez did not pay the premium during that grace period or ever. The question in this case is whether the coverage terminated at the end of the grace period, or whether such termination was retroactive to the end of the policy term.

The Court reads the applicable statute and case law to permit the retroactive cancellation.  However, it holds that the policy did not provide for that outcome.

Accordingly, the Court denies Occidental's motion to dismiss the breach-of-contract claim. However, it granted Occidental's motion to dismiss Jimenez's estoppel claim, as well as a second contract claim that is duplicative and predicated on an invalid legal theory.

A renewal notice called for payment of the new premium by July 17, 2020. Jimenez acknowledges that he did not pay the new premium by that date.  Occidental mailed a Notice of Cancellation dated July 21, 2020.  That notice specified a "Date of Cancellation" of four days prior: July 17, 2020, the last day of coverage for which Jimenez had paid. The cancellation notice also provided for a 15-day grace period, as required by New York's Insurance Law. 

The fire occurred on July 25, 2020 — four days into the grace period. Still, Jimenez acknowledges that he did not pay the renewal premium.  But he does allege that the policy of insurance did not provide for retroactive cancellation.  He seeks $160,156 in reimbursement from Occidental for his home's contents. 

The question here, accordingly, is on what date Jimenez's coverage lapsed. Occidental argues that coverage lapsed on July 17, when the prior policy period ended; Jimenez claims coverage remained in effect until August 6 — the end-date of the grace period.

Jimenez claims two separate theories: that the terms of the policy did not provide for retroactive cancellation; and Occidental should be equitably estopped from denying coverage under the policy. His complaint does not set forth sufficient factual content to sustain that claim.

Occidental's mailing of a renewal notice had the effect of renewing the policy.  Once renewed, the policy can be canceled only as permitted by statute. Section 3425 provides that "upon the effective date if the policy is a renewal, no notice of cancellation shall be issued to become effective" unless one of several listed events transpires. N.Y. Ins. Law § 3425(c). One such event is nonpayment of premium. Id. § 3425(c)(2)(A); see also id. § 3425(a)(10) (defining "nonpayment of premium").

Even in the event of non-payment, however, the law provides a grace period. That period is triggered by the issuance of a notice of cancellation. "Payment to the insurer, or to an agent or broker authorized to receive such payment, shall be timely, if made within fifteen days after the mailing to the insured of a notice of cancellation for nonpayment of premium." Id. § 3425(a)(10).

Despite the auto-renewal upon billing and the statutory grace period, New York cases make clear that retroactive cancellation is permitted under the statute.  Further support from this position came from the old New York State Department of Insurance, which opined "that retroactive termination of coverage back to the last day for which premium was paid is permitted when premium is not received during the grace period."  This makes sense; otherwise, every policyholder would be insured for free during the grace period.  A grace period is not intended as a free bonus month of insurance coverage added to every contract. For these reasons, the relevant statute permits retroactive cancellation.

Still, the New York insurance statute is only an overlay to the policy. Jimenez alleges that Occidental's policy "did not provide for retroactive cancellation," and thus he was covered until the end of the grace period — August 6, 2020.  According to Jimenez, the "policy of insurance was in full force and effect" when the fire occurred on July 25, having been renewed by law (as described above) and not canceled retroactively. On this argument, the Court says he is correct.

To effectuate retroactive cancellation, the cancellation provisions of the policy have to provide for it. The plain language of an insurance policy is determinative, and a court cannot rewrite the agreement by disregarding that language. The insurer cannot deploy a statute to rewrite (in its own favor) the contract it wrote its insured. As the New York Court of Appeals has explained (albeit in a different context), statutory provisions "cannot be implied as part of the agreement so as to make a different contract from that which the parties intended nor override the agreement which the parties, in fact, made." 

Occidental's policy did not specify any effective date of cancellation. It stated simply: "When you have not paid the premium, we may cancel the entire policy at any time by mailing to you at least 15 days' notice of cancellation."  This language is ambiguous — at best — on whether cancellation may be retroactive. And it is axiomatic that ambiguities in the policy are to be interpreted against the insurer in New York. 

Ultimately, this appears to be a case of imperfect drafting: the policy could easily have said that upon nonpayment, the insurer "can cancel at any time by mailing a notice of cancellation, and such cancellation will be retroactive to" or "effective as of" an earlier date — either the date the policy expired, or the date the notice of cancellation was mailed. But that is not the policy that Occidental wrote, and therefore retroactive cancellation is unavailable.

Jimenez's First and Second causes of action are duplicative. They are predicated on the same provisions in the same insurance policy; they both allege that Occidental was contractually obligated to cover the same loss but did not; and they seek recovery of the same $160,156 for the contents of Jimenez's house. The only difference between the causes of action is that they assert different theories to rebut an anticipated defense: namely, that coverage under Jimenez's policy had lapsed for nonpayment of premiums. The First Cause of Action asserts that the nonpayment defense should fail because Jimenez did not receive Occidental's notice of cancellation until "on or after the loss date." The Second Cause of Action asserts, as noted above, that the defense should fail because "the policy of insurance did not provide for retroactive cancellation." 

The argument underpinning Jimenez's First Cause of Action is untenable and is dismissed.

Jimenez argues that his policy remained in full force and effect on the date of loss" because the notice of cancellation was not received until on or after the loss date.  But as Occidental argues, the date on which he received the notice is irrelevant.

Once again, this question is governed by both Section 3425 and the terms of the policy. In this case, both peg timeliness to the mailing — not receipt — of a notice of cancellation. 

Finally, in his Third Cause of Action, Jimenez alleges that Occidental should be equitably estopped from denying coverage. He argues that when he reported the loss to Occidental, its claims representative failed to inform him that he had failed to pay his renewal premium. But Jimenez has not adequately pleaded an equitable estoppel claim. Under New York law, Jimenez must establish certain elements regarding the insurer's conduct and his own state of mind.

As to Occidental, a party seeking the protection of equitable estoppel must demonstrate the following as to the party against whom the doctrine is invoked: (1) Conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) intention, or at least expectation, that such conduct shall be acted upon by the other party; (3) knowledge, actual or constructive, of the real facts.

As to himself: as related to the party claiming the estoppel, the elements are: (1) Lack of knowledge and of the means of knowledge of the truth as to the facts in question; (2) reliance upon the conduct of the party estopped; and (3) action based thereon of such a character as to change his position prejudicially.

Jimenez has not pleaded sufficient facts to support this claim. Thus, Jimenez's estoppel claim must be dismissed for failure to state a claim.
 

02/28/23       U.S. of America v. Lashaumba O. Randolph and Armond L. Long
United States District Court, W.D. Pennsylvania
In a Scheme to Defraud State Farm and Progressive in Staged Auto Losses, Federal Criminal Insurance Fraud Conviction in a Topsy-Turvy Tale Featuring a Diverse Cast of Characters That Includes Fraternal Fraudsters, Drug Addicts, Prostitutes, and a Mysterious Man Known only as "Black"

Defendants Lashaumba O. Randolph and Armond L. Long were charged in a superseding indictment perpetrating a scheme to defraud the State Farm and Progressive insurance companies by submitting fraudulent loss claims on certain automobiles in late 2017 and early 2018. This tale, explained below, is a topsy-turvy one, featuring a diverse cast of characters that includes fraternal fraudsters, drug addicts, prostitutes, and a mysterious man known only as "Black." But at its core, the superseding indictment alleges that Defendants, either personally or by soliciting others, procured stolen vehicles, submitted false claims of loss on those vehicles by staging accidents for each of the vehicles, arranged for the vehicles to be towed to specific automobile repair garages, and in some cases burned the vehicles and submitted claims for loss.

Pursuant to the agreement of the parties, this Court held a non-jury trial on September 19, 2022, and September 20, 2022. The Court finds Lashaumba Randolph GUILTY beyond a reasonable doubt as to Counts 1 and 4-6 and NOT GUILTY as to Counts 2 and 3, and finds Armond Long NOT GUILTY on all Counts.

On the facts, the Court finds beyond a reasonable doubt that a fraud has occurred here. The more pointed question is whether these Defendants committed the fraud alleged in the superseding indictment, and whether the government has proven every element of each count beyond a reasonable doubt.

Lashaumba Randolph is charged at all counts of the superseding indictment. Specifically, the government alleges he: (1) devised a scheme to defraud State Farm by false pretenses and representations related to the Acura MDX (Count 1) and the Chevrolet Camaro (Count 4); (2) devised a scheme to defraud Progressive by false pretenses and representations related to the Nissan Maxima (Counts 2 and 3); (3) used fire, or induced another to use fire, to destroy the Acura MDX and Cadillac Escalade in order to facilitate the wire fraud charged at Count 1 (Count 5); and (4) used fire, or induced another to use fire, to destroy the Chevrolet Camaro in order to facilitate the wire fraud charged at Count 4 (Count 6). Considering all the evidence introduced at trial, the Court finds Lashaumba Randolph guilty beyond a reasonable doubt as to Counts 1, 4, 5, and 6, and not guilty as to Counts 2 and 3.

The Court finds that Lashaumba Randolph devised a scheme to defraud State Farm. He insured the Acura MDX with State Farm in his name and his company's name and reported via telephone that the Acura MDX was involved in an accident, a claim for which he received payment. Based on the evidence, the Court concludes that the accident did not actually occur, and that Lashaumba Randolph falsely reported the accident.  Even though Lashaumba Randolph reported the vehicle had been damaged, he let the Acura MDX sit on the lot at Darrin's Auto Body for weeks and showed no interest in getting it repaired. Then, the Acura MDX was destroyed via fire. It was only at that point—almost immediately thereafter—that the owner of the Acura MDX suddenly contacted Darrin's to permit repairs to begin. State Farm accordingly issued a check to Lashaumba Randolph for the fire damage to the Acura MDX. This evidence establishes the first element of Count 1, that Lashaumba Randolph devised a plan, device, or course of action to deprive another of money or property by means of false or fraudulent pretenses, representations, or promises reasonably calculated to deceive persons of average prudence.

The government established Lashaumba Randolph's specific intent to defraud State Farm by showing that he let the Acura MDX sit at Darrin's Auto Body for weeks without authorizing its repair, even though the damage was extensive. That the owner of the Acura MDX waited to authorize repairs on the vehicle (at which point State Farm issued a check to Lashaumba Randolph to cover the fire damage) until just after the fire further establishes that Lashaumba Randolph specifically intended to defraud State Farm. Specifically, this evidence shows that Lashaumba Randolph never intended to make the vehicle drivable—rather, he used it as a tool by which to defraud State Farm.

The government established the third element with evidence that Darrin Leech contacted a State Farm office in New York via telephone to report the Acura MDX fire, because Darrin Leech had no way to contact the owner of the vehicle. As such, the government established beyond a reasonable doubt all three elements of Count 1 as to Lashaumba Randolph.

Likewise, as to Count 5, this evidence establishes beyond a reasonable doubt that fire was used to destroy the Acura MDX, in order to have State Farm issue a check to cover the fire damage. The government did not have to prove who specifically set the fire—it proved beyond a reasonable doubt that the fire was set intentionally. This fact, taken with the evidence establishing Lashaumba Randolph's scheme to defraud State Farm, and the actions he took in furtherance of it, establishes his guilt beyond a reasonable doubt as to Count 5.

The Court also finds that Lashaumba Randolph devised a scheme to defraud State Farm involving the Chevrolet Camaro, which was insured in the name of his business. Findings of Fact. On the night of the Chevrolet Camaro's purported crash, Lashaumba Randolph was on-scene, claimed to be the owner of the vehicle, and was evasive in answering the responding officer's questions about the accident.  After the Chevrolet Camaro was towed to Nickolich Towing and Salvage, Lashaumba Randolph appeared there, claimed ownership of the vehicle, and directed that it be transferred to Johnny's Auto.  A few weeks later, the Chevrolet Camaro was destroyed by fire at Johnny's Auto.  State Farm then received a claim for loss as to the fire damage from Lashaumba Randolph's business, but received nothing as to the purported collision damage.  The logical chain, supported by the evidence, shows beyond a reasonable doubt that Lashaumba Randolph devised a scheme to defraud State Farm by staging the Chevrolet Camaro crash, arranging for it to be brought to Johnny's Auto, and destroying or directing it to be destroyed with fire in order to make an insurance claim on it. These actions also establish beyond a reasonable doubt Lashaumba Randolph's specific intent to defraud State Farm. The government established the third element with evidence that State Farm communicated with an employee at Johnny's Auto via telephone in order to gain information about the Chevrolet Camaro fire. Thus, all elements of Count 4 are met beyond a reasonable doubt.

Again, this evidence also establishes beyond a reasonable doubt that fire was used to destroy the Chevrolet Camaro, in order to have State Farm issue a check to cover the fire damage (i.e., Count 6). The government did not have to prove who specifically set the fire—it was enough that it proved beyond a reasonable doubt that the fire was set intentionally. This fact, taken with the evidence establishing Lashaumba Randolph's scheme to defraud State Farm, and the actions he took to further it, establishes his guilt beyond a reasonable doubt as to Count 6.

The Court finds that Lashaumba Randolph is not guilty as to Counts 2 and 3. Specifically, the Court finds that the government failed to prove beyond a reasonable doubt that Lashaumba Randolph either devised the scheme to defraud Progressive as to the Nissan Maxima, or that he took part in that scheme to defraud in some fashion. The government's evidence does not link Lashaumba Randolph in any way to the Nissan Maxima or to any of the key players involved in that scheme—Derek Price, Haley Johnson, Holly Smith, and Brianne Cornetta. For the same reason, the Court also finds the government's evidence is deficient as to the second element of Counts 2 and 3, and finds that it has failed to prove beyond a reasonable doubt that Lashaumba Randolph acted with the specific intent to defraud Progressive.

Armond Long is charged at Counts 1-3, and 5 of the superseding indictment. Specifically, the government alleges that he: (1) devised a scheme to defraud State Farm by false pretenses and representations related to the Acura MDX (Count 1); (2) devised a scheme to defraud Progressive by false pretenses and representations related to the Nissan Maxima (Counts 2 and 3); and (3) used fire, or induced another to use fire, to destroy the Acura MDX and Cadillac Escalade in order to facilitate the wire fraud charged at Count 1 (Count 5). But considering all the evidence introduced at trial, the Court finds Armond Long not guilty at all Counts.

For the Court to find Armond Long guilty on these charges, the government had to prove beyond a reasonable doubt that he devised or participated in a scheme to defraud the insurance companies and had the specific intent to defraud them. But the chain of evidence connecting Mr. Long to that scheme to defraud and his specific intent to do so is muddy, to say the least.

The Court has no doubt that Armond Long likely engaged in some suspect business dealings, and the government has presented evidence suggesting his business involves acquiring stolen vehicles, constructing phony titles, and selling them to other parties.  But the Court sees only scant evidence that Mr. Long participated in or had any knowledge of the specific scheme to defraud the insurance companies.

The main deficiency with the government's case against Armond Long is the government's substantial reliance on the testimony of two witnesses whom the Court does not find credible: Kelvin Long and Derek Price. First, the evidence that AAA Auto Sales received payment from Progressive to cover the loss on the Cadillac Escalade falls short because the only evidence linking AAA Auto Sales to Armond Long is Kelvin Long's statement. Findings of Fact. The allegation that Armond Long was given the title to the Cadillac Escalade and directed Kelvin Long to pay Dionne Amison is unpersuasive for the same reason—the only evidence supporting this claim is Kelvin Long's uncredible testimony. Lastly, Kelvin Long's testimony that Armond Long "laughed" at an alleged statement—or rather, jest—tying Stephon Black to the Cadillac Escalade fire is simply insufficient evidence to show Mr. Long devised or participated in the scheme to defraud.  Even crediting Kelvin Long's story, he wasn't even in the same room when he overheard this alleged laugh and wasn't part of the conversation. 

Nor does Derek Price's testimony meet the government's burden of proof. As with Kelvin Long, the Court does not find Derek Price's testimony credible, and so discounts his statement that he paid Armond Long for the Nissan Maxima.  But even if the Court did find Derek Price credible, his testimony still would not be enough because Derek Price himself expressed uncertainty whether he operated at the direction of Armond Long or his brother, Thomas, who also had some role in some type of fraudulent scheme ("Q. Who came up with something about insurance? A. I'm not sure if it was Val [Armond Long] or Roni [Thomas Long].").

Relatedly, the government cannot meet its burden based on Pinkerton liability. Under that legal theory, a co-conspirator may be held accountable for the acts of other conspirators in furtherance of the conspiracy.  Pinkerton liability stops short because, for the reasons explained above, there is insufficient evidence to prove beyond a reasonable doubt that Armond Long was a party to any conspiracy to defraud the insurance companies. Specifically, there is insufficient credible evidence to connect Armond Long to the main participants in this case.

In the end, the government failed to prove beyond a reasonable doubt that Armond Long was part of a scheme to defraud the insurance companies, through crashing the stolen vehicles, setting them on fire, or submitting false claims for loss. And there is insufficient evidence to link him to any co-conspirators under Pinkerton. For these reasons, the Court finds Armond Long not guilty on all Counts.

The Court finds Defendant Lashaumba Randolph GUILTY as to Counts 1, 4, 5, and 6, and NOT GUILTY as to Counts 2 and 3, and finds Defendant Armond Long NOT GUILTY as to all Counts. An appropriate verdict order follows.

 

FLEMING’S FINEST
Katherine A. Fleming
[email protected]

03/03/23       Miller v. Nodak Ins. Co.
Supreme Court of North Dakota
No Coverage for Losses Arising Out of the Failure of Defective Seed Potatoes Due to “Seed Performance” or “Failure to Conform” Exclusion

John D. Miller, Jr. d/b/a John Miller Farms, Inc. and JD Miller, Inc. (collectively, “Miller”) operate a farm in Minto, North Dakota. Miller was insured by a Farm and Ranch policy and Excess Liability policy issued by Nodak Insurance Company (“Nodak”). During the 2015 planting season, Miller planted seed potatoes. Miller asserted a North Dakota State Seed Department representative inspected the field where the seed was being grown on July 13, July 26, and September 3, 2015, which indicated no problems with the seed crop. On or about September 3, 2015, Miller “killed the vines” in anticipation of and as required to harvest the seed crop. Miller harvested the seed crop, and the harvested seed crop was immediately taken from the field to Miller’s storage facility south of Minto. Then, Miller and Johnson Farming Association, Inc. (“Johnson”) entered into a contract for the sale of seed potatoes. The contract for sale disclaimed any express or implied warranty of merchantability or fitness for a particular purpose and contained a limitation of consequential damages and remedies. Under the contract, Johnson paid $104,000 for the seed potatoes. Johnson picked up the seed potatoes. Later, Johnson informed Miller of problems with some of the seed potatoes he had purchased. Johnson stated an analysis definitively showed very high levels of the herbicide glyphosate, which caused the problems with the seed potatoes. The seed potatoes did not grow properly, and Johnson alleged damages as a result. It is undisputed that the seed potatoes were damaged because an employee of Miller inadvertently contaminated the seed potatoes with glyphosate while they were growing on Miller’s Farm. Miller asserts that the glyphosate product was applied inadvertently by Miller’s employee, likely at the time the vines were killed and the seed harvested.

When Miller sought coverage for the loss from Nodak, Nodak denied coverage based on the “seed performance” or “failure to conform” exclusion. Under the exclusion, there is no coverage for loss arising out of failure of seed sold by an insured to conform to the variety or quality specified, to be suitable for the purpose specified, or to be free of disease, bacteria, fungi, or similar conditions. Johnson sent Miller a written demand for losses totaling $365,593.45, and Miller personally reimbursed Johnson for this amount in full.

Miller commenced an action against Nodak for refusing to cover the claim regarding the damaged seed potatoes. The district court granted summary judgment to Nodak on Miller’s claims for negligence and unjust enrichment but held that the exclusions relied on by Nodak to preclude Miller’s claim for coverage were inapplicable. The district court held that the policy’s exclusions did not apply because it was not alleged that the seed potato was not of the variety specified and because the contract did not hold the seeds out as suitable for a particular purpose. The district court further held that the contract between Miller and Johnson contained express disclaimers.

On appeal, Nodak argued that an inherent quality of seed potatoes is the ability to successfully grow a new plant, and since the seed potatoes Miller sold to Johnson did not conform to this quality, this exclusion precluded coverage. Nodak also argued the district court erred in holding Miller did not specify a specific purpose for the seed potatoes under the contract. Miller countered that the seed conformed to the variety and quality specified and that Miller made no other specification, warranty, or promise to Johnson regarding the variety or quality of seed. Miller argued that all such matters were specifically disclaimed by the seed potato contract’s terms and by operation of North Dakota law.

The Supreme Court concluded the “seed performance” or “failure to confirm” exclusion applied because the claimed losses arose directly from failure of the seed potatoes sold by Miller, i.e., Miller’s sale of defective seed. The Supreme Court disagreed that the contract disclaimed any specified quality or suitability of purpose of the seed potatoes sold to Johnson. The exclusion’s use of the word “seed” at its core contemplates “plant propagation.” The exclusion’s reference to “quality specified” does not just mean seed grade. The Supreme Court also rejected Miller’s contention that the seed potato contract’s broad warranty disclaimers nullified the exclusion’s use of the language “purpose specified” because Miller sold Johnson seed potatoes for the minimal purpose of plant propagation. It was undisputed that the seed potatoes did not grow properly, that the claimed losses were to Johnson’s crop yield, and that Miller’s payment to Johnson included losses beyond the seed purchase price. The undisputed defective condition of the seed potatoes at the time of Miller’s sale to Johnson goes both to the specified “quality” and “purpose” of the seed as a viable seed capable of plant propagation. Based on the exclusion’s plain language, the Supreme Court concluded that Nodak’s policy did not provide coverage for the claimed losses arising out of the failure of the defective seed potatoes sold by Miller to Johnson. Accordingly, the court reversed the district court’s decision.

 

GESTWICK’S GREATEST
Evan D. Gestwick
[email protected]

 

03/06/23       MIC Gen. Ins. Corp. v. Rashid
Supreme Court of the State of New York, County of New York
The Same Argument Can Fail When Applied to the Grant of Coverage but Succeed When Applied to the Policy Exclusions

The underlying plaintiff slipped and fell at a premises and brought suit against MIC General’s insured as a result. MIC General picked up a courtesy defense of its insured, and subsequently brought a declaratory judgment action seeking a declaration that it may withdraw from said defense. MIC General made two principal arguments: (1) that the facts of the underlying incident failed to trigger the grant of coverage because the dwelling at which the claimant slipped and fell is not an “insured location;” and (2) the claimant’s injuries are excluded under the policy’s insured location exclusion.

In considering whether the facts of the underlying action fell within the scope of coverage, the Court held that it did. The grant of coverage as to the liability part of the policy provided that MIC General would cover the costs of a defense and of any judgment should a “suit [be] brought against an ‘insured’ for damages because of ‘bodily injury’ . . . caused by an ‘occurrence’ to which this coverage applies.” The Court began its analysis under this part of the policy by noting that the underlying action would only fall outside of the grant of coverage if the claimant’s slip and fall was not an “occurrence to which this coverage applies.” The Court then noted that this grant of coverage did not limit the scope of “occurrences” to only those occurring in an “insured location” or “residence premises,” as MIC General urged. The Court rejected MIC General’s first argument accordingly.

MIC General made essentially the same argument, but with respect to a policy exclusion that eliminates coverage for bodily injury “[a]rising out of premises [o]wned by an ‘insured’ . . . that is not an ‘insured location.’” The policy defined “insured location” as the “residence premises,” “Residence premises,” in turn, was defined as a one or two-family dwelling. The premises at issue here was a three-family dwelling, and accordingly, did not meet the definition of “residence premises.” Since the premises at issue did not qualify as a “residence premises,” the premises also was not an “insured location,” and thus, the above exclusion applied to bar coverage for the entirety of the underlying action.

Essentially, MIC General made the same argument twice—that the underlying incident is not covered under its policy because the claimant did not fall at any insured location. When MIC General made this argument in the context of its contention that the grant of coverage was not triggered, it failed because the grant says nothing about an insured location. However, when made in the context of the above-referenced policy exclusion, it proved to be wholly dispositive. This case serves as an example of the importance of the steps to any coverage analysis: (Grant of Coverage – Exclusions) x (Compliance with Policy Conditions).

 

03/06/23       N.Y. Gen. and Marine Ins. Co. v. Merchants Mut. Ins. Co.
Supreme Court of the State of New York, County of New York
The Difference Between the Duty to Defend and the Duty to Indemnify Applies Equally in the Context of a Tendered Defense

The underlying plaintiff was injured when performing work in the scope of his employment with White Contracting and Renovation, the subcontractor on a construction project. He then sued Ryder Construction, the general contractor, among other parties in the underlying matter.

Prior to the claimant’s injuries, the general contractor and subcontractor entered into a subcontract, whereby the subcontractor was to procure liability insurance and name the general contractor as an additional insured on a primary and non-contributory basis. Pursuant to this subcontract, Ryder, insured by New York Marine, tendered its defense in the underlying action to White Contracting, insured by Merchants.

The Merchants policy provided coverage for any additional insured where required by contract, agreement, or permit, when White Contracting and that party agreed in writing, prior to the injury, that the party was to be added as an additional insured. However, coverage under the Merchants policy was limited to bodily injury that is caused, in whole or in part, by either White Contracting’s acts or omissions, or by the acts or omissions of those acting on White Contracting’s behalf.

Merchants denied Ryder’s tender on the basis that its status as an additional insured did not apply unless and until there was a determination that the underlying injuries were caused, in whole or in part, by White Contracting’s acts or omissions. In response to Merchant’s denial of Ryder’s tender, New York Marine, as Ryder’s insurer, commenced a declaratory judgment action, seeking a declaration that Merchants had a duty to defend its insured, Ryder.

The Court began by noting that Ryder was clearly an additional insured under the Merchants policy by the terms of the subcontract. While noting that there must be some sort of showing, prior to the triggering of Merchant’s coverage obligations, that the claimant’s injuries were caused, in whole or in part, by the acts or omissions of White Contracting, the Court explained that the determination of whether Merchants is required to defend Ryder, as opposed to the determination of whether Merchants must indemnify Ryder, lies in the difference between the duty to defend and the duty to indemnify. That is, where the allegations in the underlying complaint suggest a reasonable possibility of coverage, the party receiving the tender must accept the tender and provide a defense to the tendering party, while the duty to indemnify is narrower and allows for information not within the four corners of the underlying complaint to be taken into account. Here, the Court found sufficient to trigger Merchant’s duty to defend the allegations in the underlying complaint that the claimant sustained injuries at the construction site while engaged in work for White Contracting due to the failure to provide a safe place to work. This, together with the terms of the subcontract, while charge White Contracting with the responsibility of ensuring workplace safety in connection with the construction project, were deemed sufficient to trigger Merchants’ duty to defend Ryder after the tender was made.

 

ON the ROAD with O’SHEA
Ryan P. O’Shea
[email protected]

 

03/07/23       State Farm Mut. Auto. Ins. Co. v Selective Ins. Co. of Am.
Supreme Court of the State of New York, County of New York
Arbitrator Finds 100% But Awarded $0 Damages, Amended Decision Follows and Liable Insurer Appeals

On November 24, 2004, Scott Camarra hit an American Glass Company of Albany motor vehicle driven by George Ellis. State Farm issued Camarra an auto policy. Selective issued American Glass a worker’s compensation policy.

Selective paid for Mr. Ellis’s lost wages and medical expenses in connection with the accident. A March 31, 2008, arbitration decision determined that Camarra was 100% liable for the accident and awarded Selective $14, 614.43 in damages from State Farm. Selective also sought to recover benefits it paid to Mr. Ellis that exceeded the $50,000 no-fault limit.

On August 22, 2022, Selective received a favorable arbitration decision that again found Camarra 100% liable for the accident and found Selective proved $19,840 in damages. However, the arbitrator’s decision listed the final award as $0. The following day the arbitrator issued an amended decision that corrected the final award to $19,840. State Farm petitioned to vacate the arbitration award arguing it was the result of an ex parte communication. In response, Selective stated it made only a post decision inquiry into the clerical/scrivener’s error made by the arbitrator.

The New York County trial court found the arbitrator did not exceed his power in correcting the award total via the amended decision. It determined the original decision found State Farm’s insured 100% liable and the $0 award was a clear error.

 

NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
[email protected]

 

02/09/23       Will the filing of a Climate Rights lawsuit against Shell PLC in the UK result in Copycat Litigation in Canada?

The NGO ClientEarth issued a press release on February 9, 2023 stating that it has filed the world’s first derivate lawsuit in the High Court of England & Wales against the Board of Directors of Shell plc for failing to manage the material and foreseeable risks posed to the company by climate change.  This claim is funded by well-known British, Swedish, French, and Belgian pension funds. ClientEarth’s senior counsel is quoted as saying:

 “The shift to a low-carbon economy is not just inevitable, it’s already happening. Yet the Board is persisting with a transition strategy that is fundamentally flawed, leaving the company seriously exposed to the risks that climate change poses to Shell’s future success – despite the Board’s legal duty to manage those risks.

“Long term, it is in the best interests of the company, its employees and its shareholders – as well as the planet – for Shell to reduce its emissions harder and faster than the Board is currently planning.”

This lawsuit may be the catalyst for Canadian climate change litigation to move from actions against governments to actions against private corporations, challenging the coverage offered under D&O policies.

 

03/07/23       OSFI Publishes New Mandatory Expectations for the Management of Climate Risks

On March 7, 2023, the Office of the Superintendent of Financial Institutions (OSFI) published its first guideline for the management of climate risks in Canada. This guideline is applicable to all federally regulated financial institutions which includes federally regulated American insurers operating in Canada.  It comes into effect fiscal year-end 2024.

 

03/16/23       New Brunswick Caps Disaster Financial Assistance for Homeowners

The Public Safety Ministry for the Province of New Brunswick has announced that effective immediately, the maximum payable by the provincial government for disasters such as flooding and coastal storm surge will increase to $200,000 up from the current level of $160,000. However, once the $200,000 limit has been reached for incidents of the same nature, the property will have a notice placed on the provincial land registry indicating it is ineligible for assistance after a similar disaster. The notice goes against title meaning that no subsequent homeowner can access public funds for damage caused by the same peril.

The changes also include increasing the maximum payout for structural damage and lowering the threshold at which the government would buy out homeowners affected by floods.  Under the previous scheme, the damage had to be 80% of the property’s fair market value for a homeowner to be offered a buyout. That threshold has been changed to 50% arising from one event, or 80% accumulated across multiple disasters, such as flooding.

The Public Safety minister is quoted in the news as saying “The program is designed to help homeowners get out of harm’s way and ensure the taxpayer is not repeatedly paying for the same homes.”

It is expected that other provinces will emulate these changes.

 

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