Coverage Pointers - Volume XXIV, No. 24

Volume XXIV, No. 24 (No. 645)
Friday, May 12, 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.


HF Coverage Pointers


Dear Coverage Pointers Subscribers:

Mothers day mother clip art 4

Do you have a situation? We love situations. Our newest issue of Hurwitz Fine’s Coverage Pointers is attached.  This is our teaser, our cover letter. It’s a mere 31 pages, chock full of all you need to entice you to read the attached 32-page issue of our newsletter.  Our editors welcome you here and prove you with a taste of the meal provided in the newsletter attached. Other than a blue martini, there’s no better way to spend an evening, reading Coverage Pointers.

Happy Mother’s Day.  In our “hundred years ago” news clipping below, we offer you century old Mother’s Day ads, to give you some suggestions for gifts.  I’d suggest you might do better with gifts, other than those advertised.

Moon Rising Over Lake Erie, Ontario


Wrongful Death Legislation (Grieving Families Act) Introduced, Anew:

After suffering a veto this past January, a revised version of the Grieving Families Act was just introduced to the New York legislature on May 2, 2023. The Grieving Families Act would completely overhaul wrongful death claims in New York by permitting recovery for emotional damages and expanding the class of persons who can seek recovery for a fatality. The recent iteration of the bill seeks to remedy perceived pitfalls from the prior legislation by more clearly defining who can assert a claim for emotional damages, narrowing the expansion of the statute of limitation, and placing limits on its retroactivity. The new bill, however, does not implement a cap on damages, nor carve out an exception for medical malpractice claims. Hurwitz Fine Attorneys David Adams and Eric Andrew provide further analysis of this new proposed legislation in Law360's May 4, 2023, Expert Analysis article, "Unpacking NY's Revamped Wrongful Death Bill."

For a pdf of the article, click here


Kudos to our advancing partners:

Hurwitz Fine attorneys Lee SiegelScott KaganJesse Siegel and Mike Williams have all advanced at the firm, effective May 1. Lee has been named a Shareholder and Scott, Jesse and Mike have been promoted to Member. Each of these individuals has exceled as an attorney and in the practice of law. They are committed to their clients, handle highly complex matters, and are always ready and willing to assist our teams. Outside of their legal work, each of these individuals are actively involved in legal and community organizations, and regularly author articles and speak at events.

P.S. And Lee became engaged!


Exhausting Exhaustion:

The battle over vertical and horizontal exhaustion continues in New York with another vote from the Second Circuit for the purists, those who support horizontal exhaustion.  Steve Peiper scored a win at the Second Circuit Court of Appeals this week in a case where we represented Selective, the federal appeals court relegated vertical exhaustion to “judicial economy” but refused to ignore the logical and systematic approach provided by following a horizontal exhaustion approach.  Horizontal exhaustion calls for primary policies to be exhausted before excess or umbrella policies, followed, if appropriate, by the application of risk transfer through common law or trade contracts.  Vertical looks to “intent”.

I thank Heather Sanderson for inviting me to speak at the Canadian Defence Lawyers Insurance Symposium a week ago Friday, on issues relating to requests by policyholders for claim resolution prior to the determining of coverage disputes.  Great panel, great audience, and great organization.

On another topic, we speculated whether Donald Trump’s homeowner’s or Personal Umbrella carrier was asked to provide a defense to the libel claims asserted against him in his recent civil trial.


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.



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

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


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


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


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


Peiper on Property (and Potpourri):

Lots going on in this issue.  We start with the Property column, and particularly the Apergis v. Narragansett Bay Ins. Co. decision reviewed therein.  The Court sided with the carrier that repair/cleaning was sufficient to make the insured whole. In so holding, the Court relied upon expert proof submitted by Narragansett to demonstrate that the damaged items did not need to be replaced as urged by plaintiff. 

Recall, of course, that a first party policy’s primary objective is to place the insured in exactly the same situation he or she was in just prior to the loss.  Thus, if an item can be sufficiently cleaned/repaired, the carrier is under no obligation to pay full replacement cost.  Well done here by the carrier, and a good result from the Court followed.

On the third-party side of things, we do take a moment to offer our own thoughts on the Amerisure v. Selective opinion from the Second Circuit reviewed in Ryan Maxwell’s column.  There has been much discussion over the past few months on the concepts of vertical and horizontal exhaustion.  The concepts are not new, but the expediency of vertical exhaustion appears to be gaining popularity among courts. 

Essentially, where the Court can “cut to the chase” and apply the indemnity language to supersede a traditional other insured analysis, there has been much more openness to doing so.  The concern with this approach, however, is that where the DJ court is rendering a judicial determination on a contractual indemnity claim that may not be before it, the dispute immediately becomes subject to the possibility of inconsistent results.  Consider this.  If the DJ action enforces the indemnity claim on a partial record, but the indemnity claim is dismissed in the underlying action after full and fair litigation, you would end up with a distorted priority of coverage analysis based upon incomplete, or potentially worse, an incorrect analysis. 

This is precisely what was at issue in the Amerisure case.  The underlying trial court had ruled that the indemnity provision was invalid, and thus unenforceable.  Nevertheless, Amerisure continued to argue that the concept of indemnity should control and, in effect, override a traditional “other insurance” analysis.  The Court, in rejecting Amerisure’s claims, noted that the theory of vertical exhaustion relies on judicial economy as its underpinnings.  Thus, if there is no need to litigate the indemnity claim (because it has been conceded, for example), a Court should be empowered to apply its impact in the DJ Action.  Where, as here, the indemnity clause is at issue in the underlying litigation, or has been dismissed, there is no judicial economy realized by relitigating or co-litigating the very same clause. 

Boiled down a sentence, what it appears the Second Circuit is rightly recognizing is where there is no question on indemnity vertical exhaustion is an option.  If there is a question, or a dispute, traditional horizontal exhaustion should rule the day. 

That’s it for this week.  Happy Mother’s Day to all Moms. 

P.S. – In case you are wondering, May 11th is/was “Eat What You Want Day.”  We hope you took the opportunity to celebrate; even if it meant digesting a Devil Dog. 


Steven E. Peiper

[email protected]


DON’T FORGET: She Brought You In, She Can Take You Out! – 100 Years Ago:

The Post-Star

Glens Falls, New York

12 May 1923


is nationally recognized as gift day.

We know a dandy gift that you can’t go wrong on. Let your gift be

A Sterling Range



Robinson Hardware Co.


Wilewicz’ Wide-World of Coverage:    

Two weeks seem to go by ever-faster each time, and here we are again, dear readers. Since our last writing we have kept busy, cross-crossing the State, visiting Yonkers/The Bronx, and finally starting some much-overdue lawn care in the meantime. Lots more travel (but hopefully not too much yard work) to report on the next issue.

Now, this week in the Wide World, we bring you something jurisdictional from the Eighth Circuit Court of Appeals. In its recent decision in M&B Oil v. Federated Mutual, the Court addressed the issue of “snap removal”, a rare procedural device where a defendant moves to remove a matter before other defendants have even had a chance to be served. The question becomes then – is there diversity jurisdiction where the two appearing parties are diverse but other yet-to-be served are not? See the attached summary of the case and link to the decision itself.

Until next time!


Agnes A. Wilewicz

[email protected]


Every Woman Loves A New Pair Of Shoes, So Will Your Mom – 100 Years Ago:

The Post-Star

Glens Falls, New York

12 May 1923

‘Twas Mother

who taught you to walk

NOW you can make Mother’s steps lighter and add to her comfort with a Mother’s Day gift of

A pair of Walk-Over Shoes


Walk-Over Boot Shop

Glen St.                                                                              Glens Falls, N.Y.

Barnas on Bad Faith:

Updates on the NBA playoffs have been in short supply in Coverage Pointers since the Wandering Waters column had its final edition.  So, as a tribute to my good friend, Mr. Waters, I bring you this update on the NBA playoffs.

The Suns made headlines when they traded for Kevin Durant at the trade deadline.  However, they find themselves down 3-2 against Denver and two-time MVP Nikola Jokic.  Denver has not had much playoff success in recent years, but this could be the year they finally make the NBA Finals.  Elsewhere, Knicks fans were excited by their first round win over Cleveland, but the Knicks found themselves down 3-1 to Jimmy Butler and the Miami Heat.  The East seems wide open after the Bucks went out in the first round.  Meanwhile, the defending champion Warriors are on the ropes against LeBron James and the surging Lakers.  This is a rare year in the Association where it seems like any team can win.

With that being said, this week we have one bad faith case from the United States District Court, Southern District of New York.  I hope you enjoy.


Brian D. Barnas

[email protected]


      Make Mom’s Job Easier! – 100 Years Ago:

The Post Star

Glens Falls, New York

12 May 1923


  Of course, you want to lighten her household labors. Then why not make her gift on Mother’s Day





Power and Light


    Phone                                                                            Phone

Glens Falls                                                                Hudson Falls

      1887                                                                            117

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

It’s been a hectic spring. I’m on my third trip to Buffalo in the last month, on top of travels across the country and across an ocean. I’ve been racking up the frequent flyer miles, but at the cost of much needed sleep.

Still, it’s been an exciting time around HF’s Connecticut office. I am proud to announce to my readers that I’ve been elected a shareholder in the firm. I am so grateful for the firm giving me a chance and the support to develop both as a lawyer and business generator, as I returned to private practice just four years ago. Starting from scratch was a daunting prospect. But in a collaborative environment of giving partners, together with a great support staff and strong young associates who made me look good at every turn, it almost felt easy (it wasn’t! but we’re being humble here). A heartfelt thank you to those who were willing to take a risk on me, had the foresight to expand the firm’s practice into Connecticut, and all the assistants, paralegals, and associates who are essential to any firm’s—and my—success.

Keep keeping safe,


Lee S. Siegel

[email protected]


Booze, Whipping, And Fire; Stories from Around The Nation! – 100 Years Ago:

Buffalo Evening News

Buffalo, New York

12 May 1923



COLUMBUS, Ohio May 12.—State Prohibition Commissioner McDonald announced today that four inspectors from his office last night raided the annual “spring prom” at Kenyon college Gambier, Ohio, and arrested eight students for haring liquor in their possession. Considerable “evidence” was reported seized. 


TALLAHASSEE, Fla., May 12.—The banning of all forms of corporal punishment of prisoners in this state at least for two years as a trial measure seemed a certainty today when the senate passed 16 to 11 a bill by Senator Turnbull that would ban whipping of county convicts forever and ban it in the handling of state convicts for two years.


GRAND RAPIDS, Mich., May 12— Armed guards stood watch in every factory lumber yard today, when police attempted to find a pyromaniac, believed responsible for the loss of more than $500,000 in three large furniture fires this week. Discovery that oil had been poured on piles of lumber led to this measure by the police.


Kyle's Construction Column:

Dear Readers,

It finally feels like spring. The weather is good and both golf season and softball season are getting underway. Golfed surprisingly well this week after not swinging a club for almost half a year, apparently the key is to play less.

Unfortunately, there were no noteworthy construction coverage cases to report on this week.

Until next time,


Kyle A. Ruffner
[email protected]


All I Can Say Is Yikes … – 100 Years Ago:

The Buffalo Times

Buffalo, New York

12 May 1923

Baby to Honor Youngest Mother

SAN ANTONIO, Tex., May 12.— Two months old Gordon Joe will wear a red flower on “Mothers’ Day” in honor of ten years old Mary Cavander. The world's youngest mother.

Mother Mary has temporarily deserted her marvelous little "Live Doll,” that smiles and sometimes cries, in her enthusiasm in arranging surprise for Mrs. Sarah Culberson, the only mother that the 28 children at the San Antonio mission know.

Beyond the red rose to be worn by her baby, Gordon Joe, there will be no recognition of the fact that Mary is a mother. The policy of the home, according to Mrs. Culberson, is to treat Mary herself as a child and keep her from feeling the full extent of her responsibilities.


Ryan’s Federal Reporter:

Hello Loyal Coverage Pointers Subscribers:

It begins. My oldest son had his first baseball game yesterday and it was…interesting. He got the start in center field, but his team only fielded six positions and so he was technically the designated outfielder, but wound up defending the area between the mound and second base in the infield. He also served a few innings at first base, where he did what he was told (well sort of). It was difficult to get him to make a target for the thrower, which was complicated by the concept of tracking. He was a perfect target for the batter, but the ball was somewhere in the field. Then he was a target for the second baseman, which would have been great except the second baseman fielded the last one and the pitcher had the ball this time. A work in progress. But he was four for four batting, which is something his dad has not done in a while, if ever. Dad will get a crack at batting again tonight as the HF softball team takes on Assigned Counsel in the first game of the season.

For this edition, I have two federal decisions for you.

The first is a recent Second Circuit Summary Order handled by HF’s one and only Steve Peiper, which addressed priority of coverage and provided an interesting gloss on another recent Second Circuit decision, Century Surety Company v. Metropolitan Transit Authority. In Century Surety, a different judicial panel, applying New York law, found the “other insurance” clauses of competing policies irrelevant, concluding that “an indemnity agreement in a trade contract between insureds could override the terms of an insurance policy concerning priority of coverage.” This most recent panel characterized Century Surety as espousing “judicial economy” in its effort to avoid the need to file a separate action to establish a right to contractual indemnification. This most recent decision opens the door for a return to traditional priority of coverage analysis where jumping the shark and deciding contractual indemnification in a coverage action may not serve judicial economy. One scenario that comes to mind for me is the actual existence of an underlying third-party action between the parties to a trade contract, who are in a better position to advocate for their rights and obligations under their contract.

The second decision discussed is a recent Southern District of New York decision involving the interplay between CGL and auto insurance, and the scope of “loading and unloading,” where, and when. Although the decision is an interesting read, there is a practice pointer to be had relative to the appropriate interpretive standard. Although the matter was brought by an insured against two insurers, of which the insured preferred one over the other, contra preferentum was found inapplicable to resolve an ambiguity since the matter essentially concerned two competing insurers, and the circumstances required coverage owed by one or the other. I think Highlander said it best: “There can be only one.”

Until next time…


Ryan P. Maxwell

[email protected]


Accordion Player Sued for Slander – 100 Years Ago:

Democrat and Chronicle

Rochester, New York

12 May 1923

Dollar Verdict Given

Woman in Slander Action

Mrs. Maria Casello of Field Road, Gates was awarded a verdict of $1 by the jury in Supreme Court in a suit against Antonia Savino, of No. 309 Orchard street as damages for alleged slanderous remarks made by the latter.

Mr. and Mrs. Savino and Mrs. Casello all attended a party given at the home of Mr. and Mrs. Donato Cavnoti, of No. 276 Whitney Street, one evening in May 1922. The Cavnotis had killed a fatted calf, and after the feast Savino tuned up his accordion and the guests danced to the music.

Testimony showed that all went well until Savino turned over the accordion to his host and asked Mrs. Casello to dance with him. When she declined, it was alleged, he turned to the hostess and made some derogatory remarks concerning Mrs. Casello. She sued for slander. Savino in his own defense said that Mrs. Casello was impolite when she declined his invitation to dance. In his reply to this, Mrs. Casello said she merely told him he was too drunk to make a good partner.

The trial consumed a day and the jury decided, after a half hour’s deliberation, that $1 would cover the damages. James L. Brewer appeared for the plaintiff with William J. Maloney representing the defendant.


Rauh’s Ramblings:

On maternity leave           


Patricia A. Rauh

[email protected]


Short in Stature, Big in Crime – 100 Years Ago:

Buffalo Courier 

Buffalo, New York

12 May 1923



Two of the smallest prisoners who ever appeared in higher courts were sentenced yesterday by Judge Noonan in county court. They were Joseph Tresco, seventeen years old, No. 271 Myrtle Avenue. and his brother Daniel, sixteen years old. Neither of the lads were more than four feet, eight or nine inches tall.

Both were charged with first degree grand larceny. Judge Noonan suspended sentence, however, so that they could he sent back to Industry for violating their parole. They were accused of holding up Frank Hennessey, No. 147 Purdy Street, on the night of last March 9.

On his plea of guilty to first degree criminally receiving stolen property, Alexander Berkowitz, thirty-six years old, Brookline, Mass., was given a suspended sentence. It was an old indictment and Berkowitz had served in Sing Sing since the indictment was found against him here.

Ernest Simoni, twenty-three years old. No. 1548 Filmore Avenue pleaded guilty to a charge of second degree grand larceny and also was released under a suspended sentence.


Storm’s SIU:

Hi Team:

The rain has finally stopped, and the sun is shining.  Better weather to enjoy watching baseball and my favorite team, Orchard Park Quakers Varsity (undefeated), and my favorite player – my son.  In the MLB my other favorite teams, Dodgers and Pirates, are doing great and the Mets, well o.k., but they’ll get better.  

Three cases this edition:

  • Claimant Who Lived with Her Daughter’s Grandmother was Not a Covered Person Under the Grandmother’s Auto Policy for UIM Coverage as Not Related by Blood, Marriage, or Adoption.

  • In Granting Summary Judgment to Insurer in Response to Fraudulent PIP Claim, Court Admitted Unsigned EUO Transcript as Evidence in Establishing Material Misrepresentation.

  • Commercial Liability Policy Does Not Cover Disease from Microorganisms or Bodily Injuries Due to Exposure to Mold Caused by Negligent Construction.

See you next edition.  Have a most-excellent two weeks!


Scott D. Storm

[email protected]


A Woman’s Suit Falls Short, As She Did at The Movies – 100 Years Ago:

Daily News

New York, New York

12 May 1923



Mrs. Cecilia Wray, 521 East Sixteenth Street, who sued Loew’s Theatrical Enterprises for $35,000 damages for being ejected from a motion picture at 162 East Eighty-sixth Street after an argument with a girl usher, was awarded a verdict of $500 yesterday by a jury before Supreme Court Justice Tierney. The argument started when Mrs. Wray claimed her ticket entitled her to a reserved seat. She said she suffered permanent injury as a result of being forcibly removed from the theater.


Fleming’s Finest:

Hi Coverage Pointers Subscribers:

This week, Fleming’s Finest continues its Southern Tour with another opinion from the Texas Supreme Court. Unlike New York, Texas follows the minority rule that requires an element of scienter to rescind an insurance policy based on a material misrepresentation on the insurance application. The Texas Supreme Court held that the common-law requirement had not been displaced by statutory recodification, which set a floor rather than the exhaustive requirements to rescind a policy.

In other news, firm softball starts up again this week, so we are all looking forward to a little friendly competition. 

Catch you later,


Katherine A. Fleming

[email protected]


Dad Jokes Never Fall Out of Fashion – 100 Years Ago:

Yonkers Statesman and the Yonkers Daily News

Yonkers, New York

12 May 1923

Smile a While With Tom Sims

We have two new British lecturers. But could be worse. Suppose they stuttered!


Good steaks are rare.


Galesburg (Ill.) woman defeated her husband in an election and now he can sue for non-support.


It is not true that when a runaway balloon landed near Plano, Ill., they thought it was an oil salesman.


A Kentucky mountaineer who was a dead shot is dead, shot.


Miss Edna Wallace is an actress of 62 who looks like 26. Just the opposite is often true.


New York man is in trouble because he never kissed his wife, and you can tell, your husband.


National drive to clean up swindlers has been started because they are cleaning up too much.


Rome prohibits kissing in public places! No doubt girls say. mouths are not public places.


Gestwick’s Greatest:

Hello Readers!

As my colleagues have informed you already, the sun is indeed shining. NHL and NBA playoffs are both in full swing, but so, too, are the often-forgotten NLL playoffs. Our hometown Buffalo Bandits executed a beautiful 20-7 victory over the Rochester Knighthawks last weekend. Because the first round is single-elimination, they begin the second round, a best-of-three series, against the Toronto Rock, this Friday evening.

All of this action in the world of sports must have New York’s trial-level courts pre-occupied this week, as there was nothing of particular interest to report on this week. Double cases for you next time around, I’m sure of it. See you in two weeks!


Evan D. Gestwick

[email protected]


Insurance Companies Cry “J” – 100 Years Ago:

The Brantford Expositor

Brantford, Ontario

12 May 1923



Joyriders, Jaywalkers, and Juries Play Big Part in

Keeping Rates at High Figure—Some Causes

for Dissatisfaction Explained

Today the motoring public is up in arms against insurance companies, claiming that the rates for automobile insurance are not merely too high, but, in many instances prohibitive. The insurance companies admit that the rates are often prohibitive, and, viewed from the motorist's standpoint are too high, but from the standpoint of the insurance company they not only are not too high, but not high enough.

The cause of insurance rates is childishly simple; facetiously it can be attributed to three "J’s," Joyriders, Jaywalkers and Juries, and yet underlying this is a very serious condition which is not provocative of mirth.

First is the joyrider. In him is an irresponsible, irrepressible operator of a heavy, fast-moving instrument of great and serious possibilities. He drives rapidly and recklessly, and the two are not necessarily related—causing death, serious injuries to persons or destruction to another's property and probably to his own property. The jaywalker does the unexpected. No matter how careful the motorist, he cannot guard against the pernicious activity of the pedestrian who, hurrying across a thoroughfare, suddenly changes his mind and reverses his steps. Under the head of jay-walker comes also the individual who crosses streets at points other than at crossings, and those who suddenly appear from behind a moving vehicle, and, with sublime faith in some power that motorists are not aware of, expect to escape unscathed from that which should be termed "attempted suicide.”


And then the juries. To one who is in the habit of thinking, the reports in the daily papers of jury awards explain much. The extent of the injuries plays a minor part in influencing nine out of every ten juries which are drawn in accident cases. Contrary to all question of right or wrong the main factor is the income, real or suspected, of the person who causes the injury. Whether or not the car owner was at fault often makes little or no difference. A clerk driving a low-priced car, a businessman with a medium-priced car, and a banker or broker with an expensive car affect the jury differently. Each one is assessed all that it is believed he can stand. Only a week or two ago a jury awarded about $15,000 for a sprained or broken wrist and a bruised knee. A mother was given $28,000 in a suit brought against her daughter in whose car she was a passenger when the accident occurred.


On the Road with O’Shea:


Hey Readers,

This week I have a Second Department decision considering a discovery issue within an auto case. The case is pretty interesting as it considers the timing of disclosure of surveillance materials compiled during litigation.

On another note, golf season is upon us. The PGA Championship starts in Rochester next week. Hopefully, I can learn something there to improve my boomerang of a slice.


Ryan P. O’Shea
[email protected]


Local Man Creates Ray, Unbound by Physics  – 100 Years Ago:

Brooklyn Daily Eagle

Brooklyn, New York

12 May 1923

Pull Of Gravity Offset By

Odic Ray, Inventor Claims;

May Use Steel Airships

Pasadena Cal., May 12—Aviation of the future may be based on the use of a newly discovered ray which “shuts off” the pull of gravity, if a theory propounded by Edgard L. Hollingshead, local inventor and experimenter in the field of electricity, is substantiated in practice.

Mr. Hollingshead calls the new ray which he said he discovered after 30 years of experimentation, the odic ray.

Its most spectacular property is the power to increase atomic speed in matter upon which it is focused. When the speed of the whirling atoms reaches a certain point, he explains, the pull of gravity has no effect on them.

When the use of the odic ray has been perfected, Mr. Hollingshead predicts, any solid object on which it may be focused on will float in air. Equipped with the proper apparatus, for generating this powerful ray, he asserts, the airship of the future could be built of steel and yet rise with the ease of gas filled dirigible.

Heat also accelerates the speed of whirling atoms composing any substance, Mr. Hollingshead points out, but heat freely applied eventually transforms the solid into a gas. The odic ray, on the other hand, can increase the atomic speed tremendously without causing the disintegration of the solid, he said.

The action of a gyroscope furnishes an illustration of power of accelerated motion to offset gravity. The rapidly revolving gyroscope cannot be toppled over by a blow; yet when it is not revolving it is pulled over by a force of gravity. A somewhat similar “speeding up” of atoms in any substance, according to Mr. Hollingshead, sets up a force which overcomes gravity.


Louttit’s Legislative and Regulatory Roundup:

Hello All:

Today’s column reports on the advancement of a proposed bill that if passed and signed into law would require insurers in the event of a declared disaster or emergency to accept or reject a claim within a limited time frame. We’ll keep an eye on this bill, which advanced to a third reading in New York State’s legislature, If passed and signed into law, it could place an incredible strain on insurers resources during times immediately following a natural disaster like Super Storm Sandy.

That is all I have to report. I’ll continue to update everyone on bills and laws discussed and passed in New York that affect New York’s insurance community.


 Robert P. Louttit

[email protected]


Bare Leg, Bare Screen Says Commission   – 100 Years Ago:

Buffalo Evening News

Buffalo, New York

12 May 1923



Movie Censors Order Deletion

From Picture and Courts Invoked

The question whether a man's bare leg tends to incite to crime, if exposed to the eye of the movie fan, must be decided by the Appellate division of the Supreme court because of the efforts of Mrs. Eli T. Hosmer. 68 Ashland Avenue, a member of the Motion Picture commission, to have a scene deleted from a comedy showing a dog pulling the trousers off an actor who is dancing.

Mrs. Hosmer was not at home to-day, but it is reported that she objected to a subtitle which ordered someone to "take him up seven miles and throw him out—after that he's his own boss," the punishment meted out in the comedy to the dog who caused the painful scene. Mrs. Hosmer's letter, reporting on the picture to the commission—which allowed her protest against the showing of unsheathed shins to remain, but rejected her protest against the subtitle, ordered the commission to:

"Eliminate scene throwing dog out of airplane."

“Eliminate the views of man's leg exposed where trouser is pulled off by dog at dance."

"Eliminate episode of lighting fuse attached to dog's tail."

The order of review in the Appellate division was obtained by the Pathe exchange after the commission had refused to change the ruling made by Mrs. Hosmer. Meanwhile the picture will remain in obscurity until the court hands down its decision.


North of the Border:

The Canadian Defence Lawyers’ Insurance Coverage Symposium in Toronto on April 28 was a success; the venue was sold out; all of the speakers were in fine form, including Dan Kohane, who spoke on a panel discussing what the insurer’s options are when the insured wants an early settlement and the insurer disagrees. It was so good to spend time in person with CDL members and insurance personnel from British Columbia, Alberta, Ontario, Quebec and Nova Scotia. We used to take that interaction for granted. Now its special.

My column this week discusses whether an intentional act motivated by paranoid delusions is within the intentional and criminal act exclusion of a liability policy.



Heather A. Sanderson

Sanderson Law, Calgary, Alberta

[email protected]


Get the Worm … Those Parking Spaces are Gone Now   – 100 Years Ago:

Buffalo Evening News

Buffalo, New York

12 May 1923



Schwab Names 39 persons for

29 Available Places at City Hall Curb

If Mayor Schwab keeps adding to the list of plain people privileged to park their automobiles in Franklin Street in front of the City Hall, he will have to begin proceedings to have that section of the street widened.  Already there are 39 names on the list with parking places for only 29 cars, so until the parking place is enlarged it would seem to be a case of the early bird getting the proverbial reward for punctuality.

Some of the wiseacres around City Hall were inclined to believe that the mayor in making it a case of first come, first served, was actuated by desire to encourage earlier reporting for duty on the part of city employes but among those, privileged to park their cars in front of the hall are justices of the Supreme court and other dignitaries who would likely resent any effort on the part of the mayor to tell them when they should "punch the time clock." So complications are likely to result from the mayor’s overstuffed list.

Among the plain persons whose names were added to the list today were Walter T. Hofheins, assistant district attorney; Jeremiah J. Hurley, assistant corporation counsel; Ralph K. Robertson, assistant corporation counsel; Horace F. Hunt, commissioner of charities and corrections. The latter two have no offices in the City Hall.


Headlines from this week’s issue, attached:


Dan D. Kohane
[email protected]

  • Policy Reformed to Reflect Current Owner of Premises as an Additional Insured when that was Clearly the Parties Intention.  Late Disclaimer on Policy Exclusion Bars its Enforcement

  • A Valid Premium Arbitration Agreement that Bound the Named Insured, Did Not Bind Subsidiaries and Affiliates

  • Antisubrogation Rule Not Triggered because there was No Proof that the Third Party Action Sought to Recover Damages by One insured against Another.  Pay Attention to the Procedural Posture of the Motion


Steven E. Peiper

[email protected]

  • Replacement of Allegedly Damaged Property Not Appropriate Where the Items Could be Restored/Cleaned

  • Proof of Loss Tendered Outside of 60 Days Results in Loss of Coverage for Insured

  • Failure to Appear at EUO, After Repeated Warnings, Vitiates Coverage

  • Incomplete Appendix Results in Dismissal of Appeal


Agnes A. Wilewicz

[email protected]

  • Eighth Circuit Court of Appeals Addresses Rare Procedural Maneuver in Federal Court Called Snap Removal, in Coverage Case of Disputed Jurisdiction



Brian D. Barnas

[email protected]

  • No Bad Faith where Plaintiff Stood in Shoes of the Insured During Settlement Negotiations



Lee S. Siegel

[email protected]

  • Advice of Counsel Defense Defeats Bad Faith Claims

  • Court Fails to Decide the Bad Faith Pleading Standard


Kyle A. Ruffner

[email protected]

  • No noteworthy construction related coverage decisions this week


Ryan P. Maxwell

[email protected]

  • Subcontract Found Not To Contain Additional Insured Provision, While Judicial Economy Favors Horizontal Exhaustion of Primary CGL Policies 

  • Complete Operation Doctrine Found Inapplicable To Dispute That Was “In Reality, Between Two Insurers”



Patricia A. Rauh

[email protected]

  • On maternity leave


Scott D. Storm

[email protected]

  • Claimant Who Lived with Her Daughter’s Grandmother was Not a Covered Person Under the Grandmother’s Auto Policy for UIM Coverage as Not Related by Blood, Marriage, or Adoption

  • In Granting Summary Judgment to Insurer in Response to Fraudulent PIP Claim, Court Admitted Unsigned EUO Transcript as Evidence in Establishing Material Misrepresentation

  • Commercial Liability Policy Does Not Cover Disease from Microorganisms or Bodily Injuries Due to Exposure to Mold Caused by Negligent Construction



Katherine A. Fleming

[email protected]

  • Texas Common-Law Scienter Requirement To Avoid Liability Based On A Material Misrepresentation Not Displaced By Statutory Recodification



Evan D. Gestwick

[email protected]

  • Nothing of particular note this time around from New York’s trial level courts. See you in two weeks!

ON the ROAD with O’SHEA

Ryan P. O’Shea

[email protected]

  • Disclosure of Post Video Surveillance


Robert P. Louttit

[email protected]

  • Assembly Bill to Establish Specified Standards for the Prompt Resolution of Claims Arising Out of State Emergencies Advanced to Third Reading



Heather A. Sanderson

Sanderson Law, Calgary, Alberta

[email protected]

  • An Intentional Act Motivated by Paranoid Delusion is an Intentional Act Within the Meaning of an Intentional and Criminal Act Exclusion


From our offices and homes to you and yours, all the best and again, Happy Mother’s Day.


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

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

Dan D. Kohane

[email protected]


Agnes A. Wilewicz

[email protected]


Evan D. Gestwick

[email protected]

Dan D. Kohane, Chair
[email protected]

Steven E. Peiper, Co-Chair

[email protected]
Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

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

Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Scott D. Storm

Brian D. Barnas

Dan D. Kohane

[email protected]

Alice A. Trueman

Jody E. Briandi, Team Leader
[email protected]

Diane F. Bosse

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Kyle’s Construction Column

Ryan’s Federal Reporter

Rauh’s Ramblings

Storm’s SIU

Fleming’s Finest

Gestwick’s Greatest

On the Road with O’Shea

Loutit’s Legislative and Regulatory Roundup

North of the Border


Dan D. Kohane

[email protected]


05/11/23       Wesco Insurance Company v. Fulmont Mutual Ins. Co.

Appellate Division, First Department

Policy Reformed to Reflect Current Owner of Premises as an Additional Insured when that was Clearly the Parties Intention.  Late Disclaimer on Policy Exclusion Bars its Enforcement

This insurance coverage action arises out of a personal injury lawsuit commenced against Beyond as owner of the premises located at 501 West 173rd Street (also known as 2284 Amsterdam Avenue). Pursuant to the terms of the commercial lease, the tenant added the building, 2284 Amsterdam Avenue, and its then-owners, SC2284 LLC and EFE Realty LLC (SC2284 LLC), as additional insureds under its commercial general liability insurance policy issued by Fulmont. SC2284 LLC conveyed the premises to 501 West 173 Street, LLC (501 West), and the insurance policy was updated merely to replace SC2284 LLC with 501 West as the additional insured.

Prior to the underlying accident, 501 West conveyed the property to Beyond by deed dated January 7, 2016. The additional insured endorsement in the policy maintained by the tenant, however, was not updated to reflect this change in ownership. As such, although the policy remained in effect with additional insured coverage, 501 West, the former owner, was still listed as the additional insured, not Beyond.

On October 2, 2019, plaintiffs tendered the defense and indemnification of the underlying claims to Fulmont after the tenant failed to respond to their September 21, 2018, and June 17, 2019, demands for coverage. In correspondence dated November 7, 2019, and May 18, 2020, Fulmont disclaimed coverage to Beyond on two grounds — that Beyond was not "an insured or additional insured under the above referenced policy," and that "based on our investigation to date, it cannot be determined that the alleged accident occurred within the demised premises or from the use of, maintenance of, or the direct operation of our insured."

On April 13, 2021, Wesco responded to Fulmont, stating that 501 West was misidentified on the Fulmont policy. Wesco contended that the failure to update the owner's name after the January 7, 2016, sale of the property to Beyond was the result of an innocent mistake, and that, as such, the policy should be reformed to substitute Beyond for 501 West. Wesco also stated that Fulmont's other basis for denying coverage was inaccurate, as the photographic evidence demonstrated that the alleged accident location was the public sidewalk next to the premises leased to the tenant, which exposed the tenant to liability. This action ensued.

The policy was reformed. The Fulmont insurance policy always extended coverage to the building and its owner as additional insureds. Thus, under these circumstances, the fact that the endorsement was never updated by the tenant to reflect a mere change in ownership is of no moment. The name of the insured in the policy is not dispositive if the intent to cover the risk, as here, is clear.

Moreover, Fulmont failed to timely provide written notice that it was disclaiming coverage based on the vicarious liability exclusion in its policy, which it asserted in its June 1, 2021, answer. Insurance Law § 3420(d) requires a liability insurer to disclaim coverage of a personal injury claim by written notice "as soon as is reasonably possible." "Insurance Law § 3420(d) precludes an insurer from delaying issuance of a disclaimer on a ground that the insurer knows to be valid . . . while investigating other possible grounds for disclaiming" Fulmont, by first disclaiming coverage based on the vicarious liability exclusion in its answer, failed to disclaim coverage as soon as reasonably possible, as required under Insurance Law § 3420(d)(2).

Editor’s Note:  Attaboy Max (Gershweir).  He hasn’t had one in a while.


05/10/23       Kent Waterfront Assoc. LLC, v. National Union Fire Ins. Co.

Appellate Division, Second Department

A Valid Premium Arbitration Agreement that Bound the Named Insured, Did Not Bind Subsidiaries and Affiliates

Kent Builders entered into a payment agreement with the respondent, National Union pursuant to which National Union agreed to provide insurance coverage. The payment agreement contained a provision for arbitration whereby "[a]ny other unresolved dispute arising out of this Agreement must be submitted to arbitration."

When a dispute over the payment of premiums arose, National Union served a demand for arbitration on Kent Builders, and its subsidiaries and affiliates.  The subsidiaries/affiliates moved to stay arbitration, claiming that they were not bound by the arbitration agreement.

While National Union acknowledged that the subsidiaries were not identified as named insureds, it relies upon a separate provision of the payment agreement indicating that the agreement was binding on Kent Builders as well as "all Your subsidiaries or affiliates except those listed below: (None)."

Contrary to National Union's contention, the payment agreement contained plain and unambiguous language providing that Kent Builders' affiliates were bound only if they were named insureds, and that language must be given effect. Since the appellants were not named insureds, they were not bound by the payment agreement.


05/10/23       Catlin Insurance Company, Inc. v. Falco Construction Corp.

Appellate Division, Second Department

Antisubrogation Rule Not Triggered because there was No Proof that the Third-Party Action Sought to Recover Damages by One Insured Against Another.  Pay Attention to the Procedural Posture of the Motion

Catlin Insurance Company, Inc., as subrogee of LRC Construction, LLC commenced this subrogation action against Falco to recover insurance benefits it paid in connection with property damage that occurred during a construction project for which LRC Construction, LLC (“LRC”), was the construction manager and Falco performed excavation installation work. Falco commenced a third-party action against LRC, seeking indemnification and contribution.

Catlin, on behalf of its insured LRC, moved to dismiss the third-party complaint,  on the ground that the third-party action was, in essence, a subrogation action asserted on behalf of Falco's insurer and was barred by the antisubrogation rule because, pursuant to the contract between LRC and Falco, LRC was to be named as an additional insured under the insurance policy issued to Falco.

In opposition to the motion, Falco submitted, inter alia, its insurance policy, under which LRC was included as an additional insured, "but only with respect to operations performed by or on behalf of Falco.”

"Under the antisubrogation rule, an insurer has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered". The essential element of the antisubrogation rule is that the party to which the insurer seeks to subrogate is covered by the relevant insurance policy. 

If the third-party action commenced by Falco can be regarded as effectively seeking subrogation on behalf of Falco's insurer, Catlin nonetheless failed to establish that the relief sought therein is barred by the antisubrogation rule. Since its submissions in support of its motion did not demonstrate that the loss was related to operations performed by or on behalf of Falco.  Catlin failed, under the circumstances of this case, to establish that LRC was covered as an additional insured under the terms of Falco's insurance policy. Accordingly, the Supreme Court properly determined that, at this juncture, there is no basis on which to dismiss the third-party complaint pursuant to the antisubrogation rule.

Editor’s note:  Setting aside the question of whether or not the parties were insured under the same policy, I want to take a moment and comment on procedure. There are some courts that have taken the position that antisubrogation questions must be resolved in a separate Declaratory Judgment Action.  Those courts, we suggest, are wrong. It is tort defense that should be resolved, as the parties did here, in the underlying action by a motion to dismiss.



Steven E. Peiper

[email protected]


05/11/23       Apergis v. Narragansett Bay Ins. Co.

Appellate Division, Second Department

Replacement of Allegedly Damaged Property Not Appropriate Where the Items Could be Restored/Cleaned

Plaintiff’s home sustained damage, and plaintiff sustained damage to his personal property, when the boiler at the home malfunctioned and created a “puff back.”  The insurer issued undisputed payments for structural damage, damage to flooring, and damage to personal property.  Plaintiff, being unsatisfied with the offer from the insurer, commenced the instant action alleging breach of contract.

In ultimately moving for summary judgment, Narragansett produced reports prepared by two investigators and an expert in garment cleaning, all of which opined that the disputed damage could have been repaired/cleaned and did not require replacement.  Plaintiff was unable to oppose the carrier’s proof on repair/cleaning, and as such his action was dismissed accordingly.


05/04/23       Picinich v. NY Cent. Mut. Fire Ins. Co.

Appellate Division, Third Department

Proof of Loss Tendered Outside of 60 Days Results in Loss of Coverage for Insured

This matter has its origins in a 2019 fire loss at plaintiff’s home.  We are advised that the carrier made payment on the undisputed portion of the loss.  Plaintiff commenced this action seeking to challenge the sufficiency of the damages paid.  Unfortunately for the plaintiff, the claim record revealed that NY Central requested documents and EUO in September of 2020.  In addition, it also sent a formal demand for proof of loss at the same time. 

In January of 2021, with no additional information provided, NY Central disclaimed coverage.  In February of 2021, plaintiff submitted its proof of loss which was subsequently rejected as untimely.

The Appellate Division granted summary judgment, noting that the failure to submit a proof of loss form within 60 days of receipt from the insurer is an absolute defense.  In so holding, the Court noted that a partially typed inventory list prepared by the insured’s public adjuster was insufficient because it was not signed/sworn to.   

In addition, this particular policy required that the carrier demonstrate prejudice before it disclaimed coverage for failure to timely proffer a proof of loss.  Here, however, the claims professional handling the file submitted an affidavit that asserted he was unable to complete the investigation because he did not have a complete claimed loss which inhibited his ability value the claimed damages.


05/02/23       MDRN Intelligence Living Wolfhome v. Hartford Fin. Servs.

Appellate Division, Second Department

Failure to Appear at EUO, After Repeated Warnings, Vitiates Coverage

Plaintiff commenced this action seeking recovery for first party loss under its policy.  However, prior to filing the action, the record of the claim reveals that plaintiff’s principal failed to comply with a number of conditions precedent to coverage.  Among them, the court advises that plaintiff failed to respond to “repeated requests” for documents, failed to return a signed EUO transcript, and failed to produce the plaintiff’s principal for an EUO. 

The court noted that Hartford made “continued warning” that the foregoing issues would jeopardize plaintiff’s rights to coverage.  When the matter was eventually placed into suit, Hartford moved for summary judgment based on the foregoing violations of conditions.  Hartford’s motion was granted with the Court noting that “failure to appear for an examination under oath is an ‘absolute defense’.” 



05/03/23       Ravasio v. La Pata

Appellate Division, Second Department

Incomplete Appendix Results in Dismissal of Appeal

Plaintiff’s lawsuit was dismissed on summary judgment.  In attempting to perfect the subsequent appeal, plaintiff attempted to certify the record using the “appendix method” rather than a jointly stipulated Record.  Unfortunately, plaintiff failed to include the defendant’s moving papers, the plaintiff’s opposition papers and “most of the supporting exhibits.”

Not surprisingly, the appeal was dismissed for failure to provide the Court with an adequate Record.   



Agnes A. Wilewicz

[email protected]


05/01/23       M&B Oil, Inc. v. Federated Mutual Ins. Co.

United States Court of Appeals, Eighth Circuit

Eighth Circuit Court of Appeals Addresses Rare Procedural Maneuver in Federal Court Called Snap Removal, in Coverage Case of Disputed Jurisdiction

M&B Oil suffered a water leak that allegedly caused over $400,000 in property damage. They had been insured by Federated Mutual, who denied the claim. M&B then brought a state-law breach of contract claim in Missouri state court for alleged “vexatious refusal to pay”. Interestingly, M&B also sued in that action the City of St. Louis under a detrimental reliance theory for failing to “shut off the water” as promised, which precipitated the damages, as it were.

Federated immediately filed a notice of removal of the action in order to bring it into Federal Court. However, in what the court called an “unusual procedural twist”, Federated filed that notice before M&B had properly served the City. Notably, the City of St. Louis was the only non-diverse defendant. Federated ’s position at the time was that complete diversity jurisdiction (as is required for the Federal Court to hear a case, absent a federal question), because Federated was a Minnesota corporate, M&B was a citizen of Missouri, and St. Louis was not yet a party to the case.

The next procedural wrinkle was that M&B then filed an amended complaint to add an inverse-condemnation claim against St. Louis. This alleged that the City was responsible for the property damage due to its allegedly “unreasonable use and maintenance of the buildings water-piping system”. Then, M&B made a motion to remand the case back down to state court, arguing the subject matter jurisdiction was absent because there were Missouri citizens on both sides of the caption. This motion was denied because not only was the City not officially a party until it was “properly joined and served” but that did not even happen until after the removal to Federal Court. This had cured complete diversity.

Ordinarily, a decision to deny remand is not immediately appealable in Federal Court (i.e., there is no interlocutory appeal and you can only appeal a final judgment). However, the Second Circuit took this up because there were two novel questions presented: are “snap removals” permitted and if so, under what circumstances will amendments to pleadings warrant remand?

Ultimately, in a nicely worded primer on federal jurisdiction, the Second Circuit said that “service does not matter in evaluating the diversity of the parties”. Indeed, the citizenship of all named plaintiffs and all named defendants count, regardless of service. Here, as such, there was no “original jurisdiction”. Moreover, the Court wrote:

“Snap removal has nothing to do with the complete-diversity requirement. It offers a potential solution to a different problem: the forum-defendant rule. First enacted in 1887, the forum-defendant rule keeps certain “otherwise-removable” cases in state court if any “property joined and served” defendant “is a citizen of the state in which such action is brought. So, what happens if the action is removed before the plaintiff “properly joins and serves” the forum-state defendant? Although we have yet to weigh in on the question, many courts have held that the forum-defendant rule does not apply. A defendant can remove the case to federal court, assuming there is “original jurisdiction”, if the forum-state defendant has yet to be property served. Even if we assume these courts are right, snap removal cannot cute a lack of complete diversity. Remember that the forum-defendant rule only applies when the case is, in the words of the statute, “otherwise removable”, meaning there is “original jurisdiction”.

It then adds a further limitation based on the citizenship of the defendant. It does not subtract the requirement that the parties be completely diverse. Indeed, as we recently explained, the forum-defendant rule is not jurisdictional at all. Violating does not destroy jurisdiction. Complying with it cannot create jurisdiction either. Snap removal or not, an absence of complete diversity makes a federal forum unavailable.”



Brian D. Barnas

[email protected]

05/03/23       Crysknife Capital v. Liberty Specialty Markets

United States District Court, Southern District of New York

No Bad Faith where Plaintiff Stood in Shoes of the Insured During Settlement Negotiations

This coverage dispute arose over a guaranty signed by McDevitt in connection with a transaction between KLS and his former company Sensei.  The question was whether Sensei’s insurance covered McDevitt’s liability regarding that transaction.  Sensei was insured by Lloyd’s and Liberty (together “Defendants”). 

In the underlying litigation, the court granted summary judgment to KLS, concluding that McDevitt had breached the conditional guaranty in the contract.  Breach of the guaranty made McDevitt personally liable on the promissory note for purchase of the company.  Together with interest, the judgment entered in the underlying litigation was valued at $5,469,186.79.  McDevitt appealed the decision to the Second Circuit.  The Second Circuit affirmed the decision of the district court on July 13, 2022.

Defendants had issued a policy to Sensei with Directors, Officers and Company Liability Coverage.  The policy contained multiple exclusions that Defendants claimed applied to the suit against McDevitt, but Defendants defended McDevitt in the KLS action.

While the appeal of the summary judgment decision was pending, KLS assigned the judgment in the underlying action to Crysknife Capital, the plaintiff in the coverage and bad faith action. On or about April 25, 2022, Plaintiff and McDevitt entered into a settlement agreement, whereby Plaintiff agreed to discount the KLS judgment in exchange for assignment of McDevitt's rights under the Policy.  Following McDevitt's assignment to Plaintiff, Plaintiff attempted to negotiate with Defendants. Plaintiff offered to release its claims against McDevitt pursuant to the judgment in exchange for payment of the remaining limits of the policy. Defendants denied Plaintiff's offer.

Plaintiff commenced this action seeking to recover the judgment from the Policy. Plaintiff also argued that it was entitled to the entire judgment because Defendants failed to settle the underlying action in bad faith. Defendants opposed, arguing that certain exclusions in the policy applied and because they did not act in bad faith.

The court found that Defendants could not establish the applicability of any policy exclusions.  The decision of the court in the underlying action did not establish that McDevitt engaged in fraudulent conduct.  The court also found that the improper advantage exclusion did not apply.  In addition, the court concluded that the prior litigation exclusion was inapplicable.  Accordingly, the court found that Plaintiff demonstrated there were no disputes of material fact that coverage existed under the Policy and that no exclusions applied.

However, the court did find that Plaintiff could not show bad faith.  Plaintiff argued that the Defendants acted in bad faith by failing to settle the claim within the policy limits and that Defendants exposed Plaintiff to an above-limits judgment.  The court disagreed.

A key element of a bad faith claim is the probability that an insured would be held personally accountable for a judgment above the policy limits if a settlement offer within the policy limits is not accepted.  By the time any settlement offers were made, the summary judgment decision had been rendered and the Second Circuit appeal was about to be decided.  The court noted the procedural oddity of this bad faith case.  This was not a typical situation implicating the good faith doctrine where the underlying plaintiff was adverse and negotiating a settlement.  Rather, Plaintiff stood in the shoes of the insured and demanded coverage directly from Defendants. The court noted that there was an inherent conflict of interest in Plaintiff playing both sides as assignee of the judgment and the rights under the Policy at the time Plaintiff made its demands.  The Court went on to say it saw no reason to condone Plaintiff effectively using the judgment as leverage to obtain insurance coverage to which it claims, acting on behalf of McDevitt, it was clearly due.

Even if the court were inclined to consider the claim, it found that the settlement correspondence did not contain any evidence of bad faith.  The court held that there was nothing unreasonable about waiting a few months after Plaintiff’s initial demand for the Second Circuit to render a decision in a complicated underlying matter.



Lee S. Siegel

[email protected]


05/04/23       Krausman v. Liberty Mut. Ins. Co.

Superior Court of Connecticut, Stamford

Advice of Counsel Defense Defeats Bad Faith Claims

The plaintiff claimed that Liberty Mutual held her UIM arbitration award hostage in order to pressure her to abandon her statutory and common law bad faith causes of action. Following a bench trial, the court found that Liberty’s advice of counsel defense trumped the plaintiff’s bad faith allegations.

Here, the plaintiff was injured in an auto accident, received the $50,000 policy limit from the at fault-driver and then sought UIM benefits from Liberty. Following a complicated adjustment history, the plaintiff brought suit for breach of contract and statutory and common law bad faith. The UIM claim was determined by an arbitrator to be worth approximately $19,000 in new money. Neither party challenged the arbitrator’s award, it was reduced to a judgment, but Liberty still did not pay it for about four years.

The plaintiff contended that Liberty’s refusal to pay her UIM arbitration award was because it was “attempting to gain a tactical advantage in the CUTPA/CUIPA counts.” While it was a good lawyer’s argument which may have worked before a jury, the bench was having none of it, finding that “Plaintiff has submitted no evidence to support that contention.” Ultimately, however, it was the advice of counsel defense that the court relied on to dismiss all the plaintiff’s remaining claims.

The gist of counsel's message was that Liberty was not required to pay the judgment because it did not dispose of the bad faith causes of action. As a result, there was no final judgment requiring payment, the court held. In construing the defense of advice of counsel in response to claims of vexatious litigation, the court described the test to require:

First, the defendant must actually have consulted with legal counsel about his decision.... Second, the consultation with legal counsel must be based on a full and fair disclosure by the defendant of all facts he knew or was charged with knowing....; Third, the lawyer to whom the defendant turns for advice must be one from whom the defendant can reasonably expect to receive an accurate, impartial opinion as to the viability of his claim; The fourth element of the defense of reliance upon the advice of counsel is, of course, that the defendant, having sought such advice, actually did rely upon it. Fifth and finally, if all other elements of the defense are satisfactorily established, the defendant must show that his reliance on counsel's advice was made in good faith. [citations omitted]

The court found that Liberty showed by a preponderance of evidence that 1) it conferred with its counsel about the timing of payment; 2) counsel was well-apprised of the circumstances; 3) the lawyers involved were experienced in the field; 4) the adjusters relied on the advice and followed it, even when their lawyers reversed their advice shortly before trial; and 5) the record did not show that the adjusters acted in bad faith. Accordingly, the court found for Liberty on all the remaining extracontractual claims.


05/02/23       Napolitano v. Ace American Ins. Co.

Appellate Court of Connecticut

Court Fails to Decide the Bad Faith Pleading Standard

In a decision reinstating a bad faith cause of action, the Appellate Court opted not to decide what is the correct pleading standard required under Connecticut law.

As the court noted, “There is some variance among trial court decisions concerning the standard of pleading required to state a legally sufficient bad faith cause of action.” One line of cases requires specific allegations that establish malice or a dishonest purpose, whereas a second line of cases applies a less stringent standard accepting factual allegations from which an inference of bad faith may be drawn.

Here, while finding that the contested workers compensation policy was appropriately cancelled on the date of loss, the court reversed the dismissal of the plaintiff’s bad faith cause of action. Without resolving which standard is correct, the court held that operative cause of action satisfied either standard-that a court could either infer or that plaintiff actually alleged facts demonstrating dishonest purpose.

[Editor’s Note: the court did not address how the bad faith claim could survive in the absence of coverage.]



Kyle A. Ruffner

[email protected]

No noteworthy construction related coverage decisions this week.

Ryan P. Maxwell

[email protected]

05/09/23       Amerisure Ins. Co. et al. v. Selective Ins. Grp., et al.

Second Circuit Court of Appeals

Subcontract Found Not to Contain Additional Insured Provision, While Judicial Economy Favors Horizontal Exhaustion of Primary CGL Policies 

An accident occurred during the construction of a theater for its owners, when a forklift operated by a C&D Laface Construction, Inc. (“C&D”) foreperson at the construction site seriously injured a C&D employee.

Pursuant to an August 7, 2015, contract (the “General Contract”), the owners retained Eilerson Development Corporation (“EDC”) as general contractor for the project. By way of a September 9, 2015, contract (the “Subcontract”), EDC subcontracted masonry work to C&D.

The General Contract and Subcontract each required EDC and C&D to obtain insurance. The General Contract required EDC to procure liability insurance and name the owners as additional insureds. The Subcontract required C&D to procure commercial general liability (“CGL”) insurance that named EDC as an additional insured, and which would be “primary and non-contributing so that [EDC's] policy will not respond until the limits under [C&D's] policy are exhausted.” The Subcontract also required C&D to procure umbrella insurance “for at least $1,000,000 [that] shall be as broad as the primary General Liability ....” EDC procured a CGL and umbrella coverage from Amerisure, and C&D procured the same from Selective.

The injured worker and his wife sued EDC and the owners. Selective defended EDC as an additional insured under the Selective CGL policy in that action, but took the position, however, that: (1) the owners were not additional insureds; and (2) the Selective umbrella policy was excess over the Amerisure CGL policy issued to EDC. In August 2022, the underlying action settled, but Amerisure and Selective each reserved their rights against and between each other.

In December 2018, the owners filed a separate lawsuit seeking defense and indemnity from EDC and Amerisure. The case was removed on diversity grounds, after which EDC and Amerisure added C&D and Selective as third-party defendants. Amerisure and Selective each moved for summary judgment as to the additional insured status of the Owners and the priority of coverage between the Amerisure CGL and Selective umbrella policies. On June 3, 2021, Selective’s motion was granted as to both issues and this appeal followed.

In upholding the district court’s decision, the Second Circuit noted relative to the additional insured issue that “[i]n order for the Owners to qualify as additional insureds under the Selective policies, C&D must have agreed in writing — in the Subcontract or otherwise — to name the Owners as additional insureds.” It was undisputed that “the text of the Subcontract does not itself require that C&D name the Owners as additional insureds.” However, Amerisure argued that the Subcontract incorporated all of EDC's obligations under the General Contract, including “the clause that required EDC to provide additional insured coverage to the Owners.” In support, Amerisure asserted that EDC promised the Owners in the General Contract “that it would require subcontractors ‘to assume toward [EDC] all the obligations and responsibilities ... which [EDC], by the Documents, assumes toward the Owner[s],’ . . . , and that . . . the Subcontract states that ‘[t]he Subcontractor shall be bound by the terms of the Specifications, General Conditions and Supplemental Conditions and Addenda in the Contract between the Contractor and the Owner, shall confirm to and comply with the Drawings and Specifications and Addenda, and shall assume toward the Contractor all the obligations and responsibilities that the Contractor assumes toward the Owner.’”

Although Amerisure cited a number of New York cases claimed to support its incorporation argument, the Second Circuit found that the Subcontract was to be interpreted under Virginia law pursuant to a choice-of-law provision, and further that under Virginia law, Amerisure's incorporation argument was unavailing. Citing on point precedent from Virginia, the Second Circuit found that a similar incorporation clause stating that a “subcontractor ‘agree[d] ... to be bound to the Contractor by the terms of the [general contract], general conditions, drawings and specifications, and to assume toward [the] Contractor all the obligations and responsibilities that the Contractor, by those documents, assume[d] to the Owner,’” did not bind  a subcontractor beyond “the nature of the work to be performed under the subcontract.” Striking an even further blow, the Second Circuit proceeded to indicate that it “would reach the same result even if we were to apply New York law,” since New York “narrowly construes incorporation clauses in subcontracts when they purport to bind a subcontractor to provisions in the general contract that do not relate to the “scope, quality, character[,] and manner of the work to be performed by the subcontractor.”

The more important issue at hand in this matter was priority of coverage and the Second Circuit once again agreed with Selective on the issue. It was undisputed that the Selective CGL policy was primary to the other three policies. Consistent with this understanding, Selective defended EDC (as an additional insured) in the underlying action under that policy. However, the parties disputed which policy — the Amerisure CGL policy or the Selective umbrella policy — was next in line.

Reviewing the policies respective other insurance clauses under New York law, the Second Circuit easily found that the Amerisure CGL policy is primary to the Selective umbrella policy. However, Amerisure made three principal arguments in urging the Court to reach a contrary result, which the court dispelled in turn.

First, Amerisure argued that the relevant other insurance provision in the Amerisure CGL policy had been “deleted and replaced.” Recognizing that “[a]t first glance, this provision may appear to ‘delete’ and ‘replace’ the [relevant] provision,” From the context, however, the Second Circuit found that “it is clear that this replacement provision applies only to additional insureds, not to named insureds under that policy.” Since EDC was a named insured under the Amerisure CGL policy, the relevant “other insurance” provision remained the operative provision.

Second, Amerisure argued that because the Subcontract required C&D’s CGL coverage to be “primary and non-contributing” to any insurance procured by EDC and “also required that C&D procure umbrella insurance ‘as broad as the primary General Liability’ insurance,” it followed that Selective’s “umbrella policy must also be primary and non-contributing.” However, the “as broad” language invoked by Amerisure was found “more easily understood to qualify only the scope of coverage (e.g., what risks are covered), not the priority of coverage.” The court further noted that “Amerisure does not sufficiently explain why the language of the Subcontract, in the face of otherwise unambiguous language of the Selective umbrella policy's ‘other insurance’ clause, should control here.”

Finally, (and most importantly from your author’s chair), the Second Circuit disagreed with Amerisure’s final argument “that C&D's agreement to indemnify EDC . . . should be transferred to Selective (as C&D's insurer), which would effectively require the Selective umbrella policy to provide coverage prior to that in the Amerisure CGL policy.” In making this argument, Amerisure primarily relied upon a recent Second Circuit decision, Century Surety Company v. Metropolitan Transit Authority, in which a different judicial panel, applying New York law, concluded that “an indemnity agreement in a trade contract between insureds could override the terms of an insurance policy concerning priority of coverage.”

Finding that decision distinguishable on its facts for two reasons, the Second Circuit astutely advised that “[t]he animating principle in Century Surety, and the cases on which it relied, is judicial economy — that is, that an indemnitee's insurer should not have to bring a separate suit to enforce an indemnity agreement that would nullify the court's earlier decision regarding priority of coverage.”

First, the court found that Amerisure did not raise the indemnity argument before the district court and that, although “EDC's third-party complaint against C&D did assert indemnity-related claims against C&D,” EDC and Amerisure subsequently stipulated to discontinue all claims against C&D. Amerisure’s attempt to resurrect abandoned indemnity-related claims “underscore[d] why judicial economy — the principle animating Century Surety — undercuts Amerisure's position here.”

Second, “the [underlying] court affirmatively held that the [relevant] indemnity provision is void under Virginia law.” Amerisure’s suggestion “that it is not bound by the [underlying] court's determination regarding the validity of the indemnity provision because it was not a party to that litigation,” was unsupported and Amerisure failed to offer any “credible reason why we would reach a different conclusion . . . if we were to assess the validity of the indemnity provision anew.”

Accordingly, the Second Circuit found its traditional priority of coverage analysis was undisturbed and plainly established that the Amerisure CGL policy was primary to the Selective umbrella policy, affirming the district court.


Maxwell’s Minute: The arrow for your quiver from this case is the Second Circuit’s gloss on the holding in Century Surety, which relied upon Indem. Ins. Co. of N. Am. v. St. Paul Mercury Ins. Co., 74 A.D.3d 21 (1st Dep't 2010) and Arch Ins. Co. v. Nationwide Prop. & Cas. Ins. Co., 175 A.D.3d 437 (1st Dep't 2019) in predicting that the New York Court of Appeals would find “that an indemnity agreement in the underlying trade contract between insureds governs over the terms of an insurance policy concerning priority of coverage.” The Second Circuit’s gloss frames Century Surety as a decision predicated upon “judicial economy”. Under Amerisure, where it was found that contractual indemnitee claims had been entirely foreclosed by stipulation and an underlying decision, it would appear that Century Surety stands for the proposition that a court can determine the issue of contractual indemnification in a coverage action in the name of judicial economy, where sufficient facts exist to decide that issue on the record before it, so as to avoid the need for the filing of a separate lawsuit to decide that issue.

Between Century Surety and Amerisure, there stands any number of factual circumstances where judicial economy may not best be served by deciding contractual indemnification issues in a coverage action. Quite plainly to me, for example, judicial economy is best served by allowing ongoing, third-party litigation between the contracting parties to serve as the vehicle for a determination on contractual indemnification issues, so as to avoid not only the necessity for duplicative discovery, but also duplicative verdicts that are potentially inconsistent with one another.


04/28/23       Amerisure Ins. Co. et al. v. Selective Ins. Grp. et al.

United States District Court, Southern District of New York

Complete Operation Doctrine Found Inapplicable to Dispute that was “In Reality, Between Two Insurers”

Plaintiff Furnishare Inc. (“Furnishare”), brought this declaratory judgment action against two insurers to clarify whose policies cover the including primary and excess CGL coverage with Travelers and automobile insurance coverage with State Farm. It was undisputed that Furnishare was entitled to coverage under either the Travelers CGL Policy or the State Farm Auto Policy since, as all agreed, “one insurer's policy leaves off where the other's begins: The Travelers CGL Policy covers accidents “before” the “loading” of a car begins, and the State Farm Auto Policy covers accidents “after” that point.” Pinpointing the “decisive question,” Judge Engelmayer sought to decide “whether the accident occurred before, or during, the “loading” of Furnishare's truck.”

On the relevant date, a Furnishare team traveled to lower Manhattan to pick up and remove a couch that a customer had sold through Furnishare's website. To be removed, the couch had to be moved from the seller's sixth-floor condominium down at least five flights of stairs to the lobby and taken out of the building's entrance to the city sidewalk, where it would be placed in a Furnishare moving truck. As the field team began to descend the sixth-floor staircase, the couch struck an exposed sprinkler head near the top of the stairwell, resulting in a large release of water. At the time of the accident, Furnishare's moving truck was parked on the curb of a public street outside.

The Travelers CGL Policy contained an “auto exclusion,” precluding coverage for “‘[b]odily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any ... ‘auto’ ... owned or operated by or rented or loaned to any insured. Use includes operation and ‘loading or unloading,’” with “loading and unloading” defined to include “handling of property ... [a]fter it is moved from the place where it is accepted for movement into or onto an ... auto.” In contrast from the Travelers CGL Policy, the State Farm Auto Policy excludes coverage for “damages resulting from ... the handling of property before it is moved from the place where it is accepted by the insured for movement into or onto a vehicle.” Neither policy elaborated in defining the above provisions, including the terms “loading” or “place” and the facts above make it entirely unclear whether loading was taking place and whether the couch had left the place where it was accepted for movement.

In answering which policy applied, the court found that “insofar as the key policy provision defines ‘loading and unloading’ to include handling of property after ‘it is moved from the place where it is accepted for movement into or onto an . . . auto,’ and insofar as the parties differ as to whether the term ‘place’ here means the apartment (Travelers's view) or the building (Furnishare and State Farm's view) from which the couch was removed,” the provision was textually ambiguous. Judging by what was described as a “surprising large” body of case law applying similar provisions, the Southern District found that “with Furnishare and State Farm, that, based on the assembled precedents, the accident in the sixth-floor stairwell here was too remote from the Furnishare’s truck waiting on the street, or from any use of it, to constitute ‘loading.’” The court dispelled Travelers reliance upon the “complete operation” doctrine, since the accident had no causal relationship with the moving van parked outside.  Accordingly, Travelers CGL Policy was the only applicable coverage for the loss.

Maxwell’s Minute: This one was an interesting read for those of you that find yourselves assessing coverage amongst the rock and a hard place that is “loading and unloading” between a CGL and auto risk. However, I’ll raise you another practice tip from this case.

In finding ambiguity, the court was careful to note the standard it chose to apply. Specifically, although this matter was brought by Furnishare against Travelers and State Farm, Judge Engelmayer was unwilling to apply contra preferentum against Travelers, Furnishare’s chosen and preferred target in this matter. “At argument, Furnishare explained that it prefers coverage from Travelers over coverage from State Farm because, given the excess layer, the Travelers CGL Policy stands to provide a greater monetary recovery than the recovery under the State Farm Auto Policy.” But Furnishare did “not cite case law in which textual ambiguity as to which of two competing insurers is responsible for an insured's coverage is driven by the insured's preference between the two.” The court notes that “were this case solely between Furnishare and Travelers, New York's interpretive principle that ambiguity is to be construed against the insurer would resolve this case, in favor of insured Furnishare,” but “[a]s all parties agree[d], the dispute in this case is, in reality, between two insurers— and regardless of the outcome of this declaratory judgment, one of them will provide coverage to Furnishare.” Accordingly, the court placed Travelers and State Farm on equal footing in resolving the textual ambiguity, ultimately finding Travelers responsible upon careful dissection of the facts.



Patricia A. Rauh

[email protected]

On maternity leave


Scott D. Storm

[email protected]


04/26/23       Miller v. USAA General Indemnity Co.

United States District Court, Middle District of Pennsylvania

Claimant Who Lived with Her Daughter’s Grandmother was Not a Covered Person Under the Grandmother’s Auto Policy for UIM Coverage as Not Related by Blood, Marriage, or Adoption

Plaintiff Melanie Miller brings this action against defendant USAA General Indemnity Company ("USAA") for breach of an insurance contract and bad faith. USAA moves for summary judgment. We will grant USAA's motion.

This case arises from a car accident on December 4, 2020. An underinsured motorist failed to yield the right of way while turning into oncoming traffic and struck the 1997 Mazda in which Miller was a passenger. Miller suffered serious, permanent physical injuries requiring extensive medical treatment.

At the time of the accident, Miller lived with her daughter, Kayleigh Halverson, and Kayleigh's grandmother, Tammy Halverson. Tammy Halverson held an insurance policy with USAA covering three vehicles: a 2002 Ford F-350, a 2012 Lincoln MKX 4D, and a 2017 Nissan Rogue.  The policy's declarations page identifies Tammy as the sole "named insured" and lists both Tammy and Kayleigh as "operators" of the covered vehicles. The policy also provides for underinsured motorist coverage ("UIM coverage") in the amount of $300,000 per person and $500,000 per accident, stacked across the three vehicles for bodily injuries sustained by a "covered person" resulting from an automobile accident caused by an underinsured motorist.

For purposes of UIM coverage, "covered persons" include (1) "you or any family member," (2) "any other person occupying your covered auto," and (3) "any person for damages that person is entitled to recover because of bodily injury to which this coverage applies sustained by a person described in" the first two categories.  The policy defines "you" and "your" as "the ‘named insured' shown on the Declarations and spouse if a resident of the same household," and "family member" as "a person related to you by blood, marriage, or adoption who resided primarily in your household." Miller is not related to Tammy Halverson by blood, marriage, or adoption, and none of the vehicles involved in the accident is a "covered auto" under Tammy's policy.

Following the crash, Miller submitted her UIM coverage claim to USAA. USAA initially offered Miller $300,000 in exchange for releasing the company from all claims she may have had under the policy stemming from the accident. Miller rejected USAA's offer and demanded $900,000 in stacked UIM coverage as a "resident relative of Kayleigh" Halverson. USAA refused to entertain Miller's demand after determining she does not meet the policy's definition of "family member."

Miller initiated the present action on November 5, 2021. USAA moves for summary judgment. The motion is ripe and ready for disposition.

Tammy Halverson's policy with USAA expressly limits the persons covered by its UIM coverage provisions to the named insured, family members who primarily reside in the named insured's household, and individuals occupying covered automobiles. Tammy is the sole named insured on the policy.  Miller resided in Tammy's household at the time of the accident, but she was and is not related to Tammy by blood, marriage, or adoption, nor was she occupying a covered vehicle at the time of the accident. Miller thus seeks to establish herself as a "covered person" via her daughter, Kayleigh, with whom she also resided.  But the policy merely identifies Kayleigh as an insured "operator" of the covered vehicles, not a "named insured."  Hence, Miller's claim for coverage facially is unavailing.

The instant policy definition of "covered persons" only extends resident-relative coverage to resident family members of the named insured. USAA is not obliged to extend coverage to Miller because she is not a resident family member of Tammy Halverson, and thus is not a "covered person" under the plain terms of the policy's UIM coverage provisions. Miller has no claim for breach of contract.


04/19/23       State Farm Fire and Cas. Co. v. Merle, et al  

Supreme Court, New York County

In Granting Summary Judgment to Insurer in Response to Fraudulent PIP Claim, Court Admitted Unsigned EUO Transcript as Evidence in Establishing Material Misrepresentation

Plaintiff's motion for summary judgment is granted in this no-fault auto insurance matter, plaintiff insurer established prima facie entitlement to summary judgment by submitting the examination under oath transcript of defendant insured Leslie Merle, in which she testified that she primarily garaged the car involved in the accident in Far Rockaway, New York, rather than in Connecticut and the affidavit of its underwriter Christina Ardito, who establishes that such misrepresentation to plaintiff of the car's location was material.

Plaintiff also submits the affirmation of its counsel Kevin W. O'Leary, Esq., who attests to defendant Brittani Watson's failure to appear for an examination under oath ("EUO") pursuant to the terms of the policy.  The failure of an injured person to appear for an ["EUO"] is a defense to any claims for benefits by that person or their assignors.

Finally, plaintiff submits the affidavit of its claim specialist Richa Sinha. Sinha attests to the results of plaintiff's investigation into the accident giving rise to this action. Sinha's affidavit notes several discrepancies in the EUO transcripts of Merle and defendant Katie Dieubon which led it to conclude that the accident had been staged. This prima facie establishes plaintiff's right to deny claims arising from the accident.

Integrated Interventional Pain Management P.C. fails to raise a triable issue of fact. Integrated submits no documentary or other record evidence in support of its motion. The opponent of a motion for summary judgment may not simply point to defects in the movant's proof.  A party must marshal and lay bare its own evidence to withstand a motion for summary judgment. Integrated asserts that plaintiff cannot rely on Merle's transcript because it is unsigned, however it has been more than 60 days since plaintiff sent Merle the transcript and she failed to sign and return it (CPLR 3116[a]).

Merle's cross-motion to vacate the default judgment against her must also be denied. Merle is estopped from challenging service upon her at 13-10 Redfern Avenue, Apt. 2B, Far Rockaway, New York 11691 because she holds a New York driver's license registered at that address and provided that address in the accident report and NF-2 claim form. She fails to provide a reasonable excuse to vacate the default pursuant to CPLR 5015[a][1], as conclusory and vague claims of law office failure are insufficient. Finally, the record reflects that she appeared in court on the initial return date for the motion for default judgment and stipulated to the extension of the briefing schedule but ultimately failed to submit any opposition. Therefore, she cannot be said to have "not personally received notice of the summons in time to defend".

Plaintiff's motion for summary judgment is granted.  Defendant Leslie Merle's cross-motion to vacate the default judgment entered against her is denied. 

Defendants lack standing to seek or receive No-Fault reimbursements for any bill submitted by or on behalf of Merle, as she perpetrated a scheme to defraud and/or fraudulently procure a policy of insurance from plaintiff by knowingly submitting an application for insurance that contained material misrepresentations of fact and false and/or fraudulent statements.  The alleged motor vehicle accident which gave rise to the above-captioned lawsuit, was not the product of a covered event as defined by the applicable policy of insurance issued by plaintiff since the incident was the product of a staged and/or intentional event.


04/18/23       Burke v. Utica First Ins. Co.

United States District Court, Eastern District of Pennsylvania

Commercial Liability Policy Does Not Cover Disease from Microorganisms or Bodily Injuries Due to Exposure to Mold Caused by Negligent Construction

This matter involves an insurance dispute following errors in construction that resulted in a mold infestation in a family home. This dispute focuses on a contractor's insurance policy ("the Policy") held by Plaintiff Joseph Oliver Construction, LLC ("Joseph Oliver") and carried by Defendant Utica First Insurance Company ("Utica First"). The Policy covers general liability subject to certain exclusions.

The Policy includes two exceptions at issue here. The first is titled "Virus or Bacteria Exclusion" and a second exclusion, titled "Exclusion — Wet Rot, Dry Rot, Bacteria, Fungi, or Protists Contracting Operations" ("the Fungi Exclusion"). 

The Burkes hired Joseph Oliver to perform construction work at the Burkes' home.  Joseph Oliver's work was insured under the terms of the Policy with Utica First. The Burkes allege that the construction was done negligently, resulting in water intrusion, mold contamination, and structural damage. The alleged negligence resulted in both property damage and serious personal injuries, namely that Mr. Burke developed nodular sclerosis Hodgkin lymphoma and chronic myeloid leukemia.

The Burkes and Joseph Oliver entered into an arbitration agreement and submitted the underlying action to binding arbitration. It does not appear that Utica First was party to the arbitration. Rather, Utica First agreed to provide Joseph Oliver with a defense in the arbitration. At the same time, Utica First refused to provide Joseph Oliver with coverage for potential damages resulting from Mr. Burke's personal injuries. The arbitrator entered an award in favor of the Burkes for $41,237.70 for property damages and $3,000,000.00 for personal injuries; the latter was lowered to $583,762.21 due to a high-low agreement.

Utica First covered the $41,237.70 in property damage. However, neither Utica First nor Joseph Oliver has made payment on the $583,762.21 in personal injury damages. Following the arbitration, Joseph Oliver assigned all his rights and interest in and to the insurance policy to the Burkes.

The Burkes allege that the personal injury damages should be covered under the Policy, specifically alleging that, while the Fungi Exclusion appears to eliminate coverage for bodily injuries resulting from mold exposure, the Virus or Bacterial Exclusion supersedes the Fungi Exclusion and allows for coverage of bodily injuries that result from or relate to any microorganism that causes disease or illness.

The Burkes bring a claim of Declaratory Judgment on whether the Policy covers personal injuries resulting from mold contamination and requested this Court issue an order requiring Utica First to pay the sum of $583,762.21.

Utica First moves to dismiss the Complaint, arguing that coverage of bodily injury or illness caused by mold is excluded from the Policy's coverage. Utica First argues that the Fungi Exclusion excludes coverage for "bodily injuries" arising out of Joseph Oliver's work that were caused by exposure to mold. It points out that the personal injury damages awarded by the arbitrator are separate from the property damages that were awarded and have already been paid.  Utica First argues that the Fungi Exclusion and the Virus or Bacteria Exclusion should be read separately, and applying to separate sections of the Policy, rather than as one superseding the other. Utica First argues that the language found in Section 4 of the Virus or Bacteria Exclusion precludes the exclusion from being read as superseding the Fungi Exclusion.

The Burkes responded by arguing that the Policy is ambiguous and should therefore be interpreted in favor of the Burkes. They argue that there is ambiguity as to whether the Virus or Bacteria Exclusion supersedes the Fungi Exclusion. They argue that if the Virus or Bacteria Exclusion supersedes the Fungi Exclusion, then coverage for Mr. Burke's personal injuries is not excluded because the Virus or Bacteria Exclusion only applies to "property coverage." The Burkes argue that this interpretation is reasonable because Utica First had already provided coverage for property damage under the Commercial General Liability section, where "property coverage" is lowercased, whereas "Property Coverage" uppercased refers to the Property Coverage section separately.  The Burkes argue that this distinction between "property coverage," generally, and "Property Coverage," specifically, opens the Policy to the interpretation that the Fungi Exclusion applies only to the Commercial General Liability section (including the property coverage available under that section), whereas the Virus or Bacteria Exclusion applies to, and supersedes, all similar exclusions to all sections that include property coverage, including the Property Coverage section and the Commercial General Liability section. This interpretation would create ambiguity as to whether the Fungi Exclusion has been superseded, and so, the Burkes argue, the Motion to Dismiss should be denied.

Utica First replies, arguing that the Burkes' reading of the Policy is not reasonable, and that misinterpretation of a contract does not create ambiguity. It argues that the Fungi Exclusion applies to the Commercial Liability Coverage section for third party claims against Joseph Oliver, whereas the Virus or Bacteria Exclusion applies to the Property Coverage section, namely first party claims by Joseph Oliver for damage to its own property. Utica First points to several textual cues that would support this interpretation.  Utica First argues that the Burkes' interpretation ignores the plain language of Section 4 of the Virus or Bacteria Exclusion. It also argues that the capitalization of the term "property coverage" does not create ambiguity.

The Burkes argued that the Virus or Bacteria Exclusion, on one hand, applies broadly to all sections of the policy that provide any level of property coverage, including the Commercial Liability section, but, at the same time, only re-excludes loss relating to property coverage and none of the other coverages available. That is, the Burkes argue that the Virus or Bacteria Exclusion broadly wipes away all similar exclusions applying to all claims found in all sections of the Policy only to re-exclude solely losses that could be claimed under property coverage but leaving all other coverage (such as commercial liability or third-party claim coverage) available. The Burkes' argument begs a single question: if the Virus or Bacteria Exclusion's "superseding" language applies broadly to all sections of the Policy that provide "property coverage," regardless of whether that section provides other coverage, then why does the "exclusion" language in the Virus and Bacteria Exclusion not also apply to all coverage of all sections of the Policy that provide "property coverage"?

There are, fundamentally, two possibilities: either "property coverage" as referenced at the beginning of the Virus or Bacteria Exclusion is to be interpreted narrowly as only applying to the Property Coverage section, or it is to be interpreted broadly enough to apply to all sections of the Policy, and therefore all exclusions to all other sections of the Policy, including the Commercial Liability Coverage.

If the Virus and Bacteria Exclusion is interpreted narrowly as only applying to the Property Coverage section, then it cannot be read as superseding an exclusion to the Commercial Liability Coverage. The only coverage and associated exclusions the Virus or Bacteria Exclusion could apply to are the Property Coverage section and the Property Coverage section's exclusions. The Virus or Bacteria Exclusion would therefore not supersede the Fungi Exclusion, which applies to the Commercial Liability Coverage. Both exclusions would exclude coverage of disease caused by microorganisms, or bodily injury resulting from exposure to mold — the Virus or Bacterial Exclusion would exclude such coverage from the Property Coverage section, and the Fungi Exclusion would exclude such coverage from the Commercial Liability section.

On the other hand, if "property coverage" is interpreted broadly so as to apply the Virus or Bacteria Exclusion to the entire Policy, that exclusion may supersede the Fungi Exclusion. However, it would also apply to all coverage available under those sections. As such, Section 2 of the Virus or Bacterial Exclusion (which states that it applies to "all coverages, coverage extensions, supplemental coverages, optional coverages, and endorsements" and does not limit itself to "property coverage," capitalized or otherwise) would apply broadly. Section 2 adds the following exclusion:

"We" do not pay for loss, cost, or expense caused by, resulting from, or relating to any virus, bacterium, or other microorganism that causes disease, illness, or physical distress or that is capable of causing disease, illness, or physical distress.

If "property coverage" is interpreted broadly to apply to all coverage sections, then the exclusion contained in Section 2 of the Virus or Bacteria Exclusion would also apply broadly to all coverages, thereby excluding coverage of the personal injury damages even as it supersedes the language found in the Fungi Exclusion.

This Court does not need to rule on which interpretation of the phrase "property coverage" is more reasonable where both interpretations would have the same outcome. There is no ambiguity where the outcome of both interpretations is the same.

There is a further logical disconnect in the Burkes' argument: both exclusions exclude coverage for bodily injuries or illnesses resulting from mold, or other microorganisms. That two negatives make a positive is a rule found in math textbooks, not legal doctrines. Reading the exclusions as the Burkes encourage would result in the Fungi Exclusion having no meaning, and the Virus or Bacteria Exclusion to have a meaning that neither exclusion intended.

Finally, Section 4 of the Virus or Bacteria Exclusion appears to put any further question to rest. Section 4 of the Virus or Bacteria Exclusion states:

The terms of this endorsement, whether or not applicable to any loss, cost, or expense, cannot be construed to provide coverage for a loss, cost, or expense that would otherwise be excluded under the policy to which this endorsement is attached.

The Burkes attempt to do just that — construe the Virus or Bacteria Exclusion to provide coverage for bodily injury resulting from mold and disease caused by a microorganism that would otherwise be excluded under both exclusions.

The language of the Policy is clear: Mr. Burke's personal injury damages from his disease caused by exposure to mold is excluded under at least one exclusion contained within the Policy. The Policy at issue does not cover damages resulting from disease caused by microorganisms or bodily injuries caused by exposure to mold.



Katherine A. Fleming

[email protected]


04/28/23       Am. Nat’l Ins. Co. v. Bertha Arce

Texas Common-Law Scienter Requirement to Avoid Liability Based on a Material Misrepresentation Not Displaced by Statutory Recodification

During a chance encounter with an insurance agent at a motorcycle shop, Sergio Arce, Jr. spontaneously applied for a $25,000 life insurance policy with American National Insurance Co. (ANIC). The application process consisted of ANIC’s agent reading questions to Arce from an electronic application form and documenting his responses using a computer tablet. Arce disclosed some adverse medical history and provided the name and address of his medical provider, but the agent recorded his answers to all other medical-history questions as “no.” At the conclusion of the application interview, Arce electronically signed the application form, affirming that his answers were “full, complete and true to the best of [his] knowledge and belief.” By signing, Arce also authorized ANIC to secure his medical records. One month later, ANIC issued a life insurance policy to Arce but, for undisclosed reasons, declined accidental-death coverage and required payment of an additional premium on delivery. As required by statute, the policy would become incontestable two years after issuance, but in a tragic turn of events, Arce died a mere thirteen days later from injuries sustained in an automobile accident.

Arce’s mother, Bertha, submitted a claim under the policy as his designated beneficiary, but ANIC denied the claim and refunded the premium. During the claims-investigation process, ANIC reviewed Arce’s medical records and determined that he had incorrectly answered “no” to an application question inquiring about diagnoses, treatment, or medical advice for “any disease or abnormality of the stomach, intestines, rectum, pancreas, or liver, including cirrhosis, hepatitis and colitis.” In refusing to pay the claim, ANIC informed Bertha that it would not have issued the policy if the application questions had been answered correctly. Bertha sued ANIC for policy benefits, statutory penalties, and attorney’s fees, alleging breach of contract and related violations of the Texas Insurance Code. ANIC answered and moved for summary judgment. In its motion for summary judgment, ANIC argued that it was entitled to rescind the policy.

ANIC acknowledged the common-law rule requiring proof of intent to deceive but argued that the scienter requirement was incompatible with section 705.051 of the Texas Insurance Code’s plain language following its recodification in 2003. Under ANIC’s view of the statute, an insurer could avoid an obligation to pay on an insurance policy based on an innocent, unknowing, or careless misstatement in an insurance application, so long as the misstatement was of a material fact and either induced the policy’s issuance or affected the premium charged. Bertha argued that section 705.051’s language does not conflict with the common law and noted that the two have coexisted for more than a hundred years without any substantive modification to the statute.

The trial court agreed with ANIC and rendered a final take-nothing judgment rescinding Arce’s life insurance policy. The court of appeals reversed and remanded. After rejecting ANIC’s argument that the common-law scienter requirement did not survive section 705.051’s recodification, the court held that ANIC could not avoid its contractual obligation without pleading and proving that Arce intended to deceive ANIC. Measured against that standard, the court held that summary judgment was not proper on the breach-of-contract claim because intent often involves fact questions, ANIC’s evidence did not conclusively establish intent, and mere knowledge of a health condition does not conclusively establish intent to deceive.

The appeal to the Texas Supreme Court considered whether section 705.051 grants insurers a misrepresentation defense without proof of intent, as required under the common law. For more than a century, Texas courts have applied the settled rule that insurers may not avoid liability under an insurance policy based on a misrepresentation in an insurance application unless, among other things, the insurer pleads and proves the insured intended to deceive or induce the insurer to issue the policy. The primary issue was whether the common-law scienter requirement is repugnant to the plain language of section 705.051 of the Texas Insurance Code, which provides that “[a] misrepresentation in an application for a life, accident, or health insurance policy does not defeat recovery under the policy unless the misrepresentation: (1) is of a material fact; and (2) affects the risks assumed.” Section 705.051, which dates back to 1909, has long functioned side by side with the common law, having been reenacted and recodified without substantive change, most recently in 2003. ANIC also argued that the Supreme Court should abandon the scienter requirement because the common-law rule places Texas in the minority. 

The Texas Supreme Court held that section 705.051 does not displace the common-law rule because the statute prescribes necessary, not exclusive or sufficient, conditions for denying recovery under a contestable policy. It reasoned that in over a hundred years, there has been no indication that the Legislature disagrees with the common-law approach to enforcement of insurance contracts. Both the statutory and the common-law elements govern an insurer’s misrepresentation defense because, grammatically, section 705.051 states conditions that are necessary, not sufficient, to defeat recovery. Consistent with its status as a consumer-protection statute, section 705.051 sets a floor that cannot be avoided by contract or under the common law. Accordingly, the Supreme Court held that insurers must plead and prove intent to deceive to avoid contractual liability based on a misrepresentation in an application for life insurance, whether the policy is contestable or not. Proof of a material inaccuracy is not enough.



Evan D. Gestwick

[email protected]


Nothing of particular note this time around from New York’s trial level courts. See you in two weeks!


ON the ROAD with O’SHEA

Ryan P. O’Shea

[email protected]

05/10/23       Pizzo v. Lustig

Appellate Division, Second Department

Disclosure of Post Video Surveillance

There is a lot to unpack here timeline wise, so please bear with me. The dates are crucial to the Second Department’s decision and reasoning in this one.

Pizzo was involved in a motor vehicle accident with Lustig with Pizzo alleging personal injuries. Pizzo served discovery demands on January 11, 2019, requesting “[a]ny and all photographs, motion pictures and/or video tapes taken of plaintiff(s) in the possession of defendant(s), their agents, servants and/or employees, at any time since the date of this incident." On January 28, 2019, the trial court executed a preliminary order requiring the parties to exchange surveillance tapes within 30 days.

On February 7, 2019, AIG, the insurer for Lustig, retained ISG to conduct surveillance of Pizzo. Initial footage was recorded on either February 15th or February 19th. On September 27, 2019, at a compliance conference the trial court directed the parties to respond to all outstanding discovery demands by October 28, 2019.

On November 20, 2019, the first portion of Pizzo’s deposition was conducted. On January 24, 2020, the trial court issued a “final pre-note order,” which adjusted the remaining deposition dates and set a date for filing a note of issue. Importantly, this order made no particular reference to the surveillance video demands. On March 4, 2020, Pizzo’s deposition was completed. Two minutes later ISG captured more video surveillance of Pizzo.

ISG continued surveillance with success on June 25, 25, 2020, July 14, 2020, and December 16, 2020. ISG unsuccessfully attempted to obtain videos of Pizzo in Mid-December 2020.

On January 27, 2021, Pizzo moved for summary judgment on the issue of serious injury pursuant to Insurance Law §§ 5102 and 5104(a). On March 17, 2021, and prior to the note of issue, Lustig disclosed all the ISG collected surveillance videos, materials, and reports. Lustig then used the videos in its opposition to Pizzo’s motion for summary judgment. In response to the disclosure, Pizzo “cross-moved” for discovery sanctions pursuant to CPLR §§ 3101(i) and 3126 to preclude Lustig from using the videos.

Pizzo argued Lustig’s prior failure to disclose the videos was willful, intentional, and in violation of the trial court’s discovery orders. In opposition Lustig counterargued that Pizzo’s “cross-motion” was procedurally improper and the post deposition videos were timely disclosed under CPLR 3101(i). The trial court denied Pizzo’s summary judgment on serious injury issue and denied Pizzo’s “cross-motion” in its entirety. The issue raised on appeal involves the disclosure of the videos only.

The Second Department noted that Pizzo’s “cross-motion” was improper pursuant to CPLR 2215, which requires cross-motions are solely for seeking relief against the initial movant. However, the Appellate Division noted CPLR 2001 grants courts with discretion to correct a party’s mistake, omission, defect or irregularity, to disregard the mistake if a substantial right of the party is not prejudiced. The court reasoned Lustig submitted ample opposition that was considered by the trial court on the merits, thus no prejudice occurred in hearing Pizzo’s “cross-motion.”

In reviewing the discovery motion, the Second Department first addressed the pre-deposition surveillance materials. The court provided an extensive backdrop regarding the evolution of disclosure of surveillance evidence. Noting that prior to 1992 there was no requirement for surveillance videos to be disclosed prior to trial, creating a proverbial grenade. Until the Court of Appeals in DiMichel v South Buffalo Ry. Co. 80 NY2d 184 [1992], placed conditional protection status on surveillance videos allowing discovery once a party showed a substantial need and undue hardship. However, the Legislature abrogated DiMichel by amending CPLR 31031 adding subdivision (i) requiring full disclosure of such videos.

In examining the statue, the Second Department found no time constraints built into CPLR 3101(i). In 2003, the Court of Appeals confirmed the elimination of qualified privilege in Tai Tran v New Rochelle Hosp. Med. Ctr., 99 NY2d 383 [2003]. Applying Tai Tran, the Second Department found Pizzo demanded the surveillance materials in January 2019, with ISG’s first video obtained in February 2019. Accordingly, the February 2019 materials fell within the scope of the trial court’s initial January 28, 2019, discovery order. The lack of disclosing the February 2019 materials also violated the September 27, 2019, discovery order. Based on this reasoning, the Second Department found Lustig should have been precluded February 2019. While the court noted this may lead to surveillance post deposition, it merely creates a strategic decision.

The Appellate Division next addressed the post-deposition surveillance materials. The court reasoned CPLR 3101(i) does not prohibit the disclosure of surveillance materials of a party until after that party was deposed, nor does any authority. Nor does CPLR 3101(i) provide a fixed deadline for the disclosure of surveillance videos. In affirming this part of the trial court’s decision, the Second Department pointed out the decision to admit the videos was within the trial court’s decision because the disclosure satisfied CPLR 3101(i); the disclosure was not significantly delayed from the conclusion of ISG’s surveillance; disclosure occurred prior to the note of issue; and Pizzo failed to establish prejudice.

The court also rejected Pizzo’s contentions that each successive surveillance was required to be disclosed individually due to the continuing obligation to disclose. The Appellate Division reasoned successive disclosures would defeat the purpose of surveillance, likely causing a party to change its habits once it knows it’s being watched.

In sum, the Second Department provided guidance on the issues of surveillance material and videos. The court noted that parties may make the strategic decision to take surveillance, begin post-depositions, and withhold disclosure up until the eve of the note of issue. However, it also reinforces that one must play by the respective court’s discovery rules to avoid evidence preclusion.



Robert P. Louttit

[email protected]


05/11/23       New York Assembly Bill A2078

New York State Assembly

Assembly Bill to Establish Specified Standards for the Prompt Resolution of Claims Arising Out of State Emergencies Advanced to Third Reading

On May 11, 2023, New York legislative bill number A02078 advanced to a third reading. The proposed bill seeks to establish standards for the prompt investigation and settlement of claims arising out of states of emergency and disasters.

The purpose of the bill is to establish claim investigation and settlement standards for insurance companies to follow in the event of a disaster. The bill would require every insurer authorized to writes policies in New York State that cover loss or damage to real property, personal property, or other liabilities for loss of, damage to, or injury to persons or property to begin investigating a claim arising from a declared disaster or emergency and inform the insured of all items, statements, and forms that the insurer believed will be required of the claimant in accordance with regulations promulgated by the Superintendent of Financial Services.

Within fifteen business days after receiving all the items, statements, and forms that the insurer required from the claimant, the insurer will be required to advise the claimant in writing whether the insurer has accepted or rejected the claim. An insurer would be allowed a one-time extension of fifteen additional business days to continue its investigation, provided that the insurer notifies the claimant of the reasons additional time is needed for the investigation.

Should the above pass into law, this will impose yet another time requirement on insurers to accept or deny a claim at a time the insurers are receiving an influx of storm related losses. We will keep an eye on this developing bill and advise of its progress.



Heather A. Sanderson

Sanderson Law, Calgary, Alberta

[email protected]

04/06/23       Butterfield v. Intact Insurance Company

2023 ONCA 246 (CanLII)

An Intentional Act Motivated by Paranoid Delusion is an Intentional Act Within the Meaning of an Intentional and Criminal Act Exclusion

Dean Carr operated a gun shop in Preston, Ontario. According to news reports Carr never felt threatened or concerned about customers coming into the store as anyone buying a gun or ammunition needed to produce a Possession and Acquisition License (PAL) issued by the Ontario government. The application process is rigorous, and that process offered Carr the safety that he was looking for. That all changed following an encounter with a customer in March of 2019 that sent him to hospital with serious, disfiguring injuries.

19-year-old Brett Butterfield and his mother went into Carr’s store on the evening of March 23, 2019. Brett was wanting to buy a shot gun to protect his mom and himself as he was convinced that “an evil syndicate was after him”. Butterfield believed that members of that syndicate had raped his girlfriend and every other female friend of his. That belief was the product of a long history of mental illness and substance abuse that produced paranoid delusions.  Those delusions caused him to acquire a long-bladed hunting knife for protection. Fearing that wasn’t sufficient, he wanted to add a shot gun to his arsenal.

And so, after entering Carr’s store and producing a PAL, (How did he get and maintain that license? That’s a story for another day….) Butterfield pointed to the gun he was interested in. Carr took it down from the rack and pumped it to demonstrate its function. That action triggered Butterfield’s delusions. Butterfield left the store and returned with his hunting knife. He lunged at Carr with his knife screaming that Carr had raped and then killed Butterfield’s girlfriend. Carr ran into a backroom. Carr and a gunsmith tried to disarm Butterfield. Carr sustained serious knife wounds to his head and neck. Butterfield ran out of the back of the store, encountering police who had just arrived. Butterfield screamed at the police demanding that they kill him and, when they didn’t, Butterfield slashed his own throat with his own knife.

Both Butterfield and Carr survived.

Butterfield was charged with aggravated assault. After a full trial, he was found Not Criminally Responsible (NCR) under s. 16 of the Criminal Code, R.S.C. 1985, c. C-46. due to his proven psychiatric illness. 

Carr sued Butterfield in negligence claiming damages of $600,000. Butterfield was insured under his mother’s condo unit owner’s insurance policy, which included third party liability insurance with limits of up to $2 million.   Citing an exclusion for intentional and criminal acts, Intact denied coverage to Butterfield, stating that the claims are excluded because the knife attack “was both an intentional act and a criminal act for which no coverage would be afforded under the policy”.

The Statement of Claim alleged that “… in periods of lucidity prior to the subject attack, Brett was negligent, the particulars of which are as follows:

a) he ought not to have applied for a PAL or attended a firearms store, when it was reasonably foreseeable that he may have injured or killed someone in the course of purchasing or possessing a firearm, including Dean.

The Statement of Claim did not plead intentional act, or that Carr was injured a result of a battery, or other intentional tort.

Butterfield contested the denial which resulted in a written decision from the Ontario Superior Court.

Following the direction of the Supreme Court of Canada set out in several decisions, the trial court stated that the issue of whether Intact had an obligation to defend is not determined by the labels used by the third party pleader in describing the cause of action. “The plaintiff cannot change an intentional tort into a negligent one simply by choice of words. The court must examine the substance of the allegations contained in the pleadings to determine the true nature of the claims. If the alleged negligence is based on the same harm as the intentional tort, the insured will not be permitted to avoid the exclusion clause for intentionally caused injuries.”

The trial court found

“…while Mr. Butterfield may have been negligent in applying for the firearms permit, there is no causal link between that negligence and the damages, without the intentional tort of assault …the damages suffered by Mr. Carr clearly flow from the attack. A plaintiff cannot convert the intentional tort of assault into an action in negligence solely to ensure that the defendant’s insurer will provide the necessary ‘deep pocket’ to make a judgment recoverable. The negligence claim is derivative of an intentional tort, which is the true nature of the claim.”

Turning to the issue of whether the assault was intentional or criminal, the trial court found that judge in the criminal case must have been satisfied that the actus reus and mens rea of the offence of aggravated assault were proven, beyond a reasonable doubt, when he found that Butterfield committed the criminal act and, then, found him not criminally responsible. An NCR finding is not available absent a finding that the elements of the offence have been made out. Mr. Butterfield admitted that he intended to stab Mr. Carr, although he was under a delusional belief about what Mr. Carr had done and did not appreciate that stabbing Mr. Carr was morally wrong.  As to whether the act was intentional, the trial court stated:

Mr. Butterfield formed the intention to stab Mr. Carr and then took several steps to fulfill his intention. He left the store and went to retrieve a hunting knife. He returned to the store with the hunting knife in hand. He walked up to Mr. Carr and stabbed him, yelling that he needed to be murdered. Mr. Butterfield’s stated goal was to harm Mr. Carr.

Mr. Butterfield understood the physical nature and consequences of his act. He clearly did not appreciate that what he was doing was morally wrong given the schizophrenia diagnosis, but that does not change the fact that his actions were intended to harm Mr. Carr. Mr. Butterfield’s actions demonstrate a clear intention to injure or kill Mr. Carr with a large knife, even if it was based on a delusional belief wherein he did not know his actions were morally wrong.

For these reasons, the trial court found that the assault was both intentional and criminal and, therefore, the exclusion applied. Intact did not have a duty to defend Butterfield.

Butterfield appealed and the decision of the Ontario Court of Appeal was released on April 6, 2023. That court dismissed the appeal and endorsed the trial decision. The appeal panel stated that they agreed that the claim is for damages arising from an intentional act.

The intentional and criminal act exclusion in liability policies has received significant scrutiny over the years. This decision clarifies that it is not necessary to prove that the insured appreciated that his or her act was morally culpable to invoke the exclusion.

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