Volume XXIV, No. 7 (No. 628)
Friday, September 16, 2022
A Biweekly Electronic Newsletter
Hurwitz Fine P.C.
The Liberty Building
424 Main Street, Suite 1300
Buffalo, New York 14202
Phone: 716-849-8900
Fax: 716-855-0874
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575 Broadhollow Road
Melville, New York 11747
Phone: 631-465-0700
Fax: 631-465-0313
www.hurwitzfine.com
© Hurwitz Fine P.C. 2022
All rights reserved
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You will find back issues of Coverage Pointers on the firm website listed above.
Dear Coverage Pointers Subscribers:
Do you have a situation? We do love situations. And we do love our Buffalo Bills. New York’s ONLY football team
.
Not a lot going on in the appellate courts yet, in terms of decisions. We will start seeing a more natural flow of post-Labor Day opinions over the next few weeks.
Use of Expert Witnesses in Bad Faith Cases:
Wonder about if, when, who, and how expert witnesses can be used in bad faith cases? I had the pleasure of conducting a podcase for the Federation of Defense & Corporate Counsel last week on the subject, speaking with attorney Kim J. Jackson, of the Bovis Kyle firm in Atlanta. Wanna listen? Click here.
Being on the Policy Does Not Make One a Resident:
Interesting SUM case in my column this week. Individual who was listed on the policy filed a SUM (underinsured motorists) claim. Court held, rightly so, we would argue, that simply because someone is listed on the policy does not make that individual a resident and a framed issue hearing was necessary to work out that issue.
No Good Deed Goes Unpunished:
I was arguing a New York appeal last week and the lawyer on the other side made a point that we reviewed a Texas Supreme Court case in an issue of Coverage Pointers released in 2004 – over 18 years ago – and therefore we should have known of that non-binding precedent and brought it to the court’s attention. We review over 1,000 decisions a year, so we reviewed that case some 18,000 case reviews ago (with the summary written by two lawyers from a California firm). He claims to have found the decision a day before oral argument. He should read CP more closely. See what we get for publishing a newsletter? No good deed goes unpunished.
I am glad my opponent finds Coverage Pointers a publication worth reviewing!
Training, Training and More Training:
Schedule your in-house training for 2022. Need a topic? Here are 160 or so coverage topics from which to choose.
News from the Albany:
The Grieving Families Act (changing the Wrongful Death recovery parameters) and the Justice for Injured Workers Act, which changes the rules on the collateral estopped effect of Workers’ Compensation decisions, have still not reached the Governor’s Desk. Looks like they are not going to do so, until after the general election in November.
Newsletters:
We have other firm newsletters to which you can subscribe by simply letting the editor (or me) know, including a new publication, which was created to advise on business and employment law questions:
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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.
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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.
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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.
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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:
Nothing to report this week. Go Bills!
Steve
Steven E. Peiper
[email protected]
It’s All Greek to Me – Rochester Style -- 100 Years Ago:
Buffalo Evening News
Buffalo, New York
16 Sep 1922
Love Letters Annoyed, Man Held.
Steven Pappas, 14 Grove Street, Rochester, was today sent to the City Hospital for observation when arraigned before Chief City Judge Woltz for sending annoying letters to Mrs. Mary Macheras, who has a candy store at 317 Main Street. The letter was written in Greek and incoherent but in his way, he had expressed his love for Miss Vasso, one of her daughters. There was nothing at which one could take offense except his forced attentions.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
Fall is here, school is back in session, and life seems to finally be returning to relative normalcy. Indeed, there are more and more in-person events and activities these days to enjoy. Apple picking, fall festivals, and of course pumpkin spice everything is in the air. On the coverage and insurance end, there are many events coming up as well. As many of you know, I hold a number of leadership positions with the Tort Trial and Insurance practice section of the American Bar Association. Coming up, we have a whole host of meetings and CLEs around the country to enjoy. Check out the events calendar and drop me a line if you are interested in attending any of the offerings or have any questions about the ABA or TIPS.
Next up for the TIPS committees in particular is the Fall Leadership meeting in Scottsdale in October. Always a well-attended event, we will be coordinating and planning further upcoming programming. In particular, do be sure to mark your calendars for the Insurance Coverage Litigation Committee seminar, February 23-25, 2023, in Phoenix. More information to come!
This week, the Second Circuit was quiet on coverage. We will be back next time with more on your Federal Circuit Courts, so stay tuned.
Until then,
Agnes
Agnes A. Wilewicz
[email protected]
Some Things Never Change -- Parental Involvement in School Important - 100 Years Ago:
Buffalo Evening News
Buffalo, New York
16 Sep 1922
PARENTS NEGLECT SCHOOLS.
If the public schools are not among the vital concerns, then what is? Most persons see them as the chief safeguards for future welfare and happiness of the nation. Certain members of the city council seem to regard them as more or less necessary evils, or as political playthings.
The trouble in Buffalo has been that parents and the public generally have not taken enough interest in the schools. They have not assumed any responsibility with regard to them. If they had been actively participating in educational affairs, the schools would not have got into politics. The condition that now obtains, because of the shortage of teachers, never would have arisen.
When the general public loses interests in the schools, the politicians are quick to act. Their effort always is to extend the scope of their control. That is what they are seeking to do here. The result is hundreds of children are denied their day in school, because the council has denied the board of education the appropriation necessary to provide instruction for the number of children registered.
Barnas on Bad Faith:
Hello again:
Things are going pretty well for me over here as far as the world of sports is concerned. The Bills rolled to an opening night victory and look like the Super Bowl favorite. Syracuse football is 2-0 with two definitive wins to open the season, and the Blue Jays are 10-3 in September and currently sit in the first wild card spot. It can never all be going right though of course. Kevin Harvick has wrecked out of the first two races of the NASCAR playoffs and now needs to win at Bristol Saturday to advance, and Tottenham lost their second Champions League group fixture to Sporting CP. On balance, we are still feeling pretty good.
While the trials and tribulations of my favorite sports teams may not be overly interesting to the masses, I do have what I think is a rather interesting case from Pennsylvania in my column. There, the Superior Court of Pennsylvania, their appellate level court, considered whether a statutory bad faith claim under Section 8371 could be brought against a surety. This was a matter of first impression, with no Pennsylvania appellate court having ruled on the subject. The statutory language specifically used the language an action arising under an “insurance policy.” The court held that this did not include a surety.
Brian
Brian D. Barnas
[email protected]
Sign, Signs, We Need More Sign- 100 Years Ago:
Clarion-News
Opelousas, Louisiana
16 Sep 1922
Signs Placed on Highways
QUEBEC, Sept. 11. —The provincial government is now installing signs on the national highways which will prove most convenient for motorists and should be in place by the middle of September on all the main roads of the province. Those indicating plates are situated at the entrance of villages and cities and show the name of the place and the speed allowed in each section.
Kyle's Construction Column:
Dear readers,
Great to see the Buffalo Bills off to a flying start this year, taking it to the defending Superbowl Champions in their own stadium and walking away with a convincing victory. My fantasy football team, on the other hand, had no such luck, finishing dead last in points scored in the entire Hurwitz league (and now has multiple injured players to deal with). We will look to bounce back this week.
This week’s case involves a coverage dispute over whether a CGL policy provided coverage for a personal injury claim, arising from a damaged sewage pipeline following the demolition of a building. The plaintiff in the underlying action suffered severe infections after he was in the unfortunate position of being in the restroom when raw sewage was projected from the toilet.
Kyle
Kyle A. Ruffner
[email protected]
Tip Your Hat- 100 Years Ago:
The Ithaca Journal
Ithaca, New York
16 Sep 1922
Straw Hat Riot
Marks Advent
Of Felt Lids
New York, Sept. 16—The city rubbed its eyes and its head this morning, stretched a few times then went out to work—but it went under felt hats. And as it went it watched the street cleaners busily sweeping up the remains of the wild orgy and riot which marked the “end of a perfect day” yesterday from the Battery to the Bronx.
Last night the city had a straw hat riot. All along Broadway, the battles raged. The appearance of a straw hat was the signal for the rapid entrance of gangs of hoodlums and in an amazingly short time the straw hat was scattered over the street.
The police were kept busy. But there wasn’t enough of them and there were too many hats. It had been a warm day, was a warm evening, and the result was direct invitation for all the gangsters in the city to party.
Today, it was noticeable, felt hats arrived. There were two reasons for that, one that the weather was cooler, and two, that most of the straw hats were destroyed last night.
Fleming’s Finest:
Hi Coverage Pointers subscribers:
Football is back, and the city is abuzz with excitement following the Bills’ win against the Rams last week. I recently joined what has been dubbed the firm’s fantasy football “B-team” despite no knowledge of the rules. In the words of one attorney, I “must have done something wild” to assemble the cast of characters that is my team. Does fortune still favor the bold?
This week’s case from the Ohio Supreme Court considered whether an insurer owed a duty to defend its insured, a wholesale distributor of pharmaceutical products, in several lawsuits brought by cities and counties in West Virginia, Michigan, and Nevada for economic losses caused by the opioid epidemic.
Catch you later,
Kate
Katherine A. Fleming
[email protected]
Heartbroken - 100 Years Ago:
Daily News
New York, New York
16 Sep 1922
48 More Lovelorn
Sentenced for Life
At Cupid’s Court
Forty-eight persons eager to wed were matched at the Sixth Session of Cupid’s Court, at Hammonton, N. J. This makes a total of 124 persons selected to date as theoretically perfect companions for each other.
Among the lucky ones was an Atlantic City widow, forty-six, who was chosen as the prospective wife of an Ohioan, fifty-six. A Philadelphia widow, thirty-eight, and a Brooklyn theatrical manager, forty; a Long Island stenographer, twenty-three, and a New York dentist; and a thirty-year old Philadelphia school teacher, and an Elmer, N. J., man, thirty-four, also were matched.
Ryan’s Capital Roundup:
Hello Loyal Coverage Pointers Subscribers:
My son is on day 8 of kindergarten. His first week of Library, he brought home a Lego book. I loved Lego as a child. Proud father moment. His second week? Even better. He brought home a Pete the Cat book for his younger brother, albeit one we already own. PROUD father moment. These are adding up quick…
This week—another slow one—I have outlined a quick form filing disapproval in our From the Filings Cabinet segment. Specifically, the form discussed was proposed in the context of donation surety coverage. Although I pledge to you that it’s a good read, there may be no obligation to read on (certainly not monetarily, maybe morally for the sake of us starving artists). And DFS finds fault with that.
Until next time,
Ryan
Ryan P. Maxwell
[email protected]
Cover Charges to be Eliminated? – 100 Years Ago:
Daily News
New York, New York
16 Sep 1922
Cover Charge Will Join
The Dodo If This Host
Gets Favorable Verdict
The legality of the cover charge, the downfall of many a host, will be passed upon when the case of Isaac Schulman and the Shelburne Hotel comes up in the Brooklyn Court of Special Sessions.
Schulman recently entertained four guests at the hotel. He refused to pay the cover charge, claiming that it was exorbitant, that it represented no service received and that he arrived before 10 P. M., when the charge goes into effect. He was hailed before a Magistrate and found guilty. The case was appealed yesterday and will be tried again in two weeks.
Dishing Out Serious Injury Threshold:
Dear Readers,
I hope everyone is having a great summer and had a great Labor Day weekend. As school is back in session and the days are getting shorter, I hope everyone is able to enjoy the last bits of summer before the fall activities come around.
As we are at the end of summer, it’s a slow time for decisions. Unfortunately, there were no new decisions regarding Serious Injury Threshold § 5102(d) in the past few weeks. Be on the lookout for the next issue!
Enjoy,
Michael
Michael J. Dischley
[email protected]
Can’t the US and Russia Just Get Along? – 100 Years Ago:
New York Herald
New York, New York
16 Sep 1922
MOSCOW HOPES FOR
RELATIONS WITH U. S.
Tchitcherin Says Soviet Is
Ready for Preliminaries
MOSCOW, Sept. 15 (Associated Press).—A note was sent by Foreign Minister Tchitcherin to U. S. Ambassador Houghton, which is considered a reply to the unofficial inquiry in Berlin by Washington as to whether an American technical commission would be welcome in Russia, states that Soviet Russia “is ready to enter official preliminary negotiations for the reestablishment of official relations with an American delegation appointed for this purpose.”
______
WASHINGTON, Sept. 15 (Associated Press). —The State Department views the stress laid in the Soviet note on the readiness of the Moscow officials to enter into preliminary negotiations with an American delegation “for the establishment of official relations” between Russia and the United States as purely a political move. The Washington Government will take no further move toward sending a delegation to Moscow.
Lee’s Connecticut Chronicles:
Dear Nutmeg Newsies:
It was a busy fortnight, with forays to Buffalo, Ft. Erie, Toronto, and Niagara Falls (with a layover in D.C. to boot). Good friends, good food, and some amazing vistas. If you are in Toronto, you must check out Kost. What amazing views of the city, from the 44th floor.
While it was personally busy, the Connecticut courts are still shaking off that summer feeling. Only one case for you this time, and we are revisiting the Connecticut appraisal saga. Apparently, we can’t seem to get enough of that.
Keep keeping safe.
Lee
Lee S. Siegel
[email protected]
Fickle – 100 Years Ago:
Times Union
Brooklyn, New York
16 Sep 1922
Wife of Man a Judge Wouldn’t Shoot
Now Loses Plea to Have Him Jailed
Christopher Donegan, of 5 Water Street, Woodhaven, whose wife, Ellen, told Magistrate Doyle in the Jamaica Police Court, several days ago, when her husband was arraigned for abusing a policeman, that he ought to be shot, was before Judge Doyle again yesterday on another charge of disorderly conduct. This time, the complaint was his wife. She said he threw a knife at her.
“Well, she said she would have me sent up for five years in spite of you.” Donegan said to Judge Doyle, who previously let Donegan off with a $5 fine, although he held him for the Grand Jury on a charge of having stabbed his stepson.
“Why should you say that to him? What have you got against me?” Judge Doyle asked Mrs. Donegan.
“Oh, nothing, except that you wouldn’t shoot him when I wanted you to,” the woman said.
Magistrate Doyle decided that it will be best for the Donegan family if Mr. and Mrs. Donegan separate for a time. Both agreed with him.
Donegan was paroled until today and directed to move out his belongings and find accommodations elsewhere.
Rauh’s Ramblings:
Hello subscribers!
It feels like fall is upon us today in Buffalo with the cooler morning temperatures. It does look like it’s supposed to jump back up into the 80’s towards the end of the week though, so we might still have a few more hot days left this year.
Unfortunately, there were no noteworthy life insurance/ERISA cases to report on this week, but hopefully I will have better luck in two weeks.
Until next time,
Patty
Patricia A. Rauh
[email protected]
Blood is Nastier than Water – 100 Years Ago:
The Baltimore Sun
Baltimore, Maryland
16 Sep 1922
WOMAN FAINTS IN COURT
Spell Comes When Daughter
Testifies Against Her
Mrs. Lettie Hill, 1958 Patterson Place, fainted yesterday in Part 2 of the Superior Court when her daughter, Mrs. Elsie Teal, 1817 North Collington Avenue, testified against her in her $5,000 suit against Georgie Miller, 1945 Patterson Place, for alleged assault.
Mrs. Hill was carried from the court room and revived. She claimed Miller struck her with a bed slat. It was said Mrs. Teal displeased her parents when she married.
The trouble occurred July 12, 1921, when boys on Patterson Place were skylarking. Miller said he left his house to learn the reason for the excitement and was struck by someone in the crowd. Then he wielded a stick in his hand, but he denied trying to strike Mrs. Hill.
Storm’s SIU:
Hi everyone:
Good news, the Dodgers have clinched their division! Baseball season is getting exciting as the playoffs draw near.
Four cases for you this edition:
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Summary judgment granted due to no-fault claimant’s failure to subscribe and return the EUO transcript pursuant to the policy conditions.
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No coverage for extra living expenses where residence was not rendered uninhabitable by a covered loss.
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Functional similarity between a destroyed property and the replacement property is all that replacement cost coverage requires, with no adjustment based on the difference in square footage.
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Public adjuster precluded from offering an opinion as an expert at trial with respect to the cause of the loss or whether the loss is covered under the policy.
“No matter how good you are, you’re going to lose one-third of your games. No matter how bad you are, you’re going to win one-third of your games. It’s the other one-third that makes the difference.” ~ Tommy Lasorda
Talk to you again in two. Go Bills!
Scott
Scott D. Storm
[email protected]
Early Daubert Considerations- 100 Years Ago:
Times Herald
Olean, New York
16 Sep 1922
SCIENTIFIC CRIME
The latest tools of criminals are displayed in New York at the international conference of police.
Detectives seem most interested in apparatus used by “rope workers.” With the skill of “human flies,” this breed of crooks gets on a roof and climb down as many as 14 stories to commit robbery, using only their muscles and a clothesline.
Burglars now have a fad of carrying their tools in violin and banjo cases.
Electricity is being used widely by yeggmen. Hooking to a light socket, they go through a safe door with electric drills. In blowing a safe, they even use an electric fuse-exploder.
Detective Boylan says the yeggmen never have been able to perfect the use of acetylene torches for burning through steel vaults.
All around, the “scientific” tools of crime are disappointing to the curious. In the main they are crude, about the same as a decade ago, with nothing startling as in “master mind” detective fiction.
Each professional criminal, the convened police say, has a characteristic style of work peculiar to himself.
For instance, if a window is broken noiselessly by plastering flypaper on it to prevent the crash of falling glass, the police know instantly that the crook is one of a score or so who specialize in this method.
Further elimination is easy, for certain crooks work only on Saturday nights, at certain hours or only during storms.
Cocaine is the chief tool of the New York crook, says Detective Frank Quigley. He explains:
“Anybody that goes crooked begins taking it to steady his nerves. If a man shows a yellow streak, his pals make him take a big sniff of cocaine before they will go out on a job with him. I don’t believe a loft burglary, or any other dangerous crime has been pulled off in New York in years except after they have doped themselves to keep their nerves.”
Crime and the drug traffic go hand-in-hand. To attack crime at its roots and paralyze its growth, stop drug traffic. That is the way, and police know it, but it’s easier said than done. The job, however, is not impossible.
North of the Border:
At first, we heard that Queen Elizabeth II was gravely ill, and the family was gathering at Balmoral … within an hour or so we learned that she had died. At age 96.
Queen Elizabeth’s reign was the longest of any British monarch and the longest recorded of any female head of state in history. Canada’s tie to the British Crown runs deep.
A portrait of her with Charles and Anne at her side was on the wall above the blackboard (yes, a chalk blackboard) of every classroom during my elementary school years and a very regal portrait was at the front entrance to my junior high and high school. Every school event was opened with the singing of “O Canada” and closed with “God the Save the Queen”.
I met her in 2005 when she came to Calgary to open the Museum of the Regiments on the occasion of Alberta’s centennial. I curtsied and nodded. She nodded in return. It was quite a moment.
I will be up at 4:00 a.m. on Monday morning to watch her funeral. Monday has been declared a federal holiday.
We now enter the reign of King Charles III. King Charles I was executed in 1649; that of King Charles II was interrupted by Cromwell’s republic. Hopefully the reign of King Charles III will be calmer.
Immediately the Alberta Court of Queen’s Bench became the Alberta Court of King’s Bench as did the similarly named superior trial courts of Saskatchewan, Manitoba, and New Brunswick. The honorary designation of Q.C. became K.C. overnight. All proceedings against the provincial and federal Crowns will now be styled “His Majesty the King in Right of the Dominion of Canada” or the Province of Alberta or whatever province is involved. We will now sing God Save the King. Criminal prosecutions will be “Rex v. [insert name]” rather than “Regina v. [insert name]. It all seems strange.
An icon of decency and continuity has passed. It is a sad moment.
No cases of note this week. See you next time.
Heather
Heather A. Sanderson
[email protected]
Headlines from this week’s issue, attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
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Being Listed on a SUM Policy Does Not Mean One is a Resident of the Household. Need to Demonstrate Permanency. Framed Issue Hearing to be Scheduled
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Nothing this week.
DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley
[email protected]
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No Serious Injuries to report this issue
WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz
[email protected] -
Second Circuit quiet this week
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
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As a Matter of First Impression, Statutory Bad Faith Claim Cannot be Made Against a Surety
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
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First Carrier Forced into Appraisal, Now Loses Assignment Tussle
KYLE'S CONSTRUCTION COLUMN
Kyle A. Ruffner
[email protected]
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No Duty to Defend Defendant in Underlying Action, Arising from Raw Sewage Explosion
RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell
[email protected]
- DFS Disapproval Finds Mere “Pledge” May Not Create Enforceable Debt
RAUH’S RAMBLINGS
Patricia A. Rauh
[email protected]
- No life insurance/ERISA cases to report on this week – see you in two weeks!
STORM’S SIU EXAMEN
Scott D. Storm
[email protected]
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Summary Judgment Granted Due to No-Fault Claimant’s Failure to Subscribe and Return the EUO Transcript Pursuant to the Policy Conditions
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No Coverage for Extra Living Expenses Where Residence was Not Rendered Uninhabitable by a Covered Loss
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Functional Similarity Between a Destroyed Property and the Replacement Property is all that Replacement Cost Coverage Requires, with No Adjustment Based on the Difference in Square Footage
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Public Adjuster Precluded from Offering an Opinion as an Expert at Trial with Respect to the Cause of the Loss or Whether the Loss is Covered Under the Policy
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- No Duty to Defend Against Allegations of Governments’ Economic Loss Arising Out of The Opioid Epidemic
NORTH of the BORDER
Heather A. Sanderson
[email protected]
- No cases of note this week. See you next time.
Stay well. Stay happy. Keep the world spinning in the right direction.
Dan
Hurwitz Fine P.C. is a full-service law firm providing legal services throughout the State of New York and providing insurance coverage advice and counsel in Connecticut.
In addition, Dan D. Kohane is a Foreign Legal Consultant, Permit No. 000241, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]
ASSISTANT EDITOR
Patricia A. Rauh
[email protected]
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
[email protected]
Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Scott D. Storm
Thomas Casella
Brian D. Barnas
Ryan P. Maxwell
Patricia A. Rauh
Diane F. Bosse
Joel R. Appelbaum
Kyle A. Ruffner
Katherine A. Fleming
FIRE, FIRST PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Michael F. Perley
Scott D. Storm
Brian D. Barnas
NO-FAULT/UM/SUM TEAM
Dan D. Kohane
[email protected]
Alice A. Trueman
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Diane F. Bosse
Topical Index
Kohane’s Coverage Corner
Peiper on Property and Potpourri
Dishing Out Serious Injury Threshold
Wilewicz’s Wide World of Coverage
Barnas on Bad Faith
Lee’s Connecticut Chronicles
Kyle’s Construction Column
Ryan’s Capital Roundup
Rauh’s Ramblings
Storm’s SIU
Fleming’s Finest
North of the Border
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
09/06/22 Travelers Home and Marine Insurance Company v. Barowitz
Appellate Division, First Department
Being Listed on a SUM Policy Does Not Mean One is a Resident of the Household. Need to Demonstrate Permanency. Framed Issue Hearing to be Scheduled
Travelers issued a Maine automobile liability insurance policy to Zachary Barowitz. The policy's declaration page listed Zachary as the named insured, residing at 28 Gilman Street, Portland, Maine. In 2013, Zachary's residence on the policy was changed to 22 Huntress Street, Portland, Maine.
Elliott Barowitz is Zachary's father and was added as a driver to the policy in 2017.
The policy contained an uninsured/underinsured motorist endorsement (SUM coverage) which defined an insured as, among other things, "1. You or any family member." The policy defined "family member" as "a person related to you by blood, marriage or adoption who is a resident of your household."
On May 22, 2019, Elliott allegedly was involved in an incident in which, as a pedestrian, he was struck by a motor vehicle while crossing a street. Thereafter, Elliott made an uninsured/underinsured motorist claim under the policy's SUM coverage and subsequently demanded arbitration under the policy.
In response to the petition seeking to stay the arbitration, Elliott asserted that he was an insured under the policy. Alternatively, he contended that the policy created an ambiguity as to his status, and that this ambiguity had to be resolved against petitioner.
Elliott also contended that he maintains residences in Maine with Zachary and in New York, and, since he resided with Zachary in Maine, he was a covered person for purposes of the SUM coverage.
The addition of Elliott as a driver does not mean that he meets the definition of an insured under the policy The policy is clear as to who is an insured and who is a driver.
However, a hearing is required to determine the question of fact as to whether Elliott is covered as a resident family member. The policy conditions the status of an insured relative on whether the relative resides with the named insured. Residency is established by a degree of permanency and an intention to remain, and a person may have more than one residence. Here, both parties have proposed that it would be reasonable to hold a framed issue hearing, and Elliott has raised sufficient facts to warrant one, including that he splits his time between Maine and New York, spends a portion of each year at 22 Huntress Street where he keeps personal items and has a bedroom, furnishes the house and landscapes the yard jointly with Zachary, and holds the only mortgage on the property.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
DISHING OUT SERIOUS INJURY THRESHOLD
Michael J. Dischley
[email protected]
No Serious Injuries to report this issue.
WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz
[email protected]
Second Circuit quiet this week.
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
09/01/22 Eastern Steel Constructors, Inc. v. International Fid. Ins. Co.
Superior Court of Pennsylvania
As a Matter of First Impression, Statutory Bad Faith Claim Cannot be Made Against a Surety
The Superior Court of Pennsylvania addressed a matter of first impression in Pennsylvania: whether a statutory bad faith claim under Section 8371 could be brought against a surety. The court concluded that it could not be.
The Pennsylvania bad faith statute provides that in an action arising under an “insurance policy,” if the court finds that the “insurer” has acted in bad faith toward the “insured,” the court may award certain damages. Eastern Steel argued that the term “insurance policy” as used in the statute included surety bonds.
First looking at the language of the statute, the court noted that the plain language applied only to an insurance policy. Nothing in the legislative history revealed any discussions on suretyships or whether the legislature intended to include sureties within the meaning of the term “insurance policies.” The court relied the Black’s Law Dictionary definition of “insurance policy” and upon a 1962 Supreme Court decision in Pearlman, wherein the Court noted that suretyship is not insurance.
The court reasoned that its conclusion was supported by fundamental differences between insurance and suretyship. An insurance policy is a bilateral contract where an insurer and its insured share a direct contractual relationship, and the understanding is that the insurer will compensate the insured for loss of damage upon proper proof of claim. Suretyship contracts, on the other hand, are tripartite in nature where one party, the surety, agrees on behalf of another party, the principal, to make whole a protected party for debts incurred by the other party.
Thus, the court concluded that special damages for bad faith under Section 8371 are only appropriate in the context of insurance where the parties share a direct bilateral relationship.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
09/13/22 American Guarantee & Liability Ins. Co. v. 51 Roses Mill, LLC
United States District Court, District of Connecticut
First Carrier Forced into Appraisal, Now Loses Assignment Tussle
The saga of appraisal continues. As we reported in January, the Connecticut Supreme Court took up the issue of when appraisal is appropriate in a first party property damage claim. The underlying dispute was a common one: wind damaged a homeowner’s roof shingles, the carrier acknowledged a covered loss, and then they fought over how much of the roof needed to be replaced. The homeowner demanded appraisal, but the carrier claimed that this was a coverage dispute making appraisal inappropriate. The Connecticut Supreme Court found that the scope of an insurer's replacement obligation under the state’s matching statute is a question of the amount of loss, and issues of adjacency and reasonableness of matching, are to be resolved by the appraisal panel.
Then in May we reported on a Superior Court judge’s apparent expansion of Klass’s application beyond the matching statute, in 51 Roses [opinion still unavailable]. There, a vacant commercial property was burned to the ground by vagrants. Notwithstanding substantial coverage issues, the trial court held that appraisal was appropriate to determine the “value of the property and the extent of the damage.” Interpreting Klass, the court wrote that appraisal can be compelled where the “damages in question [are] the result of a covered peril, and the issue to be appraised [is] purely a question of fact.”
Now, we turn to the resolution of those substantive coverage issues. As you may recall, while the Superior Court was ordering appraisal, the parties were duking out the coverage dispute in federal court. In September 2020, while the sale of the commercial property was pending (from Bridge33 to 51 Roses) the building was destroyed in a fire. Nevertheless, 51 Roses elected to continue with the purchase of the Property for $1 million. The final sales transaction assigned the insurance proceeds due Bridge33 to 51 Roses and a later agreement assigned the insurance claim to 51 Roses.
American Guarantee claimed that under Connecticut law, a claim for policy proceeds is only assignable after the loss occurs and after the claim accrues. The claim does not accrue, American Guarantee argued, only after the insured satisfies the conditions precedent to receiving proceeds under the policy. Here, American Guarantee argued that no assignment of the right to receive replacement cost value occurred because, at the time of assignment, Bridge33 had not satisfied the condition precedent of rebuilding the destroyed structure within two years and American Guarantee had not consented to an assignment. 51 Roses, on the other hand, asserted that once the loss occurred, any and all insurance proceeds arising from that loss that were contemplated by the policy became assignable regardless of the existence of any conditions precedent to receiving those proceeds.
The Court agreed with 51 Roses. While the policy expressly limited the right of assignment, insurance contracts with a non-assignment clause are generally interpreted as prohibiting the assignment of the policy itself. “Connecticut follows the clear majority rule that such provisions do not bar assignment of an insured's claim after the loss that is the subject of the claim has occurred,” the court wrote (citing, among others, Rising Star Roofing, LLC v. Liberty Mut. Ins. Co., No. HHD-CV-21-6148302-S, 2022 WL 1154520, at *2 (Conn. Super. Ct. Apr. 8, 2022) (citing cases). The court, therefore, held that the anti-assignment clause was ineffective to the extent it barred a post-loss assignment of a claim.
Still, American Guarantee argued that since policy required repairs to be completed within two-years of the loss, and as the repairs had not been made at the time of assignment, the attempted assignment of RCV was invalid. Because rebuilding the property is a condition precedent to RCV, the carrier claimed that Bridge33 failed to satisfy the condition and had, as a result, nothing to assign,
The court easily dismissed this contention. First, the actual scenario was dealt with by the Iowa Supreme Court, which ruled that the post-loss RCV transfer was valid. Second, the court found that American Guarantee’s only cited Connecticut authority did not stand for the proposition asserted. And third, American Guarantee cited no case in which such an assignment was invalidated, whereas multiple courts have approved of such an assignment of rights. “A loss having occurred; American Guarantee must meet the obligations of the Policy if 51 Roses satisfies its conditions.” The court granted 51 Roses motion seeking a declaration that the assignment of RCV rights was valid. Presumably, the amount of loss will (or already was) determined in the appraisal. Perhaps the next iteration of this case will be a proceeding to confirm the appraisal.
KYLE'S CONSTRUCTION COLUMN
Kyle A. Ruffner
[email protected]
09/08/22 Peleus Ins. Co. v. Ron Sparks, Inc.
United States District Court for the Northern District of Texas, Dallas Division
No Duty to Defend Defendant in Underlying Action, Arising from Raw Sewage Explosion
This case involved a declaratory judgment action to determine whether Peleus Insurance Company owed a duty to defend or indemnify the defendant Ron Sparks, Inc. against claims asserted in an underlying personal injury lawsuit. The suit alleged that Ron Spark’s negligence in demolishing a building next to an O’Reilly Parts Store caused significant damage to a sewage pipeline. As a result, the restroom in the O’Reilly store allegedly experienced a reverse sewage flow incident that projected sewage out of the toilet. The complaint alleged that an employee in the restroom at the time was covered in and exposed to raw sewage and ultimately suffered a bacterial infection, sepsis, organ failure and other debilitating injuries.
The commercial general liability policy issued by Peleus to Ron Sparks provided that Peleus will pay those sums Ron Sparks becomes legally obligated to pay as damages because of bodily injury. The policy contained a Total Pollution Exclusion which specified that the policy does not apply to “bodily injury which would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.” Pollutants was defined by the policy as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.”
Under Texas law, courts apply the “eight corners rule” when determining an insurer’s duty to defend, which provides that where the four corners of a petition allege facts stating a cause of action that potentially falls within the four corners of the policy’s scope of coverage, the insurer has a duty to defend. The Fifth Circuit and Texas courts have both held that the language of the Total Pollution Exclusion is unambiguous and susceptible to only one possible interpretation: the preclusion of coverage for liability stemming from bodily injury caused by the discharge, dispersal, seepage, migration, release, or escape of pollutants.
There was no dispute that the underlying lawsuit alleged bodily injury and no dispute as to whether the injuries were allegedly caused by exposure to raw sewage. The court held that the complaint alleged that the bodily injuries suffered were a direct result of exposure to raw sewage, and the allegations clearly involved a “pollutant” as defined by the policy. The court further found that the raw sewage was “released”, which the Fifth Circuit has defined as setting free a pollutant from confinement. Since the underlying lawsuit alleged that raw sewage was released and set free from confinement, the Total Pollution Exclusion’s requirement of discharge dispersal, seepage, migration, release, or escape of a pollutant was satisfied. Therefore, the court held the underlying lawsuit only alleged facts excluded by the policy and the insurer had no duty to defend Ron Sparks.
With regard to the insurers duty to indemnify, the court held that this generally cannot be determined until the completion of litigation when liability is established. Here, the underlying lawsuit that gave rise to the litigation was still pending in state court, so the facts that would control the duty to indemnify had not yet been established. Therefore, the court denied without prejudice the insurer’s motion for summary judgment with respect to its duty to indemnify.
RYAN’S CAPITAL ROUNDUP
Ryan P. Maxwell
[email protected]
From the Filings Cabinet
09/12/22 DFS Disapproves Donation Assurance Form Filing
Department of Financial Services
DFS Disapproval Finds Mere “Pledge” May Not Create Enforceable Debt
These difficult few weeks on the Albany beat continue, but I have found a recent Donation Assurance form filing disapproval from New York’s Department of Financial Services (“DFS”), which raised an interesting point.
On September 12, DFS disapproved a recent form filing for a Donation Assurance Endorsement. Per the filing carrier, this endorsement was meant to cover “the unfulfilled balance of an individual’s written pledge to contribute money to [the insured] that is not honored because of the donor’s bankruptcy, bankruptcy reorganization, unemployment, or incapacitation.” In justifying this proposed endorsement, the carrier noted that such coverage “falls within Section 1113(a)(16)(H) of the Insurance Law because it guarantees the performance of a monetary obligation.” For reference, that Section (which I had never seen before) provides as follows:
(16) “Fidelity and surety insurance,” means:
(H) Becoming surety on, or guaranteeing the performance of, a contract of indebtedness or other monetary obligation where: (i) the aggregate gross principal, interest, and other amounts of indebtedness or other monetary obligations of any obligor whose obligations are guaranteed by the insurer under all bonds issued to that obligor pursuant to this subparagraph by the insurer does not exceed ten million dollars; and (ii) the bond is not issued directly or indirectly in connection with the sale of securities, a pooling of financial assets, or a credit default swap as defined by article sixty-nine of this chapter; and (iii) the bond by its terms terminates upon any sale or other transfer of the insured obligation in connection with the sale of securities, a pooling of financial assets, or a credit default swap as defined by article sixty-nine of this chapter;
However, in disapproving the form, DFS keyed in upon the “monetary obligation” for a debt required under this Section, advising that “a pledge does not create a debt, in and of itself, and a pledge by itself is not usually an enforceable contact. Therefore, the filing is disapproved.”
Maxwell’s Minute: Simple fix, from what it seems, would be to add language requiring the particular “written pledge” to have created a valid, enforceable contract resulting in a debt owed by the donor-insured. That, or avoid the word “pledge” altogether. These are just thoughts though…what do I know.
RAUH’S RAMBLINGS
Patricia A. Rauh
[email protected]
No life insurance/ERISA cases to report on this week – see you in two weeks!
STORM’S SIU EXAMEN
Scott D. Storm
[email protected]
08/12/22 Hereford Ins. Co. v. Mid Atlantic Medical, P.C., et al
Supreme Court, New York County
Summary Judgment Granted Due to No-Fault Claimant’s Failure to Subscribe and Return the EUO Transcript Pursuant to the Policy Conditions
Action for declaratory judgment in which Plaintiff Hereford Insurance Company seeks a default judgment against defendants that it has no duty to pay No-Fault claims, among other things, on the basis that Claimant breached a condition precedent to No-Fault coverage by failing to subscribe to and return his EUO transcript.
11 NYCRR 65-1.1 requires a claimant to fully comply with the terms of coverage in a No-Fault policy as a condition precedent to all claims against an insurance company under such policy. A claimant's failure to subscribe to and return an EUO transcript constitutes a breach of a condition precedent to coverage under the No-Fault regulation and warrants denial of claims submitted under a policy regulated thereunder. Here, Claimant failed to subscribe to and return the transcript for his EUO. This constitutes a breach of a condition precedent to No Fault coverage and the Court accordingly granted this branch of Plaintiff's motion for default judgment.
08/10/22 Harrington v. Berkley Ins. Co.
Supreme Court, New York County
No Coverage for Extra Living Expenses Where Residence was Not Rendered Uninhabitable by a Covered Loss
Plaintiff is a shareholder and tenant under a proprietary lease of a unit of a building owned by a non-party co-op. Berkley Ins. Co. was granted summary that it was not obliged to provide further additional living expense coverage under a Homeowners Policy. There is no dispute, and the engineering firm hired by the plaintiff and defendant, respectively, found that the cause of the failing ceiling in the unit was the improper design of the roof deck that resulted in a change in the "point loads" that transferred the weight of the roof onto beams, the pressure of which caused damage to the ceiling of the unit. Such structural movement and the faulty acts of the owner in causing such errors in weight bearing are explicitly excluded as "covered losses" under the Subject Policy. Thus, plaintiff having failed to meet his burden of demonstrating that structural movement and the faulty acts of the owner were not the proximate cause of the loss, defendant is entitled to a summary declaratory judgment in its favor.
08/26/22 Sinatra & Company Real Estate, LLC. v. Northern Security Ins. Co.
United States District Court, W.D. New York
Functional Similarity Between a Destroyed Property and the Replacement Property is all that Replacement Cost Coverage Requires, with No Adjustment Based on the Difference in Square Footage
Plaintiff Sinatra & Company brings this breach of contract action against Northern Security Ins. Co. alleging Defendant wrongfully denied payment for covered losses stemming from a fire at Plaintiff's property. It asserts three claims: breach of contract/damage to the building (Count I), breach of contract/loss of business income (Count II), and breach of contract/extra-contractual consequential damages (Count III).
Plaintiff owned a residential apartment complex, two-and-a-half-stories, 5,528-square-foot with eleven units, each consisting of a one-bedroom, one-bathroom apartment. Plaintiff was paid the actual cash value and now seeks the replacement cost holdback (difference between the replacement cost and the actual cash value).
The parties dispute whether Plaintiff has “actually repaired or replaced” the property and is thus entitled to payment on a replacement cost basis; as well as the amount “actually spent that is necessary to repair or replace” the property.
The replacement property is three stories, 11,848 square feet, and was previously used by the American Cancer Society as a housing facility for medical patients. Plaintiff plans to use the replacement property for one commercial unit, the use of which has not yet been determined; seven one-bedroom apartments; and two two-bedroom apartments.
Plaintiff argues that a property can be “replaced” with any property that is functionally similar. Defendant contends that a replacement must not only be functionally similar but also “of like kind and quality that is “equivalent,” and does not have “more square feet of space,” “fundamental changes,” or a “different use.” Because the policy contains no definition of the term “replaced”, and the arguments of both parties appear at least plausible,” and there is no extrinsic evidence of the parties’ intent, the Policy is ambiguous as a matter of law. In assessing whether rebuilt property constitutes a replacement, courts have determined that ‘functional similarity’ between the property destroyed, and the replacement property is all that replacement cost coverage requires.
The Court found the replacement property to be functionally similar. The replacement property was most recently used as housing for patients who did not require hospitalization. It contains nine residential units and one commercial unit, the use of which has not yet been determined. It has the same number of bedrooms as the Breckenridge Street Property and is approximately the same age. The Summer Street Property is larger in terms of square footage, but that alone does not make it functionally dissimilar.
Defendant argues that, after an adjustment based on square footage, Plaintiff did not actually spend more than the actual cash value and is therefore not entitled to any additional payments. The parties do not dispute that Plaintiff paid $825,000.00 to purchase the replacement property. Defendant nonetheless contends that because of the vast square footage disparity between the fire damaged property and the replacement property, the amount spent should be adjusted based on square footage, which, according to Defendant, results in an adjusted purchase price of $384,938.40. The Policy does not require an adjustment based on square footage. The plain meaning of “actually spent” is the total amount expended. Defendant cites no authority construing similar contractual language to require an adjustment based on square footage. If Defendant wanted to provide for adjustments to replacement cost based on square footage, it need only include language expressing that intent.
Material questions of fact existed as to whether Plaintiff is entitled to loss of business income coverage based on a full year's rent. Plaintiff does not address Defendant's argument that the delay in purchasing and resuming operations at a replacement property was beyond the hypothetical time period it should have taken to resume operations at the fire damaged property.
The court found a question of fact with respect to the plaintiff’s claim for consequential damages from the Defendant's alleged failure to investigate, evaluate, and pay Plaintiff's claim ‘honestly, adequately, and—most importantly—promptly.
Plaintiff's request for prejudgment interest is denied without prejudice. Plaintiff may renew its motion after Counts II and III have been resolved. In addition to the uncertainty regarding the date from which interest should run, the parties have not briefed the applicable rate of interest, which “varies depending on the nature and terms of the contract.” While Plaintiff moves for prejudgment interest as to Count I only, Counts II and III are also breach of contract claims for which prejudgment interest is requested in Plaintiff's Complaint. Against this backdrop, addressing prejudgment interest after the resolution of all counts would further the “just, speedy, and inexpensive determination of this action.
08/30/22 Coates v. Metropolitan Property and Casualty Co.
United States District Court, E.D. Pennsylvania
Public Adjuster Precluded from Offering an Opinion as an Expert at Trial with Respect to the Cause of the Loss or Whether the Loss is Covered Under the Policy
Defendant's Motion In Limine to preclude report and testimony of Plaintiff's expert, Jeff Olen, a public adjuster is granted. A skid steer operated by Coates allegedly struck a retaining wall on the Property, causing the wall to collapse. Coates submitted a claim under the homeowner's insurance policy issued by Metropolitan.
MetLife denied Coates's claim, stating that "this loss is not covered under the policy" pursuant to the exclusions "for wear, tear, and deterioration" and "for loss contributed to or aggravated by earth movement, and ground and/or surface water which exerts pressure on another structure." It relied on a report prepared by Joseph S. Graci, P.E., a public engineer. Graci opined that the "root cause" of the wall's collapse was its age, wear and tear, exposure, a lack of a proper drainage system, the very weak, decayed, water-damaged condition of the wooden members of the wall, and the lack of proper maintenance. According to Graci, the skid steer "may have been a contributing factor if it indeed hit the wall but could not be the root cause of the total or substantial collapse of the wall.” Alleging breach of contract, Coates submitted an expert report from Jeff Olen of First Choice Public Adjusters. Olen opined that "the cause of damage to this wall was the vehicle impact.
Olen also addressed whether the loss is covered under the Policy. He opined that the damages "were consistent" with damages covered under the Policy, relying on his experience as a licensed public adjuster. Olen claimed "expertise in understanding the insurance process as a public adjuster" and primarily expertise "in building retaining walls and actually rebuilding walls that were built improperly and also building new walls that have failed."
MetLife argues that Olen is not qualified to render an opinion on the cause of the retaining wall's collapse and that his opinion on causation is neither reliable nor does it "fit" this case. As to his opinion concerning loss coverage under the Policy, MetLife asserts such opinions should be excluded as legal in nature.
The Court finds that, although Olen qualifies as an expert, his causation opinion does not satisfy either the reliability or the "fit" requirements. This Court also finds that he is barred from offering an opinion on the proper interpretation of the parties' Policy, which includes whether a loss "would be covered" under the Policy.
This Court agrees that a licensed public adjuster—without more—cannot offer an opinion on the cause of a particular occurrence, whether it is water damage to a roof or a retaining wall collapse. However, a person need not possess academic training and credentials to qualify as an expert; practical experience may suffice. Olen could offer an opinion based on his own practical experience of building retaining walls and replacing walls that have failed. At the very least, a person with years of wall-building experience knows more about how retaining walls work than the average layperson.
The Third Circuit has adopted a liberal approach to the qualification restriction and this Court finds that Olen is qualified to offer an opinion on causation. However, Olen's causation opinion must also satisfy the reliability and "fit" requirements.
In evaluating an expert's reasoning or methodology, a court should consider:
(1) whether a method consists of a testable hypothesis; (2) whether the method has been subject to peer review; (3) the known or potential rate of error; (4) the existence and maintenance of standards controlling the technique's operation; (5) whether the method is generally accepted; (6) the relationship of the technique to methods which have been established to be reliable; (7) the qualifications of the expert witness testifying based on the methodology; and (8) the non-judicial uses to which the method has been put.
The Court agrees with MetLife that Coates does not provide any specific factual support for his broad assertions of sufficient facts and data and reliable principles and methods. In fact, his response does not sufficiently explain how exactly Olen reached his conclusions. Coates only addresses two of the eight enumerated factors—peer review and the qualifications of the expert witness—despite his bald statement that many of these factors apply in this case. Despite purportedly relying on technical or scientific principles, there is no indication that Olen's apparent methods for ascertaining the cause of a retaining wall collapse implicate an actual testable hypothesis, been subjected to peer review, have a known or potential rate of error, are subject to controlling standards, are generally accepted, are related to reliable methods, or have been used outside of the judicial setting. In any event, he did not "employ . . . the same level of intellectual rigor that characterizes the practice of an expert in the relevant field," such as a professional engineer or an architect. The Court finds that Olen's causation opinion does not satisfy the reliability requirement.
In his report, Olen proffered his own interpretation of the language of the Policy's coverage provisions and exclusions. According to MetLife, Olen should be precluded from providing testimony on insurance coverage because such an interpretation of an insurance contract constitutes an impermissible legal conclusion. According to Coates, "Olen will not testify regarding the construction of insurance coverage, nor his opinions on that process" but instead will testify as to "whether the loss would be covered." Under Pennsylvania law, the interpretation of insurance contracts is a question of law for the courts to decide. It is well-settled that expert testimony regarding the interpretation of an insurance policy is impermissible. Opinion evidence on this topic must be excluded.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
09/07/22 Acuity v. Masters Pharmaceutical, Inc.
Supreme Court of Ohio
No Duty to Defend Against Allegations of Governments’ Economic Loss Arising Out of the Opioid Epidemic
Masters Pharmaceutical, Inc. (“Masters”) was a wholesale distributor of pharmaceutical products, and as part of its business, Masters filled and shipped orders of prescription opioids to pharmacies around the country. Twenty-two cities and counties in West Virginia, Michigan, and Nevada (“the governments”) sued Masters, as well as several pharmaceutical manufacturers, other distributors, and retailers. The governments sued opioid manufacturers, distributors, and retailers for their alleged improper marketing and inappropriate distributing of prescription opioids across the country. The underlying suits are substantially similar to each other and share common allegations and claims against Masters. The majority of these actions were consolidated and transferred to a federal multidistrict litigation court in the Northern District of Ohio as part of the national prescription-opioid litigation. The governments alleged that Masters failed to monitor and report suspicious orders of prescription opioids and to implement measures to prevent the filling of improper prescriptions and that it thereby failed to maintain effective controls against the diversion of prescription opioids into the illicit market in violation of federal and state laws. The governments claimed that Masters’ conduct “greatly contributed to the vast increase in opioid overuse and addiction” and caused “a public-health and law-enforcement crisis” in their respective communities. Based on these allegations, the governments asserted claims for public nuisance, negligence, and, in a majority of the complaints, violations of the Racketeer Influenced and Corrupt Organization (“RICO”) Act, among other laws.
They alleged that Masters’ conduct contributed to the opioid epidemic that continues to plague their communities, resulting in the governments’ suffering economic losses, such as increased law-enforcement expenses, judicial expenditures, prison and public-works costs, emergency and medical-care-services costs, substance-abuse-treatment expenses, and lost economic opportunity.
Between July 26, 2010, and July 26, 2018, Masters purchased eight commercial general liability insurance policies from Acuity. Acuity filed an action for a declaratory judgment that it owed no duty to defend or indemnify Masters in the underlying suits. Masters counterclaimed for a declaration that Acuity owed both duties.
Both parties moved for summary judgment. In support of its motion, Acuity argued that the underlying suits do not fall within the policy coverage, because the governments seek damages for their own economic injury, not for any bodily injury, and because Masters knew of the opioid epidemic prior to purchasing the policies from Acuity. Masters countered that the policies provide coverage because the governments seek, at least in part, “damages because of bodily injury,” such as medical and treatment costs they have incurred because of opioid addiction and overdoses sustained by their citizens.
The trial court ultimately agreed with Acuity for two reasons. First, it concluded that the complaints in the underlying suits do not seek “damages because of bodily injury,” because the governments seek damages solely for their own economic loss, not damages for any citizen’s opioid addiction. And second, it found that Masters knew prior to the initial policy period of the alleged “bodily injury”—i.e., prescription opioid addiction—thereby precluding coverage under the policies’ loss-in-progress provisions. It accordingly granted Acuity’s motion for summary judgment, denied Masters’ motion for summary judgment, and declared that Acuity did not owe a duty to defend or indemnify Masters in the underlying suits.
On appeal, the First District reversed the trial court’s judgment. It concluded that the policies expressly provide for organizations, like the governments in the underlying suits, to claim “economic damages, as long as the damages occurred because of bodily injury.” Accordingly, it determined that the policies covered some of the governments’ alleged economic losses, such as medical expenses and treatment costs, because those losses are arguably “because of bodily injury”—i.e., because of physical harm from opioid addiction. The First District further concluded that the policies’ loss-in-progress provisions did not preclude coverage, because it was unclear whether some of the governments’ damages were known to Masters prior to the initial policy period.
The Supreme Court agreed with the trial court, concluding that Acuity did not owe Masters a duty to defend because the allegations of economic loss did not constitute bodily injury to trigger coverage.
NORTH of the BORDER
Heather A. Sanderson
[email protected]
No cases of note this week. See you next time.
