Coverage Pointers - Volume XXIV, No. 9

Volume XXIV, No. 9 (No. 630)
Friday, October 14, 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          

Long Island Office:
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
 

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

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

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

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

 

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Dear Coverage Pointers Subscribers:

Do you have a situation? We do love situations.

We hope that all is well with you and yours.  As we write this issue, we are wrapping up our summer at our Canadian cottage and will be moving back to Buffalo.  That will dramatically reduce my commute time to work, slashing nine whole minutes off my 17-minute journey from Canada to Buffalo to a much more palatable eight minutes.  What I will do with the extra 18 minutes I save on my round-trip journeys; I simply do not know.

BTW, just released is the Syracuse University Law School Annual Survey of New York Law. With Ryan Maxwell, we once again had the honor of writing the Insurance Law article.  This is our 11th annual offering.  If you’re interested, we have some reprints available.

 

Upcoming Education Programs:

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January 19, 2023, 1:30 PM EST

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Coverage Pointers subscribers are the first to know about this program and the first to be given the opportunity to reserve virtual seats.  There is no cost to attend.

In 2021, during the heart of the pandemic, my good friend, John Trimble, lawyer-extraordinaire from Lewis Wagner, Indianapolis, and I scheduled a Zoom continuing education program which we entitled, Insurance 101 – a Coverage Primer for Claims Professionals and Attorneys.  Originally inviting 50, we ended up with hundreds of attendees on four separate dates.  We have been asked to reprise that presentation and are doing so in January.

This is a great opportunity for newer claims professionals and new law firm associates, especially those who may be joining your coverage teams, to get a crash course in liability insurance coverage.  The presenters are two old and season codgers, who actually love this stuff. 

Contact me at [email protected] or John Trimble at [email protected] to reserve a spot or spots for the January 19th Zoom program.

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On the local side, The Buffalo Claims Association is presenting its Annual Education Day on October 20 at the Hilton Garden Inn in downtown Buffalo.  I’ll be presenting on NY Insurance Protocols, How to Craft a Proper Coverage Letter Following NY Rules. There is an array of excellent speakers on property coverage, casualty and cyber as well as Workers’ Compensation and PIP.  Contact [email protected] to register.  Only $75 for a day’s worth of excellent education.

 

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On the national stage, the Federation of Defense & Corporate Counsel (FDCC) is holding its Property Boot Camp and its I-3, the Insurance Industry Institute, at the Sheraton Times Square in midtown Manhattan.  Along with John Trimble from Indianapolis’ Lewis & Wagner, I’ll be presenting on Risk Transfer – Contractual Liability and Additional Insured Coverage.

 

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And if that’s not enough, don’t forget the PLRB Claim Conference and Expo in Orlando where I will be speaking on Risk Transfer, this time with John Hanlon, Director, Complex Claims and Litigation at Kemper.
 

Expert Witness and Mediation Services:

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

 

Need a mediator?

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

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

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

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

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

Try mediation.
 

Training, Training and More Training:

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

 

Newsletters:      

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

 

  • 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.

     

    Insane in the Membrane – 100 Years Ago:

    Times Herald
    Olean, New York
    14 Oct. 1922

    FIFTEEN YEARS IN
    INSANE ASYLUM FOR
    ​YOUTHFUL SLAYER

          Putnam, Conn., Oct. 14.—Ernest Skinner, 16, who on November 8, 1921, murdered Clarence Miller, a wealthy resident of Hampton, and later confessed the crime, was found not guilty of a charge of manslaughter on the ground of insanity in the superior court yesterday afternoon and was sentenced to fifteen years confinement in the Norwich hospital for the insane by Judge Banks. Miller’s body was found in the ruins of a fire which burned his home to the ground last November. Later Skinner confessed to having murdered Miller by chopping him to pieces with an axe and setting fire to the home, to cover up his crime. He was actuated by a desire to obtain some of the money which Miller was reputed to have in his possession.

 

Peiper on Property and Potpourri:

We invite you to take a moment to review the Weathers case reviewed in Brian Barnas’ column this week.  Plaintiff in that case obtained a large trial verdict in excess of policy limits.  The verdict was later reduced by the Appellate Division (if the parties would agree to it) or vacated in its entirety. While Plaintiff liked some of the rulings from the Appellate Division, it disputed other portions.  When he only agreed to stipulate to a portion of the proposed settlement, the alternative ruling of the Appellate Division’s Order triggered to vacate the verdict entirely.

Why does this matter, you ask?  Because at the same time plaintiff was attempting to parse the Second Department’s Order, he was also obtaining an assignment of the defendant/tortfeasor’s rights to pursue extra-contractual recovery from the tortfeasor’s insurer.  Unfortunately, when the trial verdict (albeit reduced by the Appellate Division) was vacated, any excess exposure was vacated along with it.  Now, plaintiff faces the prospect of a new trial and the need to establish damages all over again. 

We’d bet you a nickel (Canadian, of course, as Dan probably has some loose change to get rid of before his full time return back to the US) that the tortfeasor’s carrier will offer the full policy limits to resolve the case.  Doing so would very likely cut off any potential bad faith exposure.

Thus, by seeking to outmaneuver the Appellate Division’s Order, plaintiff is now left with the choice of whether to accept the policy limits or try the case and, ultimately, accept the policy limits.  Any argument for excess exposure due to bad faith appears lost at this point.

Don’t Want to Wait Until March…Check Out PLRB’s November Offering

On the training front, we take an opportunity to remind you of PLRB’s Eastern Regional Meeting in Providence, Rhode Island, on November 8th and 9th.  I will be speaking on preparation of claims professionals for depositions, and strategies for maintaining privileged and/or proprietary documents.  As always, though, there is a litany of other topics presented by a topnotch faculty. 

Find out more here. 

https://www.plrbregionalconferences.org/indexnew.cfm?DM=C

And, please, stop by and say hi if you’re able to make it.

Steve
Steven E. Peiper

[email protected]

 

Grand Theft Auto -- Gland Theft  Uh-oh – 100 Years Ago:

Buffalo Morning Express and Illustrated Buffalo Express
Buffalo, New York
14 Oct 1922

HUSKY CHICAGOAN
KIDNAPPED, WAKES
UP SHY A GLAND

Surgeons say skilled operators
removed interstitial structure

          Chicago, Ill., Oct. 13 (Special).—

          Joseph Wozniak, a husky normal person, occasionally takes a drink, but his last adventure with booze cost him one of his interstitial glands. He is now in a hospital recovering from his remarkable experience.

          On the morning of October 11th, he was walking under a viaduct, slightly lit up after a few rounds of drinks, when four men seized him, threw a sack over his head, and dragged him into an automobile. A sponge filled with chloroform was pressed against his face and he lapsed into unconsciousness. When he regained his senses, he was lying in a vacant lot, with the bag still over his head. He staggered home and there made the discovery that one of his glands had been removed and he called a physician who ordered him to a hospital.

          The attending surgeons say the gland had been removed by a skillful operator, presumably in some hospital, as the wound had been carefully sutured and dressed, the work of an expert.

          It is the theory of the hospital authorities and the police that Wozniak was kidnapped at the behest of some wealthy patient in need of a gland transplantation, that Wozniak had been chosen because of his physique and because he drank and would be easy to capture. It is the first case of gland larceny reported.

 

Wilewicz’ Wide-World of Coverage (featuring Ryan O’Shea):

Dear Readers,

This week, in the Wide World of Coverage, again we feature new associate Ryan O’Shea, with the very latest in coverage-ish cases to come out of our own Second Circuit. See his summary attached and summary of his summary below.

In the meantime, I’m off to virtually attend this week’s ABA TIPS Leadership Conference. Lots of meetings and lots of programming planning to be had. Stay tuned for more information about upcoming ABA insurance-related events.

Hello all, this case from the Second Circuit involves a Plaintiff attempting to get two bites at the apple in an action against insurance brokers. However, the Plaintiff made a procedural gaff by asserting identical claims in an amended complaint against an additional defendant, even after they were dismissed as time-barred and inadequately pled against a prior defendant. This resulted in an order of sanctions against the Plaintiff, oops... ~ Ryan O’Shea

Until next time!

Agnes
Agnes A. Wilewicz

[email protected]

 

13 Going on 13 – 100 Years Ago:

Democrat and Chronicle
Rochester, New York
14 Oct 1922

‘Thirteen’ Unlucky Number in
New York City Court

          New York, Oct. 13.—Henry Rodinsky has thirteen letters in his name, lives on East Thirteenth street and today is celebrating his thirty-ninth birthday.

          Judge Thomas C. T. Grain also has thirteen letters in his name, and when Rodinsky appeared before him to be sentenced for the theft of $13 worth of lace handkerchiefs from a shop on Thirteenth street last August 13th, the Judge said, “thirteen months.”

         “And by the way,” added the Judge, “you’re the thirteenth man I’ve sentenced today. Many happy returns.”

 

Barnas on Bad Faith:

Just a brief note from me this week, as I am working up against a filing deadline today before heading to the first Sabres game of the year tonight.  I have an interesting case from the Second Department in my column today in Weathers that involves the assignment of a bad faith claim.  Check it out and thanks to Steve for the help with the write up.

Brian
Brian D. Barnas

[email protected]

 

Baseball is Ballin’ – 100 Years Ago:

New-York Tribune
New York, New York
14 Oct. 1922

185,947 Paid Admission
To the World’s Series

WASHINGTON, Oct. 13.—With 185,947 paid admissions and receipts totaling $605,475, the admission tax collected by the Federal Government from the world’s series was $60,547.50.

          The box office statement was checked at the close of each game by representatives of the advisory council, the National and American leagues, and the Bureau of Internal Revenue.

          Admission prices ranged from $1 to $6, divided as follows:

         One-dollar admissions, 59,908; $3 admissions, 45,947; $5 admissions, 72,826; $6 admissions, $7,266.

         The paid attendance at each game was as follows: First game, 36,514; second game, 37,020; third game, 37,620; fourth game, 36,242; fifth game, 38,551.

Editor’s Note: Over the two weeks since the last issue, 100 years ago, the American and National Leagues started and completed the 1922 World Series.

In the 1922 World Series, the New York Giants defeated the New York Yankees in five games (four games to none with one tie; starting this year the World Series went to a best-of-seven format permanently). By now, the term "World Series" was being used frequently, as opposed to "World's Series". As with the 1921 World Series, every game was played at the Polo Grounds because it housed both teams, with the home team alternating; it was also the Yankees' final series to be played at the Polo Grounds as a home team, as they would move into the then-under construction Yankee Stadium (1923) for the following season.

The Giants pitched around Babe Ruth (he batted only .118 with just one RBI) and scored just enough runs to win each of the games outside the controversial Game 2 tie. That game was called on account of darkness, but many thought there was sufficient light to have played some more innings (the sun was still in the sky), and there were some suspicions that one or both teams might have "allowed" the tie to happen to increase the overall gate receipts.  Kenesaw Mountain Landis was among those who was dissatisfied with the result. One story is that Landis asked Umpire Hildebrand, "Why the Sam Hill did you call the game?" The umpire answered, "There was a temporary haze on the field." The game decision was in the hands of the umpires, but the Commissioner's Office controlled the gate receipts. Landis ordered the money, more than $120,000, turned over World War I charities, thus nullifying any impropriety. The tied game would turn out to be the third (and final) tied game in the history of the World Series. The other two tied games occurred in the 1907 and 1912 . No ties are possible under later rules, which allow for suspension of a tied game and resumption of it at a later date, as with the 2008 World Series Game #5.

 

Kyle's Construction Column:

Dear Readers,

Great time of the year for sports, as baseball heads into the playoffs, basketball and hockey are starting up, and of course football season is in full swing. Great to see Buffalo continuing to roll, and I look forward to a long-awaited rematch with Kansas City to hopefully erase any memory of the end of last season once and for all. Go Bills!

The first case this week involves a coverage action arising out of a suit regarding performance of a construction contract. The court considered whether an insured had a duty to defend or indemnify the insured subcontractor against a claim for damages against the subcontractor for defective work, delays, and breaches of contract based on the subcontractor’s work. Our other case involves an insurer’s declaratory judgment action seeking a declaration the insurer did not have a duty to defend its insured, a landscaping company, in a lawsuit brought by two homeowners alleging faulty workmanship that caused damage to the homeowner’s property.

Kyle
Kyle A. Ruffner

[email protected]

 

Incarcerated and In Love – 100 Years Ago:

Buffalo Courier
Buffalo, New York
14 Oct. 1922

ASKS WIVES OF
MEN IN PRISON
TO KEEP FAITH

          Detroit, Oct. 13.—A plea to wives of imprisoned men not to divorce their husbands “and thus fail at the most critical moment of their lives those whom they have sworn to love for better or for worse,” was made here today by Harry L. Hulburt, warden of the Michigan State Penitentiary at Jackson, speaking before the American Prison Congress.

         “I have watched the virus working in men when word was brought that their wives started divorce action,” the warden said. “I have seen first offenders making every effort to live down their disgrace and prepare for better things upon their release, only to lose their grip and go down when they realize their wives have cast them off. Most of such men become repeaters. They go out into the world to broken homes and do not care.”

 

Fleming’s Finest:

On holiday.

Kate
Katherine A. Fleming

[email protected]

 

Smuggle Struggle – 100 Years Ago:

Times Union
Brooklyn, New York
14 Oct. 1922

NURSE LOSES LIQUOR

Brooklyn Woman Tries to Bring
Wine From Canada.

          Buffalo, Oct. 14.—When a passenger train from Toronto arrived at the Black Rock station here yesterday morning, customs officials found Mabel K. Boyce, a nurse, of 191 Sterling Avenue, with three quarts of wine in her coat pockets.

          The woman confessed that she was taking the liquor to her home. After a severe reprimand, the customs officials allowed her to continue her trip without the coat and the three bottles of wine.

         “Let this be a warning to you,” the inspector told her, and she continued the trip to Brooklyn.

 

Ryan’s Capital Roundup:

Ryan
Ryan P. Maxwell

[email protected]

 

Call for Football – 100 Years Ago:

Times Union
Brooklyn, New York
14 Oct. 1922

Brooklyn Technical School

          The freshman class of Brooklyn Technical High School is progressing rapidly. The freshman who are attending Manual Training for the time being are organizing activities without the help of upper graders. A call for football material was sounded and one hundred and fifty responded. Mr. Brieling of the Annex Faculty is coaching the future Technical stars. Due to the fact that the treasury of the Tech General Organization is practically nil, the freshmen have had to depend on themselves to equip their own football team. A hurry call was sent out and every freshman responded by depositing ten cents in the box that was put up for the purpose. Consequently, the team is almost fully equipped. They are practicing every morning at the Public-School Athletic League field.

         Mr. Meserau, who has charge of the annex, reports that things are running smoothly.

         Editor’s Note: my alma mater, but a few years later.

 

Dishing Out Serious Injury Threshold:

Dear Readers,

I hope everyone is able to get out and about and enjoy the nice fall weather.

I was able to locate once case to talk about this week. It is from the Fourth Department and deals with a plaintiff who has several prior accidents and the exacerbation of prior injuries, specifically with regard to range of motion testing.

Enjoy,

Michael
Michael J. Dischley

[email protected]  

 

Equal Opportunity - 100 Years Ago:

The Evening World
New York, New York
14 Oct. 1922

HARDING FOR WOMAN
ON THE TARIFF BOARD

Three New Members to Be Named Soon.

          WASHINGTON, oct. 14.—A spirited contest has developed for places on the United States Tariff Commission under plans for its reorganization.

          Three new members will be named within the six or eight weeks. By the time Congress reconvenes, the President will be ready to organize the commission for its new and more important labors.

          The President, it is believed, will name a woman to the commission, as women are keenly interested in tariff duties.

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

I’ll be quick since there’s only a few hours left in Prime’s Early Access Sale. I still have no idea what it is, although that hasn’t stopped me from getting a new soundbar, blender, meat thermometer, and suitcase. Right now, I’ve got a lead on some clear, heavy duty storage totes. They’re 45% off so I should get them, right?

In Connecticut coverage news, Tudor edged out its insured, winning a DJ that its assault and battery sublimit apply to a shooting death at its insured’s bar. The insured (and underlying plaintiff) argued that the DJ wasn’t ripe until the underlying case resolved, as indemnity is based on the facts established at trial. The court, however, disagreed finding that since under Connecticut law an insured can negligently commit assault or battery, that there were no common questions of fact between the two actions precluding a ruling. This is an important reminder to insurers handling Connecticut claims – just because the complaint alleges assault or battery, the expected or intended exclusion is not always immediately applicable.

Keep keeping safe,

Lee
Lee S. Siegel

[email protected]

 

Trouble in Paradise – 100 Years Ago:

The Evening World
New York, New York
14 Oct. 1922

MOTHER-IN-LAW
IS SUED BY WIFE

$100,000 Asked for Loss of
“Society and Love.”

          Mrs. Annette Barnett Bockar, “Christmas-eve bride” of Anthony J. Bockar, said to be Samuel Untermyer’s Secretary, today began suit for $100,000 damages against her mother-in-law, Mrs. Annette Bockar, No. 58 East 94th Street. According to the younger Mrs. Bockar, she was deprived of the “love, society, and comfort” of the young man she married on Dec. 24 last.

          The complaint, filed by Julius L. Rosenthal, attorney, Woolworth Building, alleges that the couple, until May last, lived together at No. 1261 Madison Avenue; that about that time the elder Mrs. Bockar won him away from her, inducing him to return to the parental home on East 94th Street. The defendant has filed a general denial through H. Randolph Anderson, attorney.

 

Rauh’s Ramblings:

Hello Readers:

It is a pretty gloomy day in Buffalo today, but I will take some rain over snow any day!  Hopefully, the weather clears up this weekend so I can take my son apple picking. We haven’t been able to do too many fall activities this year, so he is really looking forward to it.  Of course, we are also super excited for the Bills to take on the Chiefs this weekend and get another win under their belt!  I hope everyone has a great weekend!

Patty
Patricia A. Rauh

[email protected]

 

Ginger Ale Gimmick – 100 Years Ago:

The Brooklyn Daily Eagle
Brooklyn, New York
14 Oct. 1922

BIG GINGER ALE
SHIPMENT MAY
HIDE RUM PLOT

Mystery About Ownership
of 57 Carloads at Bush Terminal.

          The authorities are puzzled over the unclaimed 50,000 cases of ginger ale loaded in freight cars standing at Bush Terminal. There is no claimant for the shipment, and while it was consigned to the American Druggist Syndicate, 277 Borden Ave., Long Island City, officials of that firm say that it is not their property and the contract for the order must have been forged. Mystery surrounds the case. The Chicago police suspect a plan to substitute whiskey for the ginger ale.

          Recently, three men, representing themselves as officers of the Eastman Spring Beverages Company of Benton Harbor, Mich., called at the Syndicate offices to inquire about a contract made by the Syndicate for the ginger ale. The three said that a George G. Beaver, who said he had the authorization of the Syndicate, placed the contract with the Eastman people. The three officers were informed that there was no man by the name of Beaver in the employ of the American Druggists’ Syndicate and that the firm did not handle the ginger ale.

          A bottle of the ginger ale was sampled today, and it was sure enough ginger ale.

         

Storm’s SIU:

Hi friends:

Three cases this week:

N.Y. PIP, PA SUM, and a ridiculous case for you this edition.  No, you’re not working just because you’re at home thinking about work. 

  • Summary judgment denied on rate evasion defense to PIP claim as motion not supported by documentary evidence of the materiality of the misrepresentation.
     

  • In putative class action Third Circuit holds that Pennsylvania's Motor Vehicle Financial Responsibility Law, Pa. Cons. Stat. §§ 1701-99.7 ("MVFRL") does not require insurers to seek elections of UIM coverage-limits when policyholders add vehicles to their existing policies.  An insurer must seek an election of UIM-coverage limits that are less than the bodily injury-coverage limits only when it issues a new policy, and, as long as the insurer obtains such an election, the UIM-coverage limits remain in effect as long as the policy does.
     

  • Owner of family business which allegedly requires around-the-clock management and on-call support was not in the course of his employment for purposes of SUM coverage when struck by a car while on a leisurely walk with his spouse in their neighborhood talking about work. 

I’m watching the Dodgers in their 2nd game against the Padres as I write this.  Go Dodgers!  Can’t wait for Sunday, Bills at Chiefs.  Gonna be a good one!

“You just can’t beat the person who never gives up”.  ~  Babe Ruth

Talk to you again in two weeks.

Scott
Scott D. Storm

[email protected]

 

Motor Car Food Chain – 100 Years Ago:

The Buffalo Commercial
Buffalo, New York
14 Oct. 1922

FUTURE OF MOTOR CAR INDUSTRY

          The failure of the Elgin Motor Car Company the other day brings to mind the fact that several automobile concerns have gone to the wall recently, and if reports generally are to be believed a number of others are headed for bankruptcy court and will land there in the next few weeks.

          This does not mean by any means that the automotive industry is in a weak position at the present time. On the contrary, the volume of business done this year is the best with one exception in the history of the industry.

          But there are admittedly too many automobile companies and the competition among them is fierce. Some of the smaller concerns are so financed or so conducted that they can bear up against the tremendous economies in production that the big concerns have affected. But it is true that many other must fail by the wayside sooner or later.

          Although there are about 100 corporations engaged in the business of putting out motor cars about 80 per cent of the annual production is in the hands of six concerns. These may be stated in the order of size about as follows: Ford, General Motors, Dodge, Studebaker, Willys-Overland, Knight and Nash. And 90 per cent are manufactured by ten companies. That leaves about ten percent of automobile production scattered among 90 manufacturing companies.

         If we read the signs of the times aright the automobile industry is following the course taken by the steel industry. A quarter of a century ago there were individual steel concerns with plants all over the country. Then the United States Steel Corporation was formed, gobbling up about half of them, and since that time there has been a gradual consolidation of the independents until today the whole industry is in the control of less than half a dozen concerns.

        General Motors is of course the biggest corporation of the kind, and is engaged in the production of motor cars, equipment, and accessories. Its success has given rise to the Durant Motors, which promises in time to become a formidable factor in the automotive world. Of course, Ford still leads in the motor car production and will continue to lead for years to come in spite of the competition that Durant promises. 

 

Gestwick’s Greatest:

Greetings, readers! My first few weeks as an associate, pending admission, have gone quite smoothly, and have sure been keeping me busy. This week, I’m counting down the days until I get to fly out to Kansas City, Missouri, with my dad to watch the Buffalo Bills take on (a/k/a beat) the Kansas City Chiefs. After laying a tremendous 38-3 smackdown on the Pittsburgh Steelers last weekend, a few key players are set to return to the lineup for this game. Score prediction: Bills 34, Chiefs 17.

This week, I bring to you a case out of New York Supreme Court, Kings County. This case involves whether arbitration of the responsibility of first-party no-fault benefits is mandatory where the complaining party is asserting a lack of coverage, rather than asserting that another party bears responsibility. Here, Farmers had issued a policy to a vehicle and driver that expressly excluded coverage where the vehicle was used for commercial ride-sharing purposes. Lo and behold, an accident occurred while the vehicle was being operated as an Uber. New York Insurance Law provides that the payment of first-party no-fault benefits is the responsibility of the insurer that was first billed. However, a New York regulatory code provides that, once said insurer pays the medical provider, it may then arbitrate with another insurance company that may bear the ultimate responsibility. The catch, as illustrated by this case, is that the regulation providing for mandatory arbitration only applies where the insurer is seeking reimbursement by another carrier—as this case holds, it is inapplicable where the insurer is asserting a lack of coverage.

Evan
Evan D. Gestwick – Admission Pending

[email protected]

 

Looking for Love – 100 Years Ago:

Saskatoon Daily Star
Saskatoon, Saskatchewan, Canada
14 Oct. 1922

Personal

          FARMER DESIRES TO CORRESPOND with young woman about 35, object matrimony, Scandinavian preferred. Box 1320B Star.

 

North of the Border:

Two weeks after a terrific weekend with fellow directors and members of Canadian Defence Lawyers, I am off on Friday to attend a Federation of Defense & Corporate Counsel Board of Directors’ Meeting and the FDCC Corporate Counsel Symposium at the Market Street Marriott in Philadelphia. The venue is just down the street from Independence Hall and the Liberty Bell. This will be my first time in that City – it will be intriguing to see the sites of so much history amid the daily bombardment of midterm rhetoric and the escalation of the war in the Ukraine. However, I will be grounded by the fellowship of the FDCC, and I expect that I will leave Philadelphia as I often do after FDCC gatherings -- re-invigorated to practice my skills to the best of my ability.

Heather
Heather A. Sanderson

[email protected]

 

Paternity Hearing – 100 Years Ago:

The Cincinnati Enquirer
Cincinnati, Ohio
14 Oct. 1922

PATERNITY

Of Child Established by Similarity
of Ears–Woman Wins Suit
For Divorce

SPECIAL DISPATCHER TO THE ENQUIRER.

          Papillion, Neb., October 13.—Paternity may be established by the ears, District Judge James Begley ruled today in holding that Charles Harper was the father of the eleven-weeks-old daughter of Mrs. Harper.

          Mrs. Harper had sued for divorce and $25,000 share of his $100,000 fortune. Harper told the court that he had not lived with his wife for more than a year.

          An identification expert demonstrated the similarity between the ears of the babe and those of Harper.

          “Plain as the earmarks on a range cow,” said the Court.

          Mrs. Harper won a divorce.

 

Headlines from this week’s issue, attached:

KOHANE’S COVERAGE CORNER

Dan D. Kohane
[email protected]

  • Estoppel Claim Against Carrier Fails when Insurer Advises that it May Later Disclaim

  • Where Plaintiff is a Self-Employed Independent Subcontractor, his or her Potential Negligence May Trigger Additional Insured Coverage for the Contractor
     

PEIPER on PROPERTY (and POTPOURRI)

Steven E. Peiper
[email protected]

  • Where Service Contractor Encounters a Defective Condition, No Liability Attaches Unless They Made the Site Even “Less Safe”

 

DISHING OUT SERIOUS INJURY THRESHOLD

Michael J. Dischley
[email protected]

  • Plaintiff Failed to Refute Defendant Expert Opinion that Plaintiff had not Sustained any Additional Limitation Causally Related to Subject Accident

 

WILEWICZ’S WIDE WORLD of COVERAGE (featuring Ryan O’Shea)

Agnes A. Wilewicz
[email protected]

  • Lack of Procedural Awareness Equals Sanctions

 

BARNAS on BAD FAITH

Brian D. Barnas
[email protected]

  • Law Office Failure Cannot Be Used to Overcome Deliberate, Yet Unsuccessful, Litigation Strategy to Assert Assigned Bad Faith Claim

 

LEE’S CONNECTICUT CHRONICLES

Lee S. Siegel
[email protected]

  • Assault & Battery Sublimit Is Only Coverage for Shooting Death

 

KYLE'S CONSTRUCTION COLUMN

Kyle A. Ruffner
[email protected]

  • No Coverage Under CGL Policy Where there is no Damage to Property other than the Work Product Itself

  • The Repair or Replacement of Poor Work Product or Defective Workmanship Not an Occurrence under Policy

 

RYAN’S CAPITAL ROUNDUP

Ryan P. Maxwell

[email protected]

  • DFS Disapproves Commercial Umbrella and Excess Form Filing Due To “Final Judgment” Language in Payment of Damages Provision

 

RAUH’S RAMBLINGS

Patricia A. Rauh
[email protected]

  • Nothing to report this week – see you in two weeks!
     

STORM’S SIU

Scott D. Storm
[email protected]

  • Summary Judgment Denied on Rate Evasion Defense to PIP Claim as Motion not Supported by Documentary Evidence of the Materiality of the Misrepresentation

  • Where One of Two PIP Carriers Denies Coverage and the Other Does Not, there is no "Controversy Between Insurers" Under 11 NYCRR 65-4.11(a)(6) that is Subject to Mandatory Arbitration.  Rule Requiring the First-Billed Insurer to Pay and Then Arbitrate is Not Applicable

  • In Putative Class Action 3rd-Circuit Holds that Pennsylvania's Motor Vehicle Financial Responsibility Law, Pa. Cons. Stat. §§ 1701-99.7 ("MVFRL") Does Not Require Insurers to Seek Elections of UIM Coverage-Limits When Policyholders Add Vehicles to their Existing Policies.  An Insurer Must Seek an Election of UIM-Coverage Limits that are Less than the Bodily Injury-Coverage Limits Only When It Issues a New Policy, and, as Long as the Insurer Obtains Such an Election, the UIM-Coverage Limits Remain in Effect as Long as the Policy Does

  • Owner of Family Business Which Allegedly Requires Around-the-Clock Management and On-Call Support was Not in the Course of His Employment for Purposes of SUM Coverage When Struck by a Car While on a Leisurely Walk with His Spouse in Their Neighborhood Talking About Work

 

FLEMING’S FINEST

Katherine A. Fleming
[email protected]

  • On holiday.

GESTWICK’S GREATEST

Evan D. Gestwick – Admission Pending
[email protected]

  • Arbitration of Medical Payments as Part of the No-Fault Law is Only Mandatory Where There is a Dispute Between Insurers; Not Where Lack of Coverage Has First Been Proven
     

NORTH of the BORDER

Heather A. Sanderson
[email protected]

  • Who Pays the Cost of Flood Proofing a Building Within a Flood Plain?

 

Stay well and the be sure to join in the favorite chant through the country: Go Bills!

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
Evan D. Gestwick – Admission Pending
Ryan P. O’Shea – Admission Pending

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

Michael F. Perley
Scott D. Storm
Brian D. Barnas

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

Alice A. Trueman

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

Diane F. Bosse

Topical Index
Kohane’s Coverage Corner
Peiper on Property and Potpourri

Dishing Out Serious Injury Threshold
Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Kyle’s Construction Column

Ryan’s Capital Roundup

Rauh’s Ramblings

Storm’s SIU

Fleming’s Finest

Gestwick’s
Greatest
North of the Border

 

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

10/11/22       Wesco Insurance Company v. Salvo
Appellate Division, First Department
Estoppel Claim Against Carrier Fails when Insurer Advises that it May Later Disclaim

Wesco denied coverage, that is, denied a defense and indemnity, to an insured who was sued in an underlying defamation case. The lower court ruled against Wesco, but the First Department reversed.

Plaintiff established as a matter of law entitlement to its coverage defenses. It properly disclaimed coverage under the Commercial General Liability part of the policy, as the alleged defamatory statements were first published before the policy's effective date, and it had no obligation to provide coverage under the Directors and Officers Liability part of the policy, as the underlying matter fell within the scope of exclusions in the policy.

The policyholder argued that Wesco was estopped from denying coverage because an October 14, 2016, letter notified them of the bases upon which plaintiff could disclaim coverage and that they had not established that they were prejudiced by the assumption of the insured’s defense in the underlying action.

We learned from counsel that Wesco immediately issued an ROR/partial disclaimer but agreed to defend two defendants, qualifying as insureds under policy issued to condo building, alleged to have defamed the plaintiff, retaining the same counsel to defend both.

 After the motion to dismiss complaint against both was only partially successful, Wesco opted to extricate itself from defending by filing DJ action. The insureds argued primarily that Wesco was estopped from denying coverage because it improperly failed to assign separate counsel to defend each due to a conflict of interest between them and because counsel failed to pursue discovery fast enough

The Appellate Division, reversed because Wesco had promptly advised the insureds of its coverage position, thus precluding estoppel.

Editor’s Note: Attalawyer:  Max Gershweir.

 

10/07/22       Main Street America Assurance Co. v. Merchants Mut. Ins. Co.
Appellate Division, Fourth Department
Where Plaintiff is a Self-Employed Independent Subcontractor, his Potential Negligence May Trigger Additional Insured Coverage for the Contractor

Main Street America Assurance Company (“MSAAC”) and its insured, XL Construction Services, LLC (“XL Construction”), commenced this action seeking, a declaration that defendant Merchants Mutual (“Merchants”) is obligated to provide a defense and indemnification for XL Construction, as an additional insured, in an underlying personal injury action.

Timothy J. O'Connor (“O'Connor”) commenced the underlying Labor Law action against, XL Construction pursuant to Labor Law seeking damages for injuries he sustained during his work as a self-employed drywall finishing subcontractor on a construction project. XL Construction had subcontracted that drywall work to O'Connor and, as part of a written indemnification and insurance agreement between those two parties, O'Connor was obligated to obtain insurance for the benefit of XL Construction. O'Connor was insured by Merchants defendant under a policy containing an additional insureds endorsement that, as relevant here, provided coverage to a party where required by a written agreement, but "only with respect to liability for 'bodily injury' . . . caused, in whole or in part, by . . . [O'Connor's] acts or omissions."

The complaint in the underlying action, submitted in support of the motion, suggests a reasonable possibility that O'Connor's own negligence was a proximate cause of his injuries   The fact that the . . . complaint in the underlying action alleged [Labor Law violations] on the part of [XL Construction], and not [negligence by O'Connor himself], is of no consequence inasmuch as the allegations in the . . . complaint '[brought] the claim potentially within the protection purchased' and triggered [defendant's] duty to defend [XL Construction] as an additional insured"

Merchants further contended that its duty to defend was not triggered because "it may be concluded, as a matter of law, that there is no possible factual or legal basis upon which [it] might eventually be held to be obligated to indemnify [XL Construction] under any provision of the insurance policy. Here, XL Construction "might eventually be held" partially or wholly liable for O'Connor's bodily injuries if they were proximately caused in part by O'Connor's acts or omissions.

 

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]
 

Potpourri

10/04/22       Skeete v. Greyhound Lines, Inc.
Appellate Division, First Department
Where Service Contractor Encounters a Defective Condition, No Liability Attaches Unless They Made the Site Even “Less Safe”

Crazy fact pattern here. Greyhound leased space from the New York City Transit Authority. That premises contained sewage tanks in the basement. Greyhound contracted with Laurence Well & Pump to repair and maintain the sewage pumps. Laurence, in turn, subcontracted with A&L to empty the sewage tanks.

Plaintiff, who was employed as an exterminator by a different subcontractor, fell through a cardboard box covering the sewage tank and sustained injury. The decision advises that the sewage tank’s metal covering was missing, and that a cardboard box was placed over the hole as a presumed substitute. It was further noted that A&L’s employees visited the site to empty the tank approximately one month earlier and encountered the cardboard box covering. A&L removed the box, pumped out the tank, and replaced the box.

Plaintiff sued A&L on the basis that it failed to exercise reasonable care in the performance of its contractual duties. As such, even though it was employed as a private contractor, plaintiff argued that A&L “launched an instrument of harm.”  In rejecting this argument, the Appellate Division noted that the exception is not permitted when the target contractor simply “neglects to make the accident site safer.”   Because the site was left in exactly the same condition as it was before A&L visited, it could not be said that they made it “less safe” (i.e.., launched an instrument of harm).

 

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

09/30/22       Cory Washington-Livingston v. Melinda F. Purpura, et al.
Appellate Division, Fourth Department
Plaintiff Failed to Refute Defendant Expert Opinion that Plaintiff had not Sustained any Additional Limitation Causally Related to Subject Accident

Appeal from an order of the Supreme Court, Erie County (Paul Wojtaszek, J.), entered May 24, 2021. The order, insofar as appealed from, granted the motion of defendants for summary judgment on the issue of serious injury and dismissed the complaint.

Plaintiff commenced this action seeking damages for injuries allegedly sustained in a motor vehicle accident in 2016 when her vehicle was struck from behind by a vehicle operated by defendant Rachel M. Purpura and owned by defendant Melinda F. Purpura. As relevant on appeal, plaintiff alleged that she sustained a serious injury to, inter alia, her cervical spine under the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories of Insurance Law § 5102 (d)Plaintiff alleged that her cervical injury necessitated a surgery performed in 2018. Defendants moved for summary judgment dismissing the complaint on the ground that plaintiff had not sustained a serious injury within the meaning of Insurance Law § 5102 (d)Supreme Court granted the motion and dismissed the complaint. Plaintiff appeals and the Appellate Division affirmed.

The Appellate Division found that, contrary to plaintiff's contention, defendants met their initial burden of establishing that plaintiff did not sustain a serious injury under any of the categories alleged. Plaintiff had been involved in three prior motor vehicle accidents and a work-related accident that had resulted in injury to her spine, including her cervical spine. In support of their motion, defendants submitted a report and affirmation from a physician who had examined plaintiff, as well as a report from a radiologist. The physician and radiologist had reviewed plaintiff's medical records, including MRIs, from before and after the 2016 accident. They opined, inter alia, that plaintiff's MRIs showed preexisting degenerative changes to her cervical spine that were unchanged by the 2016 accident and that there was no objective evidence of a new injury following that accident. Although plaintiff had complained of pain in her cervical spine shortly after the accident, the physician opined that, based on his review of the records and MRIs, any aggravation of the cervical spine caused by the accident would have resolved in one to six weeks.

The Appellate Division found that plaintiff failed to raise an issue of fact in opposition. Although plaintiff contends that she had measurable decreased cervical range of motion when examined after the 2016 accident, plaintiff failed to refute the expert opinions submitted by defendants that plaintiff had not sustained any additional limitation causally related to the 2016 accident by, for example, a comparison of plaintiff's pre- and post-2016 accident records and MRIs.

 

WILEWICZ’S WIDE WORLD of COVERAGE (featuring Ryan O’Shea)
Agnes A. Wilewicz

[email protected]
 

10/06/22       Dimitri Entreprises, Inc., v. Spar Insurance Agency, LLC
Court of Appeals Second Circuit
Lack of Procedural Awareness Equals Sanctions

Plaintiff-Appellant appealed a sanction issued in a district court action under Rule 11 of the Federal Rules of Civil Procedure. Plaintiff, a roofing contractor, brought this dispute arising from a coverage issue for an employee’s work related injury. Plaintiff asserted claims against Scottsdale Insurance Company, its commercial general liability carrier, and NIF Services of New Jersey, Inc., Plaintiffs alleged broker. The claims asserted were negligence and breach of contract.

The district court granted NIF’s motion to dismiss because the negligence claim was time-barred, and the breach of contract did not adequately allege any contractual terms that NIF breached. Instead of appealing or taking any other action, Plaintiff filed an amended complaint against a new defendant, Spar Insurance Agency, LLC, with identical claims. Spar filed a motion to dismiss along with a motion for Rule 11 sanctions. The district court granted both motions, it provided the reasoning for the dismissal of the claims, and determined sanctions were appropriate for filing a frivolous claim

The Second Circuit reviewed this appeal and affirmed the sanctions. The court reasoned it had held upheld sanctions in similar instances, where an original non-frivolous claim was dismissed, but after dismissal an amended complaint asserts identical claims against a new defendant without any good-faith basis for overcoming the previous ruling. It found the dismissal was proper because Plaintiff did not allege a new accrual date for the negligence claim, and the breach of contract claim again did not allege any breach of terms by Spar. Essentially, Plaintiff did not do anything to rectify the deficiencies identified in its allegations.

As for the sanctions, the court affirmed those because the Plaintiff failed to articulate how it could reasonably believe the allegations against Spar would overcome the previous district court ruling. Rather, the Plaintiff asserted the district legal analysis was incorrect. Despite this disagreement, the Second Circuit held the NIF decision made it patently clear that such claims had no chance of success, and therefore, the Rule 11 sanctions because the claims brought against Spar were not made “in good faith after reasonable inquiry.”

 

BARNAS on BAD FAITH
Brian D. Barnas

[email protected]
 

10/05/22       Weathers v. Tri State Consumer Ins. Co.
Appellate Division, Second Department
Law Office Failure Cannot Be Used to Overcome Deliberate, Yet Unsuccessful, Litigation Strategy to Assert Assigned Bad Faith Claim

At the conclusion of a trial for bodily injuries, plaintiff was awarded $1,674,000 by the jury. On appeal, the Second Department reversed the jury decision, and remanded the matter for a new trial. In the alternative, the parties were advised that the Court reasoned a full value of $800,000 was appropriate. As such, if the parties stipulated to the $800,000 within 30 days of the service of the Appellate Division’s Order, new trial would be unnecessary.

Plaintiff agreed that it would stipulate to the reductions for past and future pain and suffering, but it wished to proceed with a new trial on future medical expenses. Defendant disagreed and noted that the Court’s Order was an “all or nothing” proposal. At a later challenge, the Appellate Division agreed therein noting that plaintiff was unable to, essentially, pick and choose what parts of the Order it wanted to acknowledge.

At roughly the same time, plaintiff obtained an assignment of Tri State’s insured for potential bad faith claims. The Tri State policy only provided $100,000, and thus even the proposed future/past pain and suffering awards ($800,000) were well in excess of the verdict.

Eventually, Weathers commenced an action against Tri State asserting the acquired bad faith claim. Tri State moved to dismiss on the basis that the parties failed to stipulate to damages within 30 days of the Appellate Division’s original Order. As such, the jury verdict was subject to the Court’s vacatur and there were no damages, let alone excess damages, until after the trial. The Court agreed and dismissed Weathers’ bad faith action.

Weathers then moved in the Appellate Division for an extension of the 30-day Order, and his application was denied. Upon returning to the trial court, plaintiff next moved under CPLR 2004 and 2005 seeking an extension of the Appellate Division’s 30-day Order at the trial court level. That motion, somewhat unbelievably, was granted.  Tri State then appealed which gives rise to this decision.

The Appellate Division started its holding by noting the trial court does not have discretion to alter, nor otherwise amend, a ruling of the Appellate Division. As such, any attempt to vacate an Appellate Division Order, or extend it, was improper.

Further, even if it had the discretion to extend the 30-day Order, here plaintiff failed to produce a reasonable explanation for the delay in executing the Order. Plaintiff argued, apparently, that it was a law office failure, and as such the expiration of the 30-day window should be excused. The Appellate Division disagreed and noted that there “is a difference between law office failure and misguided strategy.”  Plaintiff’s “mistake” here was the latter, and as such there was no basis to extend the previously expired Order.

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel

[email protected]
 

10/11/22       Tudor Ins. Co. v. Ryan’s Pub, LLC
United States District Court, District of Connecticut
Assault & Battery Sublimit Is Only Coverage for Shooting Death

Tudor obtained summary judgment, holding that its CGL policy’s Assault & Battery Endorsement sublimit is the only potential coverage responsive for a shooting death at its insured’s bar.

Dante A. Hughes shot and killed Joseph Gingerella on the premises of Ryan's Pub, which was insured by Tudor. On the night of his death, Gingerella was a patron at Ryan's Pub. Hughes arrived at Ryan's Pub with a Latoya Knight near “last call.” Hughes and Knight argued, and Knight slapped Hughes. Shortly after Knight left the Pub and Hughes followed her outside. Rachel Smith, a bartender, and employee of Ryan’s Pub observed the altercation and asked Gingerella to check on Knight. Gingerella went outside with a fellow patron, John Hoyt. Hughes was striking Knight with his fists and Hoyt attempted to pull Hughes away. Gingerella stepped between Hughes and Hoyt, but Hughes shot Gingerella in the torso and extremities, killing him.

Joseph Gingerella’s Estate brought suit against the Pub and its manager-manage, Ryan, in Connecticut Superior Court. The Estate sued for wrongful death, claiming that Gingerella’s injuries resulted from the Pub’s negligence. The Estate also claimed recklessness, alleging Gingerella's injuries and damages were caused by the reckless conduct of the defendants, which created a grave risk of death to Gingerella. The Estate sought both compensatory and punitive damages.

Tudor commenced this declaratory judgment action claiming that any available coverage for the state court action under the policy is limited to the $300,000 limit in the Assault & Battery Coverage Endorsement; and that no coverage is available for any punitive damages awarded in the state court action. The Policy contained both an Assault & Battery Exclusion and an Endorsement. The Exclusion provided that:

This insurance does not apply to any claim arising out of an assault and/or battery or out of any act or failure to act to prevent or suppress an assault and/or battery whether caused by the insured, an employee, a patron, or any other person.

This exclusion applies to all causes of action arising out of an assault and/or battery including, but not limited to, allegations of negligent hiring, placement, training, or supervision, or to any act, error, or omission relating to an assault and/or battery.

However, the policy contained a separate Endorsement adding back the coverage, subject to the scheduled limit in the declarations. The policy also included a punitive damages exclusion. “This insurance does not apply to any claim for punitive of exemplary damages.”

The defendants opposed, arguing that the motion was premature as no basis for liability in the tort action had been established. The trial court noted that, generally, because a duty to indemnify is based on the ‘facts established at trial and the theory under which judgment is actually entered in a case,’ it is often premature to issue a declaratory judgment as to the duty to indemnify before the basis for liability is established. And that where “another suit is pending in a state court presenting the same issues ... between the parties, it is entirely appropriate for a district court to dismiss a declaratory judgment action.

However, the court found that there were no common factual disputes between the state court and federal actions precluding a determination of Tudor’s motion. “[U]nder Connecticut law, assault and battery in the civil context can be established through negligence. See infra. Meaning, even if the evidence in the Underlying Action establishes Hughes acted negligently, it will not affect the outcome of this action because Hughes's mens rea is irrelevant into whether there was an assault and/or battery triggering limited coverage under the Assault and/or Battery Coverage endorsement. Thus, there is no common factual dispute between this and the Underlying Action, unlike the cases relied upon by Defendants. Staying this case is inappropriate under these circumstances.” Accordingly, the court granted Tudor summary judgment, finding that any potential award is capped at the Assault & Battery sublimit of $300,000.

The defendants conceded that Tudor does not have a duty to indemnify them for punitive damages but reserved their right to seek punitive damages against Tudor should a court or jury determine Tudor unreasonably failed to settle the state court action, or otherwise inappropriately exposed the defendants to punitive damages.

 

KYLE'S CONSTRUCTION COLUMN
Kyle A. Ruffner

[email protected]
 

09/27/22       Middlesex Insurance Company v. Dixie Mechanical, Inc.
United States District Court, N.D. Georgia, Atlanta Division
No Coverage Under CGL Policy Where there is no Damage to Property other than the Work Product Itself

This insurance coverage action arose out of a suit by IHI E&C International Corporation against Robinson Construction in connection with a construction project, alleging Robinson breached the subcontract due to defective work and abandonment of the project. Robinson filed a third-party complaint against Patriot Modular, alleging Robinson subcontracted with Patriot for much of the work under the contract with IHI, and asserted Robinson should be entitled to recover from Patriot for any defective work. Patriot filed a fourth party complaint against Dixie Mechanical alleging Patriot subcontracted with Dixie for certain work and Patriot should be entitled to recover for Dixie to the extent Patriot is found liable to Robinson.

Middlesex sought a declaration that it owed no duty to defend or indemnity Dixie for any liability or damages arising out of the construction project under the policy it issued to Dixie. Middlesex contended that the claims of faulty workmanship in the underlying complaints did not constitute an “occurrence” or “property damage” under the Policy, and that Patriot was not an “Additional Insured” because Patriot’s subcontract with Dixie did not require Dixie to add Patriot to the Policy and Patriot was not listed as an Additional Insured.

It is well settled that CGL coverage is intended to insure against liabilities to third parties for injury to property or person, including damage to property other than a product or completed work itself, but not liabilities for the repair or correction of the faulty workmanship of the insured. An “occurrence” under a CGL policy can arise where faulty workmanship causes unforeseen or unexpected damage to other property, but the occurrence must cause bodily injury or property damage and the insured must incur a liability to pay damages because of such bodily injury or property damage. For there to be coverage under a CGL policy for faulty workmanship, there must be damage to property other than the work itself, and liability for such damage must arise from negligence, not breach of contract. This coverage is for tort liability for injury to persons and damage to other property and not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damage person bargained.

The court held that the damages in this case could not be considered “property damage” under the policy because the damage did not result in bodily injury to third parties and the damage was not to other property. Rather, Patriot was seeking damages from Dixie to the extent Patriot was found liable to Robinson for defective work, delays, or breaches of contract based on Dixie’s work. There was no allegation that property other than the construction project was affected or that anyone suffered bodily injury because of the deficiencies. Therefore, all alleged damages resulted from Dixie’s allegedly faulty workmanship under the subcontract and affected only the construction project. As such, the court concluded that the damages alleged in the complaints did not constitute “property damage” under the Policy, and the Policy did not provide coverage for the claims asserted regarding Dixie’s workmanship. Therefore, Middlesex did not have a duty to defend or indemnify Dixie under the policy. For allegations of defective workmanship under its subcontract with Patriot.

 

09/20/22       American Family Mutual Insurance CO. v. Sinha
Appellate Court of Illinois, First District, Second Division
The Repair or Replacement of Poor Work Product or Defective Workmanship Not an Occurrence under Policy

This case involves a declaratory judgment action by American Family Mutual Insurance Company seeking a declaration the insurer did not have a duty to defend its insured, a landscaping company, in a lawsuit brought by two homeowners alleging faulty workmanship that caused damage to the homeowner’s property. The homeowners had contracted with Mario’s to construct a gazebo and perform landscaping around a swimming pool that another contractor, Sunco Pools, would install at their home.

The policy provided that American Family will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage. American Family asserted that the allegations in the homeowner’s complaint did not allege an “occurrence,” did not plead damages because of “property damage” and contained exclusions that precluded coverage. For example, the policy excluded coverage for (1) property that must be repaired because “your work” was incorrectly performed, (2) damage to “your work” arising out of it or any party of it and included in the products completed operations hazard, (3) and damage to property that has not been physically injured, arising out a defect, deficiency, or inadequacy in the insured work. The declaratory judgment complaint alleged the homeowner’s underlying complaint alleged damages to property that must be repaired because Mario’s work was incorrectly performed on it, and which fits within the policy’s exclusions for the insured’s product and work.

The general rule in Illinois is that there is no occurrence when a subcontractor’s defective workmanship necessitates removing and repairing work. The mere repair or replacement of poor work product is considered the natural and ordinary consequence of faulty workmanship. Further, where the policy explicitly requires physical injury, there is no coverage on the basis of loss or diminished use resulting from the failure to perform work as promised. Defective work constitutes purely economic losses for which there is no coverage. The court observed that the general rule is applicable in this case, where the homeowners seek to recover damages for removing and repairing Mario’s work and for economic losses for payments for Mario’s work. Therefore, the complaint did not allege facts that constitute property damage caused by an occurrence.

The homeowners asserted that they are alleging significant damages, including the repair and replacement of Mario’s work, but also alleging other damages which were not within the scope of Mario’s work. The homeowners relied on the allegations in their underlying complaint that the defective construction work by Mario caused extensive property and other damages to Plaintiffs. However, the court determined that the allegations of damage to personal property outside the scope of Mario’s work were vague, as the homeowner’s relied heavily on the generic claim that the defective work performed by Mario’s caused “extensive property and other damages”. This generic allegation is insufficient to allege damages beyond repair and replacement of Mario’s work or other parts of the project for which Mario’s was responsible. The allegations on which the homeowners relied did not allege damage to the homeowner’s property that was clearly damage to something other than the project itself.

The court held that any judgement based on the facts presented by the homeowners could only award damages for alleged property damage that is not covered by the policy, such as property damage caused by Mario’s workmanship on the project for which it was contracted. Therefore, the court held the underlying complaint did not allege an “occurrence” as defined by the policy and American Family had no duty to defend.

 

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

 

From the Filings Cabinet

09/29/22       Payment of Damages Provision Leads to Disapproval
Department of Financial Services
DFS Disapproves Commercial Umbrella and Excess Form Filing Due To “Final Judgment” Language in Payment of Damages Provision

Recently, New York’s Department of Financial Services (“DFS”) disapproved of a carrier’s form filing due, in part, to a Payment of Damages provision contained therein. Specifically, the carrier sought to include the following provision:

11.     Payment of Damages

When the amount of damages payable under this policy has been determined by final judgment or a written settlement agreement between the claimant and us, we will pay that amount, up to our applicable Limits of Insurance, after the “controlling underlying insurance policy” or the insured has paid the full amount of the “underlying limits.”

Although not the only reason for disapproval, DFS advised the carrier that inclusion of qualifying language indicating that payment of damages requires that the amount of damages “…has been determined by final judgment…” was impermissible. Specifically, requesting that the carrier amend this language, DFS advised that “judgments need not be ‘final’ or obtained ‘after actual trial’ before an action can be brought against the insurer” by a judgment creditor.

This disapproval appears to have support in the express language of New York Insurance Law §3420(a)(2), which requires all insurance policies insuring against liability for injury to person or against liability for injury to, or destruction of, property contain, in substance, the following:

(2) A provision that in case judgment against the insured or the insured's personal representative in an action brought to recover damages for injury sustained or loss or damage occasioned during the life of the policy or contract shall remain unsatisfied at the expiration of thirty days from the serving of notice of entry of judgment upon the attorney for the insured, or upon the insured, and upon the insurer, then an action may, except during a stay or limited stay of execution against the insured on such judgment, be maintained against the insurer under the terms of the policy or contract for the amount of such judgment not exceeding the amount of the applicable limit of coverage under such policy or contract.

Indeed, there is no express requirement under New York Insurance Law §3420(a)(2) that a judgment be “final” as was indicated in the carrier’s form filing, in order for payment of damages under an insurance policy to become due to a judgment creditor. Accordingly, since the clock for satisfaction of a judgment commences upon service “of notice of entry of judgment upon the attorney for the insured, or upon the insured, and upon the insurer,” pursuant to §3420(a)(2), DFS determined that this payment provision must be amended to account for entry of a non-final judgment, in whatever form that may take.

Although there is a slight difference, it is a difference, nonetheless. We remind you, however, that Insurance Law §3420(a)(2) merely provides the judgment creditor standing to file suit directly against the tortfeasor’s insurer to recover under the policy. That right does not extinguish the insurer’s ability to stand upon any coverage defenses asserted prior thereto. Surely, an insurer’s decision to stand firm on its coverage defenses should be made on a case-by-case basis—but you did not need me to tell you that.

 

RAUH’S RAMBLINGS
Patricia A. Rauh

[email protected]

Nothing to report this week – see you in two weeks!
 

STORM’S SIU
Scott D. Storm

[email protected]

09/27/22       Liberty Mut. Ins. Co. v. Valera
Appellate Division, First Department
Summary Judgment Denied on Rate Evasion Defense to PIP Claim as Motion not Supported by Documentary Evidence of the Materiality of the Misrepresentation

Insurers' motion for summary judgment denied without prejudice and the case remanded for further discovery concerning the insurers' claim and underwriting practices and guidelines. The insurer submitted undisputed evidence that the claimant misrepresented her address based on her testimony at the Examination Under Oath. However, the insurer failed to establish, as a matter of law, that the alleged misrepresentation as to the correct address was a material misrepresentation. The affidavit of the insurers' underwriter is conclusory and not supported by relevant documentary evidence such as underwriting manuals, rules, or bulletins. 

 

09/29/22       Geist v. State Farm Mut. Auto. Ins. Co
United States Court of Appeals, Third Circuit
In Putative Class Action 3rd-Circuit Holds that Pennsylvania's Motor Vehicle Financial Responsibility Law, Pa. Cons. Stat. §§ 1701-99.7 ("MVFmRL") Does Not Require Insurers to Seek Elections of UIM Coverage-Limits When Policyholders Add Vehicles to their Existing Policies. An Insurer Must Seek an Election of UIM-Coverage Limits that are Less than the Bodily Injury-Coverage Limits Only When It Issues a New Policy, and, if the Insurer Obtains Such an Election, the UIM-Coverage Limits Remain in Effect as Long as the Policy Does

Miranda Geist sought to recover underinsured motorist ("UIM") benefits under her parents' policy with State Farm. State Farm offered her $100,000 in benefits, but Geist maintains that she is entitled to up to $200,000 in benefits because State Farm failed to seek a waiver to provide a UIM-coverage limit below the bodily injury-coverage limit when her father added a new vehicle to the policy. Geist sued State Farm seeking a declaration to this effect.

The District Court dismissed her complaint with prejudice, concluding that Pennsylvania's Motor Vehicle Financial Responsibility Law, Pa. Cons. Stat. §§ 1701-99.7 ("MVFRL") does not require insurers to seek such elections of UIM coverage-limits when policyholders add vehicles to their existing policies. The 3rd-Circuit affirms.

When State Farm issued the Policy in 2010, it insured two vehicles and provided liability coverage of $100,000 per person / $300,000 per accident for bodily injuries. Her father also elected for the Policy to provide UIM benefits of up to $50,000 per person / $100,000 per accident. From then until the date of Geist's accident, he made only two changes to the Policy: (1) he removed the second vehicle in January 2011; and (2) added a third vehicle in February 2013. As is relevant here, at the time the father added the third vehicle to the Policy, he did not execute an acknowledgment for UIM-coverage limits below the bodily injury-coverage limits.

Because her father never executed this acknowledgment when he added the third vehicle to the Policy, Geist believed that, under the Policy, she could recover up to $200,000 in UIM benefits, the stacked total of the $100,000 UIM coverage for each insured vehicle. State Farm, however, paid her only $100,000 in benefits, maintaining that the Policy provided only up to $50,000 in UIM coverage per vehicle—the lower amount elected. Geist, in turn, sued State Farm in Pennsylvania state court. In her putative class action, she seeks a declaration that State Farm must provide a stacked total of $200,000 in UIM coverage under the Policy.

State Farm removed Geist's suit to federal court and, soon thereafter, moved to dismiss her complaint. The District Court granted State Farm's motion and dismissed her complaint with prejudice. It held that, under the MVFRL, an insurer must seek an election of UIM-coverage limits that are less than the bodily injury-coverage limits only when it issues a new policy, and, if the insurer obtains such an election, the UIM-coverage limits remain in effect as long as the policy does. Because the father executed a written election for such lower limits when State Farm issued the Policy, and he never sought a new policy, the Court concluded that State Farm, consistent with this election, need only provide up to $100,000 in stacked UIM benefits to Geist under the Policy. It therefore determined that Geist had failed to state a claim and that further amendment would be futile.

MVFRL 75 Pa. Cons. Stat. § 1734 provides an individual may request a policy with UIM-coverage limits that are less than her bodily injury-coverage limits if she executes a written request to that effect. Geist contends that the District Court misinterpreted sections 1731 and 1734. She argues that, contrary to the District Court's conclusion, these statutes require an insurer to obtain a written election to provide UIM-coverage limits lower than bodily injury-coverage limits when a policyholder adds a new vehicle to an existing automobile insurance policy, and, if the insurer fails to do so, it must provide UIM-coverage limits equal to the bodily injury-coverage limits. We disagree.

Both we and the Supreme Court of Pennsylvania have recognized that sections 1731 and 1734 mean no more than what they state. Under section 1731, an insurer's "deliver[y] or issu[ance]" of a "policy" triggers its obligation to provide UIM coverage. Once an insurer receives a signed election from the insured that includes "an express designation of the amount of coverage requested," it may issue that policy with the insured's requested limit. The insurer need not do any more to fulfill its obligations under sections 1731 and 1734 during the life of that policy. 

Geist cannot overcome the MVFRL's plain text. Sections 1731's and 1734's text forecloses her reading because these provisions establish that the issuance of a policy, not the purchase of coverage, triggers the duty to seek an election of UIM-coverage limits.
 

09/27/22       Aibel v. Hartford Acc. & Indem. Co.
United States District Court, S.D. New York
Owner of Family Business Which Allegedly Requires Around-the-Clock Management and On-Call Support was Not in the Course of His Employment for Purposes of SUM Coverage When Struck by a Car While on a Leisurely Walk with His Spouse in Their Neighborhood Talking About Work

Aibel brought this action against Hartford alleging breach of contract relating to Defendant's decision to decline insurance coverage. Defendant moves to dismiss pursuant to Fed. R. Civ. P. 12(b)(6).

Plaintiff is owner and chief executive officer of Majestic Rayon Corporation, a small, family business. Plaintiff states that as a family business, the Aibel family members performed their work for Majestic at times and locations as required by the practicalities of the corporation's business needs, as well as according to their own convenience. In their capacity as the management team for a family business, Aibel and his family members go about their daily personal lives without observing hard-and-fast distinctions between work hours and personal hours.  He further states that Majestic's properties are in use 24 hours a day, and require full-time, around-the-clock management and on-call support. There is always a person functioning in this role for Majestic, day and night, weekdays, weekends, and holidays. Plaintiff alleges that, as CEO, he provides "around-the-clock" services for Majestic. He alleges that when he is unable to fulfill his roles, his sons step in to provide "full-time, around-the-clock management and support for Majestic properties." Plaintiff describes Majestic's business as a property management business that appears to require complete devotion from members. It is the official policy and longstanding practice of Majestic to allow its key employees such as Aibel, his wife, and children the flexibility to perform their respective duties for the company at any hour of any day, and from any location, as long as the needs of the business are met.

Hartford issued an insurance policy to Majestic which included supplementary uninsured/underinsured motorists' ("SUM") coverage. For the purposes of SUM coverage, the Policy defines an insured as: "Any person while acting in the scope of that person's duties for you, except with respect to the use and operation by such person of a motor vehicle not covered under this policy…".

Plaintiff was hit by a car while taking a leisurely walk with his wife. He alleges that during this walk he discussed Majestic's pending litigation with his wife. Plaintiff filed a claim with Hartford seeking coverage under the Policy, which was denied.

Defendant argues that Plaintiff's theory of liability renders the limitations and exclusions of the insurance policy null. Under Plaintiff's theory, they argue, any employee can be said to be within the scope of their employment so long as their mind is on company affairs. The policy limits insureds to those acting within the scope of their duties for the policyholder. Because Majestic is the policy holder, for purposes of SUM coverage, an insured is an employee acting within the scope of their employment at the company. Neither party disputes this.

Under New York law, an employee is said to be acting within the scope of employment "when (1) the employer is, or could be, exercising some control, directly or indirectly, over the employee's activities, and (2) the employee is doing something in furtherance of the duties he owes to his employer."  Whether an employee is acting in furtherance of the duties he owes to his employer depends on:

(1) the connection between the time, place, and occasion for the act;

(2) the history of the relationship between the employer and employee as spelled out in actual practice;

(3) whether the act is one commonly done by such an employee;

(4) the extent of departure from normal methods of performance; and

(5) whether the specific act was one that the employer could reasonably have anticipated.

Plaintiff's arguments are unavailing. Plaintiff argues that his position at Majestic required him to be on call 24/7, meaning that he could be thinking of the company's affairs even when not on site, and because Majestic holds real estate, the company is always "open," further bolstering his on-call argument.

At the time of the accident, Plaintiff was on a leisurely walk with his wife. Plaintiff was not actually on call. The fact that Plaintiff is at the helm of small business where one might shoulder more responsibility than the average employee in an employee-employer relationship does not render one as a 24/7 employee. Merely pondering work affairs cannot be said to be acting with the scope of his employment. Plaintiff also claims he discussed pending litigation with his wife. Here too, there is no indication that Plaintiff was acting under the control of Majestic. His role as CEO did not mandate that Plaintiff go on a walk around the neighborhood. Likewise, taking all facts as true, Plaintiff was not acting in furtherance of his role at Majestic. The fact that he spoke about pending litigation while on a walk with his wife—not with Majestic's counsel—does not render his actions in furtherance of his duties to Majestic. 

Although Plaintiff alleges that it is within the family's culture to work 24/7, at the time of this conversation, as a matter of law, an employee cannot constantly be in the scope of employment.
 

FLEMING’S FINEST
Katherine A. Fleming

[email protected]

On holiday.

GESTWICK’S GREATEST
Evan D. Gestwick – Admission Pending

[email protected]
 

09/30/22        Parisien v. Farmers Insurance
New York State Supreme Court, County of Kings
Arbitration of Medical Payments as Part of the No-Fault Law is Only Mandatory Where There is a Dispute Between Insurers; Not Where Lack of Coverage Has First Been Proven

Following a car crash in which Farmers’ insured was operating her insured vehicle as a commercial ride sharing vehicle, the passenger in the insured vehicle sought medical treatment from the plaintiff, Parisien. Parisien provided the necessary medical treatment and was assigned the passenger’s rights to bring this action against Farmers to recover the cost of said treatment.

In response to a notice of representation from the passenger’s attorney, Progressive Insurance, a non-party, informed the passenger that, although they did insure the Uber vehicle and the driver thereof, they believed Farrmers had also issued a policy covering the same vehicle at the time of the accident. After the passenger’s attorney then reached out to Farmers, Farmers issued a letter disclaiming coverage on the basis that the Farmers Policy did not insure the vehicle when the vehicle was being used for “commercial ride sharing purposes,” nor did it insure commercial passengers.

This action concerns Parisien’s attempt, as assignor of the rights of the passenger, to recoup the costs of the medical services she provided to the commercial passenger after the accident. Farmers renewed its coverage position as to Parisien by letter informing her that she was ineligible to receive medical payments as part of the policy’s no-fault scheme, because the vehicle was being used as an Uber at the time of the accident.

A question then arose of whether Parisien and Farmers must arbitrate the dispute over the medical payments. New York Insurance Law Section 5106(d)(1) provides that whichever insurer is billed first is the one required to pay the medical provider for the treatment rendered. Such insurance company may then, through arbitration, seek reimbursement from the insurance company that is ultimately responsible for making such payment. However, per 11 NYCRR 65-4.11(a)(6), this arbitration procedure does not apply where the basis of the first insurer’s argument is that they are not responsible due to a lack of coverage. It is that party’s burden to prove such a lack of coverage. Thus, a question arose as to whether arbitration was necessary here, given that Farmers’ position was just that—that there was no coverage afforded under the Farmers Policy because the vehicle was being used for ridesharing (I.e., commercial) purposes at the time of the accident.

The Court held that arbitration was not required in this instance. Reasoning that it was undisputed that the vehicle was being used for ride-sharing purposes and that the Farmers Policy did not provide coverage while using the vehicle as part of a commercial ride-sharing program, the Court ruled that 11 NYCRR 65-4.11(a)(6) was inapplicable, and thus, no arbitration was required. The Court went on to provide that the result may well be different if Farmers had instead denied the claim on the ground that the no-fault benefits were instead the responsibility of Progressive, instead of Farmers. This argument, the Court surmised, would give rise to the question of which insurer was obligated to pay the first-party no-fault benefits, bringing the controversy within the purview of 11 NYCRR 65-4.11(a)(6), thereby subjecting it to mandatory arbitration.

 

NORTH of the BORDER
Heather A. Sanderson

[email protected]
 

09/29/22       Emond v. Trillium Mutual Insurance Company, 2022 ONSC 5519 (CanLii)
Ontario Superior Court of Justice
Who Pays the Cost of Flood Proofing a Building Within a Flood Plain?

According to the Weather Network, the top weather story of 2019 that captivated Canadians was the Ottawa River flood that occurred at the end of April. But the same Ottawa River flooded in 2017 in the same area. The 2017 flood was considered the flood of the century. That flood was minor compared to what happened in 2019 when heavy rain fell over frozen ground covered with a higher-than-normal snowpack. The rain melted the snow raising the Ottawa river beyond its banks, flooding the riverside communities from Constance Bay to Hawkesbury.

The Stephen and Claudette Emond owned a riverside home in Woodlawn/Constance Bay and in the catchment area of the Mississippi Valley Conservation Authority- the MVCA. The Mississippi River – no relation or connection to the American river with the same name -- is a tributary of the Ottawa River. The Emonds insured their home with Trillium Mutual Insurance Company. Trillium issued their premier, all perils policy to the Emonds. That policy contained Guaranteed Replacement Cost coverage.

The April 2019 flood severely damaged the Emonds home, and it was declared a total loss. The Emonds elected to rebuild. However, to do so they had to comply with the MVCA regulations. The MVCA is a conservation authority created under the Conservation Authorities Act of Ontario. The MVCA has implemented “regulation policies” to regulate development activities within its catchment area, which includes the Emonds’ property. Those policies mandated that the replacement home had to be flood proofed, greatly increasing the replacement cost. Trillium argued that the increased costs mandated by the MVCA was not wholly covered. Although the policy specified that replacement was guaranteed, the increased replacement costs required to comply with any “law” was limited to $10,000:

We will pay an additional amount up to $10,000 or the amount shown on the “Declaration Page” [...], for the increased cost of demolition, construction, or repair to comply with any law regulating the zoning, demolition, repair, or construction of any insured buildings insured under Section 1, Coverages A and B. This endorsement responds only as a result of direct damage caused by an insured peril. This endorsement is extended to pay for:

  1. Loss resulting from the demolition of any undamaged portion of the insured building(s); or

 

  1. the cost of demolishing, and clearing the site of, and undamaged portion of the insured building(s); or

 

  1. any increase in the cost of repairing, replacing, construction or reconstructing the insured building(s) on the same site or on an adjacent site, of like height, floor area and style, and for like occupancy; arising from the enforcement of the minimum requirements of any by-law, regulation, ordinance, or law which:

 

  1. regulates zoning or the demolition, repair or construction of damaged buildings or structures; and

 

  1. is in force at the time of such loss or damage.

 

The Emonds brought a court application to compel Trillium to honour the GRC clause without limitation. The Court granted that application stating that:

  • Trillium contracted to provide guaranteed replacement cost coverage with no financial limit provided that replacement occurred “
     

  • The Exclusion does not apply to exclude compliance costs attributable to the operation of rules, regulations, by-laws, or ordinances. The para. 8 Exclusion is clear and unequivocal: it excludes only the costs of repair or replacement due to the operation of “any law.”Had Trillium wanted the term “law” to include subordinate authority for the purpose of the para. 8 Exclusion, it could have drafted the Policy accordingly. 

    (The Court seemingly ignored the fact that the cost to comply with regulations and policies of subordinate authorities was in fact capped by the $10,000 sub-limit.)
     

  • Trillium’s interpretation of the para. 8 Exclusion would “render nugatory the coverage for the most obvious risks” for which the GRC endorsement was issued. The fact that the Emonds’ home was not a new home was known to Trillium at the time the Policy was purchased. That it was located on the waterfront within the catchment area of the MVCA was also known to Trillium. It is not disputed that the Emonds are required to comply with the MVCA’s regulation policies, current building code regulations, and municipal by-laws governing construction on their property.
     

  • To interpret the para. 8 Exclusion and the Policy in the manner contended by Trillium would virtually nullify the GRC coverage and would be contrary to the reasonable expectations of the ordinary person as to the coverage purchased.

Time will tell if this decision is appealed.

The Canadian property and casualty industry is confronting the financial impacts of climate change. It makes no sense to rebuild the same property in the same location on a flood plain with like, kind and quality materials only to have it swept away by the next flood. However, the premium reflects the risks of rebuilding what is at the insured location at the time the policy is issued; not what should be there to respond to the risk of flood or wildfire. The financial burden of living in a flood plain or in area exposed to wildfire risk must be shared, either between the insured and the insurer or in some sort of partnership with government. In the meantime, the laudable, unspoken goal of the court to permit adaptation to client change ought not to be achieved by twisting, flattening, and ignoring the clear wording of standard wording in insurance policies.

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