Coverage Pointers - Volume XXV No. 14

Volume XXV, No. 14 (No. 661)
Friday, December 22, 2023
A Biweekly Electronic Newsletter

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

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

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

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

 

 

Dear Coverage Pointers Subscribers:

Do you have a situation? We love situations.

In anticipation of an early week break, we’re sending out our issue a bit earlier than usual.  Feel free to print this out and put in under the Christmas tree for a loved one who adores insurance coverage.

Merry Christmas and Happy New Year from the Coverage Team and your friends at Hurwitz Fine.  We’re delighted to complete another year, buoyed by your friendship and loyalty. We love hearing from you during the course of the year.  We wish you a year with abundant good health for you and your loved ones and peace in your lives and throughout the world.

Making its seasonal reprise, is our 13-year-old Christmas offering, with thanks to my Christmas Elves for their contributions, years ago:

Christmas Coverage
or
A Policy for Saint Nicholas
Dan D. Kohane

With apologies to Clement Moore (or less)

Special Editorial Thanks to the Christmas Elves:  
Tim Sullivan, John Intondi, Mike Perley and Rich Traub

 

T ‘was the night before Christmas, and all through the land.

Few coverage advisors were still in demand.
The policies still showed on both desk and on screen,
My eyes only open with thanks to caffeine.

Most company's adjusters had left for the day.

And most coverage lawyers had little to say.

It was surely the moment to turn out the light,
Shut down the computer, put work out of sight.

Then the phone started chirping, it startled my poise,
Not the typical ringtone, but an odd sounding noise.

It jingled like sleigh bells, instead of a "ding,"
I knew I must answer, despite everything.

A Christmas Eve caller?  What could be the need?
But the sound of the music, would just not recede.

I was really not looking for Christmas Eve banter,
Imagine my shock when the caller was Santa!

"I need some advice, sir" said a somber Saint Nick,
"My Christmas Eve Policy is three inches thick."

I don't mean to bother, but I'm wrought with confusion
"I don't understand this new 'Gifting Exclusion.'"

"It carves out the nasties, the mean and the haughty,
It favors the good ones and leaves out the naughty, 

My coverage appears to have holes like Swiss Cheese,
I'm afraid if I'm sued, I will twist in the breeze."

"A products exclusion?

A chimney one too?  

Elf employment exception, I'm screwed through and through.

Just what is still covered? I sure am confounded,
With all of these issues, I'm fear that I'm grounded."

"With a sleigh full of sacks and reindeer at the ready,
I'm starting to feel just a tad too unsteady.

My belly has acid, my knees are a 'quiver
With millions and millions of toys to deliver."

"I want you to help me, I fear a disclaimer.
This policy's scary; I need you to tame her.

We must surely save Christmas, for good girls and boys.

And Amazon won't refund "squat" on the toys.

The holiday challenged; I sure knew my mission
We needed to craft a new ISO edition.

Santa needed an ally, a comrade, a fighter,
On the opposite side was a Grinch Underwriter.

I am sure you'd imagine how hard it would be
To secure for Saint Nick a late-night policy.

Without coverage gaps, so that Santa could fly,
To save Christmas Day, we were destined to try.

The person in charge of the coverage for Nick,
Had left the shop early, was feeling quite sick.

Perhaps it was sadness, or guilt or just gumption,
He thought he'd killed Christmas, a well-placed assumption.

In order to soften his hardening heart,

We had to play coy, we had to be smart,

We needed to dazzle that Grinch with our guile,

To show him the risk was sure worth his while.

Worse yet, betwixt and between stood a broker,
A bloodsucker culled from the mind of Bram Stoker.

Through him we must go, around or about,
He'd bring pressure to bear, he's really got clout.

"It's Santa," we'd say, "who'd sue him for cash?" 
"Another broker can get us a better deal in a flash.

We'll go to the market if a deal can't be made;"
The Grinch saw his bonus beginning to fade.                   

From the cream of the crop, a new team we'd assemble,

To get Santa protection, to weaken his tremble.

We'd send out the e-mail, we'd tweet, and we'd twitter.

We needed to find the best of the litter.

The other apt choice, as the time slipped on by,
Was to use those fine people, to make him comply.

By plane and by car, by boat and by train.
We beckoned this family to join in refrain.

And gather they did, first a few then a score,
Lawyers and brokers, claims folks and more.
Much more than a choir, it was surely a throng,

Together they gave voice to a beautiful song.

And they reached that man's spirit, his heart, and his soul,

And in no time at all, they'd accomplished their goal.

"Give me my pen", the Grinch yelled to his clerk.
I knew then and there that our ploy it had worked.

"Exclusions begone!  Limitations not there!
We'll provide him his coverage, no need to beware."

And so, it was written, and Santa could jet,
And Christmas was saved, the best Yuletide yet.

On cold winter night, when you're hearing his jingle,
When the children are sleeping and in comes Kris Kringle,

Remember that coverage protected his flight………….

Happy Christmas to all, and to all a good night!

 

It's counting time, as it is every year, in the last issue of the calendar year. This year’s count starts with my favorite statistic:

The “Bad Faith” Count – A Quarter Century has Passed:

It has been 25 years, six months, and 11 days since the last time a New York State appellate court held that an insurance company in the State of New York was liable for bad faith. That’s 9,325 days, for those counting on your fingers and toes.  That decision was Smith v. General Accident, a Court of Appeals opinion handed down on July 11, 1998.

The Case Count: A Look Back at CP’s 2023 Activity:

We love producing this newsletter for our thousands of subscribers. It is the product of the dedication of our column editors and our biggest supporter, Donna Boice. To publish this newsletter, we read and digest every New York and Connecticut appellate decision, opinions from the high courts and federal circuits throughout the country, and, with the help of Heather Sanderson, the courts in Canada as well. We try to digest and foresee trends and advise you, in advance, of what we see developing in the field.

We so appreciate your feedback, when we receive it, knowing that our publication has a positive impact for your company or in your practice. In the last issue of each calendar year, we pause to look back on the previous 12 months’ activities. We were pleased to provide over 400 reviews and commentaries this year, and again, we want to thank our HF CP team for all they do for you.  That’s 10 more reviews than last year.

This year I had 61 summaries, as compared to last year’s 78.  An easy year for me. Special thanks to Evan Gestwick for his help, once again this year, with the count:

Kohane’s Coverage Corner                                  61

Peiper on Property (and Potpourri)                       46

Storm’s SIU Examine                                           45

Ryan’s Capital Roundup                                      30

Kyle’s Noteworthy No-Fault                                 30

Gestwick’s Greatest                                             28

Barnas on Bad Faith                                            28

On the Road with O’Shea                                    28

North of the Border                                              27

Fleming’s Finest                                                  26

Lee’s Connecticut Chronicles                              22

Wilewicz’s Wide World of Coverage                   19

Louttit’s Legislative and Regulatory Roundup    15

Dishing Out Serious Injury Threshold                  14

Rob Reaches the Threshold                               9

Rauh’s Ramblings                                               4

Leaning Tower of Perley                                      1

Total                                                                432

Training and More Training:
Schedule your in-house training for 2024.  Need a topic?  Here are 160 or so coverage topics from which to choose.

Need a Coverage Mediator?  

It’s a good way to try to resolve disputes between and among carriers or policyholders and insurers.

So many cases are stymied because of ongoing coverage disputes.  As a coverage mediator, perhaps I can help mediate your disagreement to see if there is some mutual agreement, we can reach that will not box you into a corner and create adverse precedent.

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

Try mediation. [email protected]

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 Elizabeth Midgley at [email protected] to subscribe.

 

Assuring Your Wife’s Future Happiness?  Nah – 100 Years Ago:

The Buffalo Enquirer
Buffalo, New York
22 Dec 1923

WASHER—Save years of your mother’s and wife’s lives by giving them a 1900 washer; it means their future happiness.  Buse-Stager Corp., 704 Main St. Tupper 020

 

Peiper on Property (and Potpourri):

We love toasting our partners’ success, and we get to do so again this week.  Mr. Labor Law, David Adams, himself, was honored by the WNY Defense Trial Lawyers Association with the Robert M. Kiebala Award.  That distinction is awarded annually to the recognized Defense Trial Lawyer of the Year.   David is a tireless advocate for his clients, a thought leader in Labor Law litigation, and enjoys a peerless reputation as a fantastic trial lawyer.  Kudos to David for his years of good work and well-earned recognition.

We also tip the cap to Marc Schulz who, like David, focuses his practice on the representation of defendants in Labor Law claims. Marc was duly, and unanimously, elected to serve as Vice President/President Elect of the DTLA for the 2024 year. 

If you are a faithful subscriber to Labor Law Pointers, you know David and Marc know their stuff.  If you’re not, please drop us a line and we’ll make sure to connect you.

No “National Day Of” this week. Instead, we recognize December 22^nd as my daughter’s 17^th (gulp) birthday.  She is a remarkable young woman, and I am most proud to say that I have the highest distinction of having raised a daughter that comfortably meets, and frequently exceeds, a level of warmth and humanity for which I can only strive. 

That’s all the holiday cheer we can muster this week.  Warmest wishes for this Holiday Season and upcoming New Year.  We’ll see you in 2024!

Steve
Steven E. Peiper
[email protected]

 

Four Bucks = Two Months in Jail – 100 Years Ago:

Free Press Evening Bulletin
Winnipeg, Manitoba, Canada
22 Dec 2023

SHOPLIFTER GIVEN TWO MONTHS’ TERM

            “Please don’t send me to jail, your worship,” sobbed Mrs. Matilda Watkins in city police court today, when Magistrate sir Hugh John Macdonald sentenced her to two months in jail for theft of three boudoir caps, valued at $4, from the T. Eaton company.  But the magistrate paid no need as the accused had just admitted she had been convicted of theft five months ago.  She said in her own defence she had no money to buy the articles, but made no answer when R. B. Graham, crown prosecutor, asked her why she had taken so many.

            Imy Dendy, convicted also on two charges of theft from the T. Eaton company, was sentenced to three months in jail, the sentences to run concurrently. 

 

Wilewicz’ Wide-World of Coverage:              

Dearest of Dear Readers,

When I started with the Firm over eight and a half years ago, I was ecstatic and beyond thrilled at the opportunity to write for this historic and storied periodical. I had been an avid reader/subscriber myself for some time before that and it felt like a pipe dream come true to be a biweekly author. For my many years on this authors’ panel, and as its associate editor for some time too, I’ve actually looked forward to the brief respite from active legal practice to set pen to electronic paper every other week with all of you audience members in mind.

This week in the Wide World of Coverage, we bring you news that may not be entirely surprising to those who have followed this column, particularly in the past year. Suffice it to say, I’m stepping back from CP with this concluding year-end issue. The demands of my other endeavors and time-consuming travel addiction have increasingly put a strain on my ability to take that respite of late. There are simply not enough waking hours in my days recently to give this esteemed publication the time and attention it so justly deserves.

I’m not going anywhere otherwise, so if you have any coverage questions, environmental law queries, want to quiz me on anything ABA-related, or just feel like dropping a line, I’m around: [email protected] / 716-849-8900.

Enjoy what’s left of the holiday season, everyone.

Until another time,

Agnes
Agnes A. Wilewicz
[email protected]

 

Not a Good Count – 100 Years Ago:

The Oakland Post Enquirer
Oakland, California
22 Dec 1923

‘Court of Beauty’ Leads to Arrest Of Seattle Count

SEATTLE, Dec. 22.-- Count Geo. Hay du Barry, president of a local piano company, was expected to be released on bail today after spending a night in the King county jail following his indictment late yesterday by a federal grand jury on a charge of sending prohibited matter through the mails.

The count was found at a garage, where he was said to be preparing for a trip to Los Angeles.

Du Barry's arrest resulted from his efforts to establish a "court of beauty” and market certain bath salts, charged with “the devil’s soul kiss,’’ and prepared, he declared, from recipes handed down from his famous reputed ancestor, Mme. Du Barry.

Circular letters extolling the salts are said to have been sent society women.

 

Barnas on Bad Faith:

Hello again:

I hope everybody has a wonderful holiday season.  With Christmas Day falling on a Monday, the NFL is once again poised to take over Christmas Eve and Christmas Day.  I used to enjoy watching the NBA all day on Christmas, but with three NFL games on, I suspect my attention will likely be focused on the National Football League.  The AFC leading Ravens against the NFC leading 49ers in primetime on Christmas Day is sure to be a great last Christmas present.

I have a case from the Ninth Circuit in my column this week that granted Geico’s motion for summary judgment because Plaintiffs’ implied covenant of good faith and fair dealing claim was time barred by the statute of limitations.  Interestingly, Plaintiffs’ counsel had testified that he “one hundred percent” believed the Plaintiffs had a bad faith claim as of April 2016, which was over two years before the lawsuit was started.  Not the most helpful testimony for Plaintiffs’ claim.

Thank you for reading all year.  Looking forward to the next one.

Brian
Brian D. Barnas
[email protected]

 

Gifting for Christmas – 100 Years Ago:

Mainland Journal
Pleasantville, New Jersey
22 Dec 1923

Christmas Gifts For All

A Wonderful Array of Pretty Gifts will be found Here

 

Lee’s Connecticut Chronicles:

Dear Nutmeg Newsies:

Unfortunately, there are no Connecticut insurance cases of note to report on in this edition. Perhaps the courts will come back from their holiday break with some breaking news. And if there is, as our friends on NPR’s Wait Wait … Don’t Tell Me say, you’ll hear it here first.  For the Siegels, we are taking the show on the road this holiday season. Five of our clan of six are heading to the Windy City (where they record Wait Wait) to spend time with local family. We’re going to take in some art and go curling. Should be a fun family outing. Then in January the kids are on their own as we make our way to some beach fun in Mexico.

We hope everyone has a joyous and healthy celebration this holiday season.

Lee
Lee S. Siegel
[email protected]

 

KKK Murder Conviction – 100 Years Ago:

Carbondale Daily News
Carbondale, Pennsylvania
22 Dec 1923

GUILTY VERDICT IN KLAN MURDER

Fox is Convicted of the Killing of Coburn and is Sentenced to Life Term in the Penitentiary.

Atlanta, Ga., Dec. 21.—Philip E. Fox, former publicity agent of the Ku Klux Klan was found guilty of murder in his trial on a charge of slaying William S. Coburn, a Klan attorney, here, November 5.  The jury recommended mercy in the sentence of the defendant.

The verdict, under Georgia laws, provided a life imprisonment sentence.  After hearing evidence and arguments for more than a week the jury received the case late last night.

Fox stood up.  He shook his head in the negative when the judge asked if he desired to say anything.

“You shall spend the balance of your natural life in the penitentiary of this State,” the jury said in passing sentence. 

Fox trembled and his head dropped heavily on his chest.

Judge Howard directed the defendant to sit down.  Two bailiffs steadied the trembling man as the sank into his chair.  The court then cautioned all spectators to remain seated.  Twenty or more policemen, headed by Chief of Police Beavers and the bailiffs surrounded Fox and he was escorted from the court room.

 

Kyle's Noteworthy No-Fault:

Dear Readers,

Great to see the Bills gaining momentum in time for a playoff push – I’m looking forward to the rest of the season! Hopefully will make it to a game one of these weeks. I hope everyone has a great Christmas!

This week’s first case, American Transit Insurance Company v. Trinity Pain Management of Staten Island, PLLC, involves the review of a master arbitrator’s decision that the no-fault insurer failed to establish its policy exhaustion defense and the determination of whether the decision was incorrect as a matter of law. The second case, In the Matter of Country-Wide Ins. Co. v. WJW Med. Products., Inc., involves the First Department’s review of the lower court’s decision denying the defendant’s motion for attorney’s fees in connection with a no-fault insurance arbitration award.

Kyle
Kyle A. Ruffner
[email protected]

 

December/May Wedding – 100 Years Ago:

Yonkers Statesman
Yonkers, New York
22 Dec. 1923

Mr. and Mrs. Tucker on Way Back to Face Charges

(By The Associated Press)

JERSEY CITY, N.J., Dec. 22.—Mr. and Mrs. Burton Tucker, who were re-married yesterday at Carthage, N.C., will return to face the indictments for perjury in connection with their first marriage in Union Hill on Oct. 2, J. Raymond Tiffany, their counsel declared today.  Tucker is 17 years old, and his wife gave her age as 46.

No definite date for the return of the couple has been set, he said, but he expected that they would arrive within the next few days.

“After talking the matter over with the Prosecutor’s office,” he said, “I notified them to begin their homeward trip as soon as they could conveniently do so.  My clients are not afraid of this thing. They will return to face it without a question.”

Editor’s note:  I checked – the marriage lasted 12 years.

 

Ryan’s Federal Reporter:

Hello Loyal Coverage Pointers Subscribers:

Merry Christmas and Happy Holidays, everyone. Nothing quite like the smile on a child’s face Christmas morning, let alone two. That’s it. That’s the note (and I mean it).

This week, I have a Second Circuit Court of Appeals Decision involving some insurer-generated creative problem solving gone wrong. The Second Circuit provides some helpful guidance on when it may weigh in on an issue, while also advising when it can’t, and, in this case, why it won’t.

Until next time,

Ryan
Ryan P. Maxwell
[email protected]

 

A Follow Up to the Previous Story – 100 Years Ago:

Birmingham Post-Herald
Birmingham, Alabama
20 Sep 1920

TOMMY TUCKER BORN
Birth Of Son To Man, 19, AND Wife, 48, Is Reported

BALTIMORE, Md., Sept. 19.—A son was reported born in Baltimore last Tuesday to Mr. and Mrs. Burton S. Tucker, of New York.

The baby, according to New York dispatches, has been named Tommy Tucker.

The romance of his parents, his father being 19 years old and his mother 48, caused widespread attention at the time of their marriage, two years ago.

A canvass of local hospitals failed to locate Tommy or his mother.  A cloak of secrecy has been maintained since Tommy’s birth, and efforts to locate them have been futile.

This is the Tucker family’s second visit to Baltimore.  On their way south following their marriage they stopped for several days at a local hotel.

In an interview given out at that time they said they were happily married, denying reports from New York that the husband’s parents would take steps to have the marriage annulled. 

 

Storm’s SIU:

Hi Team:

MERRY CHRISTMAS, HAPPY HANUKKAH and HAPPY NEW YEAR!

Three interesting cases this edition:

• Motion to Preclude Appraisal is Denied as the More Efficient Practice is to Decide any Coverage Disputes Before an Appraisal is Conducted as a

• Defendant Failed to Establish its Policy Exhaustion Defense.  Once Claims Have Been Verified, they are Subject to the Priority of Payment Regulation.  By Denying the Claim, Defendant Implicitly Declared that the Claim at Issue was Fully Verified.  Defendant also Failed to Establish the Timely and Proper Mailing of the Denials as they Contained Material Errors.  Defendant Failed to Establish its Post-IME Cut Off Defense of Medical Necessity for all Causes of Action.

• Unlicensed Driver Exclusion is Not Valid Under the Motor Vehicle Financial Responsibility Law When Applied in the Context of Statutorily Mandated First Party Medical Expense Benefits.

I hope you and your families have a very merry and safe holiday season!  Talk to you again in two weeks.

Scott
Scott D. Storm
[email protected]

 

Hit and Run Driver Dubbed Coward – 100 Years Ago:

The Evening Tribune
Hornell, New York
22 Dec 1923

Coward Escapes After Accident

            BINGHAMTON, Dec. 21—Rita Walker, six years old, dies at the Binghamton city hospital at 1:15 this morning, her sister, Florence, 8 years old, is believed to be dying, the result of being struck by an unknown automobile while crossing Riverside Drive yesterday afternoon.  Ralph Cary, a boy companion, was hurled to the ground, but escaped serious injury.  The car which struck the children drove on without stopping.  The two girls suffered fractures of the skull.

            The police have a description of the car, a Ford sedan, and are scouring this city for it. 

 

Fleming’s Finest:

Hi Coverage Pointers Subscribers:

“In my mind, I’m gone to Carolina” because this week’s case comes from the North Carolina Supreme Court. The North Carolina Supreme Court considered whether an individual qualified for UIM coverage under her mother and stepfather’s auto insurance policy as a resident family member of their household. Based on the facts of the case, the court ended up deciding there was an issue of fact whether the daughter was a resident of both her mother and father’s households. Have a read if you are so inclined.

Looking forward to spending time with friends and family and finishing up some wooly mittens with the cat by my side.

Happy holidays and see you next year,

Kate
Katherine A. Fleming
[email protected]

 

Fire Insurance – 100 Years Ago:

The Bellingham Herald
Bellingham, Washington
22 Dec 1923

FIRE!

            After the recent Berkeley, Calif., fire it was found that the fire loss was $10,000,000 and that the insurance was only $4,000,000—a loss of $6,000,000.  Insurance agents were amazed to find that with the great San Francisco fire still fresh in memory there should be such under insurance in Berkeley, just a few miles away.  The HARTFORD has sounded the clarion call, “Agents insure your city.”  We believe that a big fire in Bellingham would show great loss from under insurance and we want to quote you the rates for HARTFORD insurance.  Have insurance—the best insurance—HARTFORD insurance.  Order today to protect against the Christmas fires.  Our telephone number is 1030.  Just a call will bring the policy—pay later.  Our insurance special is the $5.00 auto accident policy paying $1500 for death and many other indemnities for loss of time, etc.  $5.00 yearly premium.

ARTHUR WATTS
1408 COMMERCIAL-ADJOINING LIBRARY
TELEPHONE 1030

 

Gestwick’s Greatest:

Dear Readers:

Christmas came early for me, with the Buffalo Bills’ 31-10 rout of the Dallas Cowboys. Since seemingly no one gives due attention to professional lacrosse, you can once again count on me as your #1 source for all things Buffalo Bandits. We are currently sitting at 1-1, with a Week 1 loss to the Albany Firewolves followed by a Week 2 home opener win over the Halifax Thunderbirds. Watching the banner raising ceremony was a great time, indeed.

As for coverage, the trial courts have apparently taken an early Holiday, as there was nothing of interest to report this time around. Merry Christmas to all, and to all a good night!

Evan
Evan D. Gestwick
[email protected]

 

Is Fire Insurance a Gamble? – 100 Years Ago:

The Hutchinson News
Hutchinson, Kansas
22 Dec 1923

FIRE INSURANCE IS NOT A GAMBLE

By L. P. YUST of the Brehm Realty Co.

            Insurance is a contract or device to remove the economic consequences of uncertainty, and there can be no real insurance unless the risks of uncertainty are negligible.

            The first duty of an insurance company is to remain solvent.  The insurance company which takes chances it is not prepared to meet in the event of disaster, is a gambling institution.  The insurance buyer who patronizes such a company gets a contract which makes him a participant in the hazard he is insuring against.  Substituting one risk for another does not eliminate risk. …

On the Road with O’Shea:

Dear Readers,

Finally, the Ottawa Senators have let go of DJ Smith. While I harbor no ill will towards DJ, it was a much-needed move and long overdue. Hopefully they can start to get something going over the next few weeks. On another note, Christmas is upon us as are the final few shopping days. I will be one of those zombies this weekend trying to finish what shopping I have left.

This week I have a decision from the Second Department modifying a trial’s court decision on plaintiffs’ claims of fraudulent inducement and rescission against an auto insurer. While the case is not overly involved, it does cover a wide range of topics including unilateral mistake, limited English literacy, agreement signatories, GBL § 349, and statute of limitations.

Until Next Year,

Ryan
Ryan P. O’Shea
[email protected]

 

Christmas Dinner in Rochester – 100 Years Ago:

Democrat and Chronicle
Rochester, New York
22 Dec 1923

Louttit’s Legislative and Regulatory Roundup:

Hello All,

Happy holidays. Today’s column notes a circular letter from the Department of Financial Services regarding a law set into effect on August 1, 2023, that automatically provides Spousal Liability coverage to all insureds (married or not). With this coverage, if the covered spouse is the driver during an accident where they are responsible, or any other kind of accident where the party at fault has no insurance, or insufficient insurance, the spouse is entitled to the limits of the liability coverage.  According to the circular letter, an insurer should submit a SERFF filing to revise its policy forms and rates for the Department’s approval as soon as possible. Happy holidays and best wishes in the new year!

Rob
Robert P. Louttit
[email protected]

 

A Man’s Gift for Christmas – 100 Years Ago:

The Buffalo Times
Buffalo, New York
22 Dec 1923

MEN like auto accessories, please him with a motor clock, cigar lighter, parking lamp, etc. O’Rourke-Plumstead, Inc., 973 Ridge Road.

 

Rob Reaches the Threshold: 

Hello Readers,

As 2023 winds down, I take this time to wish you all a Happy Holiday season and New Year. Reflecting on the past year, which included my column’s introduction, I thank you all for the opportunity to write for this publication. I hope you all have a wonderful and healthy holiday season with your loved ones.

Unfortunately, I am unable to round out the year with an article for you all – as the Appellate Division has not issued any decision dealing with Serious Injury Threshold this month. Hopefully, this just means that the new year will start with an influx of new case law to examine.

See you all in 2024. Happy Holidays!

 Rob
Robert J. Caggiano
[email protected]

 

Wealth to a Point – 100 Years Ago:

The Selma Times-Journal
Selma, Alabama
22 Dec 1923

HEIR TO FORTUNE IN SHELTER HOME
74-Year Old Man Waits But Keeps Making Pencil Sharpeners

            CHICAGO, December 22.—Henri de la Motte, 74 years old, heir to a third of a large fortune in France, according to his daughter in New Yor, prepared today to do a rushing business in pencil sharpeners.

           News of the fortune came last night in the dispatch from New York in which Mrs. Harriet Scott, the daughter, said she was starting for Chicago to visit her long-lost father and intended going to France to claim the fortune for him.

           Reporters found him in the Cathedral Shelter home and told him that his daughter was coming to visit him.

            “I’ve known for years I was an heir to that estate but what I’m interested in is when do I get it?” remarked the old man.  “Just now I’d rather have $3 in this wrinkled old hand of mine than all the promises of a fortune to come,” he observed and declared he “would like to get the money to help his friends in the Shelter Home.”

North of the Border:

I take this opportunity to wish all of you the very best for the upcoming holiday season. I do hope you find joy in family, or friends in the simple quiet of a winter night. This is a time to appreciate the tangible but most importantly the intangible; the joy of simple gatherings with friends and family, the joy of music, laughter, reflections from a really good book or movie ... all of which recharges us for another year.

See you in 2024.

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

 

Toys Advertised for Girls and Boys – 100 Years Ago:

The Dispatch
Moline, Illinois
22 Dec 1923

 

 

Headlines from this week’s issue, attached:

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

• Hold Harmless Agreement Means What It Says and Says What It Means

• Non-Privity Endorsement Provided Additional Insured Coverage for Ongoing Operations

•  

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

• Alleged Failure to Perform Under Service Contract Potentially Creates Duty to Third-Party Contractor

 

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

• Signing Off. Do Not Go Gentle into that Good Night

 

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

• Two Year Statute of Limitations Barred Good Faith and Fair Dealing Claim

 

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

• No Connecticut Cases of Note this Edition

 

KYLE'S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]

• Court Upholds Master Arbitrator’s Award, as Award Was Not Incorrect as a Matter of Law and the Master Arbitrator Did Not Exceed His Power

• Appellate Division Reverses Supreme Court Decision, Granting Attorney’s Fees in Connection with a No-Fault Insurance Arbitration Award

 

RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]

• Stipulated Conditional Final Judgment Did Not Resolve All Claims and Was Neither A Final Judgment, Nor An Appealable Partial Final Judgment

 

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

• Motion to Preclude Appraisal is Denied as the More Efficient Practice is to Decide any Coverage Disputes Before an Appraisal is Conducted as a

• Defendant Failed to Establish its Policy Exhaustion Defense.  Once Claims Have Been Verified, they are Subject to the Priority of Payment Regulation.  By Denying the Claim, Defendant Implicitly Declared that the Claim at Issue was Fully Verified.  Defendant also Failed to Establish the Timely and Proper Mailing of the Denials as they Contained Material Errors.  Defendant Failed to Establish its Post-IME Cut Off Defense of Medical Necessity for all Causes of Action

• Unlicensed Driver Exclusion is Not Valid Under the Motor Vehicle Financial Responsibility Law When Applied in the Context of Statutorily Mandated First Party Medical Expense Benefits.

 

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

• Question of Fact Whether Daughter Was a Resident Family Member and Qualified as an Insured Under Her Mother and Stepfather’s Auto Insurance Policy

 

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

• Merry Christmas to All, and to All a Good Night

 

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

• Language Barrier and Agent’s Misrepresentations Leads to Viable Fraudulent Inducement And Rescission Claims

 

LOUTTIT’S LEGISLATIVE and REGULATORY ROUNDUP
Robert P. Louttit
[email protected]

• The Department of Financial Services Circular Letter on the Issue of Supplemental Spousal Liability Insurance

 

ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]

• Nothing to report on in this issue as the Appellate Division has not issued any decision dealing with Serious Injury Threshold this month

 

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

• As Pandemic Era Orders Preventing In-Person Restaurant Dining Were Issued to Prevent Spread of Disease and Not to Thwart Property Damage that Would be Insured by an All-Risk Policy, there was No Coverage Under a Commercial All-Risk Property Policy for Food Spoilage and Lost Profits Incurred by Canadian Restaurant Chains Due to the Closures

That’s a 2023 wrap.  Again, best wishes for a great holiday season and a new year filled with health, happiness, and hope for peace.

I send regards from all of your HF friends, near and far.

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]

 

COPY EDITOR
Evan D. Gestwick
[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

Brian D. Barnas

Eric T. Boron

Robert P. Louttit

Ryan P. Maxwell

Joshua M. Goldberg

Kyle A. Ruffner

Katherine A. Fleming

Evan D. Gestwick

Ryan P. O’Shea

 

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

Michael F. Perley

Scott D. Storm

Brian D. Barnas

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

Alice A. Trueman

Joshua M. Goldberg

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

 

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri

Wilewicz’s Wide World of Coverage

Barnas on Bad Faith

Lee’s Connecticut Chronicles

Kyle’s Noteworthy No-Fault

Ryan’s Federal Reporter

Storm’s SIU

Fleming’s Finest

Gestwick’s Greatest

On the Road with O’Shea

Loutit’s Legislative and Regulatory Roundup

Rob Reaches the Threshold

North of the Border

 

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

12/19/23       Pereira v. KSK Construction Group
Appellate Division, First Department
Hold Harmless Agreement Means What it Says and Says What it Means

The clear and unambiguous terms of indemnification and insurance rider between KSK, the general contractor, and United Crane, the rigging subcontractor of HVAC contractor Copper Services, LLC, provide for United Crane to indemnify KSK and the project owner, Soho Broome. United Crane's attempt to rewrite the provision with parol evidence as being intended to trigger insurance coverage under United Crane's policy for a third party is unavailing. Similarly unavailing is its position that Soho Broome is not an indemnitee because it is not specifically named; the provision runs in favor of "owner," which is undisputedly Soho Broome

12/14/23  River Park Bronx Apartments, Inc. v. Harleysville Insurance Co.
Appellate Division, First Department
Non-Privity Endorsement Provided Additional Insured Coverage for Ongoing Operations

The language of the Harleysville additional insured endorsement does not require direct privity of contract. Accordingly, plaintiffs are additional insureds under the policy issued by Harleysville to Renewal.

The Harleysville Policy contains an endorsement, Form CG-7254, entitled “Additional Insured — Owners, Lessees or Contractors — Automatic Status When Required in Construction Agreement With You”, which provides additional insured coverage to “any person or organization for whom [Renewal is] performing operations only as specified under a written contract that requires that such person or organization be added as an additional insured on [Renewal’s] policy. . .with respect to liability caused, in whole or in part, by the acts or omissions of the [Renewal], or those acting on behalf of [Renewal], in the performance of the [Renewal]’s ongoing operations for the additional insured only as specified under the “written contract.”

While the title of the endorsement contained the words “with you” which surely sounds like a privity endorsement, that language was not carried into the policy language below it.

The final sentence of the Harleysville additional insured endorsement, states that "A person's or organization's status as an insured under this endorsement ends when your on-going operations for that insured are completed," language that has been construed as affording coverage for occurrences occurring prior to the completion of the work contracted for, but not for those occurring after completion of the work. The underlying plaintiff's accident occurred on October 25, 2014; the record testimony is to the effect that Renewal's work ended "sometime in 2015." Thus, work was ongoing at the time of the accident.

 

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

12/07/23 Axelrod v. 44 Lexington Associates, LLC
Appellate Division, First Department
Alleged Failure to Perform under Service Contract Potentially Creates Duty to Third-Party Contractor

Co-defendant TMC provided engineers, pursuant to a formal service agreement, with defendant Lexington.  As such, TMC argued that its employees were actually “special employees” of Lexington and, as such, TMC could not be held vicariously liable for the alleged negligence of the leased engineers.  Deposition testimony revealed that Lexington controlled training, scheduling, and day-to-day operations.  Nevertheless, because TMC retained the authority to terminate the engineers, the Lexington/TMC service agreement characterized the engineers as TMC employees, required TMC to pay the engineers, and required TMC to maintain workers’ compensation insurance raised questions of fact as to their legal status.

In addition, the Court also found a question of fact as to whether the engineers’ alleged failure to meet the obligation of the service contract “launched an instrument of harm.”  We are advised there were allegations in plaintiff’s Complaint that the engineers “created or exacerbated” the slip and fall hazard causing plaintiff’s alleged injuries.

Peiper’s Point – Respectfully, we see this decision as an unfortunate expansion of the rules established in the landmark Espinal decision.  It is hard to imagine how allegedly failing to perform under a service agreement could give rise to a duty of a third-party contractor.  Snowplowers beware.  

 

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

Signing off. Do not go gentle into that good night.

 

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

12/15/23  Hovsepyan v. GEICO General Insurance Co.

United States Court of Appeals, Ninth Circuit

Two-Year Statute of Limitations Barred Good Faith and Fair Dealing Claim

Plaintiffs filed an action against Geico in state court on September 18, 2018, alleging that Geico breached the implied covenant of good faith and fair dealing in its handling of plaintiffs’ underinsured motorist claim following a February 2015 car accident.

The court concluded that Plaintiffs were aware of facts supporting their breach of the implied covenant claim by April 2016.  Plaintiffs contended that Geico breached the implied covenant by taking no meaningful action toward communicating with the plaintiffs or resolving the claims in the months after the accident.  However, the record showed that Geico attempted to communicate with plaintiffs’ counsel about the claim at least eight times in the six months after the accident.

Plaintiffs also contended that Geico breached the implied covenant by extending delayed and unreasonably low settlement offers.  However, Plaintiffs were aware of this alleged breach on or before April 15, 2016, when Plaintiffs’ counsel sent a letter to Geico alleging that Geico’s low settlement offers constituted bad faith.

Finally, Plaintiffs contended that Geico breached the implied covenant by spending nearly a year investigating the claim without explaining the reason for its delay to do an independent medical exam.  However, the April 15, 2016, letter from Plaintiff’s counsel complained that Geico had not yet ordered an IME, showing Plaintiffs’ knowledge of the allegedly dilatory progress of Geico’s investigation.

Problematically for Plaintiffs, their attorney also testified in his deposition that he “one hundred percent” believed that Geico had breached the implied covenant of good faith and fair dealing in April of 2016.

Accordingly, the court concluded that the implied covenant claim accrued in April of 2016, and that the two-year statute of limitations barred the claim.

 

 

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

No Connecticut cases of note this edition.

 

 

KYLE’S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]

12/08/23 Am. Trans. Ins. Co. v. Trinity Pain Mgmt. of Staten Island, PLLC
Supreme Court, Kings County
Court Upholds Master Arbitrator’s Award, as Award was not Incorrect as a Matter of Law and the Master Arbitrator Did Not Exceed his Power

The court explained that the proper standard of review by a No-Fault insurance master arbitrator is whether the hearing arbitrator's determination was arbitrary and capricious, irrational, or without a plausible basis, or incorrect as a matter of law. The master arbitrator may not engage in an extensive factual review, which includes weighing the evidence, assessing the credibility of various medical reports, or making independent findings of fact.

The standard for Article 75 court scrutiny of a master arbitrator's review of a hearing arbitrator's award in terms of whether there was an error of law is whether it was so irrational as to require vacatur. The master arbitrator's determination of the law does not need to be correct, and errors of law are insufficient to set aside the master arbitrator's award. For questions of substantive law, the master arbitrator's determination must be upheld if there is a rational basis for his determination. However, if the master arbitrator's errors on a matter of law are irrational, his award may be set aside. Judicial review of a master arbitrator's factual determination in an arbitration appeal is limited to whether the master arbitrator exceeded his or her power, such as impermissibly weighing the credibility of a witness, by reviewing the hearing arbitrator's factual determination, or by reviewing medical reports de novo.

In this case the Master Arbitrator assessed the evidence submitted in support of a defense by the No-Fault insurer that the subject policy had exhausted. He found it deficient, concluding that a review of the papers submitted by the parties revealed only a bare payment ledger. Thus, there was insufficient evidence before the arbitrator to sustain an exhaustion defense and there was likewise insufficient evidence before the master arbitrator. The court held that the Master Arbitrator’s legal and factual conclusions were neither arbitrary, capricious, irrational, without a plausible basis, or incorrect as a matter of law. Therefore, as for the No-Fault insurer being compelled to pay above the policy limit, the determination was not incorrect as a matter of law. Further, as for the No-Fault insurer's deficient evidence in support of a policy exhaustion defense, the master arbitrator did not exceed his powers.

Furthermore, the court held that none of the grounds specified in CPLR 7511(b) for vacating an arbitration award had been established. Accordingly, the court dismissed the petition and held that the master arbitration award was confirmed in its entirety. The Respondent was therefore awarded the principal amount, interest, attorney’s fees, and return of filing fee as determined in the arbitration.

12/19/23 Matter of Country-Wide Ins. Co. v. WJW Med. Products, Inc.
Appellate Division, First Department
Appellate Division Reverses Supreme Court Decision, Granting Attorney’s Fees in Connection with a No-Fault Insurance Arbitration Award

The court held that the order of the Supreme Court, which denied respondent WJW Medical Products, Inc.'s motion for attorney's fees in connection with a no-fault insurance arbitration award was unanimously reversed, with costs. Therefore, the court granted the motion except insofar as it seeks interest accruing during WJW's delay in filing a notice of entry, and the matter was remanded to Supreme Court for a recalculation of fees in accordance with 11 NYCRR 65-4.6(d).

The Appellate Division determined that the Supreme Court should not have denied WJW's motion for attorney's fees in its entirety (see Insurance Law § 5106[a]; 11 NYCRR 65-4.6[d]). The lower court was mistaken in its belief that WJW had not previously sought attorney's fees under 11 NYCRR 65-4.6(d), which WJW had sought in its cross-petition to confirm the arbitration award. The Appellate Court determined that the February 11, 2021, order, which confirmed the arbitration award, granted the application for those fees.

However, the Appellate Court held that the Supreme Court appropriately declined to award interest for a three-month period from February 11, 2021, to May 12, 2021, as WJW's roughly three months of delay in filing a notice of entry went far beyond the 10 days that the February 11, 2021, confirmation order had allotted for the filing. The court held that WJW failed to explain why this delay should be considered reasonable (see 11 NYCRR 65-3.9[d]).

Lastly, the Appellate Court noted that WJW was not entitled to attorney's fees for prosecuting this appeal given that a party is not entitled to "fees on fees" when applying for and substantiating attorney's fees.

 

RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]

12/11/23 Scottsdale Ins. Co. v. McGrath
Second Circuit Court of Appeals

Stipulated Conditional Final Judgment did not Resolve All Claims and was Neither a Final Judgment, Nor an Appealable Partial Final Judgment

This is insurance coverage dispute involving a joint venture between Watershed Ventures, LLC (“Watershed”) and Patrick M. McGrath (“McGrath”) aimed at opening a restaurant and cocktail lounge in Aspen, Colorado. The joint venture—Rocky Aspen, LLC—failed and filed for bankruptcy. The bankruptcy trustee (the “Trustee”) then filed adversary proceedings against McGrath and two entities that he controls: AH DB Kitchen Investors LLC (“AH DB”) and Castlegrace Equity Investors, LLC (“Castlegrace”) (the three together, “Defendants”).

Defendants sought coverage from Watershed's insurer, Scottsdale Insurance Company (“Scottsdale”). Scottsdale declined coverage and filed suit seeking, among other things, a judgment declaring that it has no duty to defend Defendants under the Policy. McGrath in turn asserted counterclaims against Scottsdale and brought a third-party complaint against Watershed.

Scottsdale unsuccessfully moved for summary judgment, arguing that McGrath was not an Insured under the Policy during the relevant period resulting in the “First Order”. Scottsdale subsequently and successfully sought partial summary judgment on McGrath's counterclaim for bad faith breach of an insurance contract and on his request for consequential and punitive damages above applicable policy limits, resulting in the “Second Order” (together with the First Order, the “Summary Judgment Orders”).

In lieu of trial, the parties filed a proposed “Stipulated Conditional Final Judgment Subject to Reservation of Rights of Appeal” (the “SCF Judgment”). In the SCF Judgment, the parties agreed that if, on appeal, either of the district court's two summary judgment rulings was even partly vacated or reversed, the SCF Judgment would become void in its entirety and the damages and attorneys’ fees stipulations contained in it would have no effect. The district court “approved and ordered” that document and entered it on the docket as a final judgment.

Not off to a great start, the Second Circuit described the SCF Judgment as “an unusual document”:

“It states that the parties’ overarching goal in having the document entered is to ‘permit this case to proceed to an appeal of the Summary Judgment Orders,’ citing an ‘interest of efficiency and judicial economy.” (Citation omitted). Then, after summarizing the procedural history, it sets forth an agreed-to amount of damages on McGrath's counterclaim for breach of the duty to defend and an agreed-to attorneys’ fee award. The document states: ‘If either the First Order or the Second Order is reversed, reversed in part, or vacated and remanded, in whole or in part,’ then the entire SCF Judgment—including the agreed-to awards—'shall be void.’”

Although timely notices of appeal were filed from the SCF Judgment, the Second Circuit “directed the parties to submit supplemental letter briefs addressing whether we have jurisdiction to hear these appeals under 28 U.S.C. § 1291.” The parties provided the required briefs, but also “jointly moved for removal of AH DB, Castlegrace, and Watershed from this Court's case caption,” advising the Second Circuit for the first time that “(1) ‘there is no longer any dispute as between Scottsdale and either AH DB ... or Castlegrace ...,’ and (2) ‘the third-party claims filed in the action below by Mr. McGrath against ... Watershed ... were not served or litigated.’” This was the beginning of the end for this appeal.

The Second Circuit noted that “[s]ubject to certain exceptions not applicable here, our jurisdiction is limited to appeals from ‘final decisions’ of the district courts.” 28 U.S.C. § 1291. Here, however, and “notwithstanding the document's title and its endorsement by the district court, the SCF Judgment is not a “final decision [ ]” under § 1291 because it does not resolve all claims of all parties to the litigation, it is not an appealable partial judgment under Federal Rule of Civil Procedure 54(b), and it does not resolve with sufficient finality the parties’ claims regarding Scottsdale's duties under the Policy.”

Recognizing that under Fed. R. Civ. P. 54(b) permits “entry of a partial final judgment as to fewer than all parties or all claims,” this can occur “only if the court expressly determines that there is no just reason for delay,” since “any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time ....” And herein lies the issue. Specifically,

“In their belated motion to our Court to remove AH DB, Castlegrace, and Watershed from the case caption, Scottsdale, and McGrath—presumably recognizing that the outstanding claims against those entities may pose an obstacle to our appellate jurisdiction—represent that ‘there is no longer any dispute as between Scottsdale and either AH DB [ ] or Castlegrace.’ (Citation omitted). So far as the record before us reveals, however, Scottsdale has yet to take the critical step of dismissing its claims against AH DB and Castlegrace.

A declaration by Scottsdale's counsel confirms that there has been no substantive resolution of these claims. Counsel declares in substance that Scottsdale would have no reason to pursue its coverage claims against AH DB and Castlegrace if Scottsdale pays McGrath $1 million in stipulated damages for breach of the duty to defend, because $1 million represents the ‘remainder of the limits available under the’ (Citation omitted). However, . . . under the SCF Judgment the $1 million award becomes ‘void’ if our Court reverses or vacates either of the Summary Judgment Orders in any respect. (Citation omitted). Scottsdale's declaration that, in that event, it might not wish to pursue its claims against AH DB and Castlegrace is not sufficient to resolve those claims under § 1291. Accordingly, Scottsdale's claims against AH DB and Castlegrace are currently pending and, absent the certification discussed below, they preclude our jurisdiction.”

In addition, the SCF Judgment was not an appealable partial final judgment, since it did not make the express determination required under Rule 54(b) that there is no just reason for delay. Merely reciting in a So Ordered stipulation that

“the parties seek a stipulated judgment ‘[i]n the interest of efficiency and judicial economy’” is insufficient “because the language used in the SCF Judgment is not the language of Rule 54; by ‘so-ordering’ the parties’ offering, the district court did not itself invoke the Rule or determine that ‘there is no just reason for delay’—a more demanding standard than the parties’ own assessment that it would be ‘efficient’ to allow these appeals.”

Finally, the Second Circuit notes that although “the SCF Judgment does purport to resolve” Scottsdale’s duty to defend AH DB and Castlegrace, “albeit on a conditional basis,” it fails to do so “with sufficient finality to support our jurisdiction under § 1291.” Summarizing this last point, the Second Circuit provides that

“the SCF Judgment is not final because, although it purports to hold Scottsdale liable for breaching its duty to defend McGrath, Scottsdale could continue to dispute its liability on remand even if it loses its appeal. This result is possible because some of Scottsdale's declaratory judgment claims—all of which are logically antecedent to the question whether Scottsdale breached its duty to defend—have been dismissed only conditionally (that is, without prejudice to renewal on remand if we reverse or vacate either Summary Judgment Order in any respect).”

Maxwell’s Minute: There is a lot to unpack in this decision, given the parties’ attempt to creatively resolve the issues short of trial. Those that would like to better understand this last point regarding the appealability of Scottsdale’s duty to defend can certainly pull up the decision and read Section III for yourselves. Your author chose to stop the column at the summary of this Section for a reason.

But, because I am a man of the people and you should always give the people what they want, here is a flavor of the mental gymnastics the Second Circuit was required to perform on account of the “unusual document” that was this SCF Judgment:

“Scottsdale could lose its appeal and yet continue to litigate the claims that were conditionally dismissed by the SCF Judgment.

More concretely: This possibility would come to pass if, for example, we (1) reached the merits of these appeals; (2) affirmed the First Order (which found that McGrath was an Insured); and (3) vacated the Second Order (which found no basis for a bad faith ruling against Scottsdale or for allowing McGrath to recover damages above policy limits) and therefore remanded the case, reinstating McGrath's counterclaim for bad faith breach of an insurance contract and permitting him to seek damages in excess of the policy limits.

Critically, however, vacating the Second Order would also mean that, by its terms, the entire SCF Judgment would become ‘void.’ (Citation omitted) In that situation, the putative resolution of the damages amount associated with McGrath's counterclaim for breach of the duty to defend would come undone: Scottsdale's agreement to the stipulated damages award would be void, and there would be no intact order of the district court holding that Scottsdale breached its duty to defend. Therefore, although Scottsdale would have lost its appeal from the First Order, Counts Two through Four of Scottsdale's complaint—the claims that Scottsdale conditionally dismissed in an effort to create a final judgment—would be reinstated.”

 

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

11/20/23 7Group LLC v. Mt. Hawley Insurance Company

United States District Court, S.D. New York

Motion to Preclude Appraisal is Denied as the More Efficient Practice is to Decide Any Coverage Disputes Before an Appraisal is Conducted; an Appraisal Shall not Determine Whether the Policy Actually Provides Coverage for any Portion of the Claimed Loss or Damage
[Abridged] Court denies 7Group LLC’s motion to compel Mt. Hawley to participate in an appraisal of its insurance claim and to stay this action pending the outcome of the appraisal.

7Group owns property located at 4903 Viceroy Street, Cape Coral, Florida covered under a commercial insurance policy issued by Mt. Hawley.  The Policy contains an appraisal provision.  The Policy also includes a choice of law provision, stating that "all matters arising hereunder . . . shall be determined in accordance with the law and practice of the State of New York."  In addition, there is a forum selection clause, providing that the parties "shall submit to the jurisdiction of a court . . . in the State of New York."

On September 28, 2022, the Property was damaged during Hurricane Ian.  7Group alleges that it was significantly underpaid and moved to compel appraisal.   

As an initial matter, the Court finds that New York law is applicable to this dispute. The Policy states that "all matters arising hereunder . . . shall be determined in accordance with the law and practice of the State of New York."  New York courts "generally enforce choice-of-law clauses."  "Absent fraud or violation of public policy," New York courts "apply the law selected in the contract as long as the state selected has sufficient contacts with the transaction." 

The Court finds no reason to depart from the choice of law selected in the Policy. The allegations of the Complaint do not indicate the existence of any fraud, public policy violation, or insufficient contacts with New York. 

Applying New York law, the Court finds that the motion to compel appraisal is premature. While 7Group argues that it is entitled to an appraisal under the Policy, "it is not always appropriate for such appraisal to occur before other issues are resolved."  In particular, "the scope of coverage provided by an insurance policy is a purely legal issue that cannot be determined by an appraisal, which is limited to factual disputes over the amount of loss for which an insurer is liable."  "An appraisal is appropriate not to resolve legal questions, but rather to address factual disputes over the amount of loss for which an insurer is liable." N.Y. Ins. Law § 3408(c) ("[A]n appraisal shall not determine whether the policy actually provides coverage for any portion of the claimed loss or damage.").

There are plainly outstanding disputes regarding the scope of coverage here. 7Group concedes this point. Indeed, the Complaint alleges that 7Group "is uncertain as to the existence or non-existence of its rights to coverage under the . . . Policy." Compl. ¶ 23.  Given the existence of outstanding coverage issues, the Court finds that an appraisal is premature at this time.  "[T]he more efficient practice for the parties, the appraisers, and the Court is to decide any coverage disputes before an appraisal is conducted."

11/14/23 Barakat, P.T., P.C., a/a/o Hermenegildo, Montas v. Liberty Mut. Fire Ins. Co.

Civil Court of the City of New York, Kings County

Defendant Failed to Establish its Policy Exhaustion Defense.  Once Claims Have Been Verified, they are Subject to the Priority of Payment Regulation.  By Denying the Claim, Defendant Implicitly Declared that the Claim at Issue was Fully Verified.  Defendant also Failed to Establish the Timely and Proper Mailing of the Denials as they Contained Material Errors.  Defendant Failed to Establish its Post-IME Cut Off Defense of Medical Necessity for all Causes of Action

[Abridged] Plaintiff's Motion for Summary Judgment is granted.  Defendant failed to establish its policy exhaustion defense. "Under the no-fault system, payments of benefits ‘shall be made as the loss is incurred.' Under this regulatory scheme, ‘an insurer shall pay benefits directly to the ‘applicant,' or, upon assignment by the applicant, ‘shall pay benefits directly to providers of health care services.' In addition, ‘an insurer is required to either pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date an applicant supplies proof of claim'". "’[A]n insurer must pay or deny only a verified claim—that is, a claim that has been verified to the extent compliance with section 65-3.5 dictates in the particular case—within 30 calendar days of receipt; and, conversely, is not obligated to pay any claim until it has been so verified.' Once claims have been verified, they are subject to the priority of payment regulation, 11 NYCRR 65-3.15."  "In contrast, in the instant case, by denying the claim..., defendant implicitly declared that the claim at issue was fully verified. As we read Nyack Hosp. to hold that fully verified claims are payable in the order they are received, defendant's argument—that it need not pay the claim at issue because defendant paid other claims after it had denied the instant claim, which subsequent payments exhausted the available coverage—lacks merit. Consequently, defendant has not established its entitlement to summary judgment dismissing the complaint." 

Secondly, Defendant failed to establish the timely and proper mailing of the denials as the denials attached to Defendant's Motion contain material errors in Box # 30 having stated an incorrect amount that was billed by the Plaintiff and Box # 32 erroneously stating the wrong amount in dispute, and in one instance on COA # 3 even identifying wrong date of service in the denial. It has been well established that "a proper denial of a claim for no-fault benefits must include the information called for in the prescribed denial of claim form and must promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated. However, a timely denial of a no-fault insurance medical claim alone does not avoid preclusion where said denial is factually insufficient, conclusory, vague, or otherwise involves a defense which has no merit as a matter of law." 

Finally, Defendant failed to establish its "post-IME cut off defense of medical necessity for all causes of action." An IME is not some inflexible permanent fixture that cannot be altered or changed. An IME is merely a snapshot of the injured party's medical condition as of the date of the IME. The opinion of the doctor conducting an IME and issuing a report that no further treatment or testing is needed is nothing more than an expert's prediction that the claimant has fully recovered or received the maximum therapeutic benefit from the treatment and does not presently need any additional treatment."  "An IME cut-off is not a complete defense to the action. While an IME can demonstrate a lack of medical necessity for future treatment, it does not, by itself, conclusively demonstrate that any future treatment would not be medically necessary. Instead, the IME merely shifts the burden to the plaintiff to demonstrate, by a preponderance of the credible evidence, that the treatment at issue was medically necessary." "If the defendant subsequently felt the need to try to further limit the scope of future treatment, they could have requested a supplemental IME, an EUO of the provider, or they could have had their expert conduct a peer review of all the post-IME treatment records. Instead, the defendant just denied the bills and relied on a single pre-treatment IME."  "However, there is no legal reason why claims for medical treatment submitted after an "IME cutoff" has been issued should be treated any differently than claims submitted prior to the IME. Therefore, a timely submitted claim for medical services rendered after the issuance of an IME cutoff is presumed to be medically necessary. The timely submission of a post-IME cutoff claim shifts the burden to the defendant to establish a factual basis and medical rationale for its determination that the treatment was unnecessary." 

Plaintiff established that the bills were timely and properly submitted to Defendant, Defendant admitted that it received them and did not issue payment. Plaintiff further established that Defendant's denials lacked merit as a matter of law. Therefore, Plaintiff is to enter judgment for $1,034.12 plus statutory interest, statutory attorney fees, cost, and disbursements.

12/05/23Nationwide Property and Casualty Ins. Co. v. Castaneda
Superior Court of Pennsylvania
Unlicensed Driver Exclusion is Not Valid under the Motor Vehicle Financial Responsibility Law when Applied in the Context of Statutorily Mandated First Party Medical Expense Benefits

[Abridged] Christina Tapia Castaneda was driving her mother's car, with her mother's permission but without a valid driver's license, when she was rear ended by another car. Christina suffered injuries in the accident. Because Christina's mother had an insurance policy covering the vehicle, Christina submitted a claim for first party medical expense benefits to the insurer, Nationwide. Nationwide denied the claim. It maintained it had no duty to cover Christina's medical expenses under the unlicensed driver exclusion contained in the Policy. Nationwide eventually sought a declaration and judgment on the pleadings from the Court of Common Pleas that it was not obligated to pay first party medical benefits to Christina under the unlicensed driver exclusion in the Policy The court issued a judgment on the pleadings in favor of Nationwide. Christina argues on appeal that the court erred by finding the unlicensed driver exclusion relieved Nationwide of its obligation to pay for her medical expenses sustained in the accident. According to Christina, the unlicensed driver exclusion is not valid under the Motor Vehicle Financial Responsibility Law ("MVFRL"), 75 Pa. C.S.A. §§ 1701-1799.7, when that exclusion is applied in the context of statutorily-mandated first party medical expense benefits. We agree the exclusion is not valid in such a context, and we therefore also agree that the trial court erred by entering judgment on the pleadings in favor of Nationwide.

The Sienna was covered by the Policy, which Christina's mother had purchased from Nationwide. At the time of the accident, Christina was not licensed to operate a motor vehicle by the Commonwealth of Pennsylvania and "she was not the named insured on any policy providing first party benefits coverage; nor was she an insured on any policy other than the Policy providing first party benefits coverage."  Christina also did not regularly reside with her mother.

Christina submitted a claim for first party medical expense benefits under the Policy, which covers first party medical expense benefits up to $10,000 for a person driving with the permission of a policyholder. Nationwide denied the claim. The denial was based solely on the Policy's Exclusion 14 ("unlicensed driver exclusion

Christina requested that Nationwide reconsider the denial of her claim. Essentially, Christina argued that the unlicensed driver exclusion was invalid under the MVFRL as it was not one of the exclusions listed in Section 1718 of the MVFRL, which provides an enumerated list of persons who will be excluded from coverage of first party benefits. 

Nationwide filed a complaint requesting declaratory relief in the form of a judgment declaring that the unlicensed driver exclusion it relied upon to deny Christina first party benefits was valid and enforceable under the MVFRL. It averred in its complaint that although Section 1718 sets out a list of exclusions for first party benefits' coverage which does not include an unlicensed driver exclusion, this statutory list is not exhaustive and does not bar insurers from incorporating other valid exclusions to the recovery of first party benefits in their policies. Nationwide maintained that the unlicensed driver exclusion was valid, and it had properly denied benefits to Christina under this exclusion as she was undisputedly driving without a license at the time of the accident.

Nationwide accurately points out that Section 1718 does not contain an exhaustive list of permitted first party benefit exclusions. Rather, it identifies a number of circumstances where an insurer shall exclude benefits, and a process by which an insurer or insured can limit specific individuals from receiving those benefits.

Christina does not dispute that the unlicensed driver exclusion, as written, applies to her claim. Rather, Christina continues to contend the exclusion itself is not valid under the MVFRL when an insurer uses that exclusion as a basis for denying first party medical expenses benefits, as Nationwide did here. We agree.

In making her claim that she is entitled to medical expense coverage here, Christina highlights the fact that the MVFRL specifically mandates that policyholders purchase, and insurers provide coverage for, first party medical expenses for injuries arising from the use of a motor vehicle.

As Christina points out, the General Assembly made clear from its language in Section 1711 that its intent was undoubtedly to require policyholders to purchase a minimum amount of medical expense coverage for injuries stemming from the use of motor vehicles, while at the same time requiring insurers to cover that amount should a first party claim for medical expenses be submitted. And insurers must do so, Christina explains, without regard to fault. Such mandatory no-fault first party medical expense coverage, Christina continues, has historically been an inviolate part of Pennsylvania's auto insurance coverage scheme. 

For her part, Christina argues that we cannot ignore the mandatory nature of medical expense coverage because doing so would necessarily ignore the legislature's clear intent that insurers must provide a minimum amount of medical expense coverage for injuries sustained in a motor vehicle accident. She contends it is this mandatory nature of medical expense coverage that is the lens through which we must view the exclusions set forth in Section 1718. We agree.

Nationwide counters that this conclusion is not supported by Pennsylvania law. It argues the trial court properly found that this Court has previously stated that the list of permissible coverage exclusions contained in the MVFRL is not an exhaustive one. Christina readily acknowledges this, but she emphasizes that such a recognition was in cases involving coverage other than the mandatory first party medical expense benefits at issue here. As such, Christina argues, these cases should not serve as pillars for affirming the validity of an insurer-written exclusion not included in Section 1718's limited list of permissible exclusions but nonetheless invoked to deny mandatory medical expense coverage. Again, we agree.

Given this mandatory system the legislature constructed for medical expense benefits, we agree that Christina was entitled to coverage for her medical expense claim unless one of the limited exclusions in Section 1718 applied to her claim. Section 1718 does not include an unlicensed driver exclusion, and therefore it is not a valid exclusion upon which Nationwide can rely to refuse coverage for Christina's medical expenses arising from the accident.

We stress that our conclusion is confined to claims for first party medical expense benefits, the only benefits at issue in this case.

 

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

12/15/23 N.C. Farm Bureau Mut. Ins. Co., Inc. v. Herring

North Carolina Supreme Court
Question of Fact Whether Daughter was a Resident Family Member and Qualified as an Insured under her Mother and Stepfather’s Auto Insurance Policy

Herring was injured in a two-automobile collision while riding with her father. The other vehicle’s insurance company tendered the policy’s limits to Herring. The mother and stepfather had a personal auto policy issued by North Carolina Farm Bureau Mutual Insurance Company (“Farm Bureau”) with underinsured motorist (UIM) coverage. To qualify as an insured, the question was whether Herring was a resident family member in a named insured’s household, but the policy did not define “resident.” Herring sued in Superior Court, seeking benefits under the policy’s UIM coverage. The parties decided to engage in arbitration, and prior to the arbitration, Herring disclosed at an examination under oath by Farm Bureau’s legal counsel that she lived with her father, she gave his address as her home address, she received all mail at his address, she used his address when purchasing a car and paying property taxes on the car, and she saw a dentist and doctor with offices within a few miles of her father’s home. Herring had lived with her father for the fifteen years preceding the accident. However, Herring would travel to her mother’s home a couple of times each week, sometimes stayed overnight, and had a room at her mother’s house where she sometimes kept clothes. Before the arbitration, Farm Bureau filed a declaratory judgment action in Superior Court, seeking a judicial declaration that Herring was not an insured because she lived with her father at the time of the accident. Both sides moved for summary judgment, and affidavits asserted that Herring maintained a split residence between her mother and father’s homes. The affidavits claimed that Herring routinely received mail at her mother’s address as well. The trial court denied Farm Bureau’s motion, and the Court of Appeals affirmed. The courts reasoned that there was a question of fact whether Cassic was a resident of her mother’s home.  

The Supreme Court considered whether the appellate court erred in affirming summary judgment for the defendants, noting it had struggled to define “resident” in connection with an insurance policy and construed the term to encompass a variety of living arrangements. Nevertheless, a resident relative must actually live in the same dwelling as the insured relative for a meaningful period of time. The Supreme Court’s test is whether the party seeking coverage has stayed in the insured family member’s residence on more than merely a temporary basis and whether the facts support a finding that the family members intended to form a common household. The Supreme Court concluded the trial court should have denied the defendants’ motion for summary judgment because although an adult can be a resident of more than one household for the purposes of the policy’s UIM coverage, there was a question whether Herring was a resident of her mother’s household at the time of the accident. The Court reasoned that Herring’s time at her mother’s house amounted to four months out of the year, but her testimony established that she did not stay with her mother for extended periods. Thus, the Court determined summary judgment was improper because a jury could find that Herring is part of her father’s household and merely visits her mother.

 

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

The Holidays have apparently come a bit early at New York’s trial level courts, as no noteworthy decisions have been released within the last two weeks. See you next year!

 

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

12/13/23 Israel v Progressive Cas. Ins. Co.

Appellate Division, Second Department
Language Barrier and Agent’s Misrepresentations Leads to Viable Fraudulent Inducement And Rescission Claims

Israel commenced this action seeking to recover damages for fraudulent inducement and to rescind a release entered into between Israel and Progressive regarding a motor vehicle accident involving a motor vehicle operated by Israel that collided with a vehicle insured by Progressive. After the accident, Israel signed a document entitled “FULL RELEASE OF ALL CLAIMS AND DEMANDS” regarding the accident in exchange for $1,000, the document was in English.

Israel alleged that English was his second language, he possessed limited ability to read English, left his reading glasses in the car when he signed the document, and relied on the oral representation of Progressive’s agent when signing the document. It was Israel’s understanding from the oral representations by Progressive’s agent that only the property damage claim was released, not his potential personal injury claim. The trial court dismissed Israel’s claims by way Progressive’s motion to dismiss under CPLR 3211(a).

This appealed followed, and the Second Department found Israel did plead a cause of action for fraudulent inducement by alleging his lack of English proficiency, limited ability to read English, and that he justifiably relied on the misrepresentations by Progressive’s agent regarding the release, which resulted in Israel suffering financial damages. The Appellate Division also found Israel adequately pled a cause of action to the rescind the agreement based on a unilateral mistake because it alleged that Israel’s mistake was induced by fraudulent misrepresentation.

However, the court found Israel’s wife and co-plaintiff, Kunjamma Ben, failed to plead her respective claims of fraudulent inducement and rescission of the agreement because she did not sign the release. It is noted that Israel was driving his wife’s car at the time of accident. In addition, the court upheld the dismissal of the allegations of bad faith under General Business Law § 349, due to the action being merely a private contract dispute, failing to allege a consumer-oriented deceptive act or practice within the meaning of the statute. 

The Appellate Division also upheld the portion of the trial court’s decision that denied Israel’s cross-motion to amend his complaint. The court did so because the new causes of action to recover for personal injuries were time barred and plaintiffs  failed to establish that they were prevented from timely commencing the present action based upon reasonable reliance on any deception, fraud, or misrepresentation by the proposed new defendants. The accident occurred in 2015 and Israel commenced this action in 2020.

 

LOUTTIT’S LEGISLATIVE and REGULATORY ROUNDUP
Robert P. Louttit
[email protected]

12/18/23 NY DFS Circular Letter No. 8 (2023)

New York State Department of Financial Services

The Department of Financial Services Circular Letter on the Issue of Supplemental Spousal Liability Insurance

On December 18, 2023, New York’s Department of Financial Services issued a circular letter on the issue of Supplemental Spousal Liability Insurance. As previously reported as of August 1, 2023, all New York car insurance providers must begin adding supplemental spousal coverage to their plans. With this coverage, if the covered spouse is the driver during an accident where they are responsible, or any other kind of accident where the party at fault has no insurance, or insufficient insurance, the spouse is entitled to the limits of the liability coverage.

Spousal liability coverage has previously been offered as an option on New York auto policies. But the new law makes the additional coverage an opt-out provision that the insured must affirmatively decline.

According to the circular letter, the Department expects insurers to comply with the amendments to the Insurance Law (§ 3420(g) and 11 NYCRR 60-1).  If necessary, an insurer should submit a SERFF filing to revise its policy forms and rates for the Department’s approval as soon as possible.

 

ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]

Nothing to report on in this issue as the Appellate Division has not issued any decision dealing with Serious Injury Threshold this month.

 

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

11/22/23       SIR Corp., et al. v. Aviva Insurance Company of Canada

Ontario Court of Appeal

As Pandemic Era Orders Preventing In-Person Restaurant Dining were Issued to Prevent Spread of Disease and not to Thwart Property Damage that Would be Insured by an All-Risk Policy, there was No Coverage under a Commercial All-Risk Property Policy for Food Spoilage and Lost Profits Incurred by Canadian Restaurant Chains Due to the Closures

SIR Corp. – “Service Inspired Restaurants Corporation” – began its life in 1987 when Peter Fowler and Jeffery Dover opened their first restaurant, the original Jack Astor’s Bar and Grill, in St. Catharines, Ontario.

According to restaurant trade articles, today SIR remains a privately held company which with its related entities owns or operates about 60 restaurants in Alberta, Ontario, Quebec, Nova Scotia, and Newfoundland, through its flagship brand Jack Astor’s Bar and Grill, as well as SCADDABUSH Italian Kitchen & Bar; The Loose Moose and The Antler Room, Duke's Refresher + Bar, Local Public Eatery, and the Toronto Bay Street institutions, Reds Wine Tavern, Far Niente and Four. It also owns and operates restaurants in Northern New York State and Dallas, Texas.

However Jack Astor’s remains the core of the company – a casual chain where the tables are covered in brown paper and the staff who write their names upside down on the paper in crayon and leave crayons behind for guests to doodle at their pleasure as they wait for fresh - not frozen - chicken, which is marinated, seasoned and breaded in house, to order, as well as chicken wings, AAA-grade steaks and internationally inspired dishes including Pad Thai and Greek chicken salad.

Like all restaurants, SIR was impacted during the pandemic by provincial regulations preventing in-person dining.  Aviva Insurance Company of Canada issued an all-risk property policy to the company and its affiliates during these restrictions and several years prior to that. SIR Corp. made a claim on the 2020 policy for damage to its food and beer stock and for business losses allegedly suffered because of the Orders. Aviva denied the claim.

SIR filed an action seeking a declaration as to coverage which was heard at first instance by Justice Audrey Ramsay, who prior to her appointment to the bench, served with me as a director of Canadian Defence Lawyers. Justice Ramsay agreed with Aviva that there was no entitlement to coverage. SIR Corp appealed to the Ontario Court of Appeal. That court agreed with Justice Ramsay. In the process the Ontario Court of Appeal made some interesting findings.

SIR Corp’s principal argument was under Clause 14 which read:

SIR argued that the pandemic was “a catastrophe”. Justice Ramsay held, and the Ontario Court of Appeal agreed, that for coverage to apply, the loss must be covered by the policy; that the policy is an all-risk property policy; the loss must be as a result of “direct physical loss or damage”; that was not the case: neither the COVID-19 virus nor the Orders resulted in “direct physical loss or damage” to SIR’s property.  Further, the undefined word “catastrophe” must be interpreted in light of “a conflagration’ which means destruction of property and therefore the pandemic could not be a catastrophe as it did not destroy property.

SIR Corp. also argued that it was entitled to coverage under the ingress/egress clause which read:

Coverage under this clause was not argued at trial. The Court of Appeal held that “perils insured” under the Policy are all risks of direct physical loss or damage, except as excluded.  The Orders prevented ingress or egress, but they were not issued as a result of an insured peril – the Court stated, “The Orders did not require SIR to destroy or alter its premises or destroy food or beverage stock.” Therefore Clause 16 did not apply. 

SIR Corp. also argued estoppel. On January 17, 2020, St. John’s, Newfoundland was hit with a significant snowstorm and hurricane force winds. The province declared a state of emergency and ordered all businesses, including SIR Corp.’s Jack Astor’s restaurant to close.  That restaurant suffered food spoilage and loss of business. Aviva paid the claim under the clauses argued here. SIR argued that this payment prevents Aviva from denying this claim. Justice Ramsay held that the estoppel had not been proven. The Court of Appeal agreed. A snowstorm is capable of producing property damage; the orders in this case were issued for different reasons none of which are capable of producing property damage. After acknowledging that estoppel can be created by a representation, the Court of Appeal stated:

…[the trial judge] … was not satisfied that Aviva impliedly represented that it would cover SIR for food spoilage and business losses any time closure of its business was mandated by an order of a civil authority concerned about public safety, regardless of whether the order was “given as a direct result of loss or damage of the type insured by [the] policy, or threat thereof.” Further, even if Aviva made such a representation, SIR has not established, on this record, that it was made with the intention that SIR should act on it: see Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, 2021 ONCA 201, 32 R.P.R. (6th) 1, at para. 139, leave to appeal refused [2021] S.C.C.A. No. 176.

In short, to succeed with its estoppel argument, SIR would have to prove that the payment was not grounded in the facts that generated the payment and was a general representation of a coverage position.

As SIR Corp. failed to establish its case against Aviva, SIR Corp. was ordered to pay Aviva a total of $151,736.00 in court costs.