Volume XXV, No. 15 (No. 662)
Friday, January 5, 2024
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.
Greetings from Scottsdale, Arizona, in this new year. This morning’s hike was worth it, because of the view at the end.
A new year brings you new columns. Let me give you a rundown.
Evan Gestwick is on the cusp of admission in the New Jersey bar, so his column will focus on New Jersey coverage cases.
He had been covering lower court cases, and now that responsibility falls on the capable shoulders of Isabelle LaBarbera. Isabelle will be admitted to practice in a couple of weeks, and we’re delighted to add her to our ever-growing coverage team.
Josh Goldberg will take up our transportation law column from Ryan O’Shea while Ryan will now cover federal circuit court decisions outside of the Second Circuit.
I think I have that right!
Welcome to 2024!
Training and More Training:
Schedule your in-house training for 2023. Need a topic? Here are 160 or so coverage topics from which to choose.
Need a mediator?
Coverage mediation is a thing! Subject matter expertise may be useful.
Hey coverage lawyers. Hey professionals. Have you and a friend, adversary, or lawyer for whom who have respect reached a stalemate on a coverage dispute? Look, we know each other. We know that. We don’t want to litigate every coverage disagreement. Why? Because the position we oppose today may be the one we advocate tomorrow. Face it. We all understand that.
Let me help mediate your disagreement to see if there is some mutual agreement, we can reach that will not box us into a corner. Reach out to me. I will be pleased to mediate your dispute.
My partners, Mike Perley and Ann Evanko, are also available to help resolve other challenges.
You don’t want adverse precedent that will bite you next time you might have a slightly different view on coverage issues. You don’t want to spend tens of thousands of dollars to litigate a coverage issue before a motion judge or appellate justice that knows as much about insurance coverage as you do about nuclear physics. For those in the Western District of New York, I am certified by the Court and on the WDNY Mediation Panel as are Mike and Ann.
Try mediation.
Newsletters:
We have other firm newsletters to which you can subscribe by simply letting the editor (or me) know, including a new publication, which was created to advise on business and employment law questions:
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Premises Pointers: This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!). Please drop a note to Jody Briandi at [email protected] to be added to the mailing list.
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Labor Law Pointers: Hurwitz Fine P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected] to subscribe.
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Products Liability Pointers: Whether the claim is based on a defective design, flawed manufacturing process, or inadequate instructions/warnings, product liability litigation is constantly evolving. Products Liability Pointers examines recent New York State and Federal cases as well as high court decisions from other jurisdictions, keeping our readers up to date with the latest developments and trends, and providing useful practice tips and litigation strategies. This monthly newsletter covers all areas of product liability litigation, including negligence, strict products liability, breach of warranty claims, medical device litigation, toxic and mass torts, regulatory framework and governmental agencies. Contact Brian F. Mark at [email protected] to subscribe.
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Medical & Nursing Home Liability Pointers. Medical & Nursing Home Liability Pointers provides the latest news, developments, and analysis of recent court decisions impacting the medical and long-term care communities. Contact Elizabeth Midgley at [email protected] to subscribe.
Peiper on Property (and Potpourri):
I’m situationally in the middle of a situation, so pardon my brevity this week.
Not surprisingly, the Courts were fairly quiet over the past two weeks. We do review the Third Department’s affirmance of a two-year rebuild provision in a homeowners’ policy. The Court also reviews that standard for a directed verdict, and the high bar a movant must make to pull a decision from a jury’s realm. Spoiler alert, here, the bar was met and, apparently, far exceeded.
As a final point, while we all appreciate the question, no, there has been no snow in WNY this year. No snow = no ski, and that makes Steve a dull boy.
It’s “winter” in Buffalo, let’s get some trails open.
Steve
Steven E. Peiper
Canadian Migrants a Problem – 100 Years Ago:
Maitland Mercury
Maitland, New South Wales, Australia
05 Jan 1924
MIGRANTS SMUGGLED INTO UNITED STATES
(Australian Press Association)
NEW YORK, Jan. 3.
News comes from Ottawa that Dominion officials are disturbed over the smuggling of European immigrants through Canada into the United States. It is reported that this illicit traffic has become as profitable as rum running.
Canadian restrictions against immigrants are comparatively light. After sojourning a few days or hours in Canada, new-comers are passed into the United States over little-known by-ways.
Officials who desire population for the country view with alarm the exodus of any desirable immigrants, but they feel powerless to prevent this unless the United States creates machinery for the purpose, involving an expensive system of patrolling the border.
Barnas on Bad Faith:
Hello again:
Welcome to our first edition of 2024. It is all on the line for the Bills this week. A win and it is the second seed in the AFC and two potential home playoff games. A loss and they could be out of the playoffs entirely if Jacksonville and Pittsburgh win. It is going to be a nervous couple of days for us here in Western New York. Hopefully by the time of our next issue, we are basking in the glow of a win over Miami and a first round playoff win in Orchard Park.
My case this week is from the Appellate Division in New York, and it is an interesting one. Plaintiffs brought a claim pursuant to New York’s statute prohibiting deceptive business acts or practices. The First Department assumed that plaintiffs had met the consumer-oriented requirement to state a claim under the statute. However, it found that plaintiffs were aware of the nature and characteristics of the services they were receiving. Specifically, the court concluded plaintiffs’ own allegations indicated they knew they were not receiving personalized risk management and coverage recommendation services allegedly promised. Accordingly, the court concluded that plaintiffs could not allege that any injury they suffered was the result of any alleged deception.
Brian
Brian D. Barnas
Side Shows Popular – 100 Years Ago:
The Chat
Brooklyn, New York
05 Jan 1924
|
Entire Week Jan. 7th “A Mighty Aquatic Spectacle”
BERLO’S DIVING GIRLS
Five Shapely Daughters of the Sea, in an Exhibition of Beautiful Poses and Dives Diving Contest for Boys’, Tuesday night, Jan. 8; for Girls, Wednesday night, Jan. 9, Friday, Jan. 11, for Boys and Girls Prizes to the Winners In Addition to Superior Shows Changed Monday and Thursday ______
January 7, 8, 9 ‘The Meanest Man in the World’ with BERT LYTELL ______
January 10, 11, 12, 13 “THE LIGHT THAT FAILED’ with Jacqueline Logan |
Entire Week Jan. 7th Big Extra Attraction
Rose’s Royal 25=Midgets=25
18 to 33 Inches Tall
Singers, Dancers, Musicians, Acrobats and Magicians in a Brand-New Revue
In Addition to Usual Vaudeville Changed Monday And Thursday ______
January 7, 8, 9 ‘The Meanest Man in the World’ with BERT LYTELL ______
January 10, 11, 12, 13 “THE LIGHT THAT FAILED’ with Jacqueline Logan ______
BRING THE KIDDIES No Advance in Prices
|
Lee’s Connecticut Chronicles:
On the road this week, see you in two.
Lee
Lee S. Siegel
Married School Teachers? Feggetaboutit – 100 Years Ago:
Daily News
New York, New York
05 Jan 1924
Perth Amboy Schools Bar
Married Woman.
The Board of Education of Perth Amboy, N. J., yesterday voted to ban married women as teachers in the city’s ten public schools hereafter. As for the fifty married women now teaching, none will be re-engaged at the expiration of their contracts.
Kyle's Noteworthy No-Fault:
Dear Readers,
I hope everyone had a great Christmas and a Happy New Year! The first case of the New Year involves a petition to confirm an arbitration award issued to the petitioner, Motor Vehicle Accident Indemnification Corporation, paid no-fault benefits to the claimant after the insurer denied coverage, asserting it had cancelled the policy due to non-payment.
Until next time,
Kyle
Kyle A. Ruffner
[email protected]
Deporting Alien Drivers – 100 Years Ago:
Daily News
New York, New York
05 Jan 1924
UNCLE SAM’S BOOT FOR A
LIEN AUTO VIOLATORS URGED
In sentencing Harry Ran, twenty-two, alien chauffeur, to thirty days in the workhouse for reckless driving, Magistrate Fish in Brooklyn Traffic Court yesterday urged means to deport alien automobile drivers who are repeated offenders of traffic laws. Ran appeared before Magistrate Fish for the third time in a year and has been in this country three years.
“This is the sort of case that should come to immediate attention of authorities for deportation,” the magistrate declared. “Such men should not be permitted to drive automobiles in our already congested streets.”
Besides the term, Ran was fined $100, and his chauffeur’s license was revoked.
Ryan’s Federal Reporter:
Hello Loyal Coverage Pointers Subscribers:
Happy New Year and Cheers to 2024! I hope you had a moment to reflect on 2023 and wish you well as we tackle another years’ worth of tomorrows.
In this edition of Ryan’s Federal Reporter, I have outlined a recent Eastern District of New York decision that was a good mix of some basic procedural issues and a refresher on how New York handles suit limitations clauses. Spoiler alert: Travelers was dominant on the mound.
Until next time,
Ryan
Ryan P. Maxwell
Talkies – 100 Years Ago:
The Buffalo News
Buffalo, New York
05 Jan 1924
Phonofilm Records Sound on Film as Movie Is Made
Cleveland Man’s Invention Hailed As Success by Those Who Have Seen It Work.
CLEVELAND, Jan. 5.—The Phonofilm, a combination of radio and motion pictures, the invention of Lee Deforest, has been demonstrated successfully, according to those who have heard and seen the talking pictures. It is his object to produce motion pictures in which the characters speak. Dr. Deforest gives this explanation of the process:
“In the studio a motion picture is taken in the usual manner but in accordance with the camera lens, which registers action, a microphone registers every sound made by the actor. A write from the microphone passes through an audion amplifier to a gas filled tube fluctuates in exact accordance with the amplified telephonic currents which originated from the actor’s lips.
“A very fine slit is located near the negative film through which these fluctuating rays are registered on the sensitive emulsion of the negative as fine lines which are actual photographic sound waves and being on the same film as the picture, insure perfect synchronism at all times.
“A positive print is then made in the usual manner. In reproducing, a small attachment is placed on the standard motion picture machine. This attachment contains a small incandescent lamp which is placed in front of the photographer sound waves on the films. This light passing through the sound record, falls upon a photo-electric cell, its brilliancy being governed by the density of the photographed sound waves. The photo-electric cell’s electrical resistance at any instant it determined by the amount of light falling upon it.
“The telephonic current from the cell, is then passed through the audion amplifier, where it is built up hundreds of thousands of times. Thus, the actor’s words are converted into telephonic currents, amplified, photographically registered on the film and eventually transformed back again into telephonic currents which are made audible by the loud speaker.
“As the motion picture must be projected upon a screen to be viewed, it is likewise necessary to project the sound in order that it may appear to come from the actor’s lips. This is done simply by running a lamp cord from the machine to the screen where a loud speaker is attached.”
Storm’s SIU:
Hi Everyone:
Happy New Year! It’s an exciting time rooting the Bills into the playoffs. Go Bills!
In this section of Coverage Pointers, I digest cases which may be of interest to SIU and fraud fighting Claims professionals and are not reviewed elsewhere in Coverage Pointers (i.e., Steve comments on the Appellate Division cases). As I am also admitted to practice in Pennsylvania, we periodically consider cases from the Keystone State, like today.
Two interesting cases for you this week:
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No Coverage for Fire Damaged Property as it Did Not Constitute a Residence Premises.
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Homeowners Policy Contains an Unambiguous and Applicable Exclusion for Criminal Acts, Regardless of Mental Capacity.
Have a great two weeks until we meet again.
Scott
Scott D. Storm
Admits Auto Fraud – 100 Years Ago:
The Buffalo Enquirer
Buffalo, New York
05 Jan 1924
SAY HE ADMITS AUTO DEAL, CAN’T TELL MOTIVE
(Special Telegram to The Enquirer.)
St. Catharines, Ont., Jan. 5.—“Yes, I’m guilty but I hardly know what made me do it,” said George H. Babcock, a well dress young man from Toronto, in police court yesterday afternoon. He was accused of fraud in the selling of a car to Thomas Crowe, of Queenston, December 16. Babcock told Crowe the care as paid for and had no encumbrances, but afterwards Livingston Bros., of Hamilton, put in a claim of $500 against it. Crowe paid Babcock $500 for the car in cash and notes.
The police here have been notified that a similar game was worked in Hamilton, London and Buffalo by some unknown young man.
Fleming’s Finest:
Hi Coverage Pointers Subscribers:
Happy New Year! If you are a new reader in 2024, this column covers decisions from the highest (finest) courts in every state except New York. Each edition, I try to choose the most interesting case I come across, and it’s fun learning along the way. I hope you also enjoy seeing opinions from different states.
This week’s case comes from the Oregon Supreme Court. From a little background search, Moody is a big deal because Oregon has rejected a common-law tort cause of action for bad faith in first-party cases. The Court concluded that a surviving spouse had alleged a legally protected interest sufficient to subject the first-party life insurer to liability for emotional distress damages, and she was within a limited class as a surviving spouse that would not create indeterminate and potentially unlimited liability.
Catch you later,
Kate
Katherine A. Fleming
Ford had a Better Idea – 100 Years Ago:
The Buffalo Enquirer
Buffalo, New York
05 Jan 1924
AUTO AN AGENT OF PEACE, SAYS HENRY FORD
(By the International News Service.)
New York, Jan. 5.—More automobiles—less war. The automobile is an agent of peace, says Henry Ford.
“There are no remote places in the United States and the people of many nations live here in peace and understanding,” says the manufacturer, “because there is an easy interchange of ideas and ideals.”
This interchange, Ford explains in an interview with Norman Beasley, published in the current issue of Motor, is due to the automobile. The Detroit manufacturer believes enough automobiles could pacify Mexico.
“The development of the automobile is the greatest single instrument for world peace I can think of,” Ford declares. “When the automobile becomes as common in Europe and Asia as it is in the United States the nations will understand each other. Rulers won’t be able to make war because the people won’t let them.
“This is the biggest thing the automobile industry is going to accomplish—the elimination of war.”
“What is the automobile industry coming to?” Ford was asked.
“What is the automobile industry coming to? Why the automobile industry is get getting started,” he answered. “There can be no ‘saturation’ in the industry until there are more than enough automobiles to go around. Such a condition will be a long time coming—if it ever comes.”
“But the automobile is coming to this: refinements, everywhere. Mechanical defects have been pretty well eliminated. Friction will be removed, adding life to the care and pleasure to driving. Cars will be made lighter, making riding easier.”
Gestwick’s Garden State Gazette:
Happy New Year, CP subscribers! I’m back for another year of coverage fun, but this time, with a brand-new beat! As my application to become licensed in New Jersey is finalized, I’ve transitioned from writing about New York’s trial level courts, to covering all things New Jersey. Keep in mind, however, that the bulk of my practice remains New York insurance law, and that I will certainly be keeping my New York license active.
In the case I have for you today, the insured was involved in an automobile accident, having sustained injuries in a greater amount than the tortfeasor’s auto policy limit. With her auto carrier’s consent, the insured accepted the tortfeasor’s policy limit, preserving her right to seek underinsured motorist benefits from her own auto carrier. Despite being delinquent on the six-year statute of limitations applicable to UIM claims, the insured sued her carrier. The carrier brought a motion for summary judgment to dismiss her claims as time barred. Affirming the lower court’ s decision to grant that motion, the appellate court noted that the carrier informed its insured of its intention to rely upon the statute of limitations defense as early as 2017, and that this case did not fall into one of the limited circumstances in which the statute of limitations can be tolled.
That’s it for this time around. See you in two!
Evan
Evan D. Gestwick
Beefed about the Beef – 100 Years Ago:
The Buffalo Commercial
Buffalo, New York
05 Jan 1924
Mayor Fines Cop Who Criticized Tough Steak Probationary Officer Loses Ten Days’ Pay Because He Spoke Ill of Sturdy Meat
Patrolman Richard R. Hunt, a probationary policeman, was given an unusually stiff fine by mayor Schwab today as a result of a rumpus he had over a piece of tough steak that was served him in a south side restaurant.
“This fellow is too young to get away with such brawls as he was in,” the mayor said and fined the officer ten days’ pay. Hunt was tried by the mayor yesterday.
O’Shea Rides the Circuits:
Happy New Year Everyone,
The new year brings new changes. This year I will be shifting from auto claims to covering the Circuit Courts. Oddly enough, this first week I have an auto case from the Eighth Circuit.
The case involves the term permission modifying the interpretation of the term hire as both are found in an auto policy’s omnibus clause.
See you in 2 weeks,
Ryan
Ryan P. O’Shea
[email protected]
Tut Uncovered – 100 Years Ago:
Buffalo Courier
Buffalo, New York
05 Jan 1924
King Tut’s Sarcophagus in Light After 3,000 Years
Luxor, Egypt, Jan. 4 (By Associated Press).—The sarcophagus of Tutankhamun has been brought to light after remaining hidden for more than 3,000 years in the tomb of the Pharaohs in the Valley of the Kings.
The long-sought-for treasure of antiquity, carved from pinkish granite, probably Assuan stone, lies within the fourth casket of blazing gold—a casket even more brilliant than the other shrines enclosing the sarcophagus, its doors covered with cartouches of the dead Pharaoh, surrounding a figure of the monarch.
Elaborately Carved.
The sarcophagus is elaborately carved and there is reason to believe it will prove to be of even greater artistic value than the pink sarcophagus of Harmahih or the famous alabaster coffin of Seti II in the Soane museum in London.
Following up yesterday’s discovery of the fourth casket the search was proceeded with and in the presence of Prof. Percy E. Newberry, the noted Egyptologist, and the other members of his staff, Howard Carter, in charge of the exploration, unbolted the doors of the fourth shrine, disclosing the sarcophagus and finally establishing the fact that the last resting place of Tutankhamun had really been discovered.
______
London, Jan. 4.—According to a dispatch to the Exchange Telegraph from Luxor, exquisite gems are set in rich profusion around the sarcophagus of Tutankhamen.
Louttit’s Legislative and Regulatory Roundup:
Hello All,
Happy New Year! Today’s column notes a New York state bill that expands the scope of SUM coverage to the application of police vehicles. The amendments to Insurance Law 3420 expand the SUM rights of police officers who are injured in police vehicles. We will track its implications in the insurance industry.
Best wishes in the New Year!
Rob
Robert P. Louttit
New Jersey to Require Car Insurance – 100 Years Ago:
The Daily Record
Long Branch, New Jersey
05 Jan 1924
COMPULSORY INSURANCE
FOR CAR OWNERS.
Compulsory personal liability automobile insurance, which received last week the tentative approval of the Republican legislative joint conference committee, should not be delayed beyond the coming session. Whether or not the State should go into the insurance business as suggested by Assemblyman Hershfield is another question.
It is proposed to compel every car owner to take out a policy of $10,000 to cover injuries to individuals and one of $2,000 for damages to property. The argument is advanced that the State would reap large profits by going into the insurance business and that by diverting these into the road funds taxes might be reduced or more good roads constructed. Since, however, it is not proposed to give the State a monopoly of this insurance it would be compelled to enter into competition as to rates with private companies, making the matter of profits somewhat problematical.
Be this as it may, there is no doubt that insurance to cover both personal and property damages should be made compulsory. Our streets and highways are cluttered up with motor vehicles that are a constant menace to the safety of one another, their occupants and pedestrians. It is said that the number licensed this year will approximate 400,000 and that of this number 85 per cent. carry no liability insurance. This shows how small a chance any one injured either in person or property by an automobile has of obtaining pecuniary redress. Of course, when the owner of the car possesses tangible property, compensation may be obtained by suit, but in these days thousands of cars are in the hands of persons of no financial responsibility and against whom a verdict for damages would be worthless.
Rob Reaches the Threshold:
Hello Readers,
Happy New Year to you as we enter 2024. I hope you all had a wonderful holiday season and have started off the New Year with energy and a handful of new goals.
Personally, I have so much in my life coming up this year (i.e., I am getting married in September!!), it is hard to not get excited as we look forward. I wish you all the best this year.
Another thing I am excited for in 2024 – more case law on Serious Injury to share with you. The end of 2023 saw the issue grind to a halt for many Appellate Divisions. Although 2024 hasn’t exactly burst out the gates, I was able to find a Decision from the Second Department which examined the issue of Serious Injury Threshold in a bit of a different context. Here, we examine a situation where the Court must review a jury verdict for a Plaintiff after a finding that her injuries had qualified as a Serious Injury under two categories of Insurance Law Section 5102(d).
I hope you all enjoy the read.
Rob
Robert J. Caggiano
Darn Cold in Buffalo – 100 Years Ago:
The Buffalo News
Buffalo, New York
05 Jan 1924
FOUR BELOW ZERO IS BUFFALO FORECAST
Below zero weather will come tonight on the crest of a cold wave, the weather bureau announces. At noon today the mercury had sunk to 10 degrees and will continue to go lower through the day, it was forecast. The minimum will be around four degrees below, it is expected.
Extreme cold weather prevailed throughout the section to the west of Buffalo. Chicago reported a temperature of 14 degrees below zero this morning. Kansas City 14 below, Saint Louis 8 below, Springfield 16 below, Cincinnati 6 below, Detroit zero, Saint Paul 30 below and Duluth 32 below.
This cold weather is due to get here tonight. It is due to a marked high barometric pressure centered over the plain states. The reading was 31.04.
There will probably be snow tonight and strong west to north west winds. Meteorologist Cuthbertson said it looked like a hard night.
Goldberg’s Golden Nuggets:
Hello World,
I’m honored to be submitting my first column to Hurwitz Fine’s Coverage Pointers after years of reading the biweekly publication. I joined Hurwitz Fine in the middle of last year and while I am excited for what 2024 holds for me professionally, on a personal level, my wife and I are eagerly looking forward to welcoming our second child come May. While getting two kids ready in the morning will be a challenge, I’m lucky to have that challenge.
I look forward to being able to contribute to Hurwitz Fine’s Coverage Pointers and hope that I can help bring you cases to help you do whatever it is you do, judgment free.
Josh
Joshua M. Goldberg
Ending Saloon Dances in the Steel City – 100 Years Ago:
The Buffalo News
Buffalo, New York
05 Jan 1924
MAYOR LOHR PUTS BAN
ON SALOON HOPS
Lackawanna’s New Executive
Bars “Razor Parties” in future—Police Department
Will Scrutinize Applications for Permits.
Mayor Lohr of Lackawanna has directed that saloon dances be banned. These dances in the last two years have been characterized as “razor parties.” Often they culminated in hurried summons for ambulances and police. The police board directed Police Chief Gilson to because the arrest of persons who stage or patronize future saloon dances.
“Hereafter, only decent dances will be permitted in the city,” Mayor Lohn said. “anyone wishing to hold a dance must first make an application for a dance permit which will be issued only after the police make a satisfactory report.
LaBarbera’s Lower Court Library:
Hello Coverage Pointers subscribers:
It’s a New Year, and a New Column! I am pleased to announce I have joined the Coverage Pointers team. My Lower Court Library will discuss an assortment of coverage issues – all released within the New York State lower courts. You will get a taste of interesting and emerging insurance law developments in New York State, as well as some cases which drive home key principles.
With the start of a new year, it’s important to reflect on the last. As a little bit of an introduction, here are some special moments I experienced in 2023. I graduated law school, studied for and passed the bar exam. I started a new job in September, as an associate (pending admission) with Hurwitz Fine’s coverage team. I traveled to Norway and watched my mother get married. My childhood dog, who I took with me on the move to Buffalo, just turned fifteen. With all these exciting changes in 2023, I can’t wait for what 2024 has in store!
For my debut, I bring to you all a case discussing a few essential points to keep in mind for any risk transfer analysis. This New York County case involved an insurer claiming another owed the duty to defend under the policy’s additional insured language. The court looked at the blanket additional insured endorsement and the construction of the subcontract at issue to make their decision. The court ultimately held that additional insured status was triggered. After making such a determination, the court drove home a key concept: under an additional insured tender for reimbursement of defense costs, one is only entitled to reimbursement of costs incurred after the tender.
Isabelle H. LaBarbera
Associate – Pending Admission
Leave Insurance to the Insurers – 100 Years Ago:
The Marshall News Messenger
Marshall, Texas
05 Jan 1924
BANKERS CANNOT
WRITE INSURANCE
At Least That Is the Ruling of
State Insurance Commissioner Scott
By the Associated Press
Austin, Jan. 4.—A policy of refusing to license bankers to write insurance except in small towns where there is no established insurance agency, which was settled some months ago, has been reiterated by Insurance Commissioner John M. Scott. A number of such requests have been received with the beginning of the new year.
“The laws of this state,” said Mr. Scott, “unequivocally prohibit the insurance of an insurance license to a person who by some advantage of relationship or position seeks a license to enable him to write the insurance of his own property or that of his friend or relatives.
North of the Border:
The quiet week between Christmas and New Year’s seems to have disappeared in a flash and here we are into a new month, a new quarter, a new year. So many of my friends and acquaintances in the profession have announced retirement. Others have moved on to other opportunities by changing firms. Change is good.
The Canadian courts are very quiet. I have taken this opportunity to report on a UK decision that I came across in doing research on a point of law that I believe is useful for those who routinely work with liability insurance towers.
Best,
Heather
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
Headlines from this week’s issue, attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Endorsement that Limited Coverage was an Exclusion that Triggered the Obligation to Disclaim Timely. In Case of First Impression, Court Considers E-Mailed Disclaimer under the Same Rules as Snail-Mailed Disclaimer
- Damn the Release. It Can be Set Aside (Even in the Absence of Fraud) where Releasor Claims there was a Language Barrier, that the Contents of the Release were Insufficiently Explained, where the Plaintiff was not Represented by Counsel and where there was Mutual Mistake as to the Nature of the Injuries. Thousands Flee
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Directed Verdict Dismisses Insureds Supplemental Fire Loss Claim
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
- General Business Law Claim Dismissed where Plaintiffs Were Aware of Quality and Character of Defendants’ Services and thus Not Injured by Alleged Deceptive Practices
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- Traveling this week.
KYLE'S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
- Court Upholds Arbitration Award, as Insurer did Not Submit Evidence it Effectively Cancelled the Insurance Policy
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
- Three Strikes and the Insured is Out: The Court has Jurisdiction, the Broker was Unnecessary, and the Coverage Claims were Time-Barred
STORM’S SIU
Scott D. Storm
[email protected]
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Homeowners Policy Contains an Unambiguous and Applicable Exclusion for Criminal Acts, Regardless of Mental Capacity
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No Coverage for Fire Damaged Property as it did not Constitute a Residence Premises
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- Surviving Spouse Pleaded Facts Sufficient to Give Rise to a Legally Cognizable Common-Law Negligence Claim for Emotional Distress Damages Against First-Party Life Insurer
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
- Statute of Limitations Applicable to Uninsured Motorist Benefit Claims Only Tolled in Limited Circumstances
O’SHEA RIDES THE CIRCUITS
Ryan P. O’Shea
[email protected]
- Permission Modifies Hire to Create Element of Control in Auto Policy’s Omnibus Clause
LOUTTIT’S LEGISLATIVE and REGULATORY ROUNDUP
Robert P. Louttit
[email protected]
- An Act to Amend the Insurance Law and the Vehicle and Traffic Law, in Relation to Supplemental Uninsured and Underinsured Motorist Coverage for Police Agencies
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
- Second Department Examines the Reasonableness of a Jury Verdict which Awarded Damages after Finding that Plaintiff Suffered a Serious Injury under the Permanent Consequential Limitation and Significant Limitation of Use Categories of Insurance Law § 5102(d)
GOLDBERG’S GOLDEN NUGGETS
Joshua M. Goldberg
[email protected]
- Hertz Fails to Secure Declaratory Judgment and Three-Year Statute of Limitations Applicable
- First Department Upholds No-Fault Carrier’s Founded Belief Chubb Denial
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
Associate – Pending Admission
[email protected]
- The Subcontract Satisfied the Statute of Frauds and Conformed to the Policy Language Granting Additional Insured Status; Insurer was Entitled to Reimbursement for Past Defense Costs Incurred after Date of Tender
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
[email protected]
- In a Follow-Form Tower of Claims-Made and Reported Policies, Each Layer is Exhausted by the Chronological Presentation by the Insured of Ascertained Third-Party Liability and Expenses Arising from Covered Claims Duly Noticed to that Layer
Again, happiest, and healthiest and more peaceful of new years to you and yours,
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
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INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Scott D. Storm
Brian D. Barnas
Robert P. Louttit
Ryan P. Maxwell
Joshua M. Goldberg
Kyle A. Ruffner
Katherine A. Fleming
Evan D. Gestwick
Ryan P. O’Shea
Isabelle LaBarbera (Pending Admission)
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
Peiper on Property and Potpourri
Ryan’s Federal Reporter
Gestwick’s Greatest
Loutit’s Legislative and Regulatory Roundup
Rob Reaches the Threshold
LaBarbera’s Lower Court Library
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
01/04/24 Titan Industrial Services Corp. v. Navigators Insurance Co.
Appellate Division, First Department
Endorsement that Limited Coverage was an Exclusion that Triggered the Obligation to Disclaim Timely. In Case of First Impression, Court Considers E-Mailed Disclaimer under the Same Rules as Snail-Mailed Disclaimer
Navigators moved for summary judgment, granted by the lower court. The policy it issued contained an Endorsement, which served to subtract coverage rather than expand it. It was explicitly titled "Designated Person(s) or Entities Exclusion" and states that certain entities are "excluded" from coverage.
Thus, despite Navigators' position to the contrary, Endorsement No. 005 is a policy exclusion. Since it was an exclusion, and Navigators sought to deny coverage based on that exclusion, the strictures of Insurance Law § 3420(d)(2) applied. Navigators was required to provide written notice of the disclaimer as soon as reasonably possible after receiving Titan's tender in which it sought coverage under as an additional insured.
Furthermore, the application of this exclusion was obvious and did not require an investigation. The First Department therefore found that We therefore find that Navigators' unexplained delay in disclaiming coverage - seven months after the first tender and almost three months after the second was unreasonable as a matter of law (see id. [finding 30-day delay unreasonable as a matter of law]).
We reject Navigators' contention that it did, in fact, disclaim coverage in an email to Titan's insurance broker. Although the email mentioned the exclusion, it did not unequivocally state that Navigators was disclaiming coverage. Nor did the email apprise Titan, with the high degree of specificity required, of the ground or grounds on which the disclaimer was based.
Supreme Court also should have granted plaintiffs' motion for summary judgment to the extent they sought a declaration that Navigators has a duty to defend Titan in the underlying action as an additional insured. The record in this case —including the allegations in the underlying complaint, the allegations in the third-party complaint, and the information exchanged in discovery — is sufficient to establish a reasonable possibility that the named insured's acts or omissions were a proximate cause of the injuries alleged. As Navigators' duty to defend on a primary basis has been triggered, plaintiffs are also entitled to reimbursement of defense costs incurred from the date on which Navigators received the tender.
However, plaintiffs are not entitled, at this stage, to a declaration that Navigators owes Titan a duty to indemnify. While the record is sufficient to establish the tender at Navigators' duty to defend has been triggered, it is not sufficient to establish that Navigators will ultimately have to indemnify Titan once the litigation has run its course.
Editor’s note: The decision makes sense. An interesting point, though, is that the email disclaimer was considered on its merits. This is one of the first cases we’ve seen where the court considered an email disclaimer. Had it unequivocally disclaimed with specificity, perhaps it would have been the first email disclaimer recognized as valid by the New York appellate courts. Kudos to our friend Ann Odelson.
12/29/23 Huang v. Llerena-Salazar
Appellate Division, Second Department
Damn the Release. It Can be Set Aside (Even in the Absence of Fraud) where Releasor Claims there was a Language Barrier, that the Contents of the Release were Insufficiently Explained, where the Plaintiff was not Represented by Counsel and where there was Mutual Mistake as to the Nature of the Injuries. Thousands Flee
In June 2021, Huang sued the defendant in an action arising out of a car accident, claiming injuries from a rear-end collision. Thereafter, the defendants moved pursuant to CPLR 3211(a)(5) to dismiss the complaint as barred by a release signed by the plaintiff.
Generally, a valid release constitutes a complete bar to an action on a claim which is the subject of the release". A release may be invalidated, however, for any of the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake. In addition, a release may be set aside on the ground that it was not "'fairly and knowingly made'". This basis for setting aside a release may be applied in situations "'falling far short of actual fraud,' such as when, 'because the releasor has had little time for investigation or deliberation, or because of the existence of overreaching or unfair circumstances, it was deemed inequitable to allow the release to serve as a bar to the claim of an injured party'"
Here, in support of their motion, the defendants submitted, inter alia, a copy of a release signed by the plaintiff, which, by its terms, barred this action against them In opposition, however, the plaintiff's allegations were sufficient to raise questions of fact as to whether the release was signed by the plaintiff under circumstances that indicate unfairness, and whether it was not "fairly and knowingly" made.
The plaintiff averred, among other things, that shortly after the accident, an insurance representative for the defendants called him "repeatedly;" that he had difficulty understanding the defendants' representative due to a language barrier; that the defendants' representative, who had him sign the release to obtain money for medical bills, never explained that the document he signed was a release or had the legal effect of the release; and that the plaintiff was not represented by an attorney at the time he signed the release. Moreover, the plaintiff raised questions of fact as to whether there was a mutual mistake as to the nature of the injuries sustained by plaintiff from the alleged accident.
Editor’s Note: We don’t need powerful binoculars to see where this decision can lead. Watch for lawyers who meet clients who have released their claims before retaining counsel to attack the releases based on “mutual mistake” as to injuries and lack of counsel’s assistance.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
12/28/23 Rogers v. New York Cent. Mut.
Appellate Division, Third Department
Directed Verdict Dismisses Insureds Supplemental Fire Loss Claim
The claim involves a total fire loss which occurred in 2017 wherein plaintiff all of his personal possessions and, sadly, several pets that lived at the residence. The loss was accepted by NYCM, and initial payments totaling $271,878.54 were paid under both the Dwelling and Personal Property portions of the policy. Due to delays in the rebuilding, the project was not completed until after the expiration of the two-year reimbursement period set forth in the policy. When plaintiff’s demand for additional reimbursements was denied as outside the scope of the project, plaintiff commenced the instant lawsuit on a pro se basis.
The matter ultimately proceeded to trial, and after plaintiff rested his case, the matter was dismissed by way of a directed verdict. Plaintiff then appealed the dismissal to the Appellate Division, Third Department. The Appellate Court affirmed by ruling that there was no “rational process by which [the trier of fact] could find in favor of the nonmoving party.”
In support of its holding, the Court noted that plaintiff timely received the expected policy benefits of $271,878.84, and that he simply did not elicit any further proof on loss of rental income and/or boarding fees related to other pets housed at the premises. In addition, plaintiff had previously executed a sworn statement wherein he stated the value of his claimed loss and released NYCM as part of the resolution of the claim.
On the Record presented, the Court noted that plaintiff failed to establish his own performance under the insuring contract and, likewise, failed to demonstrate how/why NYCM breached its obligations.
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
12/28/23 Dobkin v. HUB International Unlimited
Appellate Division, First Department
General Business Law Claim Dismissed where Plaintiffs were Aware of Quality and Character of Defendants’ Services and thus Not Injured by Alleged Deceptive Practices
The court affirmed the dismissal of plaintiffs’ claims pursuant to General Business Law §§ 349 and 350. Even assuming plaintiffs satisfied the consumer-oriented threshold requirement, the complaint failed to allege that the injury suffered was the result of any alleged deception. Plaintiffs' own allegations demonstrated that they were aware of the true nature of the services provided by defendants, as the parties had a business relationship for some 30 years.
The complaint alleged that in 2015 plaintiffs determined that one of defendants' policy recommendations—specifically as to coverage for plaintiffs' valuable possessions including a rare book collection—was "inadequate" and "worthless." As to that recommendation, plaintiffs concluded that "specifically itemizing their valuable physical possessions would provide far superior coverage than" the "blanket" policy defendants proposed. In another instance, in 2016, defendants were "purportedly in the midst of 'a complete review of [plaintiffs'] entire personal insurance program through HUB,'" but the review's results were never provided. The complaint also alleged that, in advance of the 2021 loss at issue, defendants' 2019 and 2020 coverage recommendations amounted to "a general and vague laundry list of potential commercial coverages," and that such recommendations were made only to plaintiff foundation and not also to the individual plaintiffs. The complaint thus demonstrated that plaintiffs were aware of the character and quality of defendants' services well before the alleged loss. Plaintiffs were therefore further aware that they were not receiving the personalized risk management and coverage recommendation services allegedly promised.
Accordingly, plaintiffs' own allegations established their knowledge of any alleged deception and, moreover, that they were not injured by the alleged deceptive practices.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
Travelling this week, see you in two.
KYLE’S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]
12/13/23 Motor Veh. Acc. Indem. Corp. a/s/o Annissa Barclay v. Hereford Ins. Co.
Supreme Court, New York County
Court Upholds Arbitration Award, as Insurer did Not Submit Evidence it Effectively Cancelled the Insurance Policy
On December 23, 2020, the petitioner’s claimant was injured as a passenger in a car that was insured by the respondent. The insurer denied coverage, resulting in petitioner paying out no-fault benefits to the claimant. Petitioner commenced an arbitration against the insurer and the arbitrator issued an award to the petitioner. The insurer moved to vacate the award on the grounds that the award was procured through corruption, fraud or misconduct, and argued that it no longer covered the subject vehicle on the date of the accident. The petitioner argued that the insurer did not identify a proper basis to vacate the award because it failed to notify the DMW that the policy had been cancelled within 30 days and failed to submit any proof to the arbitrator that the DMV was told about the cancellation.
In reviewing the arbitration decision, the court stated that CPLR 7511 provides just four grounds for vacating an arbitration award, including that the arbitrator exceeded his power, which occurs only where the arbitrator's award violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on the arbitrator's power. Mere errors of fact or law are insufficient to vacate an arbitral award. Courts are obligated to give deference to the decision of the arbitrator, even if the arbitrator misapplied the substantive law in the area of the contract.
The arbitrator found that the petitioner showed that coverage was incepted with Hereford effective 8/6/20. The court noted that the insurer did not supply a record from after this time showing the cancel but did supply a cancel notice dated 8/27/20 which indicated coverage would be cancelled 9/23/20 for non-payment of premium. However, the insurer did not supply a final bill or anything to show the cancel went through on the date and time of the notice.
Therefore, the court held that the award was rational. The arbitrator reached a rational conclusion based on the evidence presented as the evidence presented to the arbitrator did not conclusively show that respondent met its burden to demonstrate that it had cancelled the insurance policy for the subject vehicle on the date of the accident. While the court recognized that the insurer believed it had properly cancelled the policy and there was another insurance company that provided coverage on the date of the accident, the court held the respondent’s reply did not adequately address the fact that none of this information was presented to the arbitrator. Therefore, the court could not conclude the award was wholly irrational based on the documents presented because no information was submitted that showed it effectively cancelled the policy.
Accordingly, the court granted the petition and the award rendered in favor of the petitioner was confirmed.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
01/02/24 Camali TV, Inc. v. Travelers Prop. Cas. Co. of America
Eastern District of New York
Three Strikes and the Insured is Out: The Court has Jurisdiction, the Broker was Unnecessary, and the Coverage Claims were Time-Barred
Camali TV, Inc. filed suit in state court against its insurer, Travelers Property Casualty Company of America, seeking $1,672,500 in damages due to Travelers’ alleged failure to provide coverage in connection with a first party property damage claim. Travelers removed the matter to federal court because Travelers, a Connecticut insurer, and Camali, a New York corporation, were diverse. Thereafter, Travelers sought to dismiss the action on the basis of a two-year statute of limitations agreed to within the policy. In addition to opposing the motion, Camali itself sought remand and permission to amend its complaint to add claims against its insurance broker and additional claims against Travelers for breach of the covenant of good faith and fair dealing. Notably, the addition of the broker, a New York company, would eliminate diversity of the parties entirely.
Finding for Travelers, the EDNY found Camali wrong on all accounts.
First, in seeking remand on the basis of a lack of diversity, Camali argued that “this is a ‘direct action against the insurer of a policy or contract of liability insurance,” and that Travelers should, therefore be treated as also being a citizen of ‘[e]very State and foreign state of which the insured [i.e., Plaintiff] is a citizen,’ rather than as only a citizen of Connecticut,” citing 28 U.S.C. § 1332(c)(1)(A). However, the EDNY notes, correctly, that “[t]his is not a direct action against an insurer to which the special rules of diversity jurisdiction apply.” The statutory provision relied upon does not apply to Camali’s claims here. Camali “is suing its own insurer seeking payment on a claim that Plaintiff asserts Travelers should cover pursuant to Plaintiff's own insurance policy.” Because ordinary diversity rules apply to actions filed by an insured against its insurer, the matter remains diverse.
Second, Camali’s contention that “it should be permitted to amend its complaint to assert claims against Sherwood, [it’s insurance broker,] because Sherwood is a ‘necessary party,’” is also incorrect. Not only is the broker not a necessary party under Fed. R. Civ. P. 19, since Sherwood’s absence would not deprive Camali of complete relief from Travelers, but inclusion of a claim against Sherwood through permissive joinder would be impermissible, because Sherwood is not indispensable and such a joinder would defeat diversity. Although Courts may permit joinder defeating diversity under 28 U.S.C. §1447(e), it will only do so “when consistent with principles of fundamental fairness,” determined by considering the following factors: “(1) any delay and the reason for delay, (2) prejudice to the defendant, (3) the likelihood of multiple litigation, and (4) the plaintiff's motivation in seeking joinder.” Each and every such factor cuts against permitting joinder of Sherwood.
Third—and third mostly—the claims asserted against Travelers were clearly time barred. The policy provides that any legal action against Travelers must be “brought within 2 years after the date on which the direct physical loss or damage occurred.” New York law plainly establishes that a two-year suit limitation clause is not “inherently unreasonable.” Filing a suit almost seven years later is too late. Moreover, although Camali sought to add a good faith and fair dealing claim, such claim was futile, because it was entirely duplicative of Camali’s now time-barred breach of contract claim.
Strong showing on the mound for Travelers.
GOLDBERG’S GOLDEN NUGGETS
Joshua M. Goldberg
[email protected]
12/15/23 Blano Med., P.C. v Hertz Co.
Supreme Court, Appellate Term, Second Department
Hertz Fails to Secure Declaratory Judgment and Three-Year Statute of Limitations Applicable
This action, commenced in 2019, was brought by Plaintiff against defendant “Hertz Co.” to recover first-party benefits pursuant to an assignment of benefits resulting from an alleged automobile accident that occurred on January 26, 2015. Separately, in December 2016, “Hertz Vehicles, LLC” obtained a declaratory judgment, on default, against “Blano Medical” declaring that “Hertz Vehicles, LLC” was not obligated to pay claims for reimbursement submitted by “Blano Medical” and its assignor.
In the instant action, Defendant “Hertz Co.” sought to amend the pleadings to conform to the evidence, pursuant to CPLR §3025(c), and have the caption reflect “Hertz Vehicles, LLC.” Upon amending the pleadings, Defendant sought summary judgment dismissing the action based upon res judicata as a result of the December 2016 Declaratory Judgment and on the grounds that the action was time-barred based upon the expiration of the three-year statute of limitations that governs actions for first-party benefits against a self-insured. Plaintiff opposed and cross-moved for summary judgment on its cause of action for overdue no-fault benefits. The lower court granted Defendant’s motion to amend and dismiss based on the grounds of res judicata and statute of limitations.
Plaintiff appealed, and on appeal, the Appellate Term reversed the lower court, finding that Defendant “failed to proffer any evidence to support the conclusory statement by its claims representative that Hertz Vehicles LLC is the ‘proper party’.” As a result, Defendant Hertz Co has failed to establish entitlement to dismissal based on res judicata and expiration of the statute of limitations of three years rather than six. The Appellate Term declined to award Plaintiff summary judgment, as it did not establish “that defendant had either failed to deny the claims or that the NF-10 denial of claim forms was conclusory, vague or without merit as a matter of law” (internal citations omitted).
01/04/24 Nationwide Ge. Ins. v. South
Appellate Division First Department
First Department Upholds No-Fault Carrier’s Founded Belief Chubb Denial
This Declaratory Judgment action was commenced by Nationwide General Insurance Company arising from an automobile incident that occurred on August 9, 2020. Nationwide denied the claim of two passengers and the assignee medical providers on the ground that it had a “founded belief” that the automobile incident was staged and not covered by no-fault insurance. Nationwide contended that the insured testified that immediately prior to the impact, the insured heard one of the passengers speaking on the phone and tell an unknown person to hit the car. Nationwide for summary judgment against certain appearing defendants and the New York County Supreme Court denied Nationwide’s appeal. The Appellate Division unanimously reversed and granted the declaration.
The Appellate Division observed that Nationwide put forth the insured’s statement regarding the conversation of his passenger and noted that the adverse vehicle fled the scene. The Appellate Division found that this, along with other unidentified pieces of evidence**, was sufficient to establish a “founded belief” that the accident was not covered by no-fault insurance, as set forth in Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195 [1997].
The Appellate Division further found, as a separate ground for the declaration, that the Supreme Court incorrectly denied the portion of Nationwide’s motion that was based upon the failure of the passengers’ failure to comply with Nationwide’s demand that they attend Examinations Under Oath. The Appellate Division found that the EUO notices were timely sent, along with the follow-up notices, and that the mailing and non-appearance was properly documented through affidavits and statements on the record.
**Nationwide also relied upon evidence like the age of the vehicle, its use as a “gypsy cab,” the nature of the relationship between the insured at the passengers, the insured’s expanded testimony of the passenger’s phone call, and what transpired when the police arrived on the scene (the investigator’s affidavit is annexed as “Exhibit I” to the underlying motion papers).
STORM’S SIU
Scott D. Storm
[email protected]
12/13/23 State Farm Fire and Casualty Co. v. O’Boyle
United States District Court, E.D. Pennsylvania
Homeowners Policy Contains an Unambiguous and Applicable Exclusion for Criminal Acts, Regardless of Mental Capacity
[Abridged] O'Boyle was found guilty of criminal homicide third-degree murder for the killing of Dr. James Sowa. Shortly thereafter, Dr. Sowa's estate brought a survival and wrongful death action against O'Boyle based on assault and battery allegations. State Farm seeks a declaratory judgment from this Court that it does not have a duty to continue to defend or indemnify O'Boyle for the underlying action. Although the underlying complaint could be read to suggest a lack of mental capacity for purposes of negating intent, I find that State Farm's policy contains an unambiguous and applicable exclusion for criminal acts, regardless of mental capacity. I will therefore grant State Farm's Motion.
Barbara Sowa, administrator of Dr. James Sowa, brought the underlying complaint against Joseph O'Boyle, as well as several individuals and healthcare providers who were allegedly involved in O'Boyle's custody and care. According to Ms. Sowa's complaint, at some point in 2020, O'Boyle began to report "jaw pain that he claimed was the result of Dr. Sowa's chiropractic services." As "O'Boyle's jaw pain allegedly worsened, so too did his hatred and ire toward Dr. Sowa." After repeated threats about Dr. Sowa to his custodians and healthcare providers, O'Boyle ultimately "acted on his threats" on November 2, 2020, when he confronted and violently beat Dr. Sowa.
The underlying complaint sets forth several counts of negligence against the custodial and healthcare defendants. As to O'Boyle, however, the underlying complaint pleads only one count of assault and battery.
In addition, the underlying complaint pleads several of O'Boyle's mental impairments and the severity of those impairments leading up to the murder of Dr. James Sowa.
State Farm issued a homeowners' insurance policy to O'Boyle's parents, which covered O'Boyle himself because he was living with his parents at the time of the incident. The policy also covered the relevant time period of the attack on Dr. Sowa.
State Farm argues that the underlying complaint adequately alleges only intentional acts, and that any allegations of negligence on O'Boyle's part are "conclusory." State Farm further argues "the simple contention that an insured perpetrator suffers from mental health issues cannot negate factual allegations that describe a purposeful assault." Mr. O'Boyle admits that the underlying complaint characterizes his conduct as intentional. Nonetheless, he emphasizes that the underlying complaint goes on to clearly allege that he was suffering from significant mental impairment, which would require a jury to engage in "an analysis regarding O'Boyle's intent at the time of the incident."
I agree that Count V in the underlying complaint characterizes O'Boyle's conduct as intentional, and any reference to O'Boyle being "grossly and outrageously negligent" appears to be conclusory. That said, the underlying complaint also sets forth several factual allegations highlighting mental impairments so severe as to possibly negate intent, to a point where O'Boyle's actions could qualify as an accident. For example, the underlying complaint alleges O'Boyle had several mental illnesses, including psychosis and schizophrenia, which had been treated with in-patient psychiatric care and medication management, but continued "to become more severe" leading up to the physical attack on Dr. Sowa.
Still, even if I were to find that O'Boyle's conduct could be classified as an "accident" for purposes of policy coverage, he is unable to overcome the policy's criminal act exclusion. As described above, State Farm's policy excludes coverage for bodily injury that was a result of a criminal act of the insured. And this exclusion applies even if the insured "lacked the mental capacity to control his or her conduct."
As other judges of this Court have done with similar policies, I find that the criminal act exclusion is applicable here, regardless of O'Boyle's intent.
O'Boyle argues that "granting a motion for judgment on the pleadings at this time based on the criminal acts exclusion would be premature," because "the issue of mens rea is still applicable and has not been resolved by a criminal conviction." But the cases he cites relate to exclusions based on intentional conduct, not criminal acts. And a criminal act exclusion is "far broader" than an exclusion for "expected or intended" injuries. As such, I am constrained to hold that State Farm's criminal act exclusion bars coverage for O'Boyle, with the result that it has no duty to continue to defend or indemnify Mr. O'Boyle for the underlying action.
12/22/23 Perry Rutter et al. v. Nationwide Mut. Fire Ins. Co.
United States District Court, W.D. Pennsylvania
No Coverage for Fire Damaged Property as it did not Constitute a Residence Premises
[Abridged] Presently before the Court are two summary judgment motions: (1) Motion for Summary Judgment filed by Nationwide; and (2) Motion for Partial Summary Judgment filed by Plaintiff Maurice Heh. For the reasons set forth herein, Nationwide's motion is granted, and Heh's motion is denied.
Heh owned a home in Braddock, Pennsylvania. Nationwide insured the Property. Heh's Policy names Heh as the insured and lists the Property on its Declarations under "Residence Premises Information." This case concerns Coverage A (Dwelling) and Coverage C (Personal Property).
Heh purchased the Property in 1990 and resided there with his wife until her passing. On January 1, 2019, Heh agreed to rent the Property and entered into a leasing agreement with its tenants though a copy of the agreement was never found. There are indicia in the record that the agreement between Heh and his tenants provided for the possibility that the tenants would rent to own. There are also indicia in the record that Heh included his furniture—either for the tenants' use during their occupancy or for the tenants to own—in the agreement.
After Heh leased the Property, the evidence of record indicates that he moved to Point Pleasant Retirement Community. Once he moved into Point Pleasant, it is undisputed that Heh did not at any point move back to the Property. However, in January 2020, Heh asked his tenants to vacate the Property. Heh gave the tenants up to a month to move out and described this dissolution of the landlord-tenant relationship as "congenial."
On February 3, 2020, before the tenants had fully moved out of the Property, there was a fire that resulted in significant physical damage to Heh's home and the personal property inside of it. At the time of the fire, one of the tenants was at the Property to collect some of her belongings due to the termination of the rental agreement.
After the fire Nationwide investigated the cause of the loss but denied coverage "based upon the policy provision related to the occupancy of the dwelling." In its investigation, Nationwide determined that Heh "had not resided in the residence premises for an extended period and had not notified Nationwide that the property was rented to tenants." The notice of denial referred Heh to various sections of the Policy in support of the denial. Heh does not dispute the factual matter of whether he resided at the residence premises prior to or at the time of the fire.
Nationwide argues the Policy predicates coverage on the insured residing at the Property. Nationwide argues that, because there is no factual debate about whether Heh was living at the Property, it is entitled to judgment as a matter of law. Heh opposes Nationwide's motion and argues that the Policy is ambiguous with respect to there being a residency condition for Coverage A (Dwelling). Regarding Nationwide's motion with respect to Coverage C (Personal Property), Heh argues in opposition that his loss of personal property at the Property is covered regardless of where he was residing.
Nationwide interprets the policy provisions as limiting coverage based on whether the insured resides at the covered property. And while Nationwide's Policy is less explicit in its conditioning its coverage on residency than the policies in cases on which Nationwide seeks to rely, the Court ultimately agrees.
Because there is no dispute Heh did not reside at the Property at the time of the fire or for a significant amount of time prior thereto, Coverage A (Dwelling) is unambiguously unavailable to him. Such coverage is available for the dwelling on the residence premises, i.e., "the one, two, three or four-family dwelling . . . located at the mailing address shown on the Declarations," that is used "mainly" as the named insured's private residence. The Merriam-Webster Unabridged Dictionary defines "mainly" as "in the principal respect" or "for the most part." The Oxford Dictionaries define "mainly" as "more than anything else." Accordingly, the terms of Coverage A (Dwelling) are not reasonably susceptible to an interpretation that would entitle Heh to coverage where the Property was not being used "in the principal respect" or "more than anything else" as his private residence. For these reasons, the Court will grant Nationwide's motion with respect to Heh's allegation of breach of contract for failure to provide coverage under Coverage A (Dwelling).
Nationwide also seeks summary judgment with respect to Coverage C (Personal Property) insofar as he sought coverage for the personal effects he left at the Property when he moved to Point Pleasant. Heh opposes the motion and moves for partial summary judgment on the same issue. Heh argues that Coverage C (Personal Property) lacks a residency requirement, that Nationwide is responsible for not more clearly articulating a residency requirement as the drafter of the Policy, and that any question concerning who owned the Personal Property at the time of the fire—Heh or his tenants—is a question of fact not resolvable at this stage of litigation. Nationwide argues that not only Coverage A (Dwelling), but also Coverage C (Personal Property), is subject to a residency requirement because the Definitions section of the Policy applies equally to all coverages found therein.
Upon close examination in this case, Heh's proffered interpretation of Coverage C (Personal Property) is not persuasive. For Coverage C (Personal Property), the relevant policy language is: "We cover personal property owned or used by an insured at the residence premises." Read in isolation, Coverage C (Personal Property) does not contain an explicit residence condition. However, Nationwide argues that the reference therein to the "insured" combined with the definition of "you"/"your" supplies a residence requirement. As noted supra, the definitions of "you" and "your" reference residency: "`YOU' and `YOUR' refer to the named insured shown in this policy who resides at the residence premises." And the definition of insured likewise incorporates "you" and "your": "`INSURED' means you" along with certain other relatives (and young people in the insured or relatives' care) who reside at the insured's household at the residence premises. Reading the policy language in Coverage C (Personal Property) with the nested definitions of "insured," "you," and "your," the terms of coverage read:
We cover personal property owned or used by [the named insured shown in this policy who resides at the residence premises] at the residence premises.
Thus, when the Policy is "read as a whole and its meaning construed according to its plain language," Coverage C (Personal Property) is conditioned upon the named insured's residence at the residence premises. Therefore, Nationwide is entitled to summary judgment with respect to Heh's breach-of-contract allegation for Coverage C (Personal Property).
In this case the definitional language of "you," "your," and "insured," combined with the terms of Coverage C (Personal Property) unambiguously provide coverage for personal property of an insured who resides at the residence. Heh did not reside at the Property, so denial of coverage for his personal property was not improper. And while the Court is not unsympathetic to Heh's protestation that he should benefit from coverage when he lived at the Property and paid insurance premiums for decades before the 2020 fire, the Court is "required to give effect to [unambiguous] language."
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
12/29/23 Moody v. Oregon Comm. Credit Union
Oregon Supreme Court
Surviving Spouse Pleaded Facts Sufficient to Give Rise to a Legally Cognizable Common-Law Negligence Claim for Emotional Distress Damages Against First-Party Life Insurer
Moody’s husband was accidentally shot and killed by a friend during a camping trip. When Moody filed a claim for life insurance policy benefits, the insurer initially denied the claim based on an exclusion for death caused by or resulting from being under the influence of any narcotic or other controlled substance because Moody’s husband had marijuana in his system. Moody brought an action against the first-party life insurer, claiming, among other things, that the insurer had negligently failed to investigate and pay her claim for policy benefits, causing her to have fewer financial resources to navigate the loss of a bread-winning spouse and, consequently, to suffer economic harm and emotional distress. The trial court granted a motion to dismiss the negligence claim and to strike her claim for emotional distress damages because the only remedy under Oregon law was contractual. Moody appealed, and the appellate court reversed, holding she could bring a claim for negligence per se and seek emotional distress damages based on the insurer’s statutory violation.
The Oregon Supreme Court affirmed for a different reason, holding Moody pleaded facts sufficient to give rise to a negligence claim for emotional distress damages. The Court reasoned that Moody had a legally protected interest sufficient to subject the insurer to liability for purely emotional damages. The Court identified Moody’s interest was, as the surviving spouse of a deceased breadwinner, in having the insurance company with which she and her husband had contracted for life insurance benefits conduct a reasonable investigation of, and promptly pay, her claim for the promised benefits. The Court acknowledged that it was hesitant to permit recovery for solely emotional injury and noted that it has looked for factors in the past that demonstrate it will not be creating indeterminate and potentially unlimited liability and that the interest in question is sufficiently important and circumscribed to support the imposition of liability. The Court concluded that Moody had alleged a legally protected interest sufficient to subject the insurer to liability for emotional distress damages, and plaintiff was within a limited class as a surviving spouse that would not create indeterminate and potentially unlimited liability. The Court cautioned that this was a narrow decision that did not make every contracting party liable for negligent conduct that causes purely psychological damage, and the decision does not make every statutory violation the basis for a common-law negligence claim for emotional distress damages.
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
01/03/24 Pereira v. New Jersey Mfg.’s Ins. Co.
Superior Court of New Jersey, Appellate Division
Statute of Limitations Applicable to Uninsured Motorist Benefit Claims Only Tolled in Limited Circumstances
Ms. Pereira was involved in a September 2014 automobile collision with an individual who carried only the minimum amount of liability coverage required by New Jersey law--$15,000. Ms. Pereira, in need of additional funds to cover the full extent of her injuries, sought to recover the balance from her own auto carrier, New Jersey Manufacturers (“NJM”) by making an underinsured motorist benefits (“UIM”) claim.
New Jersey law provides that where, as here, a party is injured in an auto accident and is offered a settlement of by a tortfeasor in an amount equal to the tortfeasor’s policy limits, the injured party may accept that offer, with the consent of their own auto carrier with which they are going to make their UIM claim. Generally, the party must do this before accepting the settlement offer.
Here, Ms. Pereira did exactly that—she notified NJM of her intent to accept the tortfeasor’s offer of his policy limits, and that she was still going to proceed against NJM under a UIM claim. NJM authorized her to accept the tortfeasor’s offer. In this initial correspondence, NJM warned that it intended to rely on the statute of limitations applicable to claims relating to UIM benefits.
After this, Ms. Pereira and her attorney sought a narrative report from a doctor which they were going to use to substantiate the monetary value of her injuries in connection with their UIM claim. They sought this report for the first time in September 2017, and did not receive it until April 2019. Once the report was received, Ms. Pereira and her attorney noticed significant inconsistencies, leading them to request a corrected version of the report from the same doctor. This process took until November 2020, when the report was finally received and forwarded on to NJM.
Having been sued in connection with the availability of UIM benefits after the statute of limitations had expired, NJM moved for summary judgment against Ms. Pereira following the close of discovery, seeking a declaration that it did not owe her any UIM benefits. The lower court granted the motion.
On appeal, Ms. Pereira argues that the statute of limitations applicable to her claim should have been tolled, since NJM had notice of her claim, and was not prejudiced in the continuation of litigation.
The appellate court upheld the lower court’s granting of NJM’s motion for summary judgment, dismissing Ms. Pereira’s complaint on statute of limitations grounds. The appellate court noted that a six-year statute of limitations applies to claims concerning UIM benefits, beginning to run on the date of the accident. The appellate court continued that these statutes are only tolled in limited circumstances, such as intentional inducement or trickery by a defendant, or where appropriate in the interest of justice, such as where an insurance company violates the implied covenant of good faith and fair dealing.
In holding that no such limited circumstances applied here, the appellate court noted that NJM had informed Ms. Pereira of the applicable statute of limitations starting with even the very first communication between them and had immediately denied her claim in any event.
O’Shea Rides the Circuits
Ryan P. O’Shea
[email protected]
12/26/23 BITCO General Ins. Co. v. Bruce Smith, et al.
United States Court of Appeals, Eighth Circuit
Permission Modifies “Hire” to Create Element of Control in Auto Policy’s Omnibus Clause
BITCO insured KAT Excavation Company (“KAT”), the general contractor at a Sky Haven Airport construction project. KAT entered into an agreement with a quarry to supply paving rock for the runway, but KAT’s own personnel and vehicles could not transport enough rock. So, KAT retained Chris White d/b/a Chris White Construction (“CWC”). KAT and CWC worked together on a previous project. KAT requested that CWC provide a dump truck, any dump truck.
KAT agreed to pay CWC a fixed amount for each ton of rock hauled to the airport. KAT did not inquire or ask who would be driving the truck. KAT made similar arrangements with other companies to also haul rock. CWC retained Clayton Hamlin who agreed to drive the CWC dump truck. Hamlin made the first trip without issue, but on the second trip from the quarry to the airport, an accident between Hamlin and Bruce Smith. Smith sued Hamlin in Missouri state court for his injuries. BITCO filed a declaratory judgment action denying defense and indemnity for CWC and Hamlin under KAT’s policy. CWC and Hamlin counterclaimed that the BITCO policy’s omnibus clause provided coverage.
The omnibus clause defined an “insured” as anyone else while using with KAT’s permission a covered auto KAT owned, hired, or borrowed; and provided coverage for anyone liable for the conduct of an insured. Smith, CWC, and Hamlin argued that the undefined terms “permission” and “hire” were ambiguous, requiring adoption of a coverage friendly definition. The district court disagreed, finding “hire” as used in the BITCO policy required an amount of control and that KAT lacked such control over the CWC dump truck and Hamlin. Smith, CWC, and Hamlin appealed.
On appeal the Eighth Circuit reasoned that while a policy term may be ambiguous, a coverage-friendly interpretation does not necessarily control, rather the interpretation must be objectively reasonable in light of the whole policy and parties’ intent. The court found that omnibuses clauses are meant to extend coverage and that the Eighth Circuit has already found “hired auto” ambiguous. Despite this, the court rejected the Appellant’s argument that “hire” does not require the element of control.
In looking at the whole of the BITCO policy, the ambiguity of “hire” is extinguished due to the term “permission” appearing in the same omnibus clause. Under Missouri law, “permission” is not an ambiguous term. The court reasoned that although “permission” has flexible use in the omnibus clause, “permission” still carries with it the necessary aspect of right, power, or privilege to grant or with the license or authority to use. Based upon the language of the BITCO omnibus clause, the court held “hire” unambiguously requires an element of control due giving or withholding of “permission.”
On the facts, the court affirmed the district court’s grant of summary judgment finding a lack of control by KAT over the CWC dump truck. It noted KAT could neither driver nor operate the truck, dictate its route, select the truck, select the driver or have the right to reject the truck or driver. It also found that CWC had control of what route to take, number of trips to be made, hours work; as well as agreeing with the district court’s finding that KAT hired CWC to perform a task, not hire the truck.
LOUTTIT’S LEGISLATIVE and REGULATORY ROUNDUP
Robert P. Louttit
[email protected]
12/22/23 New York Assembly Bill A1178
An Act to Amend the Insurance Law and the Vehicle and Traffic Law, in Relation to Supplemental Uninsured and Underinsured Motorist Coverage for Police Agencies
On January 13, 2023, the Assembly introduced legislation (A1178) aimed to amend the insurance law and the vehicle and traffic law with respect to supplemental uninsured and underinsured motorist coverage for police agencies in the state of New York. In this regard, the bill requires that bodily injury be covered under supplementary uninsured/underinsured motorist coverage for police vehicles. The legislation seeks to further define what is covered under supplementary uninsured/underinsured motorist SUM coverage. Pursuant to State Farm Mutual Automobile Insurance Company v. Fitzgerald, 25 NY34d 801 (2015), the New York State Court of Appeals determined that the statutory mandate that all motor vehicle insurance policies containing SUM coverage has no application to police vehicles. In that case, a police officer, was injured when the police vehicle was hit by a driver who only had $25,000 in liability coverage. The injured officer attempted to collect under his own underinsurance policy above the tortfeasor’s $25,000 policy. That case held that SUM coverage prescribed by Insurance Law 3420 exempts police vehicles from its definition of the term “motor vehicle” absent a specific provision to the contrary in a SUM endorsement. This bill could close that loophole.
The bill was delivered to the Governor on December 22, 2023, signed the same day, with a Senate approval memo sent the same day. We will keep a close watch on this and how it may affect insurers.
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
12/27/23 Angeles v. County of Suffolk, et al
Appellate Division, Second Department
Second Department Examines the Reasonableness of a Jury Verdict which Awarded Damages after Finding that Plaintiff Suffered a Serious Injury under the Permanent Consequential Limitation and Significant Limitation of Use Categories of Insurance Law § 5102(d)
Defendants appealed from (1) an Order of Supreme Court, Suffolk County, which denied Defendants’ motion pursuant to CPLR § 4404(a) to set aside a jury verdict and for judgment as a matter of law, to set aside the jury verdict as contrary to the weight of evidence and for a new trial, or set aside the jury verdict on the issue of damages as excessive and for a new trial on the issue of damages; and (2) a Judgment from the court for a verdict in favor of the Plaintiff against Defendants in the principal sum of $745,000.
By way of background, this matter stems from a motor vehicle accident, when Plaintiff Nicole Angeles was a passenger in a vehicle which was struck by a bus owned and operated by the Defendants. As a result, Plaintiff alleged injuries to her cervical spine.
At jury trial, Plaintiff presented evidence that she sustained a loss of range of motion in the cervical region of her spine and underwent various treatments, including injections in the neck. The evidence showed that these treatments alleviated, but did not eliminate, her pain. The plaintiff also did not fully restore her range of motion. Plaintiff’s physician testified at trial that her injuries were permanent and her prognosis for full recovery was poor.
Following proof, the jury found that Plaintiff sustained a serious injury under the permanent consequential limitation and significant limitation of use categories of Insurance Law § 5102(d). The jury awarded Plaintiff $634,000 for past pain and suffering and $111,000 for future pain and suffering over a period of 10 years.
As stated, following the verdict, Defendants made a motion pursuant to CPLR § 4404(a) to set aside the verdict and for judgment as a matter of law, or other alternative relief stated above. This motion was denied. A Judgment was subsequently entered memorializing the jury verdict. Defendants took appeal of both the Order’s denial and Judgment entered.
On appeal, the Second Department started its analysis by reiterating the established standard for setting aside verdicts – “A jury verdict should not be set aside as contrary to the weight of the evidence unless the jury could not have reached the verdict by any fair interpretation of the evidence.” Moving to the proof, the Second Department found that based on the evidence adduced by the Plaintiff at trial, there was a valid line of reasoning and permissible inferences from which the jury could have concluded that the plaintiff sustained a serious injury under the permanent consequential limitation and significant limitation of use categories of Insurance Law § 5102(d). Therefore, the Second Department found that the verdict was supported by a fair interpretation of the evidence.
However, when reviewing the actual amount of the verdict, the Second Department did exercise scrutiny. The Court wrote, “A jury’s determination with respect to awards for past and future pain and suffering will not be set aside unless the award deviates materially from what would be reasonable compensation”, and the “’reasonableness’ of compensation must be measured against relevant precedent of comparable cases.”
In evaluating the damages awarded, the Second Department found the $111,00 for future pain and suffering did not deviate materially from what would be reasonable compensation. However, the $634,000 for past pain and suffering did deviate materially from reasonable compensation when compared to numerous relevant prior cases which the Court cited.
Accordingly, the Second Department modified the Judgment, by deleting the award of damages for past pain and suffering, and remanded the issue matter back to Supreme Court, Suffolk County, to have a new trial on the issue of damages for past pain and suffering – unless the Plaintiff agrees and executes a written stipulation consenting to reduce the award for this category of damages to $300,000.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
Associate – Pending Admission
[email protected]
11/30/23 U.S. Specialty Ins. Co. v State Natl. Ins. Co., Inc.
Supreme Court of the State of New York, County of New York
The Subcontract Satisfied the Statute of Frauds and Conformed to the Policy Language Granting Additional Insured Status; Insurer was Entitled to Reimbursement for Past Defense Costs Incurred after Date of Tender
This action stems from injuries occurring at a construction site. The construction site was owned by NYU Hospitals Center (NYUHC). Turner Construction Company (Turner) was the general contractor. LJC Dismantling Corporation (LJC) subcontracted with Turner, and Skyline Scaffolding Corporation (Skyline) subcontracted with LJC. LJC is a named insured on a policy issued by U.S. Specialty Insurance Company (U.S. Specialty). Skyline is a named insured on a policy issued by State National Insurance Company Inc. (State National). NYUHC and Turner were additional insureds on LJC’s policy issued by U.S. Specialty.
Tornabene and Pacheco were injured in 2014 on scaffolding at the above-referenced construction project. Tornabene and Pacheco commenced two separate personal injury actions. U.S. Specialty provided a defense to NYUHC, Turner, and LJC. In the Tornabene action, U.S. Specialty tendered the defense of NYUHC, Turner, and LJC to State National, by letter dated February 24, 2017. In the Pacheco action, U.S. Specialty tendered the defense of NYUHC and Turner by commencing the current action against State National on October 3, 2018. U.S. Specialty contends that NYUHC, Turner, and LJC are additional insureds under Skyline’s policy issued by State National, and therefore State National owes the duty to defend.
In the instant matter, U.S. Specialty moved for partial summary judgment, alleging that State National has a duty to defend NYUH, Turner, and LJC in the underlying actions as additional insureds under the policy State National had issued to Skyline. The court agreed that State National has a duty to defend and to reimburse U.S. National’s defense costs, but only following the date of formal tender.
In making the determination, the court looked to the language of the State National policy, which stated that if the insured agrees in separate written contract to provide coverage, the State National policy will cover that person or organization with respect to operations performed by or on behalf of the insured, and only with respect to occurrences subsequent the making of the written contract. The court found that U.S. National had sufficiently authenticated the relevant subcontracts offered in support of its motion. Here, the subcontract in question was only signed by Skyline, and no date was attached to the signature page. However, the court agreed the subcontract was enforceable against Skyline because it sufficiently identified the parties, described the subject matter, stated all essential terms, and was signed by the party to be charged. The court looked to the date on the initial page of the agreement to determine that the contract was made on July 24, 2013, which was before Tornabene and Pacheco were injured at the site. Therefore, the court held that there was a valid, separate written contract and LJC, Turner and NYUHC were entitled to additional insured status under the State National policy.
Additionally, the court deciphered between how the defense costs should be allocated. The court discussed the language of the policy issued by Plaintiff, whereby it provides that the policy is excess over any available primary insurance on which parties are named as additional insureds. On the flip side, the policy issued by State National stated that the policy would be primary relative to other available primary-insurance policies. Therefore, the court reasoned that State National owed the duty to defend on a primary basis.
However, when grappling with the question of whether U.S. Specialty was entitled to reimbursement for past defense costs, with interest, the court reiterated that State National is required to provide reimbursement only for those defense costs incurred after the State National received U.S. Specialty’s tender. Therefore, holding that U.S. Specialty is only entitled to past defense costs following the February 24, 2017, tender in the Tornabene action; and costs incurred following the October 3, 2018, tender in the Pacheco action.
U.S. Specialty additionally sought a declaration that it may withdraw from the current defense offered to NYUHC, Turner, and LJC. However, the court declined to render a decision on this portion of the motion for summary judgment, because it was unclear whether coverage would be exhausted under State National’s policy before resolution of the Tornabene action. However, the court did reiterate that State National’s duty to defend is on a primary and non-contributory basis.
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law
Calgary, Alberta
[email protected]
07/31/23 Teal Assur. Co. Ltd. v. W.R. Berkley Ins. Ltd. et al.
In a Follow-Form Tower of Claims-Made and Reported Policies, Each Layer is Exhausted by the Chronological Presentation by the Insured of Ascertained Third-Party Liability and Expenses Arising from Covered Claims Duly Noticed to that Layer
While researching a point, I came upon this important decision from the United Kingdom Supreme Court rendered just over 10 years ago that remains good law. There is every reason to believe that it has application to policies issued in Canada. I thought I would share.
Black & Vetch (BV) is a global firm of architects and engineers incorporated in Delaware but with its head office in Kansas City, Missouri. For the policy year beginning November 1, 2007, Black & Vetch held practice error and omission insurance through a layered insurance tower. Above a self-insured retention of US$10 million per occurrence and US$20 million in the aggregate, as well as an each and every claim retention of US$100,000, was a primary policy issued by Lexington with a per claim and aggregate limit of US$5 million. The Lexington policy would exhaust when BV’s ascertained third party liability or expenses when a claim or claims notified in the 2007 year exceeded US $25.1 million.
Above the Lexington policy were three successive layers of excess cover issued by Teal Assurance Company Limited, which was a captive insurance company wholly owned by BV. These policies were each reinsured. Each of these layers had differently sized limits but together they totaled US$55 million of coverage. These policies and the Lexington primary policy were worldwide in scope.
Above those layers issued by Teal was a so-called ‘top and drop’ policy with limits of US$10 million that excluded US and Canadian claims. Teal also issued the top and drop policy.
In the 2007 policy year, BV notified 27 claims. Two of those claims were US and Canadian claims. There was a possibility that the underlying layers below the top and drop layer would exhaust before the US and Canadian claims were paid meaning that BV would be without coverage for those claims. To mitigate that possibility Teal argued that it could admit liability to pay the US and Canadian claims before the other claims – in other words give them priority - regardless of when the liability to pay occurred. This of course exposed the top and drop layer to pay the non-US and Canadian claims and therefore posed a risk of payment to the reinsurers of that layer.
Teal argued that a clause in the Lexington policy which applied to each following layer permitted them to re-order the payment of claims:
liability to pay under this Policy shall not attach unless and until the Underwriters of the Underlying Policy/ies shall have paid or have admitted liability or have been held liable to pay the full amount of their indemnity inclusive of costs and expenses.
Teal could simply choose not to admit liability to pay the non-US or Canadian indemnity or claims expense until the US and Canadian indemnity and claims expense was fully paid. The reinsurers applied to the court for an interpretation of this clause arguing that liability attached when the claim was ascertained, exhausting the policies pro tanto (in increments) or completely. The UK Supreme Court agreed with the reinsurers stating:
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Under the clause in issue the ascertainment by agreement, judgment or award of the insured’s liability to a third party or the incurring of expenses that are within the scope of the liability policy gives rise to a claim that either exhausts that cover completely or pro tanto (in increments).
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The insurer does not control the timing of payments.
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An insured can decide not to notify a claim to its insurer, or it can withdraw or abandon a claim which it has notified. The insurance will not then be exhausted by that claim, and the next claim will be recoverable in the ordinary course under the insurance. That does not mean that an insurer can determine which claim will be paid in priority to others.
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The requirement under the Lexington policy that BV have “paid” the amount of the deductible and the self-insured retention prior to Lexington “indemnifying the insured under the terms and conditions of the policy” does not literally require BV to have made monetary disbursements. Instead, the term “paid” is better understood as a measure of liability incurred. Otherwise, the present liability insurance would not provide the insured with indemnity to meet the threat of insolvency which might result from third party claims.
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Under the terms of the primary policy, and under the terms of each excess policy issued by, both Lexington and Teal are liable for claims in the order that BV incurred ascertained expenses or third-party liability up to the policy limit. Clause 1 does not alter this. It defines when liability arises, not the claims in respect of which liability arises. It provides that liability only attaches under each excess policy in turn as and when the underlying insurers pay, or admit, or are held liable in respect of BV’s ascertained expenses or third-party liability. As and when this occurs, each excess policy drops down to continue as if it were the primary policy.
If Teal was correct then, if Teal was not BV’s captive, but an arm’s length insurer, then an insurer in Teal’s position could pay the non-US and Canadian claims first regardless of when the liability was incurred, leaving BV exposed to the possibility that it would have to pay the US and Canadian claims from its own resources. That is not tenable, as the insurer would be minimizing its own liability at the expense of BV and BV would have redress for that insurer’s action. Accordingly, Teal’s interpretation of Clause 1 is not supportable in law or in practice.
There are several interesting points from this judgment. The captive insurer is bound by the same rules as arm’s length insurers. The top and drop policy (or the last policy in the tower) is not engaged or triggered until the underlying layers exhaust even though it is highly likely that the claims noticed to a given policy year will exhaust the underlying layers and potentially that policy. The apex policy is engaged by indemnity payments and claims expense for covered claims notified to that layer in the order in which the liabilities are incurred by the insured. It would take very strong and clear policy wording to disrupt this holding.
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