Volume XXV, No. 2 (No. 649)
Friday, July 7, 2023
A Biweekly Electronic Newsletter
As a public service, Hurwitz Fine P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York and Connecticut appellate courts and Canadian appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.
In some jurisdictions, newsletters such as this may be considered Attorney Advertising.
If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.
You will find back issues of Coverage Pointers on the firm website listed above.
Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations.
This is the fifth and final presentation of this risk transfer program scheduled. If you’re interested in additional insured coverage and contractual liability claims and otherwise tackling tenders, this is the program for you. There are only a few seats left, so book early. Send a note to [email protected] and we’ll get you registered. We’ve had over 500 participants in both public and private presentations of this training program.
Happy summer. We do love the hot weather here in Western New York. Expect 90 degrees today, and that only happens two or three times in a year. No complaints permitted.
We welcome our new subscribers. You’re reading our cover note, the special messages from our dozen or so editors. We recommend that you already read the attachment, which is the actual Coverage Pointers issue.
We thank one of our subscribers for gently advising that one the stories in last week’s issue contained a miscue, which we correct in this issue. We make an occasional error and always appreciate when someone reads our newsletter closely enough to recognize a stumble. We welcome corrections and debates over our case law analysis. Don’t hesitate to write or call.
The courts are in summer doldrums, with few appellate decisions between July Fourth and Labor Day. However, we will keep you entertained and educated on all that comes out of our courts.
The summer is a great time to mediate coverage disputes. We are here to help.
Hey coverage lawyers. Hey claims professionals. Have you and a friend, adversary, or lawyer for whom who have respect reached a stalemate on a coverage dispute? Look, we know each other. We know that. We don’t want to litigate every coverage disagreement. Why? Because the position we oppose today may be the one we advocate tomorrow. Face it. We all understand that.
Let me help mediate your disagreement to see if there is some mutual agreement, we can reach that will not box us into a corner. Reach 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 Chris Potenza at [email protected] to subscribe
Peiper on Property (and Potpourri):
Currently on vacation but headed to IADC’s Annual Meeting. Looking forward to a week of great programing and catching up with colleagues from around the Country.
In the meantime, CP doesn’t stop. In fact, it’s been accruing PTO since its inception. With that example, vacation does not stop this columnist either. Please take a moment to review our case reviews this week and, in particular, the Sakander matter involving attorney disqualification. And then, file it in your “careful what you wish for” file.
Cheers. See you in two weeks.
Steve
Steven E. Peiper
Editor’s Note: Mahalo.
Femme-Femme Fatalé – 100 Years Ago:
The Buffalo Commercial
Buffalo, New York
7 JUL 1923
Woman Carries Out Death Threat
Against Stealer of Her Husband
CHICAGO, July 7. (A. P.)—Nine months ago, Mrs. Minnie Bernatowicz, 38 years and the mother of four children, is alleged to have threatened to slay Mrs. Annie Andraski, 39 years old, whom she accused of stealing her husband.
Today Mrs. Bernatowicz at a street corner awaited Mrs. Andraski and shot and killed her.
In view of scores of persons, Mrs. Bernatowicz, revolver in hand, rushed upon her victim as Mrs. Andraski was about to board a streetcar to go to work, seized her by the hair and screamed her hatred, and as the woman writhed and sought to escape and several men appeared intent on preventing a tragedy, Mrs. Bernatowicz shot the woman twice.
John Bernatowicz, 19 years old, son of the slayer, was with his mother and according to the police, pleaded with her to give him the revolver that he might kill Mrs. Andraski, he was arrested with his mother.
"At the happiest moment of your life I will kill the woman who has made you happy, and brought this suffering onto me,” Mrs. Bernatowicz is alleged, to have told her husband, Joseph Bernatowicz, an organizer for the Brotherhood of Railway Carmen of America, from whom she was separated nine months ago.
Mrs. Adraski's son, Bruno, 16 years old, heard the shots and ran to the corner as his mother fell mortally wounded. Her husband is a laborer.
Mrs. Bernatowicz's mother charged that Bernatowicz threatened to kill his wife if she interfered with his friendship for Mrs. Andraski.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
We hope that everyone had a fun, eventful, and/or restful Fourth of July. In our house, we decided to celebrate north of the border, since we heard that even in Canada they recognize and celebrate it, in a way, so we were curious (plus we figured all the stores would be open there).
While we didn’t catch any fireworks, we did have an apropos and kind-of patriotic celebrity sighting. As we entered the elevator in our hotel after dinner, we ran into none other than the former White House Deputy Chief of Staff Josh Lyman – aka Bradley Witford. We had a pleasant exchange, talked about why so many of us Americans were in Canada for the Fourth, complimented each other, and we went on our separate ways. It was only after the doors closed that I remembered that he was/is also Commander Lawrence. So, that was cool.
In other news, this week in the Wide World of Coverage, we have a bunch of good stuff for you. Check out the attached edition for a COVID coverage case from the Ninth Circuit (i.e., there is no coverage), a case about moral obligation payments from the Sixth Circuit, and a missive about Florida’s anti-technical statute from the Eleventh Circuit Court of Appeals.
Until next time!
Agnes
Agnes A. Wilewicz
Psychic Crazes Buffalo – 100 Years Ago:
The Buffalo Times
Buffalo, New York
7 JUL 1923
Eva Fay Astounds Women at Loew’s
Seldom do so many women gather together in one place as they did yesterday afternoon at Loew's theater for the afternoon matinee when Eva Fay? the greatest exponent of mental telepathy the world has ever known, talked to "women only."
The theater was crowded, and not a man in sight, or out of sight, so far as being close enough to hear what was going on was concerned. Not even the male employes of the theater, nor the manager himself, were allowed within hearing distance by Mme. Fay, who used her mysterious powers to locate one poor man sitting in a dark recess of the theater on the chance of being overlooked before she commenced her performance.
When they left the theater, the women were enthusiastic ln their praise of the woman who has startled even blasé old Buffalo in the few days that she has been here.
Although no stranger to this city, Eva Fay has caused even greater excitement than on her previous visits.
According to Mme. Fay herself, no feature of her present engagement has been more pleasing to her than the receipt of several letters from Buffalonians thanking her for the help and advice given on her last visit.
"It is Just wonderful," she "to feel that you have done some good as you go along, and I would rather have one letter like the several I have received this week than all the money in the world."
This, from Eva Fay, is characteristic of the woman who has spent her lifetime in the interests of humanity, who has accomplished miracles ln the science of the mind. and who has endeared to herself thousands of people in all parts of the world through the help she has given them.
When Eva Fay leaves Buffalo after the last performance at Loew's -on Sunday night. Buffalo will be sorry to say good-bye.
Barnas on Bad Faith:
Hello again:
I hope everyone enjoyed the Fourth of July. America’s birthday has me thinking about America’s pastime, and specifically how we are seeing something in baseball right now that nobody has ever seen before. Shohei Ohtani may have just completed the greatest month in the history of baseball. Over 126 plate appearances, he hit .394 and led the league with a .492 on-base percentage, .952 slugging percentage, 15 home runs, 29 RBIs, 25 extra-base hits, and 99 total bases. That is incredibly impressive by itself. Then throw in that he also pitched 30 1/3 innings with a 3.26 ERA and 37 strikeouts while holding opposing hitters to a .228 average and .368 OPS. Babe Ruth is thought of as the greatest pitcher and hitter combination in baseball history, but he was only a full-time pitcher and hitter like Ohtani is now for one season.
What Ohtani is doing is unprecedented, but the Angels still find themselves outside of the playoff picture, and they just lost Mike Trout to a serious injury. It will be fascinating to see if Ohtani gets traded before the August 1st trade deadline. Baseball fans deserve to see what he can do in the postseason. Whether he is traded or not, his free agency will be one to watch in the offseason. He seems destined for the largest contract in baseball history.
I have a first-party good faith and fair dealing decision from the Southern District of New York in my column today. The court denied the motion to dismiss the good faith and fair dealing claim, finding that it was part of a breach of contract claim and not a separate cause of action. The court did, however, dismiss Plaintiffs’ claim seeking consequential damages as lacking sufficient factual allegations to support a claim for consequential damages. Merely stating in the complaint that consequential damages are potentially available for such a claim is not sufficient to satisfy the requisite pleading requirement.
Brian
Brian D. Barnas
“Anomaly” Frees Wife of Deserting Husband – 100 Years Ago:
Buffalo Courier
Buffalo, New York
7 JUL 1923
ABANDONED HERE 15 YEARS AGO;
IS GRANTED DIVORCE
Court of Appeals Reverses
Ruling Calling Arden Law “Anomaly."
New York, July 6.—The new "Enoch Arden” law, providing that couples in this state may have their marriage bonds dissolved if husband of wife disappears, for five years, or more, today was unanimously upheld by appellate division of the supreme court.
The decision was on an appeal by Mrs. Florence Jane Frankish from a decision of Supreme Court Justice McGoldrick, refusing dissolution, of her marriage to Charles Harold Kranklin. who, she said, disappeared fifteen years ago.
Call It Anomaly.
Justice in announcing his verdict had declared the Enoch Arden law "an anomaly in the legislative history of the state," despite the fact that a number of affirmative verdicts have been made under the law.
In appealing Mrs. Prankish said she was married in Toronto and went to live with her husband and two sons in Buffalo. There was a daughter born; and soon afterward her husband left, he returned, she said, to take the three children with him. For fifteen years she asserted she has not heard from him or the three children.
The appellate division reversing the previous verdict, declared that the legislature had been within its power in passing the law and asserted that the presumption of death after five years absence long had been recognized by the legislature and courts of this and other states.
Lee’s Connecticut Chronicles:
Dear Nutmeg Newsies:
I’m just back from two weeks in Europe (London, Milan, and Venice). Two weeks away from the office, even with all our modern technologies, is an awful lot. I know, your heart breaks for me. Still, what a fantastic trip—great sights and better food (even in London!). One of the more interesting places we visited was the Rialto Market in Venice, commonly believed to be the best food market in the world.
It didn’t disappoint. Endless rows of amazing vegetables, fresh fruit, and fish being offloaded from barges and gondolas from the canal. Oh, and cheese shoppes and butchers, too. It made me disappointed not to have a kitchen to cook some of these amazing ingredients. But it seems the local chefs had no problem putting this bounty to good use. Oh, and did I mention the gelato? And churches. I’m pretty sure that there are more churches in Italy than Italians. They are almost as plentiful as Ray’s Pizzas in New York City, but that’s another story for another day.
Glad to be back and getting into the groove of things.
Keep keeping safe.
Lee
Lee S. Siegel
Insanity Defense is Insane Says Judge – 100 Years Ago:
Cheltenham Chronicle and Gloucestershire Graphic
Cheltenham, Gloucestershire, England
7 JUL 1923
JUDGE REBUKES A MURDER JURY.
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FOOLISH VERDICT OF INSANITY
Thomas McCarthy, who was accused of the murder of his four-years-old daughter by drowning her, was found guilty but insane at assizes at Durham on Thursday and was ordered to be detained during the King's pleasure.
“I have accepted your verdict, and acted on it," said the Lord Chief Justice before dismissing the jury. "In the public interest, however, desire to that there was no evidence on which that verdict could be found.
“The result of this case, which has the effect of detaining McCarthy in a criminal lunatic asylum, illustrates what has happened, in my experience, more than once, and it is that the defense, on no evidence, makes a tentative and vague suggestion of insanity, and the jury, without being asked to do so, returns a verdict of guilty, but insane.”
Kyle's Noteworthy No-Fault:
Dear Readers,
I hope everyone had a great Fourth of July weekend. My fiancé and I kept up our tradition of running the 10k race in Lancaster (I believe it was our tenth year now, maybe minus one or two during the COVID years) although this one was quite a challenge since I hadn’t gone on a run in at least a few months. We spent the rest of the day with friends and family, watching the parade, having a cookout, and watching plenty of fireworks.
This week I have two No-Fault cases to report. The first involves a declaratory judgment action in the First Department brought by an insurer for a determination that it did not owe No-Fault benefits for injuries arising from an automobile accident. In the second case, the court considered whether a health service provider seeking No-Fault insurance compensation for providing post-surgery services must establish that a prior arbitration award was affirmed by a master arbitrator, confirmed by a court, and not subject to de novo review as a prerequisite to arguing that the award constituted collateral estoppel on the issue of medical necessity for the surgery.
Kyle
Kyle A. Ruffner
[email protected]
Fate’s Thread Cut for Uniform Tailor at 86 – 100 Years Ago:
St. Louis Post-Dispatch
St. Louis, Missouri
6 JUL 1986
Oscar Roettger, Tailor To Baseball Stars, Dies
Roettger, briefly a three-position big leaguer best known for years as No. 1 "tailor" for baseball uniforms, died late Friday of a heart attack at age 86.
Funeral services for Mr. Roettger will be at 2 p.m. Monday at Buchholz Mortuaries, 1645 Redman Road, in Spanish Lake. Visitation will be after 1:30 p.m. Sunday. Burial will be in Bethlehem Cemetery.
Retired 12 years ago by Rawlings Sporting Goods for which he began working in 1941, Mr. Roettger was urged shortly to return and retain his close connection with big-league clubs and players. He measured players for uniform size and style for most major-league teams until his death. His official title was manager of Rawlings' professional division.
Mr. Roettger suffered an aneurysm 10 days ago and appeared to be recovering when he suffered a heart attack while walking at St. John's Mercy Hospital.
A husky St. Louisan, Mr. Roettger played professional baseball for nearly 20 years, starting in 1921. He hit better than .300 in 10 of those seasons.
He pitched briefly with the New York Yankees in 1923-24. played the outfield for a few games with the Brooklyn Dodgers in '27 and first base for the Philadelphia A's in 1932.
The bulk of his playing years were with St. Paul in the American Association and with Montreal, then in the International League. He managed Montreal in 1934 and was finished playing as manager at Durham, N.C., in 1939. Two years later, he resigned as manager at Birmingham in the Southern League to join Rawlings.
Mr. Roettger is survived by his wife of 40 years, the former Dorothy Miller.
Editor’s Note: Roetteger played in 26 games his major league career (that’s 26 more than I’ve played, by the way). His first at bat was 100 years ago today, on July 7, 1923. That first year in the major’s, he played for the Yankees, along with Babe Ruth, a young Lou Gehrig, and other stars of the day.
Ryan’s Federal Reporter:
Hello Loyal Coverage Pointers Subscribers:
Now post-little league season and summer camp is upon us. My son was the camper of the week last week, which they don’t just give out to anyone (although it certainly helps that his counselors remember him from last year). Too young for camp, my youngest met face to face with his favorite folk artist at the Silver Creek Library, last week, at a kids concert of the ages. From what I hear, his mom was asked to lead a whole half of the room in the chorus, as the only other adult in the room who knew the words to the songs. We now find ourselves headstrong into a truncated week two of camp, with the Fourth of July now behind us and a look ahead to a summer swiftly shrinking before us. Shrinking or not, it would not be a modern summer without some record heat and, by George, is it hot out there. Enjoy the sun while it lasts.
This week, my column shares some insights into the interplay between Bankruptcy proceedings and declaratory judgment actions, summarizing a recent Eastern District of New York decision tackling that issue head on.
Until next time…
Ryan
Ryan P. Maxwell
Scotch Brew “Drink Deep” – 100 Years Ago:
The Brattleboro Reformer
Brattleboro, Vermont
7 JUL 1923
Scotch Brew
We have just unloaded our fifth car of the good old Scotch Brew. Are you getting your share of the business on this celebrated beverage.
The suggested retail price of Scotch Brew is twenty cents a bottle.
Order a case sent to your home from your dealer.
Rauh’s Ramblings:
On parental leave.
Patty
Patricia A. Rauh
Casting for Cash – 100 Years Ago:
The Buffalo Enquirer
Buffalo, New York
7 JUL 1923
Help! Help! Here’s
Fishpole Burglar, Back, Too
The fishpole burglar, which caused such a furor in Buffalo last summer returned to the job last night, reached into the bedroom of Richard Moeschke No. 403 Monroe Street, hooked Mr. Moeschke's trousers and looted them of $7, carefully placed them back in their proper place again.
Storm’s SIU:
Off this week. See you in two.
Scott
Scott D. Storm
Henry Ford Assembles A Lead Over Harding – 100 Years Ago:
The Buffalo Enquirer
Buffalo, New York
7 JUL 1923
ANOTHER WEEK OF THE POLL
COLLIER'S presidential poll this week is up to 225,298.
To most minds the big feature is that Henry Ford has 73,724 votes to President Harding's 45,596.
To some minds, the big feature is that while President Harding has 45,596 votes, the Republican field has nearly 60,000 votes; indicating that President Harding is the first choice of only a minority of his party.
Editor’s Note: Early polls can be deceiving. Henry Ford ran out of gas before the election.
Fleming’s Finest:
Hi Coverage Pointers Subscribers:
If one is in an accident while towing one’s personal vehicle—bolted to a fork on one’s employer’s forklift—backwards down the highway at night after work, is it related to or arising out of the employer’s business operations? What if the employer allegedly consented to the use of the forklift? Perhaps a fringe benefit of employment? The issue before the Mississippi Supreme Court in this week’s case was whether the losses sustained in such a situation related to or arose out of the employer’s business operations. Some (the trial court) might say yes. The Mississippi Supreme Court says no.
Catch you later,
Kate
Katherine A. Fleming
Lock Em’ Up – 100 Years Ago:
Daily Drovers Journal-Stockman
South Omaha, Nebraska
7 JUL 1923
Seventy-five Klansmen
Face Trial at Springfield
Springfield, O., July 7.--Seventy-five Ku Klux Klansmen faced trial here today charged with disorderly conduct.
The arrests were made under the recent ruling of Police Judge Golden C. Davis, that three or more persons appearing on the streets masked would constitute disorderly conduct.
The Klansmen were thrown in jail as they were returning from the funeral of a fellow member of the "invisible empire."
Hundreds of citizens cheered the prisoners as they were marched into jail.
Gestwick’s Greatest:
Dear Readers:
After a beautiful week’s vacation in Glen Lake (about 10 minutes south of Lake George in New York’s Adirondack Mountains), I am recharged and ready to go. While there, I did a little fishing, catching a decent-sized catfish and plenty of others that would’ve been better off in some kid’s fish tank. I also went axe-throwing and did decently-well. If this lawyering thing doesn’t work out, maybe I’ll move to the wilderness and hunt my dinner every night. I also kayaked with my girlfriend, and we saw some interesting island homes.
Last edition, I made a mistake (shocking, right?) Don’t answer that. I incorrectly reported that New York’s Supplemental Spousal Liability regime has shifted from opt-out to opt-in. Indeed, it is just the opposite. Effective August 1, 2023, every policy of automobile insurance issued within the State of New York will be deemed to include supplemental spousal liability insurance, unless the insured specifically declines the same. As of the time of this writing, and for the rest of this month, however, New York is still under the opt-in regime, such that insureds must specifically request supplemental spousal liability coverage to receive such coverage. Special thanks to our friend, Paul Koumourdas, for the catch. His prize? A lifetime supply of free coverage pointers.
Aside from that, not too much happening at the trial level of the State Courts of New York this week. See you in two weeks!
Evan
Evan D. Gestwick
Tailor No Longer Able to Play Dress-up – 100 Years Ago:
The Fresno Bee
Fresno, California
7 JUL 1923
HUSBANDS’ TASTE
WINS WIFE DECREE
Woman Complains Mate Demands
She Wear Too Classy Clothes
SACRAMENTO, July 7—Because her husband wanted her to wear "too classy" clothes Mrs. Adeline Pumerantz is the holder of a divorce decree on file to-day.
Pumerantz is a tailor. The wife who divorced him is a milliner.
“He told me I had a fine figure and should dress to show it,” Mrs. Pumerantz complained. “He wanted me to be a regular mannequin. I was satisfied with plain and simple frocks.”
On the Road with O’Shea:
On vacation this week, see you in two weeks!
Ryan
Ryan P. O’Shea
[email protected]
Spiders and Licenses – 100 Years Ago:
The Evening Tribune
Hornell, New York
7 JUL 1923
Southern Tier Happenings
Employees of the Empire Produce Company at Corning captured a four-inch tarantula discovered in a bunch of bananas, the second to be taken one week.
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Steuben County has exhausted its stock of automobile license plates although it had 2,000 more than last year. The county clerk has a list of applicants waiting.
Louttit’s Legislative and Regulatory Roundup:
Hello All,
I hope everyone is enjoying their summer. Today’s column notes a bill that was recently introduced into New York’s State Senate that will preclude insurers from discriminating in any way when determining premium costs. The bill prohibits property/casualty insurers from discriminating based on race, color, creed, national origin, disability, age, marital status, sex, sexual orientation, education background or educational level attained, employment status or occupation, income level, consumer credit information or score, ownership or interest in real property, location, type of residence, including but not limited to single-family home, multi-family home, apartment, housing subsidized by state and/or federal programs, or any other residence type, or any indication of a consumer's price elasticity of demand.
We will keep an eye on this piece of legislation as it makes its way through the Senate.
Rob
Robert P. Louttit
Over The Legal Limit – 100 Years Ago:
Press and Sun-Bulletin
Binghamton, New York
7 JUL 1923
Raid Against Liquors
Hits Pittsburgh Police
Pittsburgh, Pa., July 7—The city drive against liquor, heavy wines beer, launched recently, has hit the police department with greater force than it has the bootleggers, it was revealed last night when Police Superintendent Edward N. Jones announced the suspension of 11 patrolmen.
The suspension followed revelations made at a police board trial by 13 other officers, including one lieutenant and plain-clothesmen, who were suspended last week after the most sensational raid on alleged "speak easies" and beer and wine resorts in the history of the city.
Superintendent Jones declared that the 13 officers gave testimony which implicated those suspended by his order last night of giving protection to bootleggers.
Rob Reaches the Threshold:
Dear CP Readers:
I hope you all enjoyed your July 4th Holiday! I am sure that, like me, many of you were projecting fierce American Spirit to protect one of this country’s most storied institutions – Nathan’s Hot Dog Eating Contest. For a brief amount of time on our nation’s Independence Day, tyrannical powers tried to deprive the people of their right to watch humans eat an inconceivable number of hotdogs. We would not let this stand. In a mere matter of 1,776 seconds (probably), America’s collective voices were heard, and the contest was back on. Let Freedom Ring.
Since I last wrote, the few decisions on serious injury threshold from the Appellate Division have failed to tread any new or exciting ground. Instead, I chose to examine a decision of first impression from the Second Department – wherein the court dealt with the question of whether a plaintiff’s decision to undergo surgery related to alleged serious bodily injury in an active lawsuit, without allowing defendants to obtain a presurgical medical examination, warrants sanctions for spoilation of evidence.
I could comment further, but I don’t want to spoil the fun read.
Hope you all enjoy.
Rob
Robert J. Caggiano
Cleaning House To Play House – 100 Years Ago:
PERSONALS
The Spokesman-Review
Spokane, Washington
7 JUL 1923
MIDDLE-AGED CRISTIAN LADY would like housekeeping for gentleman owning own home; object matrimony if suited. Write P 13, Spokesman-Review.
North of the Border:
How is it possible that it is the first week of July? Time is roaring by. Stampede is three days away and, with it, summer will be here in earnest. This is the best time of year. Hopefully, you will get an opportunity to get outside and enjoy it.
My column this week discusses whether the requirement to notify a claims made insurer of claims made during the policy period is a condition precedent to coverage.
Heather
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
Headlines from this week’s issue, attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
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Assault and Battery Exclusion Means What it Says and Says What it Means
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
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Failure to Include Discovery Demands Fatal to Motion to Compel
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Previous Representation of Insurer, Results in Disqualification of Plaintiff’s Counsel
WILEWICZ’S WIDE WORLD of COVERAGE:
Agnes A. Wilewicz
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Ninth Circuit Holds that Temporary Closure of Restaurants Does Not Constitute Direct Physical Loss of or Damage to Covered Property; Thus, Closures Imposed by COVID-19 Do Not Trigger Coverage Under Business Insurance Policies
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In the Sixth Circuit, Payments Made Out of Moral Obligation or Otherwise Not as Part of Exchange, Do Not Constitute Payments for Value, Thus Allowing Banks Making Such Payments in Error to Recover Restitution from Recipients
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Eleventh Circuit Holds that Florida Anti-Technical Statute Allows an Insured to Recover on a Policy, Even When the Insured is in Violation of the Policy’s Warranties, if those Violations do not Materially Affect the Subsequent Property Damage
BARNAS on BAD FAITH
Brian D. Barnas
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Implied Covenant of Good Faith and Fair Dealing Claim Survives Motion to Dismiss where Plead as Part of Breach of Contract Cause of Action and not Independent Claim
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
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Failure to Disclose Dog Voids Homeowners Policy
KYLE'S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
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Court Holds Insurer is Entitled to Declaratory Judgment that it was not Obligated to Cover No-Fault Claims Arising from Auto Accident
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Court Reject’s Insurer’s Motion to Vacate Arbitration Award on the Grounds that the Claims at Issue were Properly and Timely Denied for Lack of Medical Necessity
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
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Court Finds Cause to Withdraw Bankruptcy Reference for Declaratory Judgment Action Concerning State Common Law Claims
RAUH’S RAMBLINGS
Patricia A. Rauh
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On Parental Leave
STORM’S SIU
Scott D. Storm
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Off this Week. See You in Two
FLEMING’S FINEST
Katherine A. Fleming
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Employee Towing Personal Vehicle Backwards Down Highway on Employer’s Forklift at Night not Engaged in Business Operations
GESTWICK’S GREATEST
Evan D. Gestwick
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Corrected from Last Edition: Effective August 1, 2023, Insureds Must “Opt-OUT” of Supplemental Spousal Liability Coverage; No Longer Opt-IN
ON the ROAD with O’SHEA
Ryan P. O’Shea
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On vacation – see you in two weeks.
LOUTTIT’S LEGISLATIVE and REGULATORY ROUNDUP
Robert P. Louttit
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Prohibits Property/Casualty Insurers from Discriminating
ROB REACHES the THRESHOLD
Robert J. Caggiano
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In a Ruling of First Impression for the Second Department, Court Holds that a Plaintiff’s Action in Undergoing Surgery Without Giving Defendants an Opportunity to Conduct a Presurgical Medical Examination Cannot be a Basis for Sanctions for Spoilation of Evidence
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
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The Requirement of a Claims Made Policy that States that the Policy Only Responds to Claims Made and Reported During the Policy Period is a Condition Precedent to Coverage Even Where that Requirement is Not Labelled as a Condition Precedent
All the best. See you in a fortnight.
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
ASSOCIATE EDITOR
Agnes A. Wilewicz
COPY EDITOR
Evan D. Gestwick
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
[email protected]
Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Scott D. Storm
Brian D. Barnas
Eric T. Boron
Robert P. Louttit
Ryan P. Maxwell
Patricia A. Rauh
Diane F. Bosse
Kyle A. Ruffner
Katherine A. Fleming
Evan D. Gestwick
Ryan P. O’Shea
FIRE, FIRST PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Michael F. Perley
Scott D. Storm
Brian D. Barnas
NO-FAULT/UM/SUM TEAM
Dan D. Kohane
Alice A. Trueman
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Diane F. Bosse
Topical Index
Kohane’s Coverage Corner
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Ryan’s Federal Reporter
Gestwick’s Greatest
Loutit’s Legislative and Regulatory Roundup
Rob Reaches the Threshold
KOHANE’S COVERAGE CORNER
Dan D. Kohane
06/28/23 Swan USA, Inc., v. Wesco Insurance Company
Appellate Division, Second Department
Assault and Battery Exclusion Means What it Says and Says What it Means
Swan USA, Inc, doing business as Sik Gaek II, Sik Gaek II, Chul Ho Park, and Jin Young Chung (“plaintiffs”) operate or are employed by a restaurant known as Sik Gaek. A patron of the restaurant, Lee, commenced an underlying action, related to an assault committed on her by another patron of the restaurant, Liang. Lee alleged that the plaintiffs negligently served Liang with alcohol when Liang was visibly intoxicated and failed to prevent the assault.
The plaintiffs sought defense and indemnification from their insurer, the defendant, Wesco Insurance Company (“Wesco”). Wesco disclaimed coverage based upon, among other provisions, an assault and battery exclusion in the subject insurance policy.
The plaintiffs thereafter commenced this action to recover damages for breach of contract and bad-faith denial of coverage, and, in effect, for a judgment declaring that Wesco is obligated to defend and indemnify them in the underlying action. Wesco moved for summary judgment dismissing the complaint insofar as asserted by the plaintiffs and declaring that it has no duty to defend or indemnify them in the underlying action.
An exclusion for assault and/or battery applies if no cause of action would exist 'but for' the assault and/or battery", quoting Mount Vernon Fire Ins. Co. v Creative Hous., 88 N.Y.2d 347.
The claims asserted by Lee in the underlying action arise out of the assault and, thus, fall within the exclusion under the subject policy and Wesco is not obligated to defend or indemnify the plaintiffs in the underlying action.
Editor’s Note: Atta-lawyer to Max Gershweir.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
06/28/23 Sakandar v. American Transit Ins. Co.
Appellate Division, Second Department
Failure to Include Discovery Demands Fatal to Motion to Compel
Plaintiff moved to compel further production upon receipt and initial review of American Transit’s initial responses. In making that motion, however, plaintiff failed to include copies of the demands upon which the motion to compel was premised. The trial court denied the motion.
On appeal, the Second Department affirmed. In reaching its decision, the Court reiterated that disclosure of any documentation “material and necessary” is appropriate for discovery exchange. “Material and necessary” is broadly interpreted to mean whether the material can be considered useful and supported by reason. Nevertheless, the trial court is vested with considerable discretion over discovery disputes. Here, where the trial court rejected the motion to compel based upon the aforementioned deficiency, the Second Department elected not to disturb the sound decision of the lower court.
06/28/23 Sakandar v. American Transit Ins. Co.
Appellate Division, Second Department
Previous Representation of Insurer, Results in Disqualification of Plaintiff’s Counsel
In a related appeal, American Transit sought to disqualify plaintiff’s choice of counsel because he had previously represented American Transit in “100s” of matters. The trial court granted that portion of the application, and plaintiff appealed therefrom.
In affirming, the Appellate Division first noted its inclination to defer to the “sound discretion of the trial court” on matters of conflicts. The Court noted that although a party’s choice of counsel is important, it will not supersede a possible conflict. To support a disqualification application, the movant must demonstrate that a prior relationship existed, the matters are “substantially related” and that interests between the two clients are “materially adverse.”
Because there was no dispute that counsel had a prior relationship with American Transit involving matters that are substantially related, and counsel is now on the other side, a conflict existed. On that Record, the motion was properly granted.
Peiper’s Point – We are somewhat troubled by this decision, but caution that we do not have all the facts presented on the Record.
If counsel previously represented the carrier, but now is adverse to them in a different claim entirely, we fail to see how the matters are substantially related. Indeed, insurance companies, in good faith, handle each matter independently. Thus, if the dispute was merely about claims handling, for that claim involving plaintiff, we do not see the issue. If, however, the dispute was about information which counsel would have only had because of his prior handling of a substantially similar/related matter, a dispute could have (and would have) surely arisen.
WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz
06/22/23 Team 44 Restaurants, LLC v. American Insurance Co.
United States Court of Appeals, Ninth Circuit
Ninth Circuit Holds that Temporary Closure of Restaurants Does Not Constitute Direct Physical Loss of or Damage to Covered Property; Thus Closures Imposed by COVID-19 Do Not Trigger Coverage Under Business Insurance Policies
Plaintiff Team 4 Restaurants, LLC, is an Arizona company that owns and operates a few restaurants. During the course of the COVID-19 pandemic, unsafe conditions and government regulations forced Team 4 to temporarily close their locations to customers.
Team 4 subsequently made a claim to defendants American Insurance Company and Greenwich Insurance company, which covered Team 4’s commercial properties under business insurance policies. The carriers denied coverage on the grounds that the COVID-19 related temporary closures did not constitute “direct physical loss of or damage to Covered Property”, to which Team 4’s policies applied. Team 4 brought suit in the United States District Court for the District of Arizona, where the action was dismissed with leave to amend denied. This appeal followed.
Team 4 argued that the right to operate as a dine-in facility was a tangible property right and that the forced closures diminished that right, thereby triggering the policies with defendants. Applying Arizona law, the Ninth Circuit cited a wealth of opinions in which other courts overwhelmingly denied arguments like Team 4’s. In the Ninth Circuit’s view, “direct physical loss of or damage to” requires some form of “physical alteration to property;” loss of use is not sufficient to fall under the policies. The dismissal of Team 4’s complaint was thereby affirmed.
06/26/23 Goodman v. Commercial Bank and Trust Co.
United States Court of Appeals, Sixth Circuit
In the Sixth Circuit, Payments Made Out of Moral Obligation or Otherwise Not as Part of Exchange, Do Not Constitute Payments for Value, Thus Allowing Banks Making Such Payments in Error to Recover Restitution from Recipients
Plaintiff Doug Goodman, a Missourian farmer, reached out to Doug Martinek of Southern Risk Insurance Groups, Inc., for help in procuring crop insurance. With Martinek’s help, Goodman obtained a policy. When portions of Goodman’s land became unfarmable due to excess moisture, Goodman made a claim to his insurer, but the insurer denied the claim as beyond the scope of the policy terms. Frustrated, Goodman sought relief from Martinek, who eventually gave Goodman two checks, one for $100,000 and one for $200,000, out of “moral obligation.” After several unsuccessful attempts to cash the checks (as Southern Risk’s accounts with defendant Commercial Bank and Trust Co. lacked funds), Goodman asked a teller who worked for Commercial Bank for teller’s checks in the corresponding amounts. The teller complied without checking Southern Risk’s accounts, assuming sufficient funds were present. Goodman sued Commercial Bank for enforcement of the teller’s checks, while Commercial Bank made a claim for restitution. The lower court granted summary judgment to Commercial Bank.
The Sixth Circuit affirmed the grant of summary judgment in favor of Commercial Bank. In so doing, it interpreted provisions of the Tennessee Commercial Code governing mistaken payments through payable instruments. The statute authorized restitution when a payor made a mistaken payment, unless the payee accepted said payment in good faith and for value. In the Court’s view, making a payment on the incorrect assumption that an account contains sufficient funds constitutes such a mistake. Further, the Court held that Martinek’s payment to Goodman, prompted by “moral obligation,” was not for value, and thus Goodman is not spared the duty to provide restitution to Commercial Bank.
Ultimately, the Court found that payments made by an agent to an insured, when made solely out of “moral obligation” and not in connection with a release of claims or other exchange, are not considered payments for value within the meaning of the Tennessee Commercial Code, and potentially for mirroring provisions in other states’ commercial codes based on the UCC.
06/23/23 Traveler’s Prop. Cas Co. of Am. v. Ocean Reef Charters LLC
United States Court of Appeals, Eleventh Circuit
Eleventh Circuit Holds that Florida Anti-Technical Statute Allows an Insured to Recover on a Policy, Even When the Insured is in Violation of the Policy’s Warranties, if those Violations do not Materially Affect the Subsequent Property Damage
Traveler’s Insurance Casualty Co. insured a yacht, the My Lady, owned by defendant Ocean Reef Charters LLC. A representative of Ocean Reef, Richard Gollel, was in possession of the My Lady at his Florida residence just prior to Hurricane Irma’s arrival in Florida in September 2017. Since the My Lady did not have a captain or a crew at the time (in violation of warranties requiring them embedded in Ocean Reef’s policy with Traveler’s), Gollel attempted to secure the boat himself. The My Lady was then completely destroyed by Hurricane Irma. Travelers instituted this suit, initially in the Western District of New York, for a declaratory judgment that it was not obligated to cover Ocean Reef’s loss because of Ocean Reef’s violation of the captain and crew warranties. On Ocean Reef’s motion, the matter was transferred to the Southern District of Florida. The District Court subsequently awarded summary judgment to Ocean Reef, because under Florida law, violation of warranties only bars recovery under an insurance policy when the insurer can prove that the violating conduct played a role in the destruction of property.
The Eleventh Circuit affirmed, finding that summary judgment for Ocean Reef was warranted. The Court noted first that the relevant Florida statute, called an anti-technical statute, required the insurer to show that the insured’s violation of a warranty had some material effect on the loss, otherwise the insured’s violation of the warranty would be no bar to recovery under the policy. Further, since Traveler’s did not produce admissible evidence raising a genuine issue of material fact over whether the lack of a captain or crew played a material role in the sinking of the My Lady, a jury could not find in its favor and Ocean Reef was entitled to summary judgment.
In the end, this case may be a warning to insurers operating in jurisdictions with anti-technical statutes such as Florida where, in the event an insured violated a warranty under their policy, they will nevertheless still be able to succeed on a claim unless the warranty violation had a material effect on the property damage at issue.
BARNAS on BAD FAITH
Brian D. Barnas
06/27/23 Scheuer v. United States Liability Insurance Company
United States District Court, Southern District of New York
Implied Covenant of Good Faith and Fair Dealing Claim Survives Motion to Dismiss where Plead as Part of Breach of Contract Cause of Action and not Independent Claim
Plaintiffs, Robin Scheuer and John Scheuer, are husband and wife who own the real property at 90 N Broadway, Nyack, New York 10960. On or about February 4, 2022, water escaped and was discharged from a pipe/plumping system at the Property which resulted in damage. At the time of this loss, the property was insured under a policy issued by USLI.
Plaintiffs submitted a claim for the loss to USLI. USLI denied coverage based upon the insured’s failure to maintain heat at the Property. Plaintiffs filed a lawsuit against USLI which included claims for breach of the implied covenant of good faith and fair dealing and consequential damages. USLI moved to dismiss and to strike.
The court denied the motion to dismiss the claim for breach of the implied covenant of good faith and fair dealing. USLI moved to dismiss arguing that New York law does not recognize a separate cause of action for breach of the implied covenant of good faith and fair dealing when a breach of contract claim, based upon the same facts, is also pled. Plaintiffs asserted that they did not allege a separate cause of action for breach of the implied covenant of good faith and fair dealing, and rather, they raised allegations for breach of the implied covenant in order to support their cause of action for breach of contract.
The court found that Plaintiffs plead only one claim for breach of contract wherein they alleged that USLI breached its implied duty of good faith and fair dealing to support their claim. Plaintiffs did not assert a second and separate cause of action for breach of the implied duty of good faith and fair dealing.
The court did grant USLI’s motion to dismiss the demand for consequential damages. In Bi-Economy, the Court of Appeals set forth three necessary elements to establish a claim for consequential damages arising out of a breach of contract claim: “that (1) such consequential damages were a natural and probable consequence of the breach of contract, (2) were or should have been foreseeable, and (3) were reasonably contemplated by the contracting parties at the time the policy was issued. USLI argued that Plaintiffs failed to allege sufficient facts in support of the third element necessary, asserting that Plaintiffs merely alleged they suffered additional consequential damages in an amount to be determined at the time of trial.
The Court held that Plaintiffs fail to adequately plead sufficient facts to support a claim for consequential damages. Simply citing to the line of Bi-Economy cases in the Verified Complaint to support their claim for consequential damages did not satisfy the requisite pleading requirements. Mere recitation of legal conclusions, arguments or caselaw, without more, are not the equivalent of factual allegations. However, the dismissal of the consequential damages claim was without prejudice.
USLI’s motion to strike allegations from the Complaint was granted in part. The court struck the allegation that USLI treats its insureds like fiscal enemies as inflammatory and irrelevant. However, the court declined to strike Plaintiffs’ allegations relevant to the claim that USLI violated the implied duty of good faith and fair dealing.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
07/05/23 Providence Mut. Fire Ins. Co. v. Laires
United States District Court, District of Connecticut
Failure to Disclose Dog Voids Homeowners Policy
The Court granted Providence’s motion for summary judgment in this declaratory judgment action, finding that the insured made material misrepresentations in his application for homeowners insurance. Laires’ dog seriously injured the underlying plaintiff, who sued. Laires tendered the suit to Providence which denied for multiple reasons, including material misrepresentation. As the court noted: “In Defendant's application for insurance in November 2019, he failed to disclose that he owned the dog and that the dog lived at the Premises at that time. The question on the insurance application asked whether there were any animals or exotic pets kept on the Premises, to which Defendant stated, “N,” indicating “no.” When Plaintiff learns there are no animals or exotic pets kept on the premises, it writes policies taking that information into account.” (internal citations omitted).
Laires argued that he did not complete the application but rather his insurance agent did and that he was unaware of the “dog” question or that the application was inaccurate. The court found the argument unpersuasive. Connecticut imposes on an insured a degree of reasonable diligence to see that application answers are correct. Moreover, when the agent acts on behalf of the principal, the knowledge and acts of the agents are imputed to the principal. “Further, ‘notice to, or knowledge of, an agent while acting within the scope of its authority and reference to a matter over which his authority extends, is notice to, or knowledge of, the principal.’”
06/07/23 Brar v. Allstate Ins. Co.
Superior Court of Connecticut, Waterbury
COVID-19 Executive Order Tolls Contractual Suit Limitations Period
The trial court held that the Allstate policy’s suit limitation period was suspended by application of the Governor’s Executive Orders during COVID. The court held that suspension of the statute of limitations also applies to private contracts, such as insurance contracts. The court further held that the Executive Orders acted as a toll for their duration, thus in this case extending the suit commencement period by 626 days. Since the insured brought suit only 407 days after the lifting of Executive Order, it was timely commenced.
KYLE’S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
06/29/23 State Farm Fire & Cas. Co. v. AA Acupuncture Serv., P.C., et al.
Appellate Division, First Department
Court Holds Insurer is Entitled to Declaratory Judgment that it was Not Obligated to Cover No-Fault Claims Arising from Auto Accident
In this action, State Farm moved for a default judgment declaring that it had no duty to pay the claims of the defendants arising out of the underlying automobile collision. State Farm alleged that the collision was intentional or staged and that it had no obligation to pay the claims of the defaulting defendants related to the underlying defendant, Charlene Bruno. The Supreme Court denied the plaintiff’s motion and plaintiff appealed.
The declaratory judgment action involved claims for no-fault insurance benefits made in connection with an automobile accident. The first and second causes of action sought a declaration of noncoverage because, as State Farm alleged, the accident was intentional or staged and therefore not a covered event. The First Department held that State Farm submitted sufficient evidence warranting entry of a default judgment. The Court determined that the insurer’s claim representative's affidavit and the examination under oath testimony of two of the three claimants adequately set forth the factual basis for plaintiff's belief that the crash was not a covered event, as these submissions were sufficient to determine that viable claims of noncoverage exist. Further, by failing to answer the defaulting defendants were deemed to have admitted the factual allegations in the complaint.
Accordingly, the Court held that the plaintiff was entitled to a default judgment on its cause of action seeking a declaration that it was not obligated to defend or pay the claims related to defendant Bruno. In addition, the Court concluded the plaintiff had submitted sufficient evidence that it owed no duty to pay any claims related to Bruno based on her failure to appear for an examination under oath.
06/09/23 Am. Trans. Ins. Co. v. U.S. Med. Supply Corp.
Kings County Supreme Court
Court Reject’s Insurer’s Motion to Vacate Arbitration Award on the Grounds that the Claims at Issue Were Properly and Timely Denied for Lack of Medical Necessity
Petitioner American Transit Insurance Company ("ATIC") commenced this CPLR Article 75 proceeding seeking an order and judgment vacating a No-Fault insurance master arbitration award of Richard B. Ancowitz, Esq., which affirmed the arbitration award of Jan Chow, Esq. granting Respondent U.S. Med Supply Corp.'s ("U.S. Med") claim for No-Fault insurance compensation for post-surgery medical supplies provided or rented. Arbitrator Chow awarded $4,000 to US Med as compensation for services provided to Mahendra Singh, who claimed to have been injured in a motor vehicle accident, and assigned his No-fault benefits to US Med.
Generally, the claims process for health service bills for No-Fault insurance compensation begins with the submission by a health service provider of a claim form. The claim form can be submitted directly by the injured person to the No-Fault insurer but over many decades a practice developed by which the health service providers submit the claim forms. The insurer must then either pay or deny the bill within 30 days, or seek additional verification within 15 business days. If it denies payment, it must issue a Form NF-10 denial of claim explaining why the bill was not paid. The evidence submitted in this Article 75 proceeding revealed that the underlying arbitration involved one claim form in the amount of $4,000.00 submitted to ATIC for payment. The Form NF-10 denial of claim by ATIC was timely since it was issued within 30 days after the receipt of requested additional verification. The denial of claim was predicated on a four-page peer prepared by Dr. Raghava Polavarapu, who opined that the subject supplies were not medically necessary.
Arbitrator Chow noted that the subject medical supplies were provided following right shoulder surgery performed on Assignor and the burden shifted to ATIC to substantiate its defense of lack of medical necessity. Arbitrator Chow stated, "In the event an insurer relies on a peer review report to support its lack of medical necessity defense, the peer reviewer's opinion must set forth a factual basis and medical rationale for denying the claim". The arbitrator first found that the doctrine of collateral estoppel applied to the peer reviewer's contention regarding the medical necessity of the underlying right shoulder surgery, as the respondent had a full and fair opportunity to contest the same issue in a prior action. Furthermore, the peer report did not address the disputed CPM, water circulating pump and synthetic sheepskin pad. Dr. Polavarapu only specifically addressed the CTU, DVT and shoulder orthosis, none of which are involved in this matter. Therefore, Arbitrator Chow awarded the $4,000.00 principal billed.
ATIC filed for master arbitration to appeal Arbitrator Chow's award. It challenged the arbitrator's determination to apply collateral estoppel from the award of another arbitrator and argued the surgery was not medically necessary. Master Arbitrator Ancowitz affirmed the award, stating that “Upon review of the matter before me, I do not find that the award is incorrect as a matter of law, irrational, or otherwise infirm.
In reviewing the award, I see no infirmity in the arbitrator having not credited respondent's peer review report. Apparently, both matters evaluated the medical necessity of the same surgery, and the arbitrator's authority to weigh and consider the evidence is quite broad per applicable regulation.”
ATIC filed a petition to vacate and asserted that the arbitration decision was arbitrary and capricious, irrational and without a plausible basis. ATIC contends that a requirement for collateral estoppel to apply is that the previous litigation concluded in a final and valid judgment and construed "final and valid judgment" to mean that a prerequisite to affording collateral estoppel effect to a No-Fault arbitration award is that it was affirmed by a master arbitrator, confirmed by a court into a judgment, and not subjected to de novo review.
The court explained that a leading case on the preclusive effect of an arbitration award is American Ins. Co. v Messinger, 43 N.Y.2d 184 (1977). The Court of Appeals held that a determination made in a property damage arbitration between two insurance carriers disallowing a disclaimer of coverage is binding between the same carriers in a subsequent personal injury action arising out of the same accident. While the parties were identical in American Ins. Co. v Messinger, arbitration awards do have estoppel effect against a No-Fault insurer even if the health service provider is different in the subsequent arbitration. The court held ATIC was correct that in order for collateral estoppel to apply in arbitration, the issues in both proceedings must be identical, the issue in the prior proceeding must have been actually litigated and decided, there must have been a full and fair opportunity to litigate in the prior proceeding, and the issue previously litigated must have been necessary to support a valid and final judgment on the merits. However, the court rejected ATIC’s contention that the proponent of the applicability of collateral estoppel from a No-Fault insurance arbitration award must establish that the award was affirmed by a master arbitrator, confirmed by a court, and not subject to de novo review.
An arbitrator rationally applies the doctrine of collateral estoppel against an insurer with respect to a claim by an ambulatory surgery center where the underlying surgery was previously found medically necessary in another arbitration. An arbitrator's invocation of collateral estoppel on the issue of whether shoulder surgery and related services were medically necessary and causally related to the accident against a No-Fault insurer from a previous arbitration where the insurer had a full and fair opportunity to contest the issue is rational and neither arbitrary, capricious, nor incorrect as a matter of law. Therefore, the court determined that, with the shoulder surgery being found medically necessary by virtue of Arbitrator Lustig's prior finding and there being no specific discussion of the supplies at issue in the four-page peer review, Arbitrator Chow properly awarded compensation to U.S. Med for providing the post-surgery supplies to Assignor.
The standard for Article 75 court scrutiny of a No-Fault insurance arbitration is whether the master arbitration award was so irrational as to require vacatur. Further, a master arbitrator's review of a hearing arbitrator's award where an error of a rule of substantive law is alleged must be upheld unless it is irrational. Therefore, the court found that in affirming Arbitrator Chow, who properly applied the law of collateral estoppel and did not make arbitrary, capricious, or irrational findings of fact, Arbitrator Ancowitz did not contravene the limitations on his powers. His master award conformed to the permitted standard of review of a hearing arbitrator's award by a master arbitrator.
Accordingly, the Court rejected ATIC's contentions in its petition. ATIC's rights were not prejudiced, the arbitrator was not partial, she did not exceed her powers, and she did not fail to make a final and definite award.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
06/27/23 McCord v. GEICO
Eastern District of New York
Court Finds Cause to Withdraw Bankruptcy Reference for Declaratory Judgment Action Concerning State Common Law Claims
Following significant Chapter 7 bankruptcy proceedings, including a pre-suit Bankruptcy Rule 2004 subpoena on GEICO, which survived a motion to quash and resulted in GEICO’s production of “over 700 pages of document discovery related to claims correspondence and the claim register, and two depositions of GEICO claims adjusters . . . .” On October 13, 2022, the Trustee for GEICO’s insured filed an Adversary Proceeding, alleging breach of contract and bad faith, in failing to defend its insured in an underlying action, resulting in entry of a judgment. GEICO denies “that the Adversary Proceeding was a core proceeding and stating that it did not consent to entry of judgment by the Bankruptcy Court,” filing “a motion to withdraw the reference of this Adversary Proceeding” with the Eastern District of New York (“EDNY”).
Although the EDNY has original jurisdiction over civil proceedings arising under Title 11 of the United States Code (28 U.S.C. §1334(b), it, like many district courts, uses its discretion to refer such bankruptcy matters to bankruptcy judges. (28 U.S.C. §157(a)). The EDNY “has a standing order that automatically refers bankruptcy cases to bankruptcy judges,” however, it can withdraw such reference, “in whole or in part, [for] any case or proceeding referred under this section for cause shown.” (28 U.S.C. §157(d)). As a threshold inquiry, the district court must “whether the bankruptcy court has the constitutional authority to issue a final judgment,” by assessing whether “(1) the claim involves a public right; (2) the process of adjudicating the creditor's proof of claim would resolve a counterclaim; or (3) the parties’ consent to final adjudication by the bankruptcy court.” The, “[o]nce the district court has determined whether a bankruptcy court has authority to finally adjudicate a claim, it should consider whether the claim is ‘legal or equitable’ and ‘weigh questions of efficient use of judicial resources, delay and costs to the parties, uniformity of bankruptcy administration, the prevention of forum shopping, and other related factors.’”
Applying the standard, the EDNY found that the bankruptcy court lacked constitutional authority to enter final judgment in the Adversary Proceeding and, further, that “each of the above factors weighs in favor of withdrawal or is neutral,” establishing cause for withdrawal of the reference.
Relative to the lack of authority to render final judgment, the EDNY found that the relevant claims asserted were “common law claims of breach of contract and bad faith which involve private rights, not public rights.” Continuing, the EDNY found that “GEICO has not filed a proof of claim on Haniff's claims register, nor has it asserted any counterclaims in its Answer” seeking amounts from the bankruptcy estate. Finally, GEICO had not consented to final adjudication by the Bankruptcy Court.
With the Bankruptcy Court lacking authority to render final judgment, which strongly favored withdrawal of the reference, the EDNY next addressed the various relevant factors for consideration.
First, although actions seeking damages for breach of contract are generally considered to be legal rather than equitable, favoring withdrawal, Bankruptcy Courts may be able to handle all pretrial proceedings and motions short of a final judgment, which might favor non-withdrawal absent a jury demand. The court found this factor neutral.
Second, relative to efficiency, the EDNY noted that “withdrawing the reference is more efficient than having the Bankruptcy Court first issue proposed findings of fact and conclusions of law” on the contract claims at issue, since “contract disputes are ‘the bread and butter of district courts.’”
Third, the EDNY found neutral the factor of uniformity of bankruptcy administration, since the claims do not arise under bankruptcy law, but rather state contract law.
Fourth, it was determined that costs and delay would be avoided by withdrawal of the reference “by avoiding the parties having to first litigate in the Bankruptcy Court and then in the district court . . . .”
Finally, relative to potential forum shopping, the EDNY found this factor neutral, absent any indication that GEICO had engaged in such conduct.
Maxwell’s Minute: The EDNY was careful to note that “the core/none-core determination” that many attorneys think of relative to bankruptcy matters “is no longer dispositive of whether a bankruptcy court has authority to finally adjudicate a matter.” The plaintiff here appears to have focused on that distinction in its briefing anyway (likely out of necessity, due to scarcity of precedent in this area). One decision cited by the plaintiff and discussed by the EDNY is worth a look:
“The Trustee relies on In re U.S. Lines, Inc., 197 F.3d 631, 638 (2d Cir. 1999), to support his argument that the claims are core, but this case is inapposite. (Citation omitted) In In re U.S. Lines, Inc., a Chapter 11 bankruptcy case, the Second Circuit deemed an indemnity insurance dispute to be ‘core’ because resolving the dispute would have a ‘significant impact on the administration of the estate.’ Id. There, the insurance proceeds represented the only potential source of cash available to the personal injury plaintiffs, but the insurance policies did not make insurance proceeds available until the Trust had already paid the claims. Id. In addition, there was a risk that the payment scheme employed to pay the claims would be deemed to not satisfy the pay-first requirement after the assets earmarked for other creditors were used to pay the personal injury claimants. Id. at 639. The Second Circuit explained that a declaratory judgment determining whether the chosen payment plan would trigger the indemnification obligation and the amounts payable under the contracts was necessary for the bankruptcy court to fulfill its core function of allocating assets among creditors equitably, and therefore the proceeding was ‘core.’ Id.; see also In re Cnty. Seat Stores, Inc., No. 01-CV-2966, 2002 WL 141875, at *5 (S.D.N.Y. Jan. 31, 2002) (finding an insurance dispute core for similar reasons).
However, the Second Circuit has since limited U.S. Lines’ holding to its facts. See Mt. McKinley Ins. Co. v. Corning Inc., 399 F.3d 436, 448 (2d Cir. 2005) (explaining that the Circuit Court's holding in U.S. Lines was based on ‘mutually re-enforcing effects of two factors,’ that the policies were ‘the only asset available’ and ‘were pay-first policies that required the trustee to pay the claims and then seek indemnification’); see also Roman Cath. Diocese of Rockville Ctr., N.Y., 2021 WL 1978560, at *6 (collecting cases finding that the holding of U.S. Lines had been limited by Mt. McKinley). . . .”
Given this discussion, I would venture a guess that U.S. Lines may support denial of a similar motion where the coverage claims at issue were more akin to “the only asset available” under a particular set of circumstances. Those circumstances were obviously not the circumstances before the EDNY here.
RAUH’S RAMBLINGS
Patricia A. Rauh
On parental leave.
Scott D. Storm
Off this week. See you in two.
FLEMING’S FINEST
Katherine A. Fleming
06/29/23 Penn-Star Ins. Co. v. Thompson
Mississippi Supreme Court
Employee Towing Personal Vehicle Backwards Down Highway on Employer’s Forklift at Night not Engaged in Business Operations
Murphy’s Welding, LLC (Murphy’s Welding) is a welding business. Partridge is a full-time employee at Murphy’s Welding, and he lives “no more than three hundred yards” from the Murphy’s Welding shop. Partridge’s personal truck had a mechanical issue and was inoperable. As a result, Partridge planned to use the Murphy’s Welding truck and trailer to tow his personal truck from his house to the Murphy’s Welding shop, where he planned to repair his truck. After his workday had ended, Partridge attempted to load his personal truck onto the Murphy’s Welding trailer but was unsuccessful. Partridge then decided to use the Murphy’s Welding forklift to tow his truck from his house to the shop. Partridge walked to the shop and drove the forklift back to his house. Partridge and fellow Murphy’s Welding employee, Hollings, used the forks of the forklift to lift the disabled rear of Partridge’s truck. Partridge, operating the forklift in reverse, proceeded to tow his truck backwards down Highway 8 towards the Murphy’s Welding shop. As Partridge drove the forklift backwards down Highway 8, Hollings walked along the side of the highway behind the forklift. Because it was dark outside, there were times when Hollings was unable to see the forklift towing Partridge’s truck. Just as Partridge reached the shop’s driveway, LaTonya J. Thompson’s vehicle approached from the opposite direction and struck the passenger side of Partridge’s truck. The collision caused the truck to break loose from the forklift and “shoot” across the highway into a ditch.
LaTonya and her husband filed a complaint, alleging that Partridge, as an employee of Murphy’s Welding, operated the Murphy’s Welding forklift carelessly, negligently, wrongfully, and unlawfully so as to cause the violent collision. The Thompsons claimed that Murphy’s Welding was liable under the doctrine of respondeat superior and for negligent entrustment of the forklift.
At the time of the accident, Murphy’s Welding had a commercial general liability policy issued by Penn-Star that covered risks associated with Murphy’s Welding’s business operations. Penn-Star intervened in the action, seeking a declaration that the CGL policy issued to Murphy’s Welding did not provide coverage for the Thompsons’ claims and that Penn-Star had no duty to defend Murphy’s Welding or any other party with regard to the Thompsons’ lawsuit. Penn-Star moved for summary judgment on the issue of coverage. The trial court found the injuries sustained by Thompson during Partridge’s use of the forklift were covered by Murphy’s Welding’s CGL policy and denied Penn-Star’s motion for summary judgment. Penn-Star timely filed a petition for interlocutory appeal. The Mississippi Supreme Court granted the petition.
The issue before the Mississippi Supreme Court was whether the losses sustained by the Thompsons, when Partridge towed his personal vehicle bolted to the Murphy’s Welding forklift backwards down the highway at night after his workday had ended related to or arose out of the Murphy’s Welding’s business operations. The trial court concluded “that Partridge’s use of Murphy’s Welding’s forklift, although after hours and for his personal benefit, was related to the business operation because his use was exercised [(1)] with the consent of his employer and [(2)] as a fringe benefit.”
The Mississippi Supreme Court disagreed. Penn-Star’s obligation to cover the losses under the commercial general liability policy was entirely dependent on the losses arising out of the business operations. Partridge testified that he had Murphy’s permission to use the forklift to tow his truck to the shop. The Mississippi Supreme Court reasoned that whether Murphy gave permission is immaterial to the relationship of the loss to the business operations because Partridge was not engaged in an activity related to Murphy’s Welding’s business operations: welding or cutting. For the CGL policy to apply, the losses must have been related to or have arisen out of the welding and cutting business operations. The towing of Partridge’s personal truck was unrelated to the welding or cutting business. Partridge’s actions occurred after work hours, off his employer’s premises, and while Partridge was on a substantial deviation from his work duties.
Regarding the fringe benefit argument, the trial court relied heavily on Partridge’s deposition testimony that he “had unlimited access to the shop as well as all equipment” and “was pretty confident in the fact that the full range of the facility and equipment was available to be used as needed.” But nowhere in the record did it suggest that Partridge had unlimited access to all equipment. Instead, Murphy testified that as a benefit, he allowed his employees to use his shop and his truck if they needed to go somewhere. When asked if his employees had “permission to use the forklift for whatever they might need it for,” Murphy responded, “Yeah. Around the shop.” Thus, despite the trial court’s finding, the record reflected that the only benefits were the use of Murphy’s truck, the use of Murphy’s shop, and the use of Murphy’s forklift around the shop. The accident did not occur at or around the shop, and Partridge was not driving Murphy’s truck. Partridge’s operation of the forklift was not reasonable and anticipated, and even if Murphy allowed his employees to use the forklift after hours around the shop, nothing in the record supported the conclusion that Partridge was exercising a benefit of his employment when he operated the forklift as a tow truck backwards down the highway at night.
Since the losses sustained by the Thompsons did not arise out of or relate to the Murphy’s Welding business operations, the CGL policy issued by Penn-Star to Murphy’s Welding did not provide coverage for the Thompsons’ injuries. As a result, the trial court’s order denying Penn-Star’s motion for summary judgment was reversed, judgment was rendered in favor of Penn-Star, and the case was remanded to the trial court for consideration of the remaining issues.
GESTWICK’S GREATEST
Evan D. Gestwick
06/15/23 Levy v. New York Central Mutual Fire Insurance Company
New York State Supreme Court, County of Westchester
Corrected from Last Edition: Effective August 1, 2023, Insureds Must “Opt-OUT” of Supplemental Spousal Liability Coverage; No Longer “Opt-IN”
Last edition, I incorrectly reported that New York insureds must opt into supplemental spousal liability, and that the statutory scheme is no longer opt-out. I had this backwards, as the statutory scheme, as of August 1, 2023, will require New York insureds to opt out of supplemental spousal liability coverage, such that every policy of automobile insurance issued within the State of New York will be deemed to include it absent a specific request by the insured not to do so. Special thanks to our friend, Paul Koumourdas, for the catch.
ON the ROAD with O’SHEA
Ryan P. O’Shea
On vacation this week, see you in two weeks!
LOUTTIT’S LEGISLATIVE and REGULATORY ROUNDUP
Robert P. Louttit
05/30/23 Senate Bill Number S07473
Prohibits Property/Casualty Insurers from Discriminating
Bill number 07473 is making its way through New York’s State Senate. If passed, this bill would amend Insurance Law Section 2606, to ban any discrimination in selling insurance policies in New York. In this regard, Senate Bill 07473 proposes the following:
Prohibits property/casualty insurers from discriminating based on race, color, creed, national origin, disability, age, marital status, sex, sexual orientation, education background or educational level attained, employment status or occupation, income level, consumer credit information or score, ownership or interest in real property, location, type of residence, including but not limited to single-family home, multi-family home, apartment, housing subsidized by state and/or federal programs, or any other residence type, or any indication of a consumer's price elasticity of demand.
The above bill, if passed, will preclude insurance companies using any of the above factors from determining what to charge any insureds. This will certainly alter the way policies are underwritten in New York State. It is currently in New York State’s Insurance Committee. We will carefully watch this bill as it makes its way through New York’s legislature.
ROB REACHES the THRESHOLD
Robert J. Caggiano
06/28/23 Fadeau v. Corona Industries Corp., et al.
Appellate Division, Second Department
In a Ruling of First Impression for the Second Department, Court Holds that a Plaintiff’s Action in Undergoing Surgery Without Giving Defendants an Opportunity to Conduct a Presurgical Medical Examination Cannot be a Basis for Sanctions for Spoilation of Evidence
Defendants Corona Industries Corp. and Jorge Reinoso sought appeal of Order from Supreme Court, Kings County, which denied Defendants’ motion to impose sanctions against the plaintiff for spoilation of evidence. The Appellate Division, Second Department, unanimously affirmed, without costs.
This matter stems from a Motor Vehicle Accident which occurred on February 1, 2018. Specifically, a vehicle owned by Defendant Corona Industries, and operated by Defendant Reinoso, collided with a vehicle owned and operated by Plaintiff Berwig Fadeau. Plaintiff subsequently commenced the lawsuit against defendants on February 6, 2020, alleging serious injury to his cervical and lumbar spine regions.
Defendants filed Answer to the lawsuit on March 6, 2020, and simultaneously served plaintiff with a “DEMAND FOR PRE-SURGICAL INDEPENDENT MEDICAL EXAMINATIONS”. Specifically, this demand stated that should plaintiff a surgical procedure related to alleged injuries in the subject accident, “defendants demand and require plaintiff to appear for pre-surgical independent medical examinations, to be scheduled by defendants.”
Shortly after, on March 10, 2020, Plaintiff served a verified bill of particulars indicating he had already undergone a lumbar discectomy on in February of 2019 – and that there was a “possible need for future surgery.” On August 19, 2020, Plaintiff served a supplemental bill of particulars stating that on August 6, 2020, he underwent a lumbar laminectomy and fusion with instrumentation. On December 18, 2020, Defendants moved for an order “striking Plaintiff’s pleadings or, in the alternative, pursuant to 22 NYCRR and CPLR § 3126, precluding Plaintiff from producing evidence at trial for spoilation of evidence.” Supreme Court, Kings County, denied this Motion.
On appeal, Defendants argued that the non-lifesaving, non-emergency surgery Plaintiff underwent was spoilation of evidence warranting sanctions, as Defendants were not afforded to conduct a medical evaluation of his preoperative condition. Notably, in appellate briefing, Defendants relied upon two cases from similar Supreme Court venues (Queens County and Bronx County), as well a federal holding from the Eastern District of New York. Further, after Defendants filed their brief, the First Department held that spoilation analysis should not be applied to a person’s bodily condition (see Gilliam v. Uni Holdings, LLC, 201 AD3d 83 [1st Dept 2021]). Plaintiff highlighted this decision in his appellate brief in opposition. In reply, Defendants argued that the Gilliam decision is inconsistent with the law in the Second Department and should not be followed.
At the onset of its analysis, the Second Department explicitly found that this Court has never determined whether a spoilation analysis can apply to a bodily condition. In doing so, the Court highlighted that the Supreme Court, Queens County, decision cited by Defendants in their appellate brief was not decisive on this issue, as it was affirmed on other grounds (see Mangione v. Jacobs, 37 Misc 3d 711 [Sup Ct., Queens County 2012], affd on other grounds 121 AD3d 953 [2d Dept 2014]).
The Court then analyzed the holding by the First Department in Gilliam, wherein that court held “that the condition of one’s body is not the type of evidence that is subject to a spoilation analysis.” In reaching such a finding, the First Department noted that a spoilation analysis has long been applied to a party’s destruction of inanimate evidence. The First Department therefore found that since a person’s body is fundamentally different from inanimate evidence, and medical treatment (including surgery) is entirely distinct from the destruction of documents or tangible evidence – which spoilation sanctions attempt to ameliorate.
Here, the Second Department agreed fully with the First Department’s analysis and ultimate conclusion. In doing so, the Court stated, “[I]t is not reasonable to require a plaintiff to delay medical treatment, and potentially prolong his or her suffering, solely to allow a defendant to examine the plaintiff’s body in a presurgical state.” Accordingly, the Order of Supreme Court, Kings County, denying Defendants’ motion to impose sanctions against plaintiff for spoilation of evidence was affirmed.
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
05/26/23 Kestenberg Siegal Lipkus v. Royal & Sun Alliance Ins. Co.
The Ontario Superior Court (Trial Level)
The Requirement of a Claims Made Policy that States that the Policy Only Responds to Claims Made and Reported During the Policy Period is a Condition Precedent to Coverage Even Where that Requirement is Not Labelled as a Condition Precedent
Until December 31, 2022, when they disbanded, Michael Kestenberg, Alan Siegal and Lorne Lipkus practiced law together for more than 40 years out of a building that the law firm owned that is not far from the Royal Ontario Museum in Toronto. At the time of the firm’s dissolution, they carried on a practice of banking, intellectual property law, general civil litigation and, ironically, the defence of professional liability claims.
In July 2018, about four years before the firm dissolved, Tallman Truck Centres made a demand against the law firm alleging professional negligence. The firm reported the claim to their insurance broker, HUB and told the broker that their excess insurers were to be notified.
The firm held a primary professional liability with LawPro, a first excess issued by Lloyds’ and a second excess issued by Royal SunAlliance Company (RSA). All layers of the insurance programme were composed of claims made and reported liability policies. The RSA second excess contained a notice condition, Condition C, which read “as a condition precedent to its rights under this policy, an Insured must provide written notice of any claim as soon as practicable….” The policy also contained the following provision, Condition D:
This policy only covers claims first made against the Insured and reported to the Insurer during the policy period and provided that such claim arises out of an act, error or omission committed or alleged to have been committed on or after the retroactive date set forth at Item. 6 of the Declarations.
The broker duly reported the claim to the first excess but admitted to the law firm that it did not report that claim to the second excess until 2021. At the time of that report, the 2018 policy that was in effect when the claim was made had long expired. As the claim was not made during the currency of the 2018 RSA policy, RSA denied coverage.
The errors and omissions insurer of the broker, HUB, acting in the name of the law firm, brought this action for a declaration that RSA wrongfully denied coverage. HUB argued that Condition C requiring that claims be reported as soon as practicable is inconsistent with Condition D which requires that claims be reported during the coverage period. This creates an ambiguity, and Condition C prevails over D as it is a more generous provision. Further, as Condition D was not labelled as being a condition precedent to coverage it is not a condition precedent; that if Condition D was breached then the insured was entitled to relief from forfeiture of the coverage under the second excess as the insurer had indirect notice of the claim and did not sustain any prejudice.
There was no evidence before the court that RSA had indirect knowledge of the claim and this final argument was dismissed at the outset.
As for the potential ambiguity, citing a decision of the Ontario Court of Appeal, the court held that although Condition D is not labeled with the words “condition precedent”, it clear that a claims-made clause does not have to specify that it is a “condition precedent” in order to be a condition precedent. “It is self-evident from the language of Condition D that notice had to be given during the policy period in order for coverage to ensue.” The Court further held that this condition was not inconsistent with Condition C. It is sensible to have the insured report claims as they arise during the policy period and not at the close of that period. Citing a 2006 Supreme Court of Canada decision, Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, the court held that claims made policies are a cheaper alternative to occurrence-based coverage and in exchange for the discounted premium, strict control is placed on claims which controls the insurer’s exposure. Finally, the policy allows for the purchase of an extended reporting period, which was not acquired in this case. Although the court is compelled to interpret the policy generously in favour of coverage, the interpretation afforded a policy cannot be one-sided. In this case, to compel coverage would eliminate the claims made basis of the policy and the rationale behind the setting of the premium.
As there was evidence that the broker, HUB, carried errors and omissions coverage, the application was in truth a battle between two insurers and relief from forfeiture was not an appropriate remedy in these circumstances.
For these reasons, the application was refused; the denial of the second excess was upheld; the broker’s errors and omissions coverage would step in and cover the law firm’s liability that could have been covered by the second excess policy. In the end, the law firm was not prejudiced by the denial of coverage by the second excess.
Unfortunately, the court did not discuss whether relief from forfeiture would be available for breach of a condition precedent. However, given the Ontario Court of Appeal decision in Stuart v. Hutchins, it is highly unlikely that a Canadian court would grant relief from forfeiture for breach of a condition precedent to coverage.
