Volume XXV, No. 23 (No. 670)
Friday, April 26, 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 Santa Fe, New Mexico, where I’m attending the Annual Meeting of the Association of Defense Trial Attorneys, a wonderful trade group of trial lawyers from throughout the country. Great people, great programming, and nice to be away from home, where the temperatures have been below where I’d like them to be.
On Tuesday, the First Department reinstated a declaratory judgment action in a series of Child Victims cases this week, thank goodness. The insurer, Century Indemnity, had agreed to defend the Archdiocese and then commenced the DJ action seeking a determination that the claims were outside of coverage, for a number of reasons. The lower court found that the action was premature and the complaint not specific enough and tossed it, basically holding that the duty to indemnify the Archdiocese could not be resolved until the underlying cases were resolved, so the insurer would have to continue defending.
The First Department disagreed, holding that, indeed, the insurer was permitted to pursue a declaration that it had no duty to indemnify, a finding of which would terminate the duty to defend. Century Indem. Co. v Archdiocese of N.Y. is the case, and my summary is in my column.
The whole world is watching the criminal trial of a former president, and the nation is on edge over antisemitism on our college campuses. It is a sad time in our nation’s history, and a particularly challenging and frightening time for those of the Jewish faith. For those who are celebrating Passover, we are reminded, as the President said in his message to the nation the other day, that the Passover holiday reminds us of a profound and powerful truth, that even in the face of persecution, if we hold on to our faith, we will endure and overcome.
Mediation Practice – Intercompany Mediation
My mediation practice continues to grow, mediating cases for the Bronx, Kings, Nassau, and Erie County Supreme Courts and the United States District Courts for the Western and Northern Districts. I have also been asked to mediate cases in the Southern and Eastern Districts and on coverage disputes by insurers and coverage counsel around the country.
Intercompany disputes are my favorite, so reach out if we can help.
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 V. Christopher Potenza at [email protected] to subscribe.
- Medical & Nursing Home Liability Pointers. Medical & Nursing Home Liability Pointers provides the latest news, developments, and analysis of recent court decisions impacting the medical and long-term care communities. Contact Elizabeth Midgley at [email protected] to subscribe.
Premature Retirement Predictions – 100 Years Ago:
The Buffalo News
Buffalo, New York
26 April 1924
REED DENIES HE WILL
RETIRE FROM CONGRESS
WASHINGTON, April 26. – Representative Daniel A. Reed of Dunkirk denied reports that he intended to retire from congress to accept a position with the Erie Chamber of Commerce to promote the industrial activities of the city.
“There is no truth whatever in that statement,” Representative Reed said. “On the contrary, I will be a candidate for re-election as member of congress from the 43d district.”
Editor’s note: He didn’t lie, he stayed in congress until 1959 when he succumbed to a heart attack.
Peiper on Property (and Potpourri):
We have three interesting decisions this week. Two of them may raise an eyebrow; at least they did with me.
The first issue to discuss is the First Department’s decision in the Century 21 Department Stores case. It is another attempt to trigger business interruption coverage for COVID-19 losses. The angle, this time, was to argue the Civil Authority coverage extension. You may recall that Civil Authority coverage does not require physical damage at the insured location. But, it does require that direct physical damage or loss occur nearby and that the physical damage or loss be the catalyst for the imposition of the Civil Authority Order. Since the COVID-19 virus was already determined by the Court of Appeals to not have caused direct physical damage or loss, it followed that its existence in neighboring properties did nothing to move the needle for the policyholder.
We’ll say it again. Business interruption coverage is born out of property damage. You can’t have business interruption without a covered property loss … somewhere!
The other cases reviewed are interesting. In Martin, we review the rescission of a disability policy. The Appellate Division noted that the carrier was unable to produce underwriting guidelines showing it would not have issued the policy had it known the insured was actively committing a fraud which would ultimately imperil his license to practice medicine. Notwithstanding the cases that unequivocally require specific underwriting guidelines to rescind, the Court noted that the carrier’s declarant’s statement that it would not have issued a policy to a known fraudster was sufficient to carry its burden. It is a common-sense approach, but a bit of an anomaly.
The Zimmerman case could prove to be very helpful to insurers in the Third Department. Zimmerman was attempting to confirm coverage for water damage after a pipe burst in his house due to the loss of heat. The policy was written on an all-risk basis, and he established that the loss was a Covered Cause of Loss. By most accounts, plaintiff appeared to have met its burden. The Third Department concluded, however, that as movant, Mr. Zimmerman was also required to affirmatively establish that the exclusion cited by the denying carrier was also inapplicable. In effect, the Court ruled that while the carrier has the burden of establishing the exclusion at trial, on motion the insured/movant has the burden of demonstrating that the exclusion does not apply. If this is consistently applied, it will make it much, much more difficult for an insured to prevail upon summary judgment. This is because the denying carrier will be given the benefit of all inferences on the application of the exclusion; at least on motion for summary judgment.
Very helpful, indeed.
That’s it for now. See you in two weeks.
Steve
Steven E. Peiper
[email protected]
Jilted Attorney Commits Suicide – 100 Years Ago:
Buffalo Courier
Buffalo, New York
26 April 1924
BRILLIANT YOUNG
WOMAN ATTORNEY,
SOUGHT IN MURDER,
COMMITS SUICIDE
Wanda Stopa Takes Poison In Detroit Hotel
as Police Force Way Into Room
KILLED SERVANT OF MAN WHO REFUSED TO WED HER
Chicago, April 25. – Miss Wanda Elaine Stopa, the youthful attorney whose mad infatuation for Y. Kenley Smith, Chicago advertising man, yesterday led her to his home, where she shot to death an aged caretaker who attempted to protect Mrs. Smith, staged the final act of her drama of vengeance in a Detroit hotel today by drinking poison.
Shortly before word of her death was received here, a coroner’s jury investigating the death of Henry Manning, the caretaker, had decided that the attractive young woman lawyer who came to this country a Polish immigrant and became an assistant United States district attorney had fired the shot that killed manning “with Murderous intent.”
Barnas on Bad Faith:
I hope everyone enjoys the NFL Draft this weekend. As a huge college football fan and Bills fan, it is always one of my favorite events on the sporting calendar.
I have two good decisions in my column this week. One is from Florida discussing the appropriate amount of a judgment in a UM case where the insured sought leave to amend to add a bad faith claim after a breach of contract verdict, and the other is from Nevada where a bad faith claim was dismissed on a motion to dismiss. Please consider giving them a read.
Brian
Brian D. Barnas
[email protected]
Child Labor Laws – 100 Years Ago:
The Brooklyn Citizen
Brooklyn, New York
26 April 1924
CHILD LABOR
LAW MAY FAIL
IN VOTE TO-DAY
Two-Thirds Majority Necessary to
Pass Amendment Is Threatened.
WASHINGTON, - April 26. – Hailed by friends as a death blow to “child slavery” and condemned by opponents as a dangerous centralization of power in the Federal Government, the proposed child labor constitutional amendment to-day approached a final vote in the House.
If ratified it will become the Twentieth Amendment, succeeding the woman suffrage and prohibition amendments. To secure ratification it must pass both branches of Congress by a two-thirds majority and be accepted by three-fourths of the states.
As debate proceeded a majority of the House was revealed in agreement with the argument of the amendment’s proponents that child labor was an evil demanding federal regulation.
But a minority sufficiently large to threaten the two-thirds vote required denounced it as an unjustifiable encroachment on State’s rights.
The chorus against employment of children in mines and factories was unanimous, no member opposing regulation of child labor as such. But critics of the amendment insisted such regulation was a police power belonging to the States rather than to the already cumbersome Federal Government.
Lee’s Connecticut Chronicles:
Dear Nutmeggers:
General Sherman had it wrong – “moving” is hell. Weeks of meticulous packing and then the blur of burly (and not so burly) men carrying all your worldly possessions to a truck, off a truck, and even though everything is labeled and color coded (let me introduce you to my wife!), they wind up everywhere except where they’re supposed to go. And things clearly labeled "STAYING,” like a 30-foot extension ladder, well, it’s in your new garage.
This is the state of my home office.
With travel, work, travel, work—the cycle never stops—it’s sure to look like this for weeks. Oh, and did I mention the kitchen renovation that starts in June?
On the bright side of things, Connecticut supplied us with many new cases to discuss. In this edition we highlight the “emerging majority” standard for pleading a CUTPA/CUIPA claim—it’s an emerging win for the industry; also, a perplexing additional insured conundrum. Not reviewed is an interesting uninsured motorist case in which the claim against the tortfeasor was dismissed for statute of limitations grounds. The court posed the question, sending the lawyers back for more briefing, does the dismissal of the claims against the tortfeasor render the insurance unavailable? When there’s answer, we’ll let you know.
Keep keeping safe.
Lee
Lee S. Siegel
[email protected]
Nothing Like a “Girl Bandit” – 100 Years Ago:
The Brooklyn Citizen
Brooklyn, New York
26 April 1924
GIRL BANDIT
AND HUSBAND
TO HAVE CHAT
Pair Meet To-Day in Raymond Street Jail Under Supervision
Mrs. Cecilia Cooney, girl bandit, will be permitted to meet and talk with her husband, Edward, in the Raymonf Street Jail, where both are held on charges of robbery, some time this afternoon, under supervision of a matron and the jail warden, Harry Honeck. The couple have not been allowed to see or speak to each other since their recent arrest.
Both prisoners have adapted themselves to the jail routine and discipline and neither has given attendants any trouble, the warden said. Mrs. Cooney has expressed her dissatisfaction with the prison food, but looks forward to the cashing of a check for $1,000 given her by a news organization in return for the story of her life. With the money, she said, she will be able to order some food of the sort she has been used to.
Kyle's Noteworthy No-Fault:
Dear Readers,
This week we have a couple of No-Fault cases from the Appellate Term, Second Department. In GPLW Acupuncture, the court upheld the insurance company’s denial of benefits based upon the failure of insured to appear for duly scheduled examinations under oath. The court further noted that by offering to hold the EUO virtually, the insurer satisfied the requirement that the EUO be held in a location reasonably convenient for the witness. In Longevity Med. Supply, Inc., the Appellate Term addresses the admissibility of hospital records, which the insurer attempted to admit for the purpose of establishing that the claimant was not an eligible injured person for the receipt of no-fault benefits, arguing he was assaulted and not the victim of a motor vehicle accident.
Until next time,
Kyle
Kyle A. Ruffner
[email protected]
Genesis of “Everglades” – 100 Years Ago:
The Buffalo News
Buffalo, New York
26 April 1924
Why It Is the “Everglades.”
The word “Everglades” Means nothing in English, and yet it stands for a stretch of low country which is generally understood to be desolate and God-forsaken. And yet there are some persons who maintain that there are spots of great beauty. The name is a corruption of an Indian term which means “Glassy Water.” Which is well named for there is an abundance of smooth, still water to be found there. There are some high spots which abound with game, such as deer, turkey and raccoon and some wild animals such as black bear and panther.
Ryan’s Federal Reporter:
Hello Loyal Coverage Pointers Subscribers:
NFL draft week is upon us and, I must say, it hits different when your team has a QB. Here’s to hoping that the Buffalo Bills draft a shiny new WR or three. If not, it could be a rough ending to a week that started with new beginnings for Lindy Ruff at the helm of the Buffalo Sabres. What year is it?
This issue of Ryan’s Federal Reporter discusses the SDNY’s approach to choice-of-law clauses within insurance policies, along with a dash of forum-selection clauses, a good ol’ fashioned UNO reverse card, and even a writ of mandamus. Justice prevails.
Until next time,
Ryan
Ryan P. Maxwell
[email protected]
Jews Seek Homeland – 100 Years Ago:
The Buffalo News
Buffalo, New York
26 April 1924
SYNAGOGUES TO STRESS
DRIVE FOR PALESTINE
Final services of the Passover in all the synagogues of the city tonight will be marked by addresses stressing the subject of rebuilding Palestine, the traditional home of the Jews, and the part that the Keren Hayesod (Palestine Foundation Fund) is playing in this work. The Keren Hayesod is the official medium through which the Jews of the world hope to reconstruct their ancient home.
Buffalo Jews will have a campaign for this cause beginning May 18. The offices for the campaign are located at 43 Erie street. On Monday at the Hotel Buffalo a meeting of the general committee will be held.
Storm’s SIU:
Hi Team:
I’m looking forward to speaking next week on property insurance claims issues at the Finger Lakes Insurance Council, Claims Roundtable in Syracuse. I hope you attend. It looks like an awesome event, and I cannot wait to see everyone.
I had a very fun time fishing Lake Ontario for Lake Trout and Salmon this past weekend. And this weekend I’m off to Toronto to see the Dodgers!
We review five cases this edition:
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Court Dismisses Causes of Action for Breach of Contract and to Compel Appraisal Due to the Insured’s Breach of the One-Year Suit Limitation Condition, but Not a Bad Faith Claim. Suit Limitation Condition Unambiguously Provides that it is the Date of the Loss or Damage, not the Date of the Alleged Contract Breach, from Which the One Year is Measured. No Waiver or Estoppel Proven.
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Court Awarded Actual and Exemplary Damages Because Towing Agreement did not Meet the Requirements of the Towing Ordinance and was Unenforceable.
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Damages for Mold Excluded Due to the Language of a Lead-In Clause, Even if Proximately Caused by the Hurricane.
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Plaintiff’s Complaint States a Cause of Action for Breach of Contract Where Insurer Failed to Include Sales Tax in its Calculation of ACV When Paying for the Total Loss of a Leased Vehicle.
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Insureds Lack Standing to Bring the Class Action Suit for a Condition-Adjustment Claimed to Artificially Reduce Vehicles’ Settlement Values but Class Certified for Alleged Failure to Reimburse Taxes and Fees Necessary to Replace Cars.
I hope you have a great two weeks until we meet again!
Scott
Scott D. Storm
[email protected]
Should the County Hire Married Women? – 100 Years Ago:
The Buffalo Commercial
Buffalo, New York
26 April 1924
Inquiry Looms Over
Women County Workers
As a result of the discharge of serval married women from the county service in the last few weeks, supervisor Frank E. Freedman, seventh ward, is conducting an investigation with a view of prevailing on the board of supervisors to define a fixed policy in regard to the employment of married women by the county. Mr. Freedman plans to bring the problem to the attention of the board as soon as he compiled information concerning the number of married women on the county’s payroll.
“I am going to deal with the question both from the standpoint of efficiency and the social angle,” Mr. Freedman said. “It is my opinion that a married woman, whose husband is living and supporting her, has no place on the country’s payroll. She is merely getting pin money herself and is taking a place that should be available for some woman who really needs the money.
“The matter of efficiency comes up in two ways. First of all the married woman who is supported by her husband has no incentive to do her work properly and she is not very anxious to do much work. Then there is the married woman who has children and whose mind is kept off her work by worry over what is happening to the children while she is away from them.
“But I am mainly concerned with the married woman who really doesn’t need the money she is getting from the county and would not suffer a hardship if she lost her job. The county employs many women and it is my belief that the board should adopt some kind of a definite policy for the heads of the various departments to follow.”
Mr. Freedman is gathering all the information he can get from the heads of the various departments to follow. Mr. Freedman is gathering all the information he can get from the heads of the county departments in regard to the women in the county’s employ. He will submit it to the board together with a resolution in favor of establishing a precedent for the hiring of married women.
Fleming’s Finest:
Hi Coverage Pointers Subscribers:
If you have gotten (or tried to get) tickets online for a popular event recently, then I feel your pain. Two years ago, I easily obtained tickets for an artist’s tour after the ticket release date. Two days ago, I waited in an over 400 person online queue for presale tickets for the same artist at the same venue (sold out in minutes. I secured the tix). The screen didn’t refresh on time, the tickets were disappearing, and hours later, the resale market was booming. This is a tale we’ve come to know all too well, and our society needs to address the issues with concert promotion and ticketing.
Now that I’m off my soapbox, this week’s case comes from the Maine Supreme Court. The court considered whether the insured’s actions while wrestling with another individual were with respect to the conduct of the insured’s landscaping business under his policy.
See you in a fortnight,
Kate
Katherine A. Fleming
[email protected]
“Beaning” in the Theatre, Leads to Arrest – 100 Years Ago:
The Buffalo Commercial
Buffalo, New York
26 April 1924
BEAN THROWING IN
THEATRE COSTS $25
Youth Lands in Court but Denies Guilt; Admits Laughing at Woman
Chares C, Pustelnik, seventeen years old, 853 Wagle street, went to the Savoy theater in William street last night with several other boys. Soon there were complaints from other patrons that they were being struck with jellybeans. An officer claims to have seen Pustelnik throw a bean and arrested him.
Today before Judge McLaughlin the boy denied he had thrown any beans but admitted that he laughed out loud.
“what were you laughing at, the picture?” ask the court.
“No,” replied the lad, then went on to explain that two women sat in front of him, one of whom could not read. The other read the announcements to her in such a manner that he could not help laughing.
Judge McLaughlin imposed a fine of $25 but suspended the payment providing the boy behaves himself in the future.
Gestwick’s Garden State Gazette:
Dear Readers:
The NFL draft is upon us, Lindy Ruff has regained the helm of the Buffalo Sabres, and the Buffalo Bandits have Round 1 of the playoffs this weekend. What a time to be a Buffalo sports fan! Though this may be a controversial opinion in some circles, I was ecstatic to learn that Lindy Ruff was brought in as our new head coach. Some of my fondest memories in life are going to Sabres games with my dad, between about 2005 and 2007, during the days of Daniel Briere, Chris Drury and Maxim Afinogenov, to name a few. Sadly, that’s the last time the Sabres were any good.
Next week, I will be speaking at the Finger Lakes Counsel Meeting on first-party property insurance coverage issues from the last year. I look forward to reporting back on that next edition.
This week, I have a case about New Jersey’s Insurance Fraud Prevention Act, and its interaction with arbitration proceedings. Can a claim brought by an insurer under the Act be arbitrated? Read on to find out.
Until next time,
Evan
Evan D. Gestwick
[email protected]
Looking for Body, Found in Next Article – 100 Years Ago:
The Buffalo Commercial
Buffalo, New York
26 April 1924
POLICE SEEK BODY
OF BOY IN QUARRY
Police of Broadway station today are grappling in the quarry at the foot of Davey street for the body of Louis Jaroszynski, 14 years old, 173 New South Ogden street, who fell into the water while playing with several companions late yesterday afternoon. He lost his balance.
A boat was taken from Cazenovia Park Lake today to be used by police in seeking the body.
Find Boy’s Body
The body of Louis Jarosaynski, fourteen years old, 173 New South Ogden street, who was drowned when he lost his balance and fell off a raft while playing with companions in a pond at the foot of Davey street yesterday, was recovered by police of the Broadway station this morning.
O’Shea Rides the Circuits:
Hey Readers,
The NHL Playoffs are in full swing and I hope Connor McDavid is able to make it to the finals this year. If not, then a consolation prize would be Boston eliminating Toronto in the first round. As a hockey fan in general, I take nothing but pleasure in watching the Maple Leafs fail to achieve in the playoffs.
This week I have a case from the Tenth Circuit dealing with whether an occurrence or aggregate limit applied to a motor vehicle accident under a garage policy. The court did not need to reach the merits since the claimant assignee made a few procedural errors that resulted in a grant of summary judgment for the carrier.
Until Next Time,
Ryan
Ryan P. O’Shea
[email protected]
Kids in Apartments a Problem – 100 Years Ago:
Democrat and Chronicle
Rochester, New York
26 April 1924
CHILDREN IN APARTMENTS
Architects rarely consider the welfare of children in planning apartments. One item, in addition to fresh air and sunshine, that is stressed by Dr. H. A. Rosenhaum in Hygeia is provision for permitting the children to sleep without disturbance by or to the parents during the late evening hours. The bedrooms should be sufficiently separated from the living rooms. Only too often the children are kept up until the parents go to bed, greatly to the detriment of their health, by faulty arrangement in this respect.
Rob Reaches the Threshold:
Hello Readers,
Throughout the life of my column in this publication, I have often commented on my love of the Yankees, my obsession with golf and all things related, and the ups and downs associated with living in the Western New York climate. However, this time around, there is only one topic that deserves recognition – THE NEW YORK KNICKERBOCKERS. As a lifelong Knicks fan, there has, unfortunately, been little to get excited about. Instead, mediocrity has plagued the franchise, and playoff basketball was a rarity. BUT WE ARE ALL THE WAY BACK UP NOW. At the time I write this, we are taking a 2-0 lead in the First Round series against the Sixers and heading down the turnpike to Philly for Game 3. Needless to say, this Staten Island boy is excited. Go New York Go New York Go.
I wish I could have translated this excitement into an article for you all this week, but alas, no decisions on Serious Injury from any Department of the Appellate Division for over a month now. So I will see you all again in two weeks and we will try again.
Enjoy the articles from my wonderful colleagues.
Rob
Robert J. Caggiano
[email protected]
Encouraging Women to Vote – 100 Years Ago:
Los Angeles Evening Express
Los Angeles, California
26 April 1924
6,000,000 Inactive
Women Voters Will
Be Urged to Ballot
By Associated Press
BUFFALO, April 25. – The National League of Women Voters in fifth annual convention here adopted definite plans in furtherance of its proposed campaign to bring 6,000,000 inactive voters to the polls in the forthcoming presidential elections.
Plans were discussed whereby a special committee would be designated to organize the campaign which would be considered paramount among the league’s activities of the coming year. Other league interests, including the general program to be formally adopted later in the session, would be held subservient to the vote-getting drive, according to the plans.
Mrs. Maude Wood Park delivered the president’s address.
“In all the efforts of the league,” Mrs. Park said, “it has had the advantage of the opportunity offered by the enfranchisement at one time of approximately 20,000,000 women. In the nature of the case this opportunity will last only a few years and it can never come again. Only for a few years shall we have the possible advantage of an enormous number of new voters untrammeled by carelessly made political affiliations with no bad political tendencies to undo and therefore free to form good political habits from the start.”
Mrs. Park said she looked for increasing interest and activity on the part of women voters and a larger part in the coming national conventions than they had four years ago.
Goldberg’s Golden Nuggets:
Readers:
Unfortunately I have no update to submit this edition, but for good cause. On April 22, 2024, my son, River Patrick, was born. I praise my wife for doing the heavy lifting, for a second time, and we cannot be more elated.
Until next time, be well!
Josh
Joshua M. Goldberg
[email protected]
Only One Kiss a Month – 100 Years Ago:
The Buffalo Times
Buffalo, New York
26 April 1924
One Kiss a Month
Newark Girl’s Limit
NEWARK. N.J., April 26. – From now on, Newark girls will be limited to one kiss a month.
Every girl who exceeds that quota must hand over to the treasurer of the “Non-Kissing Club” a fine of 50 cents for each excess kiss, and the half-dollar must be paid by the young man.
LaBarbera’s Lower Court Library:
Dear Readers:
In this week’s case, the Court considered whether additional insured status was triggered under a policy issued by Scottsdale Insurance Company. Here, we are reminded of the importance of complying with the Civil Procedure Laws and Rules. This case deserves some extra attention, as our very own Evan Gestwick represented the winning party!
Until next time…
Isabelle
Isabelle H. LaBarbera
[email protected]
Takes Too Much Time to Cross the Bridge into the US – 100 Years Ago:
The Buffalo Times
Buffalo, New York
26 April 1924
WANTED TRAFFIC ON
BORDER SPEEDED
Falls Organizations Object to Order Which will Cause Congestion
NIAGARA FALLS, April 26. – The Chamber of Commerce, Automobile Club and other interests here have joined forces in an effort to bring about rescinding of a recent order from Washington to the customs authorities which, it is claimed, will act to heavily increase the congestion of automobiles at the international bridges here during the coming summer season. A telegram was sent to Washington yesterday appealing for change in the order.
Under the new regulation motorists entering this country from Canada are required to secure a 30-days permit each time they enter unless their stay on this side is to be for a longer period, in which case they must give a six months surety bond. To write out the permit cards for the thousands daily who cross by auto from Canada on Sundays and rush days for short stays takes time which retards the traffic immensely and increases the congestion which it is sought to eliminate.
The telegram to Washington asks that the customs men here be permitted to return to the practice of taking up the license cards of the entering motorists and holding them as surety until the owners return to Canada. This is the system employed by the Canadian customs men across the river. Under use of this system, it is claimed, fast handling of the traffic is possible, eliminating congestion in large measure. Under the present card system here it takes 30 to 40 minutes for lines of automobiles to work across the bridges from Canada.
North of the Border:
I’m in Toronto this week to speak at the 20th Insurance Coverage Symposium put on annually by Canadian Defence Lawyers, of which I am president. Over one hundred claims officers, adjusters, and lawyers will be in attendance to hear speakers who hail from across the country speak about a myriad of issues impacting Canadian insurance law. The event is a great opportunity to catch up on personal and corporate news. This will be the 16th time that I have attended this Symposium and I am looking forward to it.
Heather
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
[email protected]
Headlines from this week’s issue, attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- First Department Reinstates Declaratory Judgment Action in CVA Coverage Appeal
- Loading and Unloading Claims Fall Within CGL’s Auto Exclusion – Remember to Include That in a Coverage Denial Letter
- Assault and Battery Exclusion Wins the Day
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Carrier Doesn’t Need a Criminal Action Clause in Its Underwriting Materials to Rescind Policy for a Doctor Engaged in Medicare Fraud
- Question of Fact on Reasonablenss of Efforts to Maintain Heat at Unoccupied Premises
- Claim Under Civil Authority for COVID Business Interruption Losses Fails Where There is No Evidence of Physical Damage to Property
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
- Court Erred in Entering Judgment Against Insurer for Total Amount of Verdict Rather than Policy Limit Absent Finding of Bad Faith
- Bad Faith Claim Dismissed Without Prejudice to Replead Where GEICO Tendered Policy Limits Within Six Weeks of Notice
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- Suit Limitations Provision Bars Claim and Related Nonsense
- Landlord’s Additional Insured Status a Question of Fact
- Recognizing “Emerging Majority” Requiring Heightened CUTPA/CUIPA Pleading
KYLE'S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]
- Court Grants Motion for Summary Judgment Dismissing Medical Provider’s Claim for Services as Insured Failed to Appear for Examinations Under Oath
- Court Denies Insurers Motion for Summary Judgment, Arguing that the Injured Party Claimant Was Not an Eligible Injured Person for No-Fault Benefits, Holding Medical Records and Statements Submitted in Support were Not Admissible
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
- Court Honors Policy’s New York Choice of Law Provision When Interpreting Coverage For Hurricane Laura and Delta Damage in Louisiana
STORM’S SIU
Scott D. Storm
[email protected]
- Court Dismisses Causes of Action for Breach of Contract and to Compel Appraisal Due to the Insured’s Breach of the One-Year Suit Limitation Condition, but Not a Bad Faith Claim. Suit Limitation Condition Unambiguously Provides that it is the Date of the Loss or Damage, not the Date of the Alleged Contract Breach, from Which the One Year is Measured. No Waiver or Estoppel Proven
- Court Awarded Actual and Exemplary Damages Because Towing Agreement Did Not Meet the Requirements of the Towing Ordinance and Was Unenforceable
- Damages for Mold Excluded Due to the Language of a Lead-In Clause, Even if Proximately Caused by the Hurricane
- Plaintiff’s Complaint States a Cause of Action for Breach of Contract Where Insurer Failed to Include Sales Tax in its Calculation of ACV When Paying for the Total Loss of a Leased Vehicle
- Insureds Lack Standing to Bring the Class Action Suit for a Condition-Adjustment Claimed to Artificially Reduce Vehicles’ Settlement Values but Class Certified for Alleged Failure to Reimburse Taxes and Fees Necessary to Replace Cars
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- Wrestling Death Not in the Conduct of the Insured’s Landscaping Business Under Businessowners Policy
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
- Court Mandates Arbitration of Claims Brought Under New Jersey Statute Designed to Combat Insurance Fraud
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
- Failure to Contest Statement of Material Facts in Motion for Summary Judgment and File Rule 56(d) Motion Leads to Grant of Summary Judgment on Applicable Policy Limit
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
- Nothing to report from the Appellate Division on Serious Injury. Hopefully we get a case next time.
GOLDBERG’S GOLDEN NUGGETS
Joshua M. Goldberg
[email protected]
- No update for this edition as my family and I are welcoming my son, River Patrick, into our family. Check back in two weeks.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
- Failure to Respond to Notice to Admit Leads to Grant of Motion for Summary Judgment, and Dismissal of Declaratory Judgment Action
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
[email protected]
- When Acting for Unsophisticated Individuals Who are in Business, Insurance Brokers Must Take Steps to Inventory the Corporations Operated by Those Individuals and Determine if the Definition of Insured in the Policies that are Placed Cover Each Entity in the Business Matrix as Well as the Operations Carried on by Those Corporations
Peace on Earth. Good will to all.
Dan
Hurwitz Fine P.C. is a full-service law firm providing legal services throughout the State of New York and providing insurance coverage advice and counsel in Connecticut.
In addition, Dan D. Kohane is a Foreign Legal Consultant, Permit No. 000241, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]
COPY EDITOR
Evan D. Gestwick
[email protected]
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
[email protected]
Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Scott D. Storm
Brian D. Barnas
Ryan P. Maxwell
Joshua M. Goldberg
Kyle A. Ruffner
Katherine A. Fleming
Evan D. Gestwick
Ryan P. O’Shea
Isabelle H. LaBarbera
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
Barnas on Bad Faith
Ryan’s Federal Reporter
Gestwick’s Garden State Gazette
LaBarbera’s Lower Court Library
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
04/23/24 Century Indemnity Company v. The Archdiocese of New York
Appellate Division, First Department
First Department Reinstates Declaratory Judgment Action in CVA Coverage Appeal
Between 1956 and 2003, the Century and its predecessors (“insurers”) issued policies to the Archdiocese of New York and its affiliated parishes and schools (Archdiocese). Insurers are currently defending the Archdiocese, under a reservation of rights, in more than 1500 actions that concern alleged sexual abuse by Archdiocese clergy and other employees against people, particularly young people, which attended its churches, schools and other facilities (“Underlying Actions)”. These actions have been enabled by the Child Victims Act of 2019, and the Adult Survivors Act of 2022, which each opened a revival period for alleged survivors of sexual abuse to bring civil lawsuits that otherwise would have been time-barred.
Insurers commenced this action seeking declaratory judgments that it has no duty to indemnify or defend, respectively, the Archdiocese in the Underlying Actions. The lower court dismissed the case basically holding that it was premature to litigate the issues of coverage.
Supreme Court should not have dismissed the complaint on the finding that it only raised bare legal conclusions. The complaint adequately sets forth factual basis for the declaratory judgments it seeks. The complaint alleges that issues surrounding child sexual abuse in the Archdiocese "reached the Church's highest levels" and that "senior [Church] officials had known for decades that members of the clergy had and were committing sexual abuse," as reflected in newly public sources. The allegations are drafted with "sufficient precision to enable the court to control the case and the opponent to prepare".
In the lower court's view, because the underlying claims allege negligence," it was "obvious that these policies cover the underlying CVA claims." The court discounted the instant complaint's allegations concerning the Archdiocese's longstanding awareness of sexual abuse as "non-specific, common knowledge type allegations against the Catholic Church."
The relevant inquiry is whether the Archdiocese's actions fall within or without the operative policies. The complaint sufficiently alleges that recovery would fall outside the scope of plaintiffs' duties to defend and indemnify if the Archdiocese had knowledge of its employees' conduct or propensities.
Plaintiffs' complaint sufficiently pled a noncooperation defense. The Archdiocese’s argument, that it is the insurer’s ultimate burden to prove noncooperation, is unavailing on this motion to dismiss.
However, plaintiffs' claim based on the known loss doctrine is not viable, as plaintiffs fail to rebut Archdiocese that there was no loss, as opposed to a risk of loss.
Editor’s note: Your editor predicted this outcome in an April 12, 2024, Law360 interview, calling the dismissal “rather abrupt”.
04/14/24 Rock Group NY Corp. v. Certain Underwriters at Lloyd's
Appellate Division, First Department
Loading and Unloading Claims Fall Within CGL’s Auto Exclusion – Remember to Include That in a Coverage Denial Letter
The commercial general liability coverage provided by Underwriters included an "Aircraft, Auto or Watercraft" exclusion, which excluded, as relevant here, coverage for bodily injury arising from "loading and unloading" property from a vehicle.
Supreme Court properly found that the policy's auto exclusion applies here. The underlying claimant was injured while unloading an iron beam from a flatbed truck. As the claimant was handing the beam to his coworker above him, the beam slipped from his coworker's hands and landed on him, causing him to fall on top of the truck. This undisputed testimony was sufficient to establish that "the general nature of the operation of unloading" led to the injuries sustained by the underlying claimant, and thus the Underwriters policy's auto exclusion.
Editor’s Note: The reminder, of course, is for the CGL carrier to cite to the auto exclusion if asked to defend a “loading or unloading” case, or face the wrath of losing that right, under Insurance Law Section 3420(d)(2), if they fail to do so.
04/16/24 Cid v. Kinsale Capital Group, Inc.
Appellate Division, First Department
Assault and Battery Exclusion Wins the Day
The court found that defendant Kinsale Insurance Company had no duty to defend or indemnify based on the "assault and battery" exclusion in the policy issued to La Chimosa, a bar and restaurant. The complaint's negligence allegations could not survive because those claims are deemed to have arisen from the assault and are thus subject to the assault and battery exclusion.
That is consistent with the Court of Appeals holding in Mount Vernon Fire Ins. Co. v Creative Hous ., 88 NY2d 347, 353 [1996]. The result may well have been different if the only applicable exclusion was “Exclusion a” in the CGL policy.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
04/23/24 Certain Underwriters at Lloyds London v. Martin
Appellate Division, First Department
Carrier Doesn’t Need a Criminal Action Clause in Its Underwriting Materials to Rescind Policy for a Doctor Engaged in Medicare Fraud
Plaintiff commenced this action, and moved for summary judgment, seeking to rescind a disability policy, ab initio, based upon a material misrepresentation in the application. Apparently, Dr. Martin, a practicing physician, was implicated in a Medicare fraud scheme between 2015 and 2019. During which time, Dr. Martin apparently submitted the application for coverage.
Dr. Martin opposed the rescission on the basis that Lloyds was unable to produce underwriting guidelines establishing that it would not have issued the policy. However, the Court was apparently persuaded by the argument that regardless of underwriting guidelines which spoke directly to this situation, Lloyds would have never issued a policy to an individual who was actively committing a crime that would ultimately impact his ability to proceed with his profession.
04/18/24 Zimmerman v. Leatherstocking Coop. Ins. Co.
Appellate Division, Third Department
Question of Fact on Reasonablenss of Efforts to Maintain Heat at Unoccupied Premises
Plaintiff’s home in Saratoga Springs sustained damage after a radiator pipe burst on the second floor of the dwelling, and water cascaded through the first floor and basement. The pipe failed when the water inside it froze due to freezing conditions inside of the house. For approximately six months prior to the loss, plaintiff had left the residence and was on an extended trip in India. During that time, however, the premises were listed for sale and a realtor had visited the premises on several occasions.
Plaintiff presented his claim for coverage to Leatherstocking who, in turn, disclaimed by relying on an exclusion which removed coverage for loss or damage arising from frozen pipes while the premises was unoccupied, and the insured did not undertake reasonable care to ensure heat or drain the system of all liquids. Plaintiff challenged Leatherstocking’s denial, and eventually moved for summary judgment. Leatherstocking cross-moved, and the trial court denied both applications on a question of fact.
On appeal, Plaintiff argues that it met its burden and is entitled to summary judgment. As an initial matter, the Appellate Division notes that the trial court applied the wrong standard of proof of the application of the exclusion. The trial court noted that the insurer bore the burden of proof on the application of the burst pipe exclusion. The Appellate Division disagreed and noted that on summary judgment the burden of proof remains on the movant who must demonstrate sufficient proof that all aspects of the claim are covered under the policy. This, in the eyes of the Third Department, extended to “proof ‘that no exclusion precluded coverage’.”
On this, the plaintiff failed to meet his burden.
For the exclusion, itself, the Court identified the difference of opinion over the proper interpretation of the term “reasonable care.” The Appellate Division cited to the Merriam Webster dictionary definition which provided “the care that an ordinarily reasonable and prudent person would use under similar circumstances.” As such, the Court noted that while there may be a disagreement over what constituted “reasonable care,” the term as applied in the insurance policy was clear and unambiguous.
The Appellate Division then addressed whether “reasonable care” had been shown by the plaintiff. There was no dispute that the home was “unoccupied” at the time of the loss. Thus, the only question is whether his actions of leaving the thermostats at 55 degrees was reasonable under the circumstances at play in this case.
In opposition, Leatherstocking adduced proof that the boiler may have stopped working at some point near or on December 21, 2018 (13 days before the loss was discovered), when utility bills showed no gas use at the premises. And, while the realtor submitted a letter advising that he, and his colleagues, checked on the general systems of the house when they were inside of it, at his later deposition he admitted that he was not a house sitter or caretaker. Further, aside from showings, his engagement with the property was to drive by occasionally to observe the condition of the premises from the outside.
As such, the Court noted that a question of fact existed as to whether plaintiff’s actions involving the thermostat and the realtor were sufficient to qualify as “reasonable care.”
04/18/24 Century 21 Dept. Stores, LLC v. Starr Surplus Lines Ins. Co.
Appellate Division, First Department
Claim Under Civil Authority for COVID Business Interruption Losses Fails Where There is No Evidence of Physical Damage to Property
Plaintiff recovered up to $5,000,000 for business interruption losses incurred as a result of COVID-19 related disruptions. The coverage was found under an endorsement entitled “Murder, Suicide and Infectious and Contagious Diseases.” In addition to this endorsement, the insured also argued it was entitled to coverage under the Civil Authority extension of its business interruption coverage form.
The policy provided business interruption when the property incurs “all risks of physical loss or damage.” This has been interpreted to mean that coverage is only triggered “where there is ‘direct physical loss or damage’ to the insured property.” And, further, the Court of Appeals has stated unequivocally that risks of the presence of contagions within the premises is not “property damage.”
In the context of the Civil Authority coverage, while the insured property need not sustain property damage, the reality is that the access must be prohibited as a result of “direct physical loss or damage to property nearby.” Here, stated directly, the COVID-19 virus did not create any property damage which prohibited access to the insured property. It is the existence of physical damage, somewhere, that triggers coverage. Where the insured could not meet that burden, its application for summary judgment failed.
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
04/17/24 State Farm Mutual Automobile Insurance Company v. Finson
District Court of Appeal of Florida, Second District
Court Erred in Entering Judgment Against Insurer for Total Amount of Verdict Rather than Policy Limit Absent Finding of Bad Faith
Finson sustained injuries as a result of an automobile accident with an underinsured motorist. He filed a one-count complaint against State Farm, his insurer, seeking UM benefits pursuant to his insurance policy, of which the policy limits were $100,000. State Farm admitted coverage but otherwise denied Finson's claim. The parties proceeded to a jury trial on the issues of causation and damages, at which the jury found that the automobile accident was the legal cause of Finson's injury and awarded him damages for past and future medical expenses and past and future pain and suffering in the total amount of $1,094,192.18.
After trial, State Farm moved to conform the judgment to the $100,000 policy limits, arguing that the judgment could not exceed the policy limits absent a judicial determination of bad faith. Finson filed a motion for leave to amend to add a bad faith claim. The trial court granted the motion for leave to amend but denied State Farm’s motion to conform the final judgment to the policy limits. The court then entered judgment in favor of Finson in the amount of $1,052,593.22 (the net verdict amount after setoffs) and provided for the accrual of post-judgment interest. However, the trial court limited execution on the judgment to $100,000.
The appellate court reversed and concluded it was an error to enter the final judgment in the net amount of the jury verdict. It is against the insurer, not the tortfeasor, that the was entered, and the cause of action was based on the UM insurance policy; a first-party bad faith claim had not even yet accrued before the time of the judgment. Indeed, the insured's underlying action for insurance benefits against the insurer must be first resolved in favor of the insured before the cause of action for bad faith can accrue. Entry of judgment against the insurer in the full amount of the jury's determination of the tortfeasor's liability to the insured when that liability exceeds the UM policy limits does not make sense in a UM action and contravenes Florida law.
The proper method is for the judgment to be for the amount of the policy limits and to include the amount of the jury’s verdict. Finson would only be entitled to the total amount of the jury’s verdict if there is a finding of bad faith. Additionally, the court erred in awarding post-judgment interest on the total amount of the verdict.
04/12/24 Jimenez v. GEICO Secure Insurance Company
United States District Court, District of Nevada
Bad Faith Claim Dismissed Without Prejudice to Replead Where GEICO Tendered Policy Limits Within Six Weeks of Notice
On May 22, 2017, Jimenez caused a vehicle accident that killed Wolford. The police report for the accident noted that Jimenez's blood alcohol content was above the legal limit, he was driving at around 75 miles per hour in a 35 miles per hour zone, he ran a stop sign and slammed into Wolford's vehicle, and Wolford died from blunt force trauma. The police report included witness statements confirming those facts. Jimenez was hospitalized and then incarcerated. The day after the accident, the Las Vegas Review Journal (LVRJ) reported on the accident and Jimenez's arrest on a fatal DUI charge.
On June 14, 2017, Jimenez’s parents’ insurer (Farmers) contacted GEICO to inform it Farmers would not cover the accident. That day, GEICO opened a claim and began to investigate. By June 26, 2017, GEICO had obtained the LVRJ article and the police report, but it did not initiate settlement negotiations. On July 24, 2017, an attorney representing Wolford's estate contacted GEICO. The next day, GEICO tendered $15,000 to Wolford's son using the contact information GEICO had obtained in June. Wolford's son rejected the offer. In April 2019, the Wolford estate sued Jimenez in state court and obtained a jury verdict against him for over $11 million. Wolford commenced a bad faith claim against GEICO.
GEICO moved to dismiss the bad faith cause of action. Jimenez claimed that GEICO committed bad faith because it failed to affirmatively contact the Wolfords to settle the claim. GEICO argued that the bad faith claim failed to state a cause of action because there was no allegation the Wolfords demanded to settle within the policy limit or were ever interested in settling. The Supreme Court of Nevada has not decided whether a settlement demand is a prerequisite for a bad faith claim.
The court found that even if a settlement demand is not required for a bad faith claim, Jimenez had not plausibly alleged a bad faith claim. GEICO began its investigation immediately and determined Jimenez was at fault within two weeks. There were no allegations that GEICO had the opportunity to settle during this time. More importantly, when the Wolfords reached out, GEICO tendered the policy limits the next day. Less than six weeks passed between Farmers notifying GEICO of the claim and GEICO tendering the limits, and there was no allegation that the Wolfords would have accepted the $15,000 to fully settle the claim. As such, the bad faith claim was dismissed.
The court also dismissed the claim pursuant to the Nevada Unfair Claims Settlement Practices Act.
However, Jimenez was given leave to replead by May 15, 2024.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
04/16/24 Travinski v. General Ins. Co. of Am.
Appellate Court of Connecticut
Suit Limitations Provision Bars Claim and Related Nonsense
The Appellate Court affirmed summary judgment, as the homeowner first presented his property damage claim more than two years after the loss. The plaintiffs discovered that the doors to the back porch were not closing properly. A contractor discovered that the floor joists were rotted and moldy. The plaintiffs filed a claim which, following an investigation, was denied because the policy did not cover loss due to rot caused by water damage. The plaintiffs sued for breach of contract and bad faith.
Interestingly, the plaintiffs not only sued their insurer, General Insurance, but also Safeco, Liberty Mutual, and Liberty’s holding company arguing that they all were involved in the denying the claim. The trial court granted summary judgment, finding that the policy was issued by General Insurance, that the suit was brought more than two years after the claim was reported to the carrier, and that without a wrongful denial of coverage there can be no bad faith.
On appeal, oddly, the insureds did not dispute the that their breach of contract claim was barred by the suit limitation provision, but rather that the trial court improperly determined that no genuine issue of material fact that the policy was issued by General Insurance or that the policy attached to the motion was “the policy.” They argued that all of their dealings were with Safeco and that the policy attached to the summary judgment motion was “a false sworn affidavit which misrepresented” who were the insurers. The Appellate Court found that the policy [upon which the insureds were seeking coverage] was issued by General Insurance and that the plaintiffs failed to meet their burden to establish a triable issue of material fact. That the denial letter sported the Safeco logo and the words “A Liberty Mutual Company,” did not create a question of fact because the letter, centered at the was “General Insurance Company of America.” The plaintiffs’ argument that they never received the policy lacked merit in the absence of any evidence that they had asked for a copy.
The Appellate Court also rejected the claim that Safeco and Liberty were conducting unlicensed business in Connecticut. Since neither entity issued the policy, summary judgment was properly granted. Further, because the unauthorized insurers were not seeking relief under the policy, there was no obligation to post a bond, pursuant to CGL § 38a-27(a).
04/18/24 Akdeniz v. Utica First Ins. Co.
Superior Court of Connecticut, New Haven
Landlord’s Additional Insured Status a Question of Fact
The plaintiff (since deceased) was injured when a basement ladder slipped, and he fell. Plaintiff was an employee of the tenant, a West Haven pizzeria, and sued the building owner for premises liability. The landlord tendered the suit to Utica First, the tenant’s insurer, seeking additional insured coverage. The carrier denied defense and indemnity, claiming that the policy failed to add the landlord as an AI. The plaintiff entered into a $1 million consent judgment with the landlord but settled for $500,000 as the landlord’s carrier Tower National, had entered liquidation. Tower assigned its rights against Utica First to the plaintiff. This suit followed.
Plaintiff argued that Utica First must pay the judgment, as it breached its duty to defend and indemnify the landlord. The lease agreement, it argues, required that the tenant obtain a policy with liability limits of $1 million and name the landlord as an AI. Utica First was aware that an additional insured was to be named on the policy, however the court noted, no additional information was provided regarding the name of the landlord during the application process. The application was completed by Utica First’s duly appointed agent, Northeast Coverage, but only provided “Additional Insured – General” with a premium of $30.00.”
Utica First argued that the information on the application did not request coverage for the landlord and that the landlord did not qualify as an insured under the terms of the policy. [Unfortunately, the court does not cite the policy language to help us understand how a landlord with an insured contract does not on the face of the policy qualify as an AI.] Utica First also claimed that even if the landlord was an insured, that the lease was an incidental contract and there is no coverage for an injury to an employee.
The court concluded that there are issues of fact precluding summary judgement for either side. We are sure to follow this matter through trial and will report back.
04/11/24 Barrett v. Allied World Specialty Ins. Co.
Superior Court of Connecticut, New Britain
Recognizing “Emerging Majority” Requiring Heightened CUTPA/CUIPA Pleading
An important, yet undecided, debate continues among Connecticut’s trial courts as to the pleading standards for an insured to allege an actionable statutory bad faith claim under the CUTPA/CUIPA framework. The court noted that there is an “emerging majority of superior courts that have required the plaintiff to plead more than broad business practices in order to survive a motion to dismiss.”
The Connecticut Supreme Court holds that unless “an insurance related practice violates CUIPA or, arguably, some other statute regulating a specific type of insurance related conduct, it cannot be found to violate any public policy and, therefore, it cannot be found to violate CUTPA.” State v. Acordia, Inc. 310 Conn. 37. There can be no CUIPA violation if the offending practice is not within the enumerated list. Section 38a-816 (6) of CUIPA defines unfair insurance claim settlement practices and further provides that the enumerated acts must be committed or performed “with such frequency as to indicate a general business practice....” § 38a-816(6). The Supreme Court has recognized, therefore, that “a CUTPA claim based on an alleged unfair claim settlement practice prohibited by § 38a-816 (6) require[s] proof, as under CUIPA, that the unfair settlement practice had been committed or performed by the defendant with such frequency as to indicate a general business practice.” (Internal quotation marks omitted.) Lees v. Middlesex Ins. Co., 229 Conn. 842, 850, 643 A.2d 1282 (1994). An insurer's alleged conduct in the handling of a single insurance claim, without other allegations or evidence of misconduct by the insurer in the processing of any other claim, does not rise to the level of a “general business practice” as required by § 38a-816 (6).
The question, then, is what facts an insured must allege to establish a prima facie case of a general business practice. Allied argued that the general trend among the trial courts is to strike CUTPA/CUIPA claims where the plaintiff has merely inserted “the magic words” of the statute without any factual support. The plaintiff, in contrast, denied that there is any heightened pleading standard.
Following the general trend, the court adopted the reasoning of recent court decisions holding that conclusory allegations of a general business practice are inadequate. The court, citing Gomez, wrote that a motion to strike admits all facts well pleaded; it does not admit legal conclusions, or the truth or accuracy of opinions stated in the pleadings. “In applying these well-established principles, the court rejected vague and broad allegations that contain the magic words – “and others” – or vague allegations referring to “insureds” which failed to provide any factual circumstances supporting the notion that the defendant engaged in other instances of misconduct with other insureds.” The court referred to other recent trial level decisions holding likewise.
As a result, the court dismissed the CUTPA cause of action, finding that the insured’s broad, conclusory, non-specific allegations, that failed to cite to other insureds, contained no factual allegation in support of its conclusions. “[A]n isolated claim of misconduct arising from the plaintiff’s claim does not allege a legally sufficient CUTPA/CUIPA claim.”
KYLE’S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]
03/14/24 GPLW Acupuncture P.C. v. Nationwide Mut. Ins. Co.
Appellate Term, Second Department
Court Grants Motion for Summary Judgment Dismissing Medical Provider’s Claim for Services as Insured Failed to Appear for Examinations Under Oath
In this action by a provider to recover assigned first-party no-fault benefits the insurer brought a motion for summary judgment to dismiss the complaint, which sought to recover claims for various services rendered, on the ground that the plaintiff failed to appear for their scheduled examinations under oath (EUOs).
The Appellate term determined that, for each bill at issue, the insurer established prima facie that it timely mailed initial and follow-up EUO scheduling letters. Further, the court held that the plaintiff failed to appear for the scheduled EUOs, and the insurer then issued timely denials of the claims. The court also addressed the portion of the District Court’s holding that there was an issue of fact as to whether the EUOs were scheduled to be held in a location reasonably convenient for plaintiff, noting that this requirement was satisfied because the EUO scheduling letters offered to let plaintiff appear virtually.
Accordingly, since the plaintiff failed to raise a triable issue of fact in response to defendant's prima facie showing, the court held that the defendant insurer was entitled to summary judgment dismissing the complaint. Therefore, the Appellate term reversed the lower court’s holding and dismissed the complaint on the grounds that plaintiff failed to appear for duly scheduled examinations under oath.
03/15/24 Longevity Med. Supply, Inc. v. Nationwide Ins. Co.
Appellate Term, Second Department
Court Denies Insurers Motion for Summary Judgment, Arguing That the Injured Party Claimant Was Not an Eligible Injured Person for No-Fault Benefits, Holding Medical Records and Statements Submitted in Support were Not Admissible
In this action by a provider to recover assigned first-party no-fault benefits, the defendant insurer moved for summary judgment dismissing the complaint on the ground that the assignor of benefits was not an eligible injured person (EIP) for receipt of no-fault benefits because his injuries did not arise from the use or operation of an insured vehicle. Rather, the insurer argued that their injuries were the result of an assault after the motor vehicle accident.
The insurer relied on the truth of insured’s factual assertions contained within uncertified records of the hospital, where he was admitted one hour after the subject accident. Conceding that the statements were hearsay, the attorney for the insurer argued that they were admissible as exceptions as party statements and/or statements relevant to diagnosis and treatment. The Civil Court denied the insurer’s motion.
The Appellate Term held that a review of the records revealed that the insurer failed to establish, as a matter of law, that plaintiff's assignor was not an EIP as defined by the Insurance Law and no-fault regulations. Hospital and medical records are admissible to support a summary judgment motion if the records are certified pursuant to CPLR 4518 (c) or the proponent of the records submits foundational testimony pursuant to CPLR 4518 (a). However, in this case, the court agreed with the plaintiff that the records were not certified, and the insurer failed to establish a proper foundation for their admissibility. Therefore, the statements relied upon by were not admissible and the insurer failed to proffer competent evidence to establish its defense that plaintiff's assignor was not an EIP.
Accordingly, the court held that the insurer’s motion for summary judgment was properly denied. Further, the court pointed out that, even if the records and the statements contained therein were admissible, the insurer would still not be entitled to summary judgment dismissing the complaint, as its motion failed to eliminate all material questions of fact as to whether the insured’s injuries were the result of an assault and not the result of the use or operation of a motor vehicle.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
04/17/24 Ram Krishana, Inc. v. Mt. Hawley Ins. Co.
United States District Court, S.D. New York
Court Honors Policy’s New York Choice of Law Provision When Interpreting Coverage for Hurricane Laura and Delta Damage in Louisiana
The plaintiff in this action was doing business as “Motel 6 Sulphur,” which operated two commercial properties in Sulphur, Louisiana. Motel 6 had paid $22k in insurance premiums to Mt. Hawley from a bank account in Louisiana for $3,975,000 in insurance policy limits for these properties. The policy contained both a choice-of-law clause and a forum-selection clause as follows:
“All matters arising hereunder including questions related to the validity, interpretation, performance and enforcement of this Policy shall be determined in accordance with the law and practice of the State of New York (notwithstanding New York's conflicts of law rules).
It is agreed that in the event of the failure of the Company to pay any amount claimed to be due hereunder, any Named Insured, any additional insured, and any beneficiary hereunder shall submit to the jurisdiction of a court of competent jurisdiction in the State of New York, and shall comply with all the requirements necessary to give such court jurisdiction. Any litigation commenced by any Named Insured, any additional insured, or any beneficiary hereunder against the Company shall be initiated in New York. Nothing in this clause constitutes or should be understood to constitute a waiver of the Company's right to remove an action to a United States District Court.”
Following Hurricane Laura, Motel 6 notified Mt. Hawley of a claim for damages sustained by the insured properties and during Mt. Hawley’s investigation, Hurricane Delta caused additional damage to the properties, resulting in a second claim. Although Mt. Hawley paid $315,040.56 in damages, Motel 6 contended that more was owed, and this lawsuit ensued. Well, not exactly.
Motel 6 filed suit against Mt. Hawley originally in the United States District Court for the Western District of Louisiana on August 27, 2021, asserting a claim for breach of contract and a claim for violations of Louisiana’s insurance statutes, including a bad faith claim. However, Mt. Hawley answered the complaint and moved to transfer the case to the Southern District of New York, pursuant to 28 U.S.C. §1404(a), based upon the policy’s forum-selection clause. After an initial denial, Mt. Hawley sought a writ of mandamus from the Fifth Circuit (never thought I’d see that in an insurance case), which was granted, and the case transferred.
Following discovery, both parties advised the court that “the choice of law issue is very significant for the progress of this case,” and the court agreed with them that “in the interests of efficient sequencing of issues and potential facilitation of settlement discussions, the parties should initially cross-move for partial summary judgment on the issue of choice of law.”
The SDNY recognized that “[t]he validity of a contractual choice-of-law clause . . . is a threshold question that must be decided not under the law specified in the clause, but under the relevant forum's choice-of-law rules governing the effectiveness of such clauses,” requiring it to answer whether New York or Louisiana is the “relevant forum [].” And while the Klaxon rule usually requires “a federal court exercising diversity jurisdiction applies the choice-of-law rules of the state in which it sits,” that rule is not absolute. “There is an exception to the Klaxon rule: when a case is transferred from one district to another under 28 U.S.C. § 1404, the transferee court applies the choice-of-law rules of the state in which the transferor court sits.” That said, however, this exception has its own exception in what can only be described as an UNO reverse card: “when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue's choice-of-law rules.” Applying Klaxon and this exception-exception under Atlantic Marine, New York governs the choice-of-law rules. But we are not out of the weeds just yet.
“Under New York choice of law rules, the first inquiry in a case presenting a potential choice of law issue is whether there is an actual conflict of laws on the issues presented,” and here, there is as the parties concede. While Mt. Hawley argued that N.Y. Gen. Oblig. Law §5-1401 required the SDNY to honor its choice-of-law provision, the SDNY ultimately went with what was behind door number two: that New York decisional law alone requires that “where parties include a New York choice-of-law clause in a contract, such a provision demonstrates the parties' intent that courts not conduct a conflict-of-laws analysis” and instead simply apply New York substantive law.” Specifically, under the New York Court of Appeals decision in Ministers, regardless of whether a contract falls within N.Y. Gen. Oblig. Law §5-1401, “New York courts should not engage in any conflicts analysis where the parties include a choice-of-law provision in their contract,” since doing so “would contravene the primary purpose of including a choice-of-law provision in a contract - namely, to avoid a conflict-of-laws analysis and its associated time and expense.”
While Motel 6 argued that La. Stat. Ann. § 22:868 generally provides that “[n]o insurance contract delivered or issued for delivery in [Louisiana] and covering subjects located, resident, or to be performed in [Louisiana] . . . shall contain any condition, stipulation, or agreement . . . [r]equiring it to be construed according to the laws of any other state or country,” that statute has no application in a case governed by New York choice-of-law rules under Ministers.
Thus, the SDNY concluded that it would be applying New York substantive law to both Motel 6’s breach-of-contract and bad faith claims.
STORM’S SIU
Scott D. Storm
[email protected]
04/08/24 Costello & Pytel v. State Farm
United States District Court, E.D. Pennsylvania
Court Dismisses Causes of Action for Breach of Contract and to Compel Appraisal Due to the Insured’s Breach of the One-Year Suit Limitation Condition, but Not a Bad Faith Claim. Suit Limitation Condition Unambiguously Provides That It Is the Date of the Loss or Damage, Not the Date of the Alleged Contract Breach, From Which the One Year Is Measured. No Waiver or Estoppel Proven
[Abridged] This action was brought by Plaintiffs Costello and Pytel against their insurer, State Farm Fire and Casualty Company, to recover damages to their home after fire and smoke damage. Plaintiffs allege that Defendant failed to pay full benefits under the insurance policy and breached its contractual obligations to participate in an appraisal process after the parties did not reach agreement on the value of their claim. Plaintiffs bring claims for breach of contract and bad faith and ask this Court to compel the appraisal process.
Defendant's Fed. R. Civ. P. 12(b)(6) Motion to Dismiss is granted as to the breach of contract and compelled appraisal claims and denied as to the bad faith claim.
Defendant moves to dismiss Plaintiffs' breach of contract claim and petition to compel appraisal based on the one-year suit limitation clause in the Policy. The Commonwealth of Pennsylvania has required that all fire insurance policies issued contain a one-year suit limitation clause. See 40 Pa.C.S. § 636(2). The one-year limitation is valid and reasonable. Furthermore, "the validity of this statutorily mandated limitation of suit provision has been consistently upheld."
Here, Plaintiffs' loss to their Property occurred on August 12, 2020. Under the terms of the Policy, the limitations period began to run on that date. Plaintiffs filed their Complaint on December 21, 2023, more than three years after the date of loss or damage. As such, Plaintiffs' breach of contract claim is time-barred.
Plaintiffs' argument that their breach of contract claim is not time barred because Plaintiffs filed suit within one year of the date that Defendant breached its contract with Plaintiffs by improperly denying Plaintiffs' right to demand appraisal is unavailing. The Policy unambiguously provides that it is the date of the loss or damage, not the date of the alleged contract breach, which starts the clock for purposes of the one-year statute of limitations: "any action by any party must be started within one year after the date of loss or damage." This provision "cannot fairly be interpreted to allow one year from the date of an insurer's alleged breach of the insurance contract, as Plaintiffs argues." This Court further agrees with Defendant that Plaintiffs' petition to compel appraisal arises from their rights under the Policy and is therefore also barred by the one-year statute of limitations.
The limitations period may be disregarded, however, "when the conduct of the insurer constitutes a waiver or estoppel." Thus, this Court next examines whether Defendant's conduct constitutes a waiver or estoppel of the limitations period such that Plaintiffs' breach of contract claims and petition for appraisal survive dismissal.
"Waiver is the voluntary and intentional abandonment or relinquishment of a known right." "Waiver may be established by a party's express declaration or by a party's undisputed acts or language so inconsistent with a purpose to stand on the contract provisions as to leave no opportunity for a reasonable inference to the contrary." Estoppel, by contrast, "refers to acts by the insurer which excuse the insured's failure to act timely." Estoppel requires "an affirmative act by the insurer by which the insured was misled and prejudiced." "The case law makes clear, furthermore, that the delinquent plaintiff must come forward with specific evidence supporting the claim of waiver or estoppel."
Plaintiffs have not come forward with any such evidence here. This Court cannot find waiver or estoppel to apply where Plaintiffs have made no assertion that Defendant (1) made any express decision not to rely on the suit limitation clause or (2) committed any affirmative act to mislead or prejudice Plaintiffs prior to the expiration of the one-year limitation period.
In the absence of waiver or estoppel, Plaintiffs' failure to timely file suit requires this Court to grant Defendant's Motion to dismiss as to Plaintiffs' breach of contract claim and petition to compel appraisal.
Under Pennsylvania's bad faith statute, a court may award compensation to an insured if it finds that "the insurer has acted in bad faith toward the insured." 42 Pa. Cons. Stat. § 8371. Bad faith on the part of the insurer is defined as:
[A]ny frivolous or unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be fraudulent. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith.
It is well established that "a claim for bad faith brought pursuant to § 8371 is a separate and distinct cause of action and is not contingent on the resolution of the underlying contract claim." The bad faith claim "is not affected by the one-year limitations period in the insurance contract." Therefore, a plaintiff "may succeed on its bad faith claim even if it fails on the underlying breach of contract claim."
To state a claim for bad faith under Pennsylvania law, a plaintiff must show (1) that an insurer lacked a reasonable basis for denying benefits; and (2) that the insurer knew or recklessly disregarded its lack of reasonable basis. However, § 8371's bad faith "is not [strictly] restricted to an insurer's bad faith in denying a claim," but rather "encompasses a wide variety of objectionable conduct," including "lack of good faith investigation into facts, and failure to communicate with the claimant."
Here, Plaintiffs have adequately alleged that Defendant lacked a reasonable basis for denying their right to appraisal. Plaintiffs allege that they took out a policy from Defendant that covered fire damage to the Property, the Property suffered fire damage while the Policy was in effect, Defendant refused to pay the full amount for the covered damage and then subsequently refused to engage in the appraisal process. Defendant fails to offer any reasonable basis for its refusal to comply with the Policy's appraisal provision.
Where, as here, the policy in question does not designate a time frame for demanding appraisal, "Pennsylvania law requires that the appraisal demand be made within a reasonable time depending upon the circumstances at the time it was made."
Here, as alleged by Plaintiffs, Defendant sent Plaintiffs a letter on August 12, 2022, exactly two years after the date of loss, and exactly 1 year after the statute of limitations under the Policy expired, indicating that it would pay only a portion of the Increased Dwelling Limit. It was this August 12, 2022, decision by Defendant that prompted Plaintiffs to demand appraisal four months later on December 19, 2022. The Policy does not designate a particular time frame in which Plaintiffs must demand appraisal. On these facts, this Court finds that Plaintiffs' demand for appraisal in December 2022— approximately twenty-eight months after the date of loss but only four months after the date of impasse between Plaintiffs and Defendant regarding the amount due—was reasonable, and that Plaintiffs adequately pled that Defendant lacked a reasonable basis for refusing to participate in the appraisal.
Given the evidence of ongoing discussions between the parties in the Summer — Fall 2022 timeframe, and in consideration of the early stages of this litigation, this Court is reluctant to conclude that the request for appraisal, though 28 months after the date of loss, was untimely.
Additionally, the allegations in the Complaint allow the proper inference that Defendant knew or recklessly disregarded the lack of a reasonable basis for refusing to participate in the appraisal process. Plaintiffs allege that Defendant misrepresented the Policy's "Suit Against Us" provision to apply to appraisal when it applies only to lawsuits (and when it was clear that Plaintiffs were only invoking their appraisal rights under the Policy), and that Defendant refused to participate in appraisal on that basis. Defendant's sole reason for refusing to engage in the appraisal process— that the Policy's "Suit Against Us" provision applied to appraisals and that the statute of limitations for filing suit had expired — is unavailing. Defendant does not offer any argument in its Motion to Dismiss or Reply as to why the expired statute of limitations for filing suit affects Defendant's obligation to participate in the appraisal process under the Policy. Plaintiffs have thus sufficiently stated a plausible bad faith claim under Pennsylvania law. Accordingly, this Court declines to dismiss the bad faith claim at this time.
01/02/24 GEICO Advantage Ins. Co. v. Modern Auto Crafters
Commonwealth Court of Pennsylvania
Court Awarded Actual and Exemplary Damages Because Towing Agreement Did Not Meet the Requirements of the Towing Ordinance and Was Unenforceable
[Abridged] Modern Auto Crafters appeals from an Order of the Court of Common Pleas of Philadelphia County (trial court) finding in favor of GEICO as subrogee of its insured, Dr. Monil Patel (Dr. Patel). Modern Auto contends it is not subject to Philadelphia Code § 9-605, (the "Towing Ordinance") because it is not a tow company, it received consent from Dr. Patel to tow his vehicle to its facility, and, as such, the fee caps in the Towing Ordinance do not apply. Upon review, we affirm.
The trial court found the facts as follows:
On September 4, 2017, Dr. Patel caused a motor vehicle accident in Philadelphia. Before the ambulance or police arrived, a private tow truck operator repeatedly approached Dr. Patel and sought his consent to tow his car to Modern Auto, a body shop and storage facility in Upper Darby, Delaware County. When Dr. Patel declined to give consent at the accident scene, the tow truck operator followed him to the emergency room and there secured Dr. Patel's signature on a one-page Towing Agreement authorizing the tow from Philadelphia to Delaware County.
The Towing Agreement was drafted by a lawyer on behalf of Modern Auto. Modern Auto distributed the form agreement to approximately 40 tow truck operators in the hope that they would tow disabled vehicles to Modern Auto's Delaware County facility, where the body shop could store the cars and repair them if they were not total losses.
In this case, GEICO, was presented with a bill by Modern Auto for $1,820.10. The bill included charges for storage, "administrative," "late fee," "clean up," tow, "transport," "special equipment," "diagnostics/check-in sheet," "preservation," and "hazardous handling." GEICO paid the bill under protest and brought this action to recover the towing, storage and related charges by Modern Auto.
In its complaint, GEICO alleged that Modern Auto violated the Towing Ordinance by engaging in solicitation, charging fees greater than the maximum allotted for storage, charging fees greater than the maximum allotted for repairs, and charging other excessive fees in its invoice. Specifically, Modern Auto charged the following fees: storage at $780.00; administrative at $135.00; lot at $95.00; clean up at $75.00; tow at $175.00; transport at $125.00; special equipment at $75.00; diagnostics/check-in sheet at $125.00; preservation at $125.00; hazardous handling at $75.00; and sales tax of 6% at $35.10. In sum, Modern Auto charged $1,820.10. This action originally proceeded to arbitration, where Modern Auto prevailed.
GEICO filed an appeal, and the trial court held a bench trial at which the trial court found in favor of GEICO awarding $1,820.10 in compensatory damages and $2,000.00 in exemplary damages. Based upon the terms of the Towing Ordinance, the trial court concluded that Modern Auto is a towing company and accordingly is subject to the Towing Ordinance. The trial court further concluded the Towing Agreement drafted by Modern Auto did not meet the requirements of the Towing Ordinance, and Modern Auto was subject to the fee caps in the Towing Ordinance because Dr. Patel did not consent to the tow. Specifically, the trial court reasoned:
While Modern Auto does not own the tow truck that conveyed Dr. Patel's car from Center City Philadelphia to Upper Darby, Delaware County, the Towing Agreement at issue was drafted for Modern Auto's benefit. The Towing Agreement does not contain the name, address or phone number of any towing vendor. The Towing Agreement further provides that the owner of the vehicle is responsible to Modern Auto for the towing fee.
The Towing Ordinance provides that "towing" constitutes "moving a vehicle by another vehicle for which a service charge is made, either directly or indirectly, including any dues or other charges of clubs or associations which provide towing services." An entity that conducts the business of "towing" as defined by the ordinance is a "towing company."
The court finds that the placement of the phrase "either directly or indirectly" is ambiguous as it is unclear whether it relates to the moving of the vehicle or to the service charge. One would expect if it were intended to apply to the service charge only, there would be no comma preceding that clause. The phrase is material because, if it modifies "moving a vehicle," Modern Auto would be subject to the Towing Ordinance by indirectly conducting the business of towing through the many towing operators it solicits and provides with form agreements.
It is a well-established principle of statutory construction that when the words of a statute are ambiguous, the intention of the legislative body may be ascertained by reference to the object the law was intended to attain. In this case, the Philadelphia City Council explicitly stated that the purpose of the Towing Ordinance is to protect the public against "fraud, discrimination, deception and similar abuses" in connection with the towing of vehicles disabled by accident or collision.
At best, the Towing Agreement used by Modern Auto is deceptive. Notwithstanding the requirements of the Towing Ordinance, it does not identify the towing company, its license number, or the registration number of the towing vehicle; it contains no fee schedule other than stating the towing fee of "$150.00-$185.00"; it does not state that the fees are certified by the [Philadelphia Parking Authority (PPA)]; it does not provide for the release of the vehicle to the owner upon payment of the amount due for towing and storage, in accordance with the statutorily required schedule of charges; and it does not limit the scope of the agreement to towing and storage.
Modern Auto clearly seeks to benefit from these deceptive practices and to prey on accident victims when they are most vulnerable.
The Towing Agreement is unenforceable because it does not comply with the requirements of the Towing Ordinance to identify the towing company or fees....
Thereafter, Modern Auto timely appealed arguing it is not a tow company under the Towing Ordinance. Modern Auto also contends the trial court erred in concluding that Dr. Patel did not consent to the tow. Further, because Dr. Patel consented to the tow, the consensual tow provisions of the Towing Ordinance should apply, and the fee caps in the Towing Ordinance should not apply.
The Towing Ordinance provides:
(2) Definitions. In this Section the following definitions apply:
(a) Towing Company. Any person, partnership, corporation, fiduciary, association or other entity owning, operating or conducting the business of towing.
(b) Towing. The moving or removing or the preparation therefor of a vehicle by another vehicle for which a service charge is made, either directly or indirectly, including any dues or other charges of clubs or associations which provide towing services.
(c) Tow Truck or Towing Vehicle. A vehicle that tows, carries or removes a vehicle for a fee, charged either directly or indirectly, including any dues or other charges of clubs or associations which provide towing services....
Philadelphia Code § 9-605(2)(a)-(c) (italics removed) (emphasis added).
We agree with the trial court that the definition of a "towing company" is one that encompasses an entity that is directly or indirectly in the business of moving or removing a vehicle by another vehicle for which a service charge is made.
Modern Auto's owner testified that Modern Auto had its attorney draft towing agreements, such as the Towing Agreement here, in the hope that the towing vendor will tow the vehicle to Modern Auto's facility. Although Modern Auto did not utilize its own tow truck to tow Dr. Patel's vehicle, Modern Auto's pre-drafted Towing Agreement states that the towing vendor will tow the vehicle to Modern Auto's facility, a towing service charge will be paid by Modern Auto, and Modern Auto will seek reimbursement either from the vehicle owner or the vehicle owner's insurance. At a minimum, Modern Auto is indirectly "conducting" the business of towing by ordering those that use its pre-drafted Towing Agreement to tow the vehicle back to Modern Auto's facility, paying the towing vendor a fee, and seeking reimbursement for that fee from the vehicle owner/insurer. As such, the trial court did not err in concluding Modern Auto is a towing company subject to the Towing Ordinance.
This interpretation is further supported by the City Council's explicit policy of "protecting the general welfare ... against fraud, discrimination, deception and similar abuses" of towing. Philadelphia Code § 9-605(1); see 1 Pa.C.S. § 1921(c)(1)-(4). If Modern Auto were not subject to the Towing Ordinance, its pre-drafted Towing Agreement would not be subject to the Towing Ordinance's protections including fraud, discrimination, and deception. Because Modern Auto was the entity that drafted the Towing Agreement and ultimately charged Dr. Patel for the tow, among numerous other fees, Modern Auto is subject to the Towing Ordinance.
Because the Towing Agreement did not meet the requirements of the Towing Ordinance by specifically setting forth a complete fee schedule that would govern any tow, it was unenforceable.
In summary, the trial court did not err in awarding actual and exemplary damages under Paragraph 17(a)(i)-(ii) because Dr. Patel's vehicle was "towed other than in circumstances authorized by the Towing Ordinance." Philadelphia Ordinance Code § 9-605(17)(a)(i)-(ii). Modern Auto meets the definition of a "towing company" under the Towing Ordinance and is subject to the provisions thereof. Further, because Modern Auto's Towing Agreement failed to meet the specifications outlined in the Towing Ordinance, it is not enforceable.
03/21/24 Gold v. State Farm
United States District Court, E.D. Pennsylvania
Damages for Mold Excluded Due to the Language of a Lead-In Clause, Even if Proximately Caused by the Hurricane
[Abridged] Plaintiffs brought this breach of contract suit against State Farm due to its refusal to cover damages to their home sustained after Hurricane Ida in September 2021. State Farm argues that Plaintiffs' claimed damages for mold fall under an insurance policy exclusion and are thus not entitled to coverage. Before the Court are Defendant's motions in limine to exclude any mention of contents damages or building damages and repairs caused by mold during trial. The Court grants the motions.
Defendant's motions in limine request that this Court preclude any mention at trial of damages relating to mold, including over $170,000 in structural damages and approximately $8,000 in content damages, because those damages are excluded under State Farm's unambiguous policy language. Plaintiffs respond that the policy is ambiguous, and the policy exclusions should be narrowly construed to conform with the reasonable expectation of the insured. They argue that the mold is the result of the hurricane—a covered cause of loss—rather than a separate cause of loss falling under the exclusion.
Here, the relevant insurance policy generally covers "accidental direct physical loss to the property" unless the loss is otherwise excluded. "Section I — Losses Not Insured" in turn includes a "lead-in clause" which states, SECTION I — LOSSES NOT INSURED. . .
2. We will not pay for, under any part of this policy, any loss that would not have occurred in the absence of one or more of the following excluded events. We will not pay for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs abruptly or gradually, involves isolated or widespread damage, occurs on or off the residence premises, arises from any natural or external forces, or occurs as a result of any combination of these: . . . g. Fungus.
The Court finds this policy language unambiguous. The exclusion clearly states that State Farm will not pay for any loss that was caused by mold, regardless of the cause of the mold, other causes of the loss, or whether other causes acted concurrently or in any sequence with the mold to produce the loss. Although Plaintiffs emphasize that the Court should construe the contract to meet the reasonable expectations of the insured, "absent sufficient justification, . . . an insured may not complain that his or her reasonable expectations were frustrated by policy limitations that are clear and unambiguous." The lead-in clause here makes "no distinction as to the causal element that triggers the exclusion. The exclusion plainly applies `regardless of' the cause."
Moreover, while Plaintiffs argue that mold is the result of loss by the hurricane, rather than the cause of loss, the Court disagrees. The mold itself is not the loss. Rather, the loss is the damage to the property—e.g., the necessary mold removal and remediation procedures—which were caused by the mold. Thus, because the contract explicitly states that losses caused by mold are not insured "regardless of the cause of the mold," any argument that the mold damages were proximately caused by the hurricane is inapplicable. "That a covered risk may have contributed to the loss is irrelevant in light of the clear language of the lead-in clause."
03/13/24 Marceletti v. GEICO
United States District Court, W.D. New York
Plaintiff’s Complaint States a Cause of Action for Breach of Contract Where Insurer Failed to Include Sales Tax in Its Calculation of ACV When Paying for the Total Loss of a Leased Vehicle
[Abridged] Plaintiff brings this putative class action against GEICO, asserting a claim for breach of contract based on Defendant's failure to pay sales tax for total loss vehicles that are leased. Defendant filed a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), which was denied.
As required at this stage of the proceedings, Plaintiff's factual allegations are treated as true. Plaintiff insured a leased vehicle under a policy through GEICO. Plaintiff was involved in an accident, after which his insured vehicle was determined to be a total loss. GEICO provided Plaintiff with a "Total Loss Settlement Explanation" document that stated that Plaintiff was not entitled to any payment for sales tax. Plaintiff replaced his vehicle and incurred sales tax in doing so.
In New York, sales tax must be paid when purchasing any vehicle. Sales tax is also required to lease a vehicle, and it must be paid at the outset of the lease agreement, based on the amount of the lease payments over the term of the agreement, pursuant to New York Tax Law § 1111(i). GEICO refused to pay sales tax to Plaintiff and other similarly situated insureds as part of the ACV for the loss of their leased vehicles.
Unless the Court concludes that the automobile insurance policy issued by GEICO to Plaintiff—the contract—unambiguously does not require the payment of sales tax on a leased total loss vehicle, it would be improper to dismiss the claim at this stage of the proceedings.
The gravamen of Plaintiff's complaint is that Defendant breached the policy by failing to include sales tax in its calculation of ACV when paying him for the loss of his insured vehicle. Defendant argues that the Court should dismiss Plaintiff's breach of contract claim because: (1) "the unambiguous policy language of his insurance contract with GEICO . . . does not require payment of sales tax on a lease agreement"; (2) "Section 216.6 of New York's Compilation of Codes, Rules and Regulations (`Regulation 64') does not require payment of sales tax on leased totaled vehicles"; and (3) "New York Tax Law §1111(i) does not require payment of sales tax on a leased vehicle." For the reasons discussed below, the Court disagrees that the policy unambiguously does not require payment of sales tax under the circumstances alleged in the complaint. As such, it would be improper to dismiss Plaintiff's cause of action for breach of contract. Moreover, because the Court concludes that, construing any ambiguities in favor of Plaintiff on this Rule 12(b)(6) motion, the insurance policy can reasonably be interpreted as including sales tax within the scope of ACV for leased vehicles, the Court need not and does not reach Defendant's arguments regarding the requirements of Regulation 64 and New York Tax Law § 1111(i).
Here, both parties assert that the language in the policy is unambiguous and supports their respective positions on the question of whether Defendant is required to pay sales tax as part of the ACV for the total loss of Plaintiff's leased vehicle. Defendant points to language in the policy that limits its liability to only the loss of or damage to the auto itself. Specifically, under "LOSSES WE WILL PAY FOR YOU, Collision," the policy states, "We will pay for collision loss to the owned or non-owned auto for the amount of each loss less the applicable deductible."
Loss is defined as "direct and accidental loss of or damage to: (a) the auto, including its equipment; or (b) other insured property." Defendant also cites language in the policy under "LIMIT OF LIABILITY," which states in relevant part that its liability is limited to "the actual cash value of the property at the time of the loss." Later in that section, the policy states that "the ACV of property will be determined at the time of the loss and will include an adjustment for depreciation/betterment and for the physical condition of the property." Defendant notes that the policy is silent on the issue of sales tax, and argues the policy does not require it to treat "leased and owned vehicles . . . identically for sales tax purposes." As such, tax on a lease agreement is not a "loss" under the policy, according to Defendant.
Plaintiff argues that the policy "defines ACV as requiring GEICO to pay the 'replacement cost' of insured vehicles after a total loss." In other words, in Plaintiff's view, the insurance policy is unambiguous in defining the ACV as future-looking in that it is based on what it would cost to replace the vehicle that was a total loss. Plaintiff cites cases in other jurisdictions, applying their respective state laws, for the proposition that "ACV defined as `replacement cost' is reasonably interpreted to include sales tax." Plaintiff argues that the policy's definition of an "owned auto" supports his position because both purchased and leased vehicles are "owned autos" and are afforded the same insurance coverage. If Defendant had sought to provide different coverage for leased vehicles, it was required to explicitly say so in the policy, according to Plaintiff.
The Court finds that Plaintiff's proffered interpretation of the policy is reasonable, which is all that is required to deny the instant motion to dismiss. As noted above, Defendant argues that the policy is "silent on sales tax" and thus does not obligate it to include sales tax in its calculation of ACV. However, this argument fails to grapple with the fact that the policy defines ACV to mean "replacement cost of the auto or property less depreciation or betterment." As other federal courts have held, where ACV is defined as "replacement cost minus normal depreciation," it is a plausible interpretation that it includes sales tax.
Defendant suggests that these cases are not persuasive and should be disregarded by the Court because they were not applying New York law. But Defendant has offered no persuasive argument that the laws of the jurisdictions at issue differ meaningfully from New York law on the key issue—namely, whether the "replacement cost" of a vehicle may reasonably be interpreted to require payment of sales tax. The Court finds the cases cited above persuasive as to this specific argument, and further does not find that this point turns on any vagaries of the state laws at issue.
Moreover, the Court is not persuaded by Defendant's reliance on the policy's definition of loss as somehow restricting the scope of ACV to not include sales tax. Liability under the policy is limited to the ACV of the property "at the time of the loss," but a reasonable interpretation of this language is that it simply addresses the timing of when the replacement cost value should be measured—in other words, not at the time the policy is issued or when the vehicle is procured, but rather at the time of the loss. And the definition of loss under the policy does little to clarify the issue. Loss is defined as "direct and accidental loss of or damage to: (a) the auto, including its equipment . . .," but this is a circular definition whereby "loss" itself is defined, in part, by "loss." In any event, given that ACV is defined under the policy as replacement cost, the Court cannot conclude that the policy's definition of loss somehow unambiguously eliminates sales tax from the policy's definition of ACV.
Thus, the Court concludes that Plaintiff's interpretation of the policy as including sales tax within the scope of ACV is not unreasonable. At best, the policy is ambiguous as to whether it includes sales tax within the ACV for a total loss leased vehicle, necessitating denial of Defendant's motion to dismiss Plaintiff's breach of contract claim.
04/02/24 Lewis, et al v. GEICO
United States Court of Appeals, Third Circuit
Insureds Lack Standing to Bring the Class Action Suit for a Condition-Adjustment Claimed to Artificially Reduce Vehicles’ Settlement Values but Class Certified for Alleged Failure to Reimburse Taxes and Fees Necessary to Replace Cars
[Abridged] Lewises sued their auto insurer, GEICO, for breaching their insurance contract when their car was totaled. They claim that GEICO undercompensated them in two ways: (1) by applying a "condition adjustment" that artificially reduced its valuation of their car; and (2) by failing to reimburse them for taxes and fees necessary to replace the car. For each instance of underpayment, they sought to certify a class of similarly underpaid insureds.
The District Court certified both classes under Fed. R. Civ. P. 23. We will affirm the order certifying the class for the taxes-and-fees claim. But the Lewises failed to show that GEICO caused them concrete harm when it applied the condition adjustment. They therefore lack standing to bring the condition-adjustment claim, so we will vacate the District Court's order in part and remand with instructions to dismiss that claim.
When an insured's car is totaled, GEICO agrees to pay the Actual Cash Value ("ACV") of the totaled car—effectively its fair market value before the accident, plus certain replacement costs. But determining a car's ACV is challenging. It involves valuing the insured's specific car in its pre-accident condition, which no longer exists. And many factors influence a car's value, including its trim level, options, after-market alterations, and condition.
Because of these challenges, GEICO uses a multi-step process to determine ACV. First, an adjuster inspects the totaled car and assesses its condition. GEICO then sends the assessment results to a vendor, CCC Intelligent Solutions Inc. ("CCC"), which maintains data on cars for sale across the country. From this data, CCC identifies a set of comparable cars and uses that set to extrapolate a value for the totaled car.
During that extrapolation process, CCC makes two adjustments to account for differences between the totaled car and the set of comparable cars. First, CCC assumes that the average privately owned car is in worse condition than the average car on a dealership lot. So CCC applies a downward adjustment—known as a "condition adjustment"—to the value of the comparable cars, which in turn reduces the extrapolated value of the totaled car. Second, CCC adjusts the value of the totaled car upward if any of its components are in above-average condition according to the GEICO adjuster's post-accident assessment.
CCC compiles this information into a Market Valuation Report ("MVR"), which it provides to GEICO. GEICO then uses the MVR's valuation as a starting point for settlement negotiations with the insured. In some circumstances, GEICO's adjusters also look at other sources and review any information the insured provides before making a settlement offer. And its adjusters may settle claims for more than the MVR's valuation.
In recent years, GEICO has compensated insureds for the taxes and fees they must pay to replace their totaled car. But before 2020, it took a different approach. If an insured owned her car, GEICO would pay sales taxes based on the value of the car when it was totaled. But if an insured leased her car, it would only pay a portion of the taxes. And it declined to pay title or license plate transfer fees to both owners and lessees.
Lewises insured their leased Volkswagen Jetta through GEICO. After the accident, GEICO followed its standard process to calculate the Lewises' payout. It determined that the car was totaled. It obtained an MVR, which identified a set of comparable vehicles valued at $17,325, $18,879, and $17,770. The MVR applied a condition adjustment that reduced the value of each of the comparable vehicles—and, by extension, the extrapolated value of the Lewises' car—by $1,006. Next, the MVR increased the extrapolated value by $886 because some components of the Lewises' car were in above-average condition. This second adjustment partially offset the condition adjustment, resulting in a final valuation of $17,058.
Working from that valuation, GEICO made an initial settlement offer of $17,058. On January 18, 2018, the Lewises emailed their GEICO agent to object to the offer. They attached information about several comparable cars with an average value of $21,870 and asserted that their car was worth $19,096. They also engaged in negotiations with GEICO over the phone. On February 13, GEICO sent a revised settlement offer of $18,258. The difference between the revised offer and the valuation in the MVR reflects a $1,200 "adjustment to settle." That amount, minus the Lewises' $1,000 deductible, was what GEICO ultimately paid to the Lewises' auto lender, Volkswagen Credit. GEICO did not compensate them for any portion of the taxes and fees.
The Lewises sued GEICO for breach of contract. Their claim asserted two distinct theories: (1) that GEICO mechanically applied CCC's condition adjustment to artificially lower its valuation of their car, and (2) that GEICO failed to compensate them for taxes and fees as required by their contract and New Jersey law.
The Lewises sought certification of two classes of GEICO insureds: (1) those who received a settlement offer on their totaled car that did not include taxes and fees ("the taxes-and-fees class"); and (2) those who received a settlement offer on their totaled car that was "based in whole or in part on the price of comparable vehicles reduced by a condition adjustment" ("the condition-adjustment class").
The District Court certified both classes, holding that each met the threshold requirements of Fed. R. Civ. P. 23(a) and the predominance and superiority requirements of Rule 23(b)(3). It then denied GEICO's motion for reconsideration. GEICO timely sought and obtained leave to file this interlocutory appeal.
We begin with the condition-adjustment claim. GEICO argues that the Lewises lack standing to bring this claim because they suffered no concrete harm from its application of the condition adjustment. We agree.
To be concrete enough to confer standing, an injury must be "real, and not abstract." In other words, the asserted harm must "have a close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American courts." Financial harm is among "the most obvious" concrete injuries.
The Lewises allege that GEICO financially harmed them when it valued their car based on the condition adjustment. Specifically, they claim that CCC applied a $1,006 downward adjustment to each of the comparable cars in the MVR it prepared, that this adjustment reduced CCC's extrapolated valuation of their car by the same amount, and that GEICO used this depressed valuation to determine how much it would pay to resolve their insurance claim. As a result, they assert, GEICO paid them less than their car was worth—a quintessential financial injury.
Both the complaint and the record undercut the Lewises' claim of financial harm. True, CCC applied a condition adjustment that reduced its valuation of the comparable cars—and, by extension, the Lewises' car—by $1,006. But this adjustment was not the end of CCC's or GEICO's valuation process. After applying the downward adjustment, CCC boosted its valuation of the Lewises' car by $886 to account for its condition. With that valuation in hand, GEICO then negotiated with the Lewises, eventually applying a $1,200 upward "adjustment to settle" before paying their claim. Even if the condition adjustment harmed the Lewises by $1,006, as they allege, these other adjustments more than offset it. The Lewises stake their claim on an isolated intermediate step within GEICO's valuation process, but they ultimately avoided any financial injury.
Although the Lewises argue that GEICO might have paid them even more if CCC had not applied the condition adjustment, this theory is too speculative to confer standing. Conjecture about how a negotiation might have played out, without more, is not enough to support the Lewises' allegations of financial injury.
Lacking any financial harm, the Lewises' only remaining injury is a bare violation of insurance rules, which they claim forbade GEICO's method of calculating ACV. But "bare procedural violations, divorced from any concrete harm . . . do not suffice for Article III standing."
We cannot consider whether other insureds suffered a financial injury from GEICO's application of the condition adjustment. The standing inquiry "focuses . . . on whether the plaintiff is the proper party to bring a claim." Here, the Lewises are not the proper parties. Therefore, we will remand with instructions for the District Court to dismiss the condition-adjustment claim for lack of standing.
The taxes-and-fees claim fares better. The Lewises allege—and the record supports—that GEICO failed to compensate them for the taxes and fees necessary to replace their totaled car. They claim that their contract entitled them to more, and that GEICO's failure to live up to it cost them money. This financial harm satisfies the injury-in-fact requirement.
The Lewises also meet the causation and redressability requirements for Article III standing. The causation requirement demands a "connection between the injury-in-fact and a defendant's conduct." And "the redressability requirement ensures that the asserted injury-in-fact is capable of resolution in a manner consistent with the traditional understanding of the judicial process." The Lewises have shown that their alleged financial injury stems from GEICO's pre-2020 practice of declining to pay taxes and fees to lessee insureds, and they ask for damages, which "are a recognized form of judicial redress for past injuries." They therefore have standing to bring their taxes-and-fees claim.
GEICO challenges the District Court's certification of the taxes-and-fees class on only one ground: that the class is not sufficiently ascertainable. "A plaintiff seeking certification of a Rule 23(b)(3) class must prove by a preponderance of the evidence that the class is ascertainable." To prove ascertainability, the Lewises must show that "(1) the class is defined with reference to objective criteria; and (2) there is a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition."
The District Court did not abuse its discretion in holding that the Lewises met these requirements. Objective criteria define the class, which covers GEICO insureds whose settlement "did not include applicable sales tax, title fees, or license plate fees." As to administrative feasibility, the Lewises presented evidence that GEICO systematically underpaid taxes and fees before 2020 and that a review of claim files and other sources could identify insureds whose settlements did not include taxes and fees.
GEICO protests that it can only determine which insureds were affected by the taxes and fees underpayment "through a file-by-file review" of the class members. But "matching of records is precisely the sort of exercise we have found sufficiently administrable to satisfy ascertainability in other cases." Indeed, we have held that "a straightforward `yes-or-no' review of existing records to identify class members is administratively feasible even if it requires review of individual records with cross-referencing of voluminous data from multiple sources." That type of review is what plaintiffs proposed and the District Court endorsed. The District Court therefore did not abuse its discretion when it found that the taxes-and-fees class was ascertainable.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
04/18/24 MMG Ins. Co. v. Estate of Greenlaw
Maine Supreme Court
Wrestling Death Not in the Conduct of the Insured’s Landscaping Business Under Businessowners Policy
MMG issued a businessowners insurance policy to McNeely. McNeely is the sole owner of a landscaping business. McNeely and his close friend, Greenlaw, had discussed McNeely measuring and providing a proposal to hydroseed Greenlaw’s backyard. Greenlaw regularly hosted an informal social group of men at his house to eat, drink, and share their enthusiasm for motorcycles. At these meetings, the group would also discuss business-related topics and engage in business dealings. On the date of the accident, McNeely came to Greenlaw’s house for one such meeting. McNeely arrived in his work truck, wore work clothes, and brought his work equipment to prepare an estimate for Greenlaw. McNeely measured and provided pricing for the project, and Greenlaw said he would get back to McNeely about it. McNeely discussed his business with the group at the gathering. Later, the men were inebriated, and Greenlaw initiated a wrestling match with McNeely. During the wrestling, Greenlaw lost consciousness and died despite McNeely’s efforts to revive him.
MMG started a declaratory judgment action against Greenlaw’s Estate for a declaration that there was no duty to indemnify McNeely in the underlying wrongful death action by the Estate. The lower court granted MMG’s motion for summary judgment because McNeely was not conducting business at the time of Greenlaw’s death. The Estate appealed and argued the court had discounted the earlier business dealings when finding the wrestling was not business-related. On appeal, the Maine Supreme Court agreed that the wrestling was not with respect to the conduct of McNeely’s landscaping business. Although there had been some business discussions earlier in the evening, there was no contention that the actual wrestling was not to further McNeely’s business. Since an ordinary person would not think that the policy would cover wrestling, the Court affirmed.
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
04/15/24 GEICO et al. v. Caring Pain Mgmt. P.C. et al.
United States Court of Appeals, Third Circuit
Court Mandates Arbitration of Claims Brought Under New Jersey Statute Designed to Combat Insurance Fraud
This appeal arises out of three separate actions from the District Court of New Jersey. In each action, GEICO contended that the providers defrauded it of more than $10 million by abusing PIP benefits available under several GEICO policies. Specifically, GEICO contended that the providers either exaggerated claims, and that the treatments were either never provided or were medically unnecessary. GEICO also alleged that certain providers participated in illegal kickback schemes.
GEICO’s suits were brought under the New Jersey Insurance Fraud Protection Act (“IFPA”), a New Jersey statute providing a private cause of action against any person (or healthcare provider) who knowingly presents a claim for payment under an insurance policy, knowing that the statement contains any false or misleading information concerning any fact or thing material to the claim. A healthcare practitioner also violates the IFPA by soliciting others to make a claim for personal injury protection benefits (“PIP Benefits”).
The providers soon made a demand to arbitrate GEICO’s IFPA claims. The providers’ demand was based on the Federal Arbitration Act (“FAA”), which provides for entitlement to and rules regarding arbitration in general. Specifically, the FAA compels arbitration where the party requesting it shows both: (1) an arbitration agreement was fully formed; and (2) that the arbitration agreement governs the claims at issue.
GEICO rejected the demand for arbitration on the ground that its IFPA claims were based on fraud, and were therefore not arbitrable. Importantly, the IFPA is silent on whether IFPA claims are arbitrable.
The providers contested GEICO’s denial of their request to arbitrate the IFPA claims, arguing that they had an agreement with GEICO that included an arbitration clause, and that other New Jersey law, aside from the IFPA (which, again, does not mention arbitration) entitles them to arbitration proceedings. GEICO responded by arguing that, although not mentioned in the text of the statute, the IFPA implicitly prohibits arbitration. In support of this argument, GEICO argued that the New Jersey Legislature did not contemplate that IFPA claims would be arbitrated, as the text of the statute provides only that the insurer may “sue” in any “court” of competent jurisdiction. The Court rejected this argument, reasoning that this text does not foreclose the possibility of arbitration.
GEICO then argued that, while the policies contained a uniform provision within the PIP endorsement specifically providing for arbitration of PIP claims, such provision does not apply to fraudulent PIP claims. The Court found this equally unavailing, explaining that this very provision lists specific types of arbitrable claims, including claims concerning whether medical treatment was actually performed, and whether such treatment was medically necessary. Considering this language, the Court found that this language suggests that claims of fraud in connection with PIP claims are indeed arbitrable.
In support of their burden under the FAA, the providers put into evidence a document created by GEICO governing GEICO’s reimbursement procedures with respect to PIP claims. In finding that the provider’s PIP claims were governed by the plan, the Court held that the providers met their burden under the FAA, and held that arbitration must proceed.
Editor’s Note: Remember, the provider’s demand for arbitration was based on the FAA, a federal statute. Meanwhile, the McCarran-Ferguson Act provides that insurance is a matter to be governed by the states, such that federal laws that invalidate, impair, or supersede state insurance laws are pre-empted by state law. The Court recognized this, rightly noting that if compelling arbitration would invalidate, impair, or supersede the IFPA, then the FAA must be ignored. However, the IFPA, a state statute concerning matters of insurance, did not provide one way or the other as to whether IFPA claims are arbitrable. Accordingly, I think the Court correctly found that the FAA is not preempted by the IFPA. Had the statute provided for whether arbitration is permissible, perhaps the result of this case would have been different.
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
04/23/24 Travelers Cas. Ins. Co. of Am. v. A-Quality Auto Sales, Inc.
United States Court of Appeals, Tenth Circuit
Failure to Contest Statement of Material Facts in Motion for Summary Judgment and File Rule 56(d) Motion Leads to Grant of Summary Judgment on Applicable Policy Limit
In January 2016, the Richesins, a couple, purchased a Subaru at auction with the intent to complete necessary repairs before reselling the vehicle from the dealership they owned, A-Quality Auto Sales. Before reselling the vehicle, the Richesins took the vehicle to RNS Auto Services for a mechanical evaluation, inspection, and repair. In February 2016, the Richesins retrieved the Subaru from RNS, but when they drove it onto the highway, they began noticing mechanical issues with the car. The Richesins pulled onto the side of the highway where Ms. Richesin exited the vehicle and was struck by another car, causing severe injuries.
At the time of the loss, RNS maintained a garage insurance policy with Travelers. The policy provided a $500,000 occurrence limit with a $1,000,000 general aggregate limit. The driver who struck Ms. Richesins was underinsured, so the Richesins looked to the RNS policy for additional coverage. Travelers offered the $500,000 occurrence limit, the Richesins’ attorney declined and took the position that there were multiple occurrences, which would trigger the aggregate limit.
In December 2016, the Richesins filed suit against Travelers and nine other parties—a mixture of individual and entity defendants along with their insurers—in New Mexico state court asserting more than a dozen tort and state statutory claims. As to Travelers, the state court complaint asserted one count for unspecified declaratory judgment regarding the policy, and one tort count for loss of consortium.
Travelers moved to be dismissed on grounds that under long-standing, New Mexico Supreme Court precedent, injured third parties do not—absent limited circumstances—have standing to sue the tortfeasor's insurer: The state court granted Travelers’ motion in October 2017 and dismissed all claims against Travelers with prejudice.
In early 2022, the Richesins and RNS entered into a series of agreements under which RNS would (1) direct Travelers to pay the $500,000 per-occurrence Policy limit to the Richesins, (2) stipulate to its liability for the Richesins’ injuries and agree to allow the state court to “award legal damages ... upon an evidentiary hearing,” (3) assign its rights under the Policy to the Richesins, and (4) assign to the Richesins “90% of all bad faith and related claims” RNS may have held against any insurer. In exchange, the Richesins agreed they would not seek satisfaction of any judgment entered in the state court litigation against RNS.
Travelers subsequently paid the Richesins $500,000 subject to a reservation of “all policy defenses.” After the assignment, Travelers moved to intervene to receive a declaratory judgment on the question of whether the occurrence or aggregate limit applied. The Richesins opposed and Travelers withdrew its motion. Less than two weeks later, Travelers filed a federal action which sought a determination that the $500,000 occurrence limit applied to the Richesins’ claims. The Richesins then moved to dismiss the federal complaint on the grounds under the Brillhart and Younger doctrines stating that the state court proceeding would resolve the issue.
While the Richesins’ motion was pending, Travelers moved for summary judgment. The Richesins did not dispute any of Travelers’ statements of material fact and rather took the position Travelers motion was premature and needed time to conduct discovery. The district court denied the Richesins’ motion to dismiss. It also converted the Richesins’ motion for discovery to a Rule 56(d) motion.
The district court issued a decision that granted Travelers summary judgment, found Brillhart weighed in favor of litigating the issue, and did not address the Younger doctrine. The Richesins’ appealed on the grounds the dispute was not ripe under Article III; erred by declining to abstain under Brillhart; erred by declining to abstain under Younger; and erred by denying the Richesin’s Rule 56(d) motion, thereby denying them discovery.
The Tenth Circuit found a justiciable controversy by finding insurance coverage disputes are routinely found to be justiciable under the Declaratory Judgment Act. The court also determined the amount in controversy threshold was met due to the Richesins conceding that they requested more than the $500,000 offered by Travelers. The court then rejected the Richesins’ Brillhart argument. In doing so, the court reasoned the Declaratory Judgment Act gave the courts unique and substantial discretion as to when to declare the rights of litigants and thus, significant deference must be given to a district court’s determination a declaratory judgment. Upon review of the Mhoon/Brillhart factors which are:
[1] whether a declaratory action would settle the controversy; [2] whether it would serve a useful purpose in clarifying the legal relations at issue; [3] whether the declaratory remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for a race to res judicata”; [4] whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and [5] whether there is an alternative remedy which is better or more effective.
The Court of Appeals found the district court correctly applied the factors and that each factor weighed in favor of litigating the federal action. As for the Younger doctrine, the Tenth Circuit found the Richesins ignored whether one of the three exceptions applied that would extend Younger applied. Those exceptions are known as the Middlesex conditions and ask whether there exists “(1) an ongoing state judicial ... proceeding, (2) the presence of an important state interest, and (3) an adequate opportunity to raise federal claims in the state proceedings.” The court quickly noted that Younger does not apply if there is merely a parallel or related state court proceeding. Since the Richesins did not explain how the state proceeding feel within any of the Middlesex conditions, the court held the Younger doctrine did not apply.
On the Rule 56(d) motion, the court also rejected the Richesins’ argument. The Richesins’ sought additional discovery due to the lack of any written discovery in the federal action, lack of deposition of the agent who issued the policy, lack of deposition of a Travelers representative, significant issues with policy sought by RNS and the coverage bound, and that the disposition of those is facts are material to Travelers complaint and motion. The Tenth Circuit recognized the district court found the Richesins’ Rule 56(d) was procedurally improper as it should have been filed before, not the same time as their opposition to Travelers’ motion for summary judgment. The court further determined the lower court’s analysis on the merits established the Richesins’ request would not show how additional time for discovery would lead to a material issue fact, did not contest Travelers’ statement of facts, and they seek discovery on potential future claims which never asserted in the federal action or any related action. Based upon the district court’s reasoning, the Tenth Circuit affirmed the grant of summary judgment in favor of Travelers.
Editor’s Note: The additional claims the Richesins argued they could have raised with additional discovery were misrepresentation and negligent procurement. However, those issues were argued in the district court only and not on appeal.
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
Yet again, nothing to report on from the Appellate Division on Serious Injury. Hopefully we get a case next time!
GOLDBERG’S GOLDEN NUGGETS
Joshua M. Goldberg
[email protected]
With great joy, I do not have an update for this edition as my family and I are welcoming my son, River Patrick, into our family of now four. He will assist in writing my next submission.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
03/29/24 Catlin Ins. Co. Inc., et al. v. Scottsdale Ins. Co., et al.
Supreme Court of the State of New York, New York County
Failure to Respond to Notice to Admit Leads to Grant of Motion for Summary Judgment, and Dismissal of Declaratory Judgment Action
St. George Outlet Development LLC (St. George), BFC Partners, L.P. (BFC), Empire Outlet Development LLC (Empire), and their insurer, Catlin Insurance Company, Inc (Catlin), commenced a declaratory judgment action seeking additional insured status under an insurance policy issued by Scottsdale Insurance Company (Scottsdale) to Ornamental Installation Specialists, Inc (Ornamental).
The declaratory judgment action arose after Corrol Maddox IV (Maddox) allegedly sustained bodily injuries at a construction site. Maddox commenced two underlying bodily injury actions, which were later consolidated, against St. George, BFC, Empire, US Spray NYC Inc., Spray Force Systems Inc., and Schnell Contracting Systems LLC.
Currently before the Court was Scottsdale’s motion for summary judgment, which sought a declaration that Scottsdale had no duty to defend or indemnify St. George, BFC, and Empire in relation to the underlying bodily injury action commenced by Maddox.
In the decision, the Court first turned to the language of the Scottsdale policy, which contained an additional insured endorsement limiting additional insured status to “any person or organization…when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.” To receive additional insured status under the Scottsdale policy, there must be a written contract or agreement between Ornamental and the party seeking coverage.
In discovery, Scottsdale propounded notices to admit upon Catlin, St. George, BFC, and Empire, asking each party to admit or deny that (1) St. George did not have a written contract with Ornamental; (2) BFC did not have a written contract with Ornamental; and (3) Empire did not have a written contract with Ornamental. The Plaintiffs failed to respond to the notice to admit. Under § 3123(a) of the Civil Procedure Laws and Rules if a party fails to timely respond to a notice to admit, the party is deemed to have admitted the facts contained therein. Accordingly, by failing to respond to the notice, St. George, BFC, and Empire admitted that no written contract existed between each party and Ornamental.
Accordingly, the Court granted Scottsdale’s motion for summary judgment, and entered judgment dismissing the action in its entirety. The Court found that St. George, BFC, and Empire were not additional insureds under Scottsdale’s policy, and no coverage was owed.
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law
Calgary, Alberta
[email protected]
04/12/24 Deasan Holdings Ltd. v. Continental Casualty Company
British Columbia Supreme Court, Kelowna Registry
When Acting for Unsophisticated Individuals Who Are in Business, Insurance Brokers Must Take Steps to Inventory the Corporations Operated by Those Individuals and Determine if the Definition of Insured in the Policies That Are Placed Cover Each Entity in the Business Matrix as Well as the Operations Carried on by Those Corporations
The ability of a private British Columbia company to find refuge from a class action lawsuit within the four corners of its CGL policy for the operations of a start-up gravel pit all came down to a two minute and forty-two second telephone call between that company’s broker and an insurance underwriter. The broker believed that the underwriter had committed during that call to add the new gravel operations to the policy. But, following a three-day trial, the Court hearing the matter concluded that there is no evidence that the underwriter agreed to underwrite the gravel pit by adding it to an existing policy.
Dean Swanberg and Sandy Beach jointly operate several businesses in the Fort St. John area of B.C. Their principal business is DRS Energy which is an oil field services company that hauls equipment to and from oilfield sites and maintains lease roads. That company owns equipment and buildings in and around Fort St. John. Both Swanberg and Beech owned the shares of a numbered company incorporated in B.C. At some point they changed the name of that company to Deason Holdings Ltd. The chosen name was a contraction of the first three letters of each of their first names.
In August of 2017, DRS transferred title to property with shops used by DRS as well as adjoining lots of land to Deason. Until October 2017, Deason’s only apparent reason for existence was to hold those titles.
Late in 2017, Beech and Swanberg saw an expansion opportunity. Seventy acres of land that once contained a gravel pit became available. DRS Energy needed gravel to maintain lease roads. The land was acquired, and Deason’s name was put on the title. For several months, no steps were taken to start mining gravel.
At the time of that land acquisition, Beech & Swanberg were using CMB Insurance Brokers to place the insurance for their businesses. There is no indication that either Beech or Swanberg had any background or in-depth understanding of insurance.
The broker told Beech to let him know when the gravel pit was put into operation. In the meantime, a commercial policy containing CGL coverage was issued to DRS Energy with Deason as an additional insured holding title to the Fort St. John property. The 70 acres acquired in October 2017 was described as ‘vacant land’ in the statement of values in the application for coverage. That statement of values did not say who owned it.
On August 31, 2018, Beech contacted their broker at CMB and told him that they were going to start up the gravel pit. On the next business day, September 4, the broker called an underwriter of the insurer to have the gravel pit operation added to the policy. The Underwriter asked for details such as a description of the buildings and the equipment that was being used. On September 10, 2018, that broker asked his staff to contact Beech for those details. That assignment went into the ‘to do’ pile.
On September 29, 2018, a landslide, originating on or near the gravel pit, destroyed a wide swath of roads and private property in Fort St. John. On the first business day after the slide, Beech called his broker. It was then that the broker realized that the material that the underwriter needed had not been gathered or sent. A mad scramble to submit that material ensued with a request to add the gravel pit operation to the policy. After that request was submitted, the landslide was reported.
In November 2018, the insurer denied that it owed a defence to Deason with respect to any alleged liability arising from the gravel pit operations. Despite multiple pleas to reconsider, the insurer steadfastly refused to reverse its decision: At no time did it agree to extend broad coverage to Deason and, in particular, add the operation of a gravel pit to the policy.
In time, a class action lawsuit was filed naming Deason Holdings Ltd. as a defendant. A duty to defend application was filed against the insurer. That application looked at the complicated history of the dealings between Swanberg, Beech, the broker and the underwriter to try to make finding of fact as the sequence of events.
The Court held that the policy adding Deason as an additional insured with respect to the title of property in Fort St. John did not grant Deason coverage for all purposes; that despite the broker believing that the underwriter agreed to add the gravel pit operations to the policy in the September 4 telephone conversation, there was no evidence that it actually did. The broker’s only saving grace was a finding of fact that the broker never told Beech or Swanberg that the gravel pit was covered.
In the end, the Court held that the insurers’ denial was well founded and there was no obligation to defend Deason in the class action as the policy did not offer broad coverage for Deason and definitely did not cover Deason’s operation of the gravel pit.
The judgment does not identify a single villain in this story. Fault was widely distributed. There was nothing communicated to Deasan by the broker that could bind the insurer to coverage for any liability of Deasan associated to the gravel pit lands. Beech (and Swanberg) did not verify coverage for their new venture and the broker did not act quickly enough to place that cover when it was told the operations were underway. The lack of coverage could have been addressed at multiple junctures. Sadly, that did not happen.
The next chapter is likely to be a negligence action against the broker. The Court opened the door for that action by finding “From Beech’s perspective on behalf of Deasan, he was seeking coverage for Deasan but left it to …[the broker]…to make the arrangements. He simply relied on ...[the broker]… to secure the coverage they needed.”
The judgment contains some valuable commentary on how one interprets “you” in a CGL policy as well as a discussion of a broker’s dual agency.
But will Deason be found liable in the end? A report published by British Columbia's chief inspector of mines and reported by CBC, says that the root cause of the slide may never be determined but “…that the …[gravel] pit's stockpile of gravel combined with natural slope instability and rain that was 44 per cent above average may all have been factors.”
In this end, this is a “shoulda, coulda” story that could have been prevented had the broker taken the time to inventory the corporations owned by Beech and Swanberg; determine what each company does and verified that the policy extended coverage to each company and the operations conducted. That failure means that Beech and Swanberg are in jeopardy of losing their life savings and putting several people out of work in the process.
© Hurwitz Fine P.C. 2024
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