Coverage Pointers - Volume XXV No. 24

Volume XXV, No. 24 (No. 671)
Friday, May 10, 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.

HF Coverage Pointers header

Dear Coverage Pointers Subscribers:

Do you have a situation? We love situations. Hey, by the way, take a moment and write to us, even if just to say hello.

Greetings from the Land of the Blue Martinis.

A glass with a drink in it

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Happy Mother’s Day

By the way, for you who love apostrophes, it is officially Mother’s Day, not Mothers Day or Mothers’ Day.  In 1907, Anna Jarvis, of Philadelphia, began the campaign to have Mother’s Day officially recognized, and in 1914, President Woodrow Wilson did this, proclaiming it a national holiday and a “public expression of our love and reverence for all mothers.” In 1870 — nearly 40 years before it became an official U.S. holiday in 1914 — social justice advocate Julia Ward Howe issued her inspired Mother’s Day Proclamation, which called upon mothers of all nationalities to band together to promote the “amicable settlement of international questions, the great and general interests of peace.” She envisioned a day of solemn council where women from all over the world could meet to discuss the means whereby to achieve world peace. She also wrote the “Battle Hymn of the Republic”.


Today’s Issue

We offer several very challenging decisions in this week’s issue.  Shotgun allegations of medical malpractice provided errors and omissions coverage for a doctor who (allegedly) sexually abused a patient.  It is, in this editor’s view, what we call a “thousands flee” case – one where it falls in the face of well-settled law.  There’s also a case where a carrier that wrote primary and excess policies for an insured, properly disclaimed with respect to the primary policy but untimely disclaimed under the excess policy and was punished for it.  In Ryan Maxwell’s column, you’ll find a head-scratcher on “lost and found” contracts.

It's tough facing the Draconian penalties of Insurance Law Section 3420(d)(2).


Who We Are and What We Do:

In the last year, this publication has provided close to half a million words of coverage summaries and advice.  Our Coverage Team has presented programs or provided counsel. or written articles for  the FDCC, IADC, ADTA, DRI, PLRB, ABA, NYIA, NYSBA, ECBA, various law schools, and a variety of claims associations, insurance companies, insurance agencies and self-insured organizations.  We have presented programs to literally thousands of lawyers, claim professionals, attorneys, self-insureds, and others.  Many of those who attended our programs have never been clients and many never will be clients.  Many of the lawyers who attend our programs are colleagues from other law firms, who do the same kind of work we do.  Many are policyholder lawyers.  Some are judges or judicial clerks.  Our other litigation teams, Labor Law, Premises, Products Liability, Transportation, Employment Practices, are equally generous with their time.

We feel it is our obligation, as professionals, to return to the insurance industry and to the public, the kindness that has been extended to our firm.


American Law Institute (ALI).


Attention ALI Members:  ALERT– a proposal pending on First Party Bad Faith – May 20, 2024, in San Francisco:

Many of you will remember that in 2018, the ALI approved a significant change to the Restatement of liability Insurance, which adopted several minority provisions, adverse to the insurance industry.  This year, the ALI is considering yet another provision as the organization is seeking to revise the Restatement of the Law Third Torts – Miscellaneous Provisions.  Prior Torts Restatements did not address the liability of first-party insurers that acted or allegedly acted in bad faith in fulfilling their obligations under an insurance policy.  Surely, many states do not recognize a tort of bad faith and each state balances its needs for consumer access to insurance and economic viability of insurers, by determining the appropriate standards for regulating insurer conduct. Surely, there are property insurers already fleeing various states because of the challenges they face as a result of climate change. 

In Section 20 A of the amendment to be considered at the upcoming meeting of the American Law Institute, the proposal is to include these amendments, leaving to the states, their determination of First Party bad faith conduct:






§ 20 A. Bad-Faith Performance of First-Party Insurance Contract

An insurer is subject to tort liability to its insured when:

(a) the insurer’s claims processing of a first-party insurance policy lacks a reasonable basis;

(b) the insurer acted with knowledge of the lack of a reasonable basis or acted in reckless disregard of the lack of a reasonable basis; and

(c) the insurer’s deficient performance is a factual cause of harm to the insured and the harm is within the insurer’s scope of liability.

As a member of the ALI, I have filed a motion, to be heard on May 20th in San Francisco, which would substitute, for that very dangerous proposal, language leaving the decision on the tort of bad faith, to the individual states, just as it now exists.  The link will bring you to the justification we offer for our proposal.  It is the only motion presently pending to revise the Reporters’ recommendation,: 


Section 20 A: § 20 A. Bad-Faith Performance of First-Party Insurance Contract

  1. When a first-party insurance bad faith tort is recognized under a state’s legislation or common law, and the insurer’s conduct meets the applicable state-law standard, the insurer is subject to tort liability to its insured for bad-faith performance of a first-party insurance contract.

  2. Whether a jurisdiction recognizes a tort for bad-faith performance of a first-party insurance contract, and the applicable state-law standard, is a determination left to the individual states.

We urge ALI members to appear and speak on this important issue.

Need a mediator for an insurance dispute? Coverage mediation is a thing!  Subject matter expertise may be useful.

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

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

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

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

Try mediation.



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:

  1. 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.


  2. 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.


  3. 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.


  4. 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.


Unusual Track Meet – 100 Years Ago:

The Buffalo News
Buffalo, New York
10 May 1924


          BATAVIA, May 10, - Under the auspices of the athletic association of the schools for the blind with headquarters in Pittsburgh, Pa. the state school in Batavia will hold its annual athletic contest for girls at the athletic field this afternoon. The results will be mailed to J.C. Hodges, the association president, and the results of the contests in all schools will be checked and copies mailed back to participants.

          LeVere H. Johnson Y.M.C.A physical director will be the starter at the meet and John B. Greeley, Elmer C. Baker and Superintendent Charles A. Hamilton will be the judges.

          Genesee county friends and relatives have been notified of the death of a former resident of Oakfield, Mrs. Laura Wolcott Smith, widow of Alva Smith at the home of her son and only survivor, William H. Smith, in San Francisco, Calif.


Peiper on Property (and Potpourri):

A tip of the cap to Maxwell’s Minutes for giving us something to talk about. 

In his column, Ryan reviewed, in detail, the GNY Insurance Company decision from the Second Circuit. We simply do not understand the logic of the ruling.  In it, the Court appears to suggest that the mere reference to a trade contract (without producing its terms) is sufficient to trigger a duty to defend.  This is a dangerous precedent to establish, and fails, in our view at least, to recognize a significant point.

The burden of establishing coverage, in the first instance, is on the tendering party.  For a blanket AI endorsement, it is fundamental that this means the party seeking coverage must produce terms of a written agreement which includes operative insurance procurement language.  It appears that the Second Circuit has now ruled that a mere reference to a written contract that allegedly includes insurance procurement language is sufficient to trigger a defense obligation.  Thus, a general contractor can now tender to a subcontractor and/or its carrier and trigger a defense simply by stating that it thinks a contract between the parties exists and, further, it thinks there was insurance procurement language. 

Simply, if a contractor cannot solely plead itself into coverage (and it can’t despite what you may have heard), it should not be able allude itself into coverage either. If this decision were to hold, a carrier receiving a tender is almost forced to commence legal action rather than simply investigating which asks for, among other things, a copy of the actual contract allegedly conferring AI status.           

That’s enough head shaking for this week.  See you in two.           

Steven E. Peiper

[email protected]


Free Notarial Service for Veterans – 100 Years Ago:

The Buffalo News
Buffalo, New York
10 May 1924


          The few stenographers and notaries who are exacting fees for aiding veterans in preparing their papers may soon find themselves up against the low, it was said today by officers of veteran organizations. While stenographers and notaries are not required to aid the veterans, they must not exact a fee if they accept a request for aid. Many of them have been placing a charge on the service and several instances have been called to the attention of the officers of the American Legion and other veteran bodies. The state law expressly prohibits such charges.

          A number of veterans who called at the bonus bureau of the EVENING NEWS yesterday brought with them improperly prepared applications, which they said they had paid a public stenographer to type for them. Many errors in the preparation of the applications would have prevented the veterans from obtaining the bonus had the applications gone forward. Names of the stenographers and notaries who have collected fees have been reported to the veteran organization heads and they will be warned today to discontinue the practice, it was said.


Barnas on Bad Faith:

Hello again:

It has been an ugly last couple of weeks for the Blue Jays.  After an okay start to the season, we have lost 10 of our last 14 and sit in last place in the AL East.  It was always going to be a tough division, but the bullpen has completely imploded, and our top three hitters have greatly underperformed expectations and career norms.  For a team that was already likely to be offensively challenged, having our three best hitters perform poorly is something we simply could not afford.  Throw in that the bullpen has one of the worst ERAs in the majors and it is not looking great.  At least Hurwitz Fine softball opening day is tomorrow.  Hopefully, that will fill the void the Jays look likely to leave in my baseball life this summer.

I have a bad faith case from the Southern District of Florida in my column this week.  The court denied Geico’s summary judgment motion dismissing the bad faith claim following an excess verdict.  The motion was denied despite the fact Geico promptly investigated the accident and tendered the limits within a month of the accident.  The court found there was an issue of fact regarding whether Geico’s timeliness and diligence in resolving impediments to settlement constituted bad faith.

Brian D. Barnas

[email protected]


Were Judges Over Paid?– 100 Years Ago:

The Buffalo News
Buffalo, New York
10 May 1924



Smith Vetoes Measure Increasing Salaries of Court of Appeals and Appellate judiciary – Believers Both are Unconstitutional.

          ALBANY, May 10. – Once more the fight for increased salaries for judges of the Court of Appeals has failed. Governor Smith yesterday vetoed the bill which would have increased their pay from $10,000 to $17,500 a year with $18,500 for the chief judge.

          At the same time the governor vetoed the measure intended to increase the salaries of judges of the Appellate division of the Supreme Court from $10,000 to $15,000. It was generally believed that both measures would receive the governor’s approval, but he announced his belief that they are unconstitutional.

          Both measures were non-partisan, having been introduced by Democrats in the senate and the Republican chairman of the judiciary committee in the assembly. It was the first time the legislature has attempted to increase the salaries of judges in this way. During the last ten years the people have four times rejected proposed constitutional amendments intended to increase the salary of judges of the Court of Appeals.


Lee’s Connecticut Chronicles:

“Gone Fishing!”

Lee S. Siegel

[email protected]


Is Nothing Sacred? – 100 Years Ago:

Buffalo Courier
Buffalo, New York
10 May 1924


          Mayor Schwab said yesterday he has demanded and obtained the resignation of Patrolman Micheal Culligan, arrested by the federal agents on charges of selling moonshine behind the bar in an Elk street soft drink place. The Mayor fined H. Boyle ten days’ pay for absenting himself without leave for eight days. Boyle said he became ill while out of town and was unable to notify his superiors.


Kyle's Noteworthy No-Fault:

Dear Readers,

Two no-fault litigation cases to report this week, both brought by American Transit Insurance Company to challenge arbitration awards. In Community Medical Care of NY, PC A/A/O Senora Sprinkle the insurer argued that the arbitration award should be vacated because the decision was arbitrary and capricious and failed to follow well settled law. While the court was not convinced by the arbitrator’s decision that the claimant was entitled to the award because they "substantially complied" with the insurer’s pre EUO verification requests, it ultimately confirmed the award because the insurer did not comply with the strict procedures for follow-up requests for its demands. In American Transit Insurance Company v. Modern Brooklyn Medical PC A/A/O Best Roderick the court granted the provider’s motion to dismiss the insurer’s complaint, as the insurer failed to allege facts to support why the claimant’s injuries were not covered.

Until next time,

Kyle A. Ruffner

[email protected]


School Grading by Intelligence Rejected – 100 Years Ago:

The Brooklyn Daily Eagle
Brooklyn, New York
10 May 1924


Present System Is Both Condemned and Praised

          The question of grading pupils according to their intelligence was thoroughly discussed yesterday afternoon at a meeting of the Teachers Council held at the Board of Education, 500 Park Ave., Manhattan Miss Helen McKeon, president of the Interboro Teachers Association, brought the matter up for discussion by severely indicting the present system of classifying students according to the results they make in tests as “bright,” “normal” or “dull.” The question was discussed for more than an hour by the delegates present at the meeting some strongly condemning the system and others complimenting the division of pupils in the highest possible terms. At the conclusion of the discussion President William McAuliffe referred the matter to the consideration of the committee on courses of study.


Ryan’s Federal Reporter:

The little league season is upon us and, it goes without saying at my son’s 7U level, there is work to be done. My son and I went through a few buckets of balls at the cage on Monday and it paid dividends at the plate against the Yankees in their scrimmage yesterday. Understanding the intricacies of defense, on the other hand, and how, for example, the second baseman should field an infield grounder before the right-fielder, will take some time to develop. Lots and lots of time…

Speaking of time, today is officially time to start up Lawyers League Softball. Hurwitz Fine is looking to make some waves this year, and not just the gesture you make as the ball sails past the outfielders. Although there will be quite a bit of that going on too…

This edition of Ryan’s Federal Reporter tackles a Second Circuit decision involving a lost and found contract issue and when an insurer’s defense obligation attaches. The non-precedential summary order issued by the court was something else, from my perspective. But what do I know?

Ryan P. Maxwell

[email protected]


Mothers Against Immorality– 100 Years Ago:

The Tablet
Brooklyn, New York
10 May 1924

The Filming of Filth

          The National Congress of Mothers and Parent-Teachers’ Association was held in St. Paul during the past week. The Chairman of the Better Films Committee, Mrs. Charles E. Merriam, of Chicago, did not mince words in her vehement denunciation of the moving-picture producers who capitalize salaciousness in their screen offerings. After careful and extensive investigation, she has arrived at the conclusion that “there is too much portrayal of crime, immorality and brutality in the movies.”


Storm’s SIU:

Hi Team:

I had the pleasure of speaking last week to over 15 different insurers at the Finger Lakes Insurance Council Claims Roundtable in Syracuse, New York, on “Notable Issues in First-Party Property Claims”.  Most-excellent event!  I enjoyed meeting a lot of new friends. 

Slim-pickings this edition for SIU related cases, so I have a federal court property coverage case finding a question of fact as to whether the property constitutes the Insured’s “residence premises” for purposes of coverage for a first-party claim.

I hope you have an awesome two weeks!

Scott D. Storm

[email protected]


Jews Seeking Homeland in Palestine – 100 Years Ago:

Yonkers Statesman
Yonkers, New York
10 May 1924

Appeals To Jews
For Contributions

Chairman of Palestine Fund
Issues Statement

          Simon Fischman, chairman of the Yonkers Campaign for the Palestine Foundation Fund, issued an appeal today to the Jewish citizens of Yonkers urging them to contribute liberally to the upbuilding of Palestine as the Jewish Homeland, because, with all the countries of the world closing their doors to Jewish immigrants from Eastern Europe, Palestine remains the one land where they would find the gates open and where freedom and the opportunity to rebuild their shattered lives awaits them.

          “Recent reports from the Palestine show striking progress being made there through the constructive enterprise fostered by the Palestine Foundation Fund,” Mr. Fischman stated. “A cable just received by Samual Untermyer, president of the fund, from the Zionist headquarters in Jerusalem, states that there is practically no unemployment in Palestine at the present time because whose who have been out of work, have been absorbed into the growing life of the country. The solution of the unemployment problem has come about largely through the success achieved in tobacco cultivation, which was started two years ago by the Palestine Foundation Fund, and which has advanced so rapidly that 3,000 additional immigrants will be employed in tobacco cultivation during the next three months.


Fleming’s Finest:

Hi Coverage Pointers Subscribers:

This week’s case from the Pennsylvania Supreme Court is pretty interesting. The question on appeal was whether there was coverage for emotional and mental distress damages for a wrongful death claim. The policy provided liability coverage for bodily injury but specifically excluded emotional and mental distress from the definition of bodily injury. Have a read if you are so inclined.

See you in a fortnight . . .

Katherine A. Fleming

[email protected]


Challenges in Palestine – 100 Years Ago:

The Hamilton Spectator
Hamilton, Ontario, Canada
10 May 1924


          After three years’ residence in Palestine, an intelligent observer remarks that the main, perhaps, the only problem in Palestine, lies in industrial development on sane, safe, and permanent lines. A prosperous population would not only provide employment for newcomers, and thus would also cause the political agitation, which at present possesses the country, to shrink to normal proportions. For too many people in Palestine, Jew and Arab, have in the absence of adequate employment, not other means of spending their time than dabbling in politics.

          Of the 16,000 or so Jewish workers in the country, probably more than one-half are without regular employment. The mistake of pushing into six months a building program that should normally have covered three years, led inevitably to a general and widespread unemployment at the end of the six months. The same mistaken policy is being pursued in regard to road making, and the same consequences are already arising. A healthy normal and stabilized source of employment in Palestine would do away with many of the difficulties and problems which are at present confronting the country.


Gestwick’s Garden State Gazette:

Dear Readers:

I had the pleasure of giving part of a lecture to over 15 different insurers at the Finger Lakes Insurance Council Claims Roundtable on “Notable Issues in First-Party Property Claims” this past week. It was a great event, and even addressed some of the very same first-party cases I have written to all of you about over the last year or so.

In sports, the Buffalo Bandits have done it again, marching their way into the finals. This is my second year as a season ticket holder, and both years, they have made it to the finals. They won it all last year. I’d say I’m the good luck charm, but in fact, the Bandits have been in the finals every season since 2019.

Evan D. Gestwick

[email protected]


How Much for a Death? – 100 Years Ago:

The Brooklyn Daily Eagle
Brooklyn, New York
10 May 1924


          Mineola, L. I., May 10 – A jury in the Nassau County Supreme Court before Justice Mitchell May awarded $5,500 to Mrs. Jannie McCord, daughter and administratrix in the estate of Charles R. Case, who was killed while riding a bicycle at the Roslyn crossing of the Long Island Railroad last September. The defendant was Hamilton De Bouvier of Huntington. He was driving a large car when Case, who was 70, and the crossing watchman at this station came along on his bicycle. Witnesses testified that his bicycle had lights on the front and rear. As a result of being ran down Case suffered paralysis and died after going to the Nassau Hospital.


O’Shea Rides the Circuits:

Hello Readers,

It was a close one, but thankfully the Toronto Maple Leafs were eliminated in the first round yet again this year. Besides a single playoff series win, the Leafs have demonstrated they are a nullity in the playoffs. Although the Ottawa Senators may have hired a suspect head coach, at least we nobly accept our present mediocrity rather than underachieve with three 90-point scorers.

This week I have a quick read from the Fifth Circuit involving a sum in controversy issue that involved two property losses. The carrier and insured elected appraisal but failed to agree on an umpire. The insured moved to dismiss the carrier’s petition in district court to appoint an umpire. The district court found it lacked subject matter jurisdiction due to the lack of appraiser estimates. The Fifth Circuit disagreed.

Until next time,

Ryan P. O’Shea

[email protected]


Bobbed Bandit Bids Bye-Bye – 100 Years Ago:

Daily News
New York, New York
10 May 1924


          Submerged in a criminal flotsam, their fleeting orgy of notoriety fast dying out, Celia Cooney, Brooklyn’s bobbed-hair gun girl, and her husband-partner, Edward Both as stanch in love as in crime – yesterday began paying the piper behind prisons walls for their spectacular holdup explicits. Each began serving a ten-year sentence.      

          Celia, confident that it was the beginning of a new life for them, left for Auburn prison on the Empire state Express from the Grand Central terminal yesterday morning.

          Edward was unexpectedly taken to Sing Sing yesterday afternoon out of the same station. It had been announced he would leave Monday.

          Cooney lost his identity and became No. 75,907 at Sing Sing. He was hardly noticed on his arrival there. Being an automobile welder by trade, he probably will be put at same mechanical work.      

          Celia was all smiles and a genial, though thoughtful person, as she started on the final lap of her crime career. She was enthusiastic over the prospect of shaping her future life by learning stenography at the prison and eagerly told how she would prepare for a brighter future.

          Cooney said he and his wife would be model prisoners so they would get out as soon as possible.

          “When we get out we shall go straight,” He said.

          “No one was there to bid him farewell as left the jail handcuffed to a deputy sheriff.

          Pressing her face against the car window, Celia’s last look at New York for a long time was a curious crowd of faces.


Rob Reaches the Threshold:

In our last edition, I expressed my excitement for the Knicks as they were in the midst of an amazing first round playoff series against the Philadelphia 76ers. As I currently type this article, Madison Square Garden is absolutely electric as the Knicks close out Game 2 against the Indiana Pacers in Round 2. I hope to be able to keep updating you on this amazing Knicks team again in two weeks (but my heart may not be able to take a nailbiter every game).

After a drought of any cases for the month of May, I am excited to be able to bring you an update from the Fourth Department. This case presents a less common serious injury claim; namely, for posttraumatic stress disorder. I hope you enjoy reading how the issue was navigated by the Court.

Robert J. Caggiano

[email protected]


President and Congress at Loggerheads – 100 Years Ago

The Daily Messenger
Canandaigua, New York
10 May 1924


Must Act on Many Bills Which Pass Congress Against His Wishes – Many Vetoes Are Expected – May have Wide Political Significance

         WASHINGTON, May 10. – Troubles piled up today on President Coolidge’s doorstep.

          The stack is being increased almost daily by a Congress that has taken the bit in its teeth and is impervious to the whip of party discipline.

          The soldiers’ bonus bill is on the President’s desk waiting for the “disapproved, C.C.” that is to be written across its fresh pages.

         It will be joined shortly by the new immigration restriction bill, excluding Japanese by Federal statue on July 1, in which issue President Coolidge and Secretary of State Hughes have suffered the most pronounced defeat of the present turbulent session of Congress.

          And in another two weeks the 1924 tax reduction measure, so torn and scrambled in its tempestuous passage through Congress it has lost all semblance of the plan or originally proposed by the President and Secretary Mellon will take place on the presidential desk and invite a veto.

          The McNary-Haugen farm relief bill setting up a $200,000,000 government buying corporation to stabilize prices, may be a late starter in the trouble sweepstakes. It is disapproved by the administration, but if the farm bloc can have its way, and it thinks it can – the measure is going to be put up to Mr. Coolidge within two weeks.


Goldberg’s Golden Nuggets:

Hello all!

Everyone at home is healthy and everyone under the age of 30, dog included, are well rested. Us adults? We’re happy to be tired – there’s no better reason.

Summer is starting to show itself, which is a nice welcome. As we wait for the full arrival of the warmth, I have two quick cases that are not special but just rely on the basics – follow the rules of the road and produce contemporaneous treatment records if you want to prevail as a plaintiff.

Until next time!

Joshua M. Goldberg

[email protected]


Protestant Bride Wanted – 100 Years Ago:

The Buffalo Enquirer
Buffalo, New York
10 May 1924

          PROTESTANT- Gentleman with a good position would like the acquaintance of a lady between 30 and 45; object matrimony. Address Home Sweet Home, Courier.


LaBarbera’s Lower Court Library:

Dear Readers:

Unfortunately – nothing noteworthy to report on this week. Hopefully, I can make it up to you all next edition, by finding a few good ones!

Until then…

 Isabelle H. LaBarbera

[email protected]


Cinque Lincoln’s Lost – 100 Years Ago:                                                 

The Indianna Gazette
Indiana, Pennsylvania
10 May 1924


LOST- Four new 5-dollar bills between Farmers Bank and 5th St. Finder please leave at Gazette. 22.


North of the Border:

This edition finds me in Chicago attending the Annual Meeting of the American College of Coverage Counsel where I have encountered many of the loyal readers of this newsletter. Wonderful to see so many familiar faces and get caught up on what is new and emerging in coverage law. Sad news to hear of the sudden passing of immediate Past President Mike Huddleston on Monday. Don't put off to tomorrow - it may never come. 

My column this week discusses a solid CGL issue / it's been a while since a CGL case has made it to a Canadian Appeal Court.

Heather A. Sanderson

Sanderson Law, Calgary, Alberta
[email protected]


Headlines from this week’s issue, attached:

Dan D. Kohane

[email protected]

  • While Carrier Disclaimed Timely on its Primary Policy, it was Untimely with Respect to its Excess Policy.  It Should have Known that Policy May be Implicated 

  • Fourth Department Requires MLMIC to Defend Sexual Abuse Case Against Doctor due to Some Other Allegations of Medical Malpractice.  Thousands Flee

  • Classification Limitation Not an Exclusion So Failure to Disclaim Timely Does Not Invoke Penalties under Insurance Law Section 3420(d)(2)


Steven E. Peiper

[email protected]

  • Question of Fact on Workmanship Denial Precludes Summary Judgment on Legal Malpractice Claim


Brian D. Barnas

[email protected]

  • Summary Judgment Denied on Bad Faith Claim Despite Insurer’s Prompt Investigation, Settlement Offers, and Repeated Attempts to Effectuate Settlement


Lee S. Siegel

[email protected]

  • Regardless of the Number of Claimants, No UIM Coverage Available Where Limits Are Equal

  • No HO Coverage for Betterment

  • Son of Former Live-in Girlfriend Not a UIM Insured


Kyle A. Ruffner
[email protected]

  • Although Claimant Did Not Fully Comply with Verification Requests, Court Upholds Arbitration Award Because Insurer Failed to Strictly Comply with the Follow-Up Procedures Set Forth in 11 NYCRR 65-3.6(b)

  • Court Grant’s Medical Provider’s Motion to Dismiss Insurers Complaint, Seeking De Novo Review of an Arbitration Award, As the Insurer Failed to Allege Facts to Support Why Claimant's Injuries Were Not Covered


Ryan P. Maxwell

[email protected]

  • Defense Obligation Triggered by Mere Allegation of Contract Requiring Additional Insurance, Despite Underlying Finding that it Did Not Exist


Scott D. Storm

[email protected]

  • Question of Fact as to Whether the Property Constitutes the Insured’s Residence Premises for Purposes of Coverage for a First-Party Claim


Katherine A. Fleming

[email protected]

  • No Coverage for Emotional and Mental Distress Damages for Wrongful Death Claim


Evan D. Gestwick

[email protected]

  • Court Finds Suit Timely Despite Being Brought After Time Prescribed by Suit Limitation Clause


Ryan P. O’Shea

[email protected]

  • Difference in Estimated Values of Loss Satisfies Amount in Controversy in Petition to Appoint Umpire Under Appraisal Provision


Robert J. Caggiano

[email protected]

  • Fourth Department Unanimously Affirmed, Without Costs, a Decision Granting Summary Judgment in Favor of Defendant Dismissing the Complaint Which Included a Claim for Serious Injury for a Posttraumatic Stress Disorder Diagnosis


Joshua M. Goldberg

[email protected]

  • Second Department Finds Comparative Fault Issue of Fact

  • First Department Upholds Lack of Causation in Serious Injury Question


Isabelle H. LaBarbera

[email protected]

  • No case to report this week


Heather A. Sanderson
Sanderson Law, Calgary, Alberta

[email protected]

  • Cumulative, Repetitive Work of a Similar Nature, Like Installing Roof Tiles or Lifts of Dirt to Create an Embankment, Does Not Mean that Each Box of Tile, or Each Lift Placement, is a “Particular Part” in a Work Performed Exclusion to a Liability Policy


Stay well and celebrate each day.


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.

Dan D. Kohane

[email protected]


Agnes A. Wilewicz

[email protected]


Evan D. Gestwick

[email protected]


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


Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Scott D. Storm

Brian D. Barnas


Dan D. Kohane
[email protected]

Alice A. Trueman

Joshua M. Goldberg


Jody E. Briandi, Team Leader
[email protected]


Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri
Barnas on Bad Faith

Lee’s Connecticut Chronicles

Kyle’s Noteworthy No-Fault

Ryan’s Federal Reporter

Storm’s SIU

Fleming’s Finest

Gestwick’s Garden State Gazette

O’Shea Rides the Circuits

Goldberg’s Golden Nuggets

LaBarbera’s Lower Court Library

North of the Border


Dan D. Kohane
[email protected]


05/07/24       New York City Housing Authority v. Admiral Insurance Co.
Appellate Division, First Department
While Carrier Disclaimed Timely on its Primary Policy, it was Untimely with Respect to its Excess Policy.  It Should Have Known that Policy May Be Implicated

NYCHA established its entitlement to summary judgment, as the evidence submitted on its motion showed that Admiral's August 2018 disclaimer of coverage was untimely as a matter of law. Admiral does not dispute that it knew of a basis for disclaiming liability on the underlying Labor Law action as early as 2016, based on the injured worker's employment with an insured and the "action over" exclusion in its excess liability policy. Indeed, Admiral relied on the identical exclusion in its primary liability policy for its March 17, 2016, disclaimer on the primary policy.

Admiral contends that its disclaimer was timely because its duty to disclaim under the excess policy was triggered only once there was a reasonable possibility that the excess coverage might be reached.  Admiral had notice of just such a reasonable possibility no later than its 2017 receipt of NYCHA counsel's litigation plan, which contained ample grounds to conclude that excess coverage might be triggered.

Editor’s Note:  Word to the wise – disclaim timely on all policies that may be implicated, or else you may lose your right to rely upon exclusions.


05/03/24       Mscichowski v. MLMIC Insurance Company
Appellate Division, Fourth Department
Fourth Department Requires MLMIC to Defend Sexual Abuse Case Against Doctor Due to Some Other Allegations of Medical Malpractice.  Thousands Flee

Plaintiff is a licensed pediatrician, started the lawsuit to get a defense and indemnity in an underlying action commenced against him by a former patient who alleges that plaintiff sexually abused her as a child. The doctor moved for partial summary judgment declaring that defendant is obligated to defend him in the underlying action, and defendant cross-moved for summary judgment declaring that it has no duty to defend or to indemnify plaintiff in the underlying action.

The lower court ruled in favor of MLIC, holding that the claims did not arise from a "medical incident" or "professional services," as those terms are defined in the subject insurance policy, and in any event that the policy's exclusion for sexual assault precluded coverage.  The Fourth Department reversed.

The court noted that the complaint in the underlying action primarily alleges that plaintiff sexually abused his former patient during a medical examination, it also contains "facts or allegations" that bring the claim "potentially within the protection purchased" for claims arising from professional services rendered by plaintiff, thus triggering the duty to defend.  For instance, the underlying complaint alleges that plaintiff improperly diagnosed, cared for and treated the former patient in question, and failed to provide her with "proper and appropriate pediatric care."

The underlying complaint further alleges that plaintiff inserted his finger into the former patient's vagina "without gloves," suggesting that perhaps such action would have been medically proper had plaintiff been wearing gloves. Without any context or details regarding the nature of the medical treatment being provided by plaintiff at the time of the alleged improper touching of the former patient, the court could not “categorically conclude that the underlying complaint is devoid of facts or allegations that potentially bring the former patient's claims within the protection purchased by plaintiff in the subject liability policy”.

In light of the above, the court concluded that defendant failed to meet its initial burden on its cross-motion of establishing that it is entitled to a declaration that it is not obligated to defend or indemnify.  In particular, defendant failed to meet its "heavy burden" of establishing that all of the claims asserted in the underlying complaint are subject to the policy's exclusion for sexual assault and battery.

Finally, the matter is referred back to the for a determination on the merits of those parts of plaintiff's motion seeking declarations that plaintiff may retain counsel of his choice in the underlying action and that defendant is responsible for paying attorneys' fees and costs with respect to that action.

Editor’s Note: It seemed pretty clear that the “operative act” that gave rise to this lawsuit was the sexual abuse. In Mount Vernon Fire Ins. v. Creative Housing, 88 NY2d 347 (1996), as “assault and battery exclusion” case, the Court refused to ignore the assault and battery allegations, despite other claims of negligent security when the “operative act” that gave rise to the claim was, indeed, assault.  Here, it appears to your editor, that the operative acts in this case were the alleged acts of sexual abuse and the exclusion for sexual assault should have won the day.


04/30/24       Wesco Insurance Company v. SR Delco C.S.M. Inc.
Appellate Division, First Department
Classification Limitation Not an Exclusion So Failure to Disclaim Timely Does Not Invoke Penalties Under Insurance Law Section 3420(d)(2)

Delco, the general contractor, hired a nonparty subcontractor to perform certain interior carpentry work on premises where one of the subcontractor's employees was allegedly injured. That employee commenced an underlying personal injury action against Delco, who in turn, sought coverage from Wesco.

Although plaintiff initially provided Delco with a defense, several months after receiving notice of the underlying action, it disclaimed coverage, taking the position that the claims against Delco were not covered by the Policy. Specifically, the Policy provides that coverage was "limited to those classification codes listed in the Policy." While the subcontractor was performing interior carpentry work, a listed classification code, at the time of the accident, Delco, as the general contractor and the named insured, was not. Accordingly, the underlying claim falls outside the scope of the Policy.

Delco argues that plaintiff must provide a defense because it failed to disclaim coverage "as soon as is reasonably possible," as required by Insurance Law § 3420(d)(2). However, the endorsement defines the scope of coverage in the first instance, and does not operate as an exclusion.

Accordingly, contrary to Delco, disclaimer pursuant to Insurance Law § 3420(d)(2) was unnecessary (id. at 403).

Editor’s Note:  Attaboy Max.  A little longer and perhaps estoppel would have set in


Steven E. Peiper

[email protected]


05/07/24       Kidron v. Suris & Associates, P.C.
Appellate Division, First Department
Question of Fact on Workmanship Denial Precludes Summary Judgment on Legal Malpractice Claim

Plaintiff’s home sustained damage when admittedly poor work product from a retained contractor resulted water damage.  A claim for coverage under the homeowner’s coverage was presented to Granite State.  Granite State cited the exclusion for poor workmanship and denied the claim in its entirety.  Plaintiff argued, however, that the ensuing loss exception to the poor workmanship exclusion applied. As such, coverage for some of the damage should have been affirmed. 

Unfortunately for plaintiff, his counsel delayed in filing legal action against Granite State and the matter was, apparently, barred by application of the two-year suit limitation clause.  In the resulting malpractice claim, the sued law firm argued that the failure to timely commence the lawsuit did not matter because there was no coverage under the Granite State policy in any event. 

The trial court agreed and dismissed the claim.  On appeal, however, the First Department found a question of fact as to whether water damage emanating from plumbing work performed, albeit poorly by a subcontractor, was covered.  Until the sufficiency of Granite State’s decision could be determined, the legal malpractice claim could not be resolved, and trial court decision was reversed.    


Brian D. Barnas

[email protected]


04/25/24       Herrera v. GEICO General Insurance Company
United States District Court, Southern District of Florida
Summary Judgment Denied on Bad Faith Claim Despite Insurer’s Prompt Investigation, Settlement Offers, and Repeated Attempts to Effectuate Settlement

On February 28, 2018, an automobile insured by Geico and operated by Garcia Sr. was involved in a motor vehicle accident with a motorcycle operated by Herrera.  Herrera sustained serious injuries including numerous surgeries and the amputation of his right leg.

Geico received notice of the accident the same day.  It spoke with Ibarra, one of the named co-insureds under the policy, on March 7 after several unsuccessful attempts to speak with Garcia Sr.  After receiving the crash report, Geico advised Ibarra and Garcia Jr., the other co-insured under the policy, that Geico found Garcia Sr. at fault for the accident.

On March 16, Geico initiated its first contact with Mr. Herrera by leaving a voicemail on his cell phone.  It followed up three days later by mail with copies of a HIPPA authorization and a Medicare eligibility form.  On March 20, Mrs. Herrera returned Geico’s initial phone call but was unable to reach a representative.  By March 21, Geico had decided to tender the policy, and left a voicemail on Mr. Herrera’s phone advising of the tender.  On March 22, a Geico field representative visited the hospital and attempted to deliver the check, but it was not accepted.  The field representative determined that Mr. Herrera’s leg had been amputated.

On March 23, the Geico field representative returned to the hospital and successfully delivered a proposed release form and the $10,000 check made co-payable to Mr. Herrera and the hospital.  However, over the next nine months, issues arose with respect to outstanding hospital bills, potential Medicare beneficiary status, and a Medicaid lien.

By November, Mrs. Herrera faxed a letter to Geico requesting a $5,000 check be issued payable to Mr. Herrera and that the other $5,000 would be accepted in satisfaction of the lien.  Geico requested Mr. Herrera send a signed release before it would issue the separate $5,000 checks payable to Mr. Herrera and Medicaid.  Alternatively, Mrs. Herrera requested Geico send the $5,000 check payable to Mr. Herrera before the Herreras would agree to sign and submit any release discharging the Garcias from additional liability.  By the beginning of December, Mr. Herrera had not signed the release and Geico had not issued a $5,000 check.

Accordingly, the Herreras commenced a tort action against Garcia Sr. and Garcia Jr. on December 3, 2018.  At the conclusion of the underlying action, the parties agreed to entry of final judgment for $5.5 million against the Garcias.  Plaintiffs subsequently brought this action alleging common law bad faith.

The court denied summary judgment.  It held that Geico's timeliness and diligence in resolving all impediments thwarting the settlement negotiations with Mr. Herrera, most notably, the confirmation of the Medicaid lien amount and the issuance of separate $5,000 checks payable to Mr. Herrera and Medicaid, could lead a reasonable jury to find that it acted in bad faith.

Geico argued that it took all steps to protect its insureds from excess exposure. Within one week of the accident, Geico investigated and concluded Garcia Sr. was at fault for the accident.  Furthermore, within days of the accident, Geico discovered Mr. Herrera's contact information, reviewed the basic extent of his injuries, and delivered a $10,000 check co-payable to Mr. Herrera.

However, while it was undisputed that Geico investigated the facts of the accident, offered potential settlements, and repeatedly called its insureds to explain and advise them on the settlement process, the court found there was still sufficient disputed evidence that supported the conclusion that Geico acted in bad faith. In Florida, courts have affirmed that bad faith may be inferred from a delay in settlement negotiations which is willful and without reasonable cause. Here, upon discovery that Mr. Herrera had his right leg amputated as result of the accident, Geico knew the gravity of Mr. Herrera's loss and the severity of its insureds’ financial exposure. Geico knew the full extent of Mr. Herrera's injury within a month of receiving notice of the accident, but Mr. Herrera's claim remained active and unsettled for approximately nine additional months.

Beyond repeated gaps in communication between Geico and Mrs. Herrera, a delay arose between March and May when the Parties dispute whether proof of a hospital bill zero balance was sufficient to permit Geico to reissue a $10,000 check payable to Mr. Herrera.  Then, between May and November, the Parties dispute whether the form GEICO sent Mrs. Herrera was the appropriate form for Mr. Herrera to sign and submit as a Medicaid beneficiary despite the form designating its intended use being for a Medicare beneficiary. Finally, a delay also arose between November and December when the parties dispute whether Medicaid required GEICO to reissue the checks first or Mr. Herrera to sign the release first before it would agree to reduce the lien amount to $5,000 and accept Geico's payment in full satisfaction.

The court did grant partial summary judgment on the issue that it had no reasonable opportunity to settle Mr. Herrera's claim after December 3, the date Mr. and Mrs. Herrera initiated their tort action against Garcia Sr. and Garcia Jr.  The Herreras admitted they would not settle the claim after the tort action was filed.


Lee S. Siegel

[email protected]


05/03/24       Brenckman v. Thivierge and Dairyland Ins. Co.
Superior Court of Connecticut, Tolland
Regardless of the Number of Claimants, No UIM Coverage Available Where Limits Are Equal

This headline might seem to be recycled from only a few weeks ago—and it is! The trial court, relying on a case we detailed about a month ago, held that were there are equal limits between the tortfeasor’s insurance and the injured claimant’s insurance, there is no underinsurance notwithstanding the number of other claimants there may be. See Bouchard v. Wheeler.


04/25/24       Kutrolli v. Liberty Mut. Ins. Co.
Superior Court of Connecticut, Waterbury
No HO Coverage for Betterment

The insured suffered extensive fire damage to his two bedroom, two bath, 1700 square foot house. Liberty’s engineer determined that the house could be repaired and the estimator set the cost of repair at $195,000, reduced for depreciation to an ACV of $167,000 (the dwelling limits were $225,000). The insured did not repair the house. Instead, at a cost of some $70,000, he demolished the house and then spent an additional $458,000 over 30 months to build an entirely new house, with more than 3000 square feet of living space and betterments at every turn.

Liberty paid the insured the dwelling and personal property ACV, plus 10 months of ALE, even though Liberty determined that the repairs could be done in four months. The insured claimed that the house was a total loss, that health reasons necessitated the building of a new house, and that it reasonable took two and half years to complete the work, so he was entitled to an extra $192,000 in ALE.

The court concluded that the insured failed to submit any evidence challenging Liberty’s engineering report or estimate, finding that a self-serving affidavit was not evidence and that a doctor’s report was not credible or germane to the insurance issues. Further, the court held that the insured failed to invoke appraisal and therefore was barred from suit for failure to comply with the policy provisions. As a result, the court held that Liberty was not in breach of contract, did not act in bad faith, or violate CUTPA/CUIPA as a matter of law.


04/23/24       Newsome v. AAA Ins. Co.
Superior Court of Connecticut, Bridgeport  
Son of Former Live-in Girlfriend Not a UIM Insured

The son of the insured’s former live-in girlfriend did not meet any definition of insured under a standard Connecticut UM/UIM policy. Accordingly, the court granted AAA’s motion to dismiss.

Newsome was injured while operating a dirt bike on a public street when the tortfeasor ran a stop sign. Progressive paid the policy limit of $25,000 to Newsome and Newsome then sought UIM benefits. AAA denied coverage, asserting that Newsome was not an insured under the policy. Suit followed, but the court agreed with the insurer.

Newsome’s mother and the named insured, Mellers, were involved in a live-in relationship. It was unclear from the opinion when the relationship ceased. Nevertheless, plaintiff argued that the unmarried couple met the policy’s definition of a domestic partnership and therefore Newsome was insured as a family member.

The court found many problems with this argument, not the least among them was that the dirt bike was not scheduled and did not meet the definition of a covered auto—which included either a four- or six-wheeled vehicle. Neither Newsome nor his mother were named insureds, and Newsome did not meet any of the policy’s definition of family member by blood, marriage, civil union, adoption, or guardianship. The claim for domestic partnership was unavailing, first because the policy requires that it be registered—it was not and could not be because, as the court highlighted, Connecticut does not recognize domestic partnerships.


Kyle A. Ruffner

[email protected]


04/12/24       Am. Trans. Ins. Co. v. Comm. Med. Care of NY a/a/o Sprinkle
Supreme Court, Kings County
Although Claimant Did Not Fully Comply with Verification Requests, Court Upholds Arbitration Award Because Insurer Failed to Strictly Comply with the Follow-Up Procedures Set Forth in 11 NYCRR 65-3.6(b)

The insurer moved pursuant to Article 75 of the CPLR for an order and judgment vacating the arbitration award in favor of the medical provider for services rendered. The insurer argued that the arbitration award should be vacated because the decision was arbitrary and capricious and failed to follow well settled law.

It was undisputed that the provider responded to pre EUO requests but did not provide some of the requested information because certain documents were not in their possession. Further, the insured stated it was undisputed that the claimant appeared for an EUO and it timely requested additional documentation after the EUO which the respondent failed to respond to. Therefore, the petitioner claimed that no-fault benefits were not due until all verification requests are received and that the 30-day requirement to pay or deny claims was tolled until all relevant requested information is received.

11 NYCRR 65-4.10(h)(1)(i) provides that a decision of a master arbitrator is final and binding except for court review pursuant to an article 75 proceeding. The role of the master arbitrator is to review the determination of the arbitrator to assure that the arbitrator reached his decision in a rational manner and that the decision was not arbitrary and capricious/ Pursuant to Insurance Law 5106, an insurer must pay or deny claims within 30 days after receipt of the proof of claim. Upon receipt of one or more of the prescribed verification forms used to establish proof of claim, an insurer has 15 business days to request any additional verification required to establish proof of claim (see 11 NYCRR 65-3.5[b]). If the insurer seeks additional verification, the 30-day window is tolled until it receives the relevant information requested and the insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested (see 11 NYCRR 65-3.8[a][1]). A claim need not be paid or denied until all demanded verification is provided

The court explained that, just as an insurer must have good cause to demand verification, a provider must have a reasonable justification for refusal to provide a response. An insurer is not required to pay or deny a claim upon a partial response to a verification request and may deny a claim where additional verification has not been provided within 120 days. However, the court held that the Master Arbitrator's was not arbitrary and capricious and did not fail to follow well settled law. The arbitrator found that following the Examination Under Oath, the claimant "substantially complied" with Petitioner's pre EUO verification requests. The court noted that while the determination that Respondents "substantially complied" with the requests, there is no concept of substantial compliance, within no-fault insurance law, and as provided for under the statute, an insurer is entitled to receive all necessary items to verify the claim, and a claim need not be paid or denied until all demanded verification is provided. Thus, the arbitrator’s decision would have been arbitrary and capricious if not for the fact that the Petitioner failed to strictly comply with the follow up procedures set forth in 11 NYCRR 65-3.6(b). The insurer failed to proffer evidence that it followed up with its continued demands, but instead attempted to request new additional verification, which is improper and constitutes a failure to act diligently in processing the claim.

Accordingly, the Court denied the insurer’s petition to vacate the arbitration award, confirming the award.


04/19/24       Am. Trans. Ins. Co. v. Modern Brooklyn Med. PC a/a/o Roderick
Supreme Court, Kings County
Court Grants Medical Provider’s Motion to Dismiss Insurer’s Complaint, Seeking De Novo Review of an Arbitration Award, as the Insurer Failed to Allege Facts to Support Why Claimant's Injuries Were Not Covered

The insurer issued a New York insurance policy to a non-party which was in effect at the time of the subject accident and included a no-fault endorsement. The defendant medical provider submitted no fault claims to the insurer seeking reimbursement for medical services rendered to the party injured in the subject accident, in the amount of $5,766.34. Defendant initiated arbitration and an award was issued to the Defendant in the amount of $5,766.34. Plaintiff filed for Master Arbitration, wherein the Master Arbitrator upheld the award. Plaintiff then asserted a cause of action for de novo review of the arbitration awards pursuant to CPLR 7511, Insurance Law 5106(c) and 11 NYCRR 65-4.10(h)(1)(ii).

The medical provider argued that pursuant to both Insurance Law §5106(c) and 11 NYCRR §65-4.10(h), the insurer had the option to either: (a) commence a proceeding to vacate the arbitration award or (b) commence a trial de novo, and that it failed to sufficiently plead a cause of action for either. The medical provider asserted that if the insurer was seeking a trial de novo, the Complaint did not specify what the alleged defenses are that precluded its obligation of paying Defendant's claims, and the insurer did not make any allegations as to any facts that would warrant the vacatur of the arbitration award or for any other relief.

As explained by the court, when a party moves to dismiss a complaint pursuant to CPLR 3211(a)(7), the standard is whether the pleading states a cause of action, not whether the proponent of the pleading has a cause of action. The appropriate test of the sufficiency of a pleading is whether such pleading gives sufficient notice of the transactions, occurrences, or series of transactions or occurrences intended to be proved and whether the requisite elements of any cause of action known to our law can be discerned. CPLR 7511 provides that a party can file a petition to vacate an arbitration award within ninety days and the award shall be vacated if the court finds that the rights of that party were prejudiced by: (i) corruption, fraud or misconduct in procuring the award; or (ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or (iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made, or by (iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection. A party seeking to overturn an arbitration award on one or more grounds stated in CPLR 7511(b)(1) bears the burden in establishing a ground for vacatur by clear and convincing evidence.

The award of a master arbitrator in a dispute over a no-fault claim is binding except for the grounds for vacating an award under CPLR 7511. Where the amount of such master arbitrator's award is five thousand dollars or greater, the insurer or the claimant may institute a court action to adjudicate the dispute de novo. Additionally, under 11 NYCRR 65-4.10(h)(1)(ii), a decision of a master arbitrator is final and binding except for if the award of the master arbitrator is $5,000.00 or greater, exclusive of interest and attorney's fees, either party may, in lieu of an article 75 proceeding, institute a court action to adjudicate the dispute de novo. 

The court determined that while Insurance Law 5106[c] and 11 NYCRR 65-4.10(h)(1)(ii) permit de novo adjudication of a no-fault insurance claim where the master arbitrator's award is $5,000 or greater, the insurer in this case merely alleged the underlying arbitration award was granted in the amount of $5,766.34 and affirmed by a Master Arbitrator. The insurer did not plead sufficient facts to give notice of the transactions, occurrences, or series of transactions or occurrences intended to be proved. For example, it did not allege facts to support why the claimant's injuries were not covered by the policy, nor its defenses demonstrating why payment was not owed. Additionally, it did not allege nor offer admissible evidence that Defendant's claims were timely denied and that the denial form included the necessary information to promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated.

Accordingly, the court granted the Defendant medical provider’s motion to dismiss the Insurance Company's complaint for failure to state a cause of action pursuant to CPLR 3211(a)(7).


Ryan P. Maxwell
[email protected]


04/26/24       GNY Ins. Co. v. The Burlington Ins. Co.
United States Court of Appeals, Second Circuit
Defense Obligation Triggered by Mere Allegation of Contract Requiring Additional Insurance, Despite Underlying Finding that it Did Not Exist

For those on the wrong side of this decision, it appears a tough pill to swallow. Greater New York Mutual Insurance Co. ("GNY") sued Scottsdale Insurance Co. ("Scottsdale") and The Burlington Insurance Co. ("Burlington"), seeking coverage for GNY's insured, Park City 3 and 4 Apartments, Inc. ("Park City"), in an underlying New York state court action.

In the underlying action for negligence against Park City and Scottsdale's insured, Phoenix Bridging, Inc. ("Bridging"), Park City brought cross-claims against Bridging for breach of contract for failing to designate Park City as an additional insured. But no party could produce the contract. The state court determined that the contract did not exist and entered summary judgment against Park City on its claims. However, the contract was later discovered, and GNY brought this case.

Despite the underlying decision that the contract did not exist, the district court here determined that it was not bound by the state court's decision and granted summary judgment for GNY on its duty-to-defend claim against Scottsdale. It found that the contract between Park City and Bridging required Scottsdale to defend Park City in the underlying action as an additional insured. Scottsdale appealed.

Scottsdale’s argument was threefold:

  1. GNY's claim is time-barred under New York’s 6-year statute of limitations;

  2. GNY is collaterally estopped from relying upon a non-existent contract as it was found by the state court; and

  3. That ignoring points (1) and (2), any defense obligation ran from the time at which the contract was provided to Scottsdale.

The Second Circuit quickly dispelled Scottsdale’s statute of limitations argument, noting that under New York law, an action for breach of the duty to defend does not accrue until the underlying action has concluded, which was not the case here.

Next, and rather unfortunately from your author’s perspective, the Second Circuit declined to address Scottsdale’s collateral estoppel argument on appeal because it was raised on appeal for the first time in reply and thus waived (ouch).

Unpersuaded on point three, the Second Circuit found that because “[a]n insurer's duty to defend is triggered when it has actual knowledge of facts establishing a reasonable possibility of coverage,” it follows that the “duty was triggered by GNY's November 26, 2013 letter to Park City, which disclosed the basis for the underlying action and stated that a contract existed between Park City and Bridging that made Park City an additional insured on Bridging's policy with Scottsdale.” This was “true even though GNY did not produce the contract when it sent that letter.”

Maxwell’s Minute: We had a robust conversation in the office about this one. Here are a few thoughts.

First, I wish the Second Circuit would have addressed the collateral estoppel issue. A judicial finding that a contract does not exist as between two represented parties to an alleged contract seems important. And here, this is the type of thing that would mean the difference regarding a purported additional insured’s ability to meet its burden of proof on that threshold issue. See National Abatement Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 33 A.D.3d 570, 824 N.Y.S.2d 230 (1st Dep’t 2006) (“The party claiming insurance coverage bears the burden of proving entitlement and is not entitled to coverage if not named as an insured or an additional insured on the face of the policy.”). I’m convinced that had the argument been asserted earlier, the outcome may have been different.

This leads to my second point, which is that being provided with a mere allegation that a contract requiring AI status exists is not the same thing as being provided with the contract itself, especially when the scope of coverage available to a purported additional insured relies upon the contract and its terms. It is not a difficult ask for a purported insured to supply a contract confirming its status as such. An insurer cannot determine the scope of any obligations owed to a purported additional insured absent the ability to review the contract defining that scope. At a certain point, a carrier should be justified in taking the position that no such contract exists. Now, could Scottsdale have defended Park City and filed a declaratory judgment action as suggested by the Court of Appeals in Lang v. Hanover Ins. Co., 3 N.Y.3d 350, 820 N.E.2d 855 (2004) (“[A]n insurance company that disclaims in a situation where coverage may be arguable is well advised to seek a declaratory judgment concerning the duty to defend or indemnify the purported insured”)? Certainly. But it should not have to when the purported additional insured has not tendered sufficient information to trigger coverage in the first place.

Which brings me to my last point that the Second Circuit may have stretched Fitzpatrick v. Am. Honda Motor Co., 78 N.Y.2d 61, 67 (1991) too far. Fitzpatrick provides that “[a]n insurer's duty to defend is triggered ‘when it has actual knowledge of facts establishing a reasonable possibility of coverage.’" To me, “actual knowledge of facts” means being actually supplied with the contract. Any defense obligation owed by Scottsdale under the circumstances presented here should extend from the point in time when that contract was actually supplied to Scottsdale. At that point in time, it could be said under Fitzpatrick that the tender of the actual contract converted an unreasonable possibility of coverage—based upon an invisible, mystical contract—into a reasonable possibility of coverage predicated upon an actual, physical contract document, complete with pages, words, terms, and conditions. Applying Fitzpatrick to this factual scenario is one step removed from requiring the defense for a purported additional insured that tendered a claim to every insurer in the yellow pages, where that tender provided broad enough allegations of a contractual relationship with their respective named insureds.

Now this was a Summary Order and, accordingly, one that “DO[ES] NOT HAVE PRECEDENTIAL EFFECT.” I think this decision can and should be limited to its unique set of facts—i.e., a lost contract, adjudicated as such but later found, which an insurer simply neglected to argue as dispositive of the additional insurance issue prior to appeal. I will chalk up the circumstances presented here as things that you certainly do not see every day.


Scott D. Storm

[email protected]


04/18/24       Menzies v. Auto-Owners Ins. Co.
United States District Court, W.D. Pennsylvania
Question of Fact as to Whether the Property Constitutes the Insured’s Residence Premises for Purposes of Coverage for a First-Party Claim

Menzies sustained water damage in February 2022. The insurer denied coverage asserting that the property did not constitute a “residence premises” as defined in the policy (“the one or two family dwelling where you reside”), as required by the insuring agreement.

Menzies moved into the property in 2001. She began remodeling the property and the project was supposed to take a few months, but there were a number of delays. Around September 2021, Menzies began staying with her boyfriend at his home during the remodel. During the remodeling, Menzies moved clothes and toiletries to her boyfriend's house, but also stored some items, including furniture, in the garage of her home, so that she could return those items to their place after the remodeling project was done. Menzies didn't sleep at the property after moving in with her boyfriend, and there were no beds set up at the insured property. Menzies kept food in the refrigerator and freezer at the insured property.  She also used the microwave and ate meals at the property a few times a month.  Additionally, between Ms. Menzies and her son, they were at the property "every other day." 

Menzies listed the property as her address for her bank accounts, listed the property's address on her tax return, and with the exception of a recent water bill, all of her personal mail was addressed and delivered to the property. Menzies changed the address on her driver's license to her boyfriend's address on December 10, 2020.  Her new driver's license was officially issued on November 5, 2021. Ms. Menzies changed the address on her driver's license because, according to her, she and her boyfriend bought a car together and the insurance policy was under his name and address. 

The Court held that a genuine dispute of material fact about whether Ms. Menzies resided in the property because the evidence submitted by the parties requires a factfinder to resolve the parties' differing views of the facts.

Under Pennsylvania law, "residence" is "one's factual place of abode."  "A person could have more than one residence."  The term "resident" in an insurance policy is not ambiguous simply because it is not defined in the policy, and courts can apply "common law definitions" and examine various factors "to arrive at a common-sense decision."  "The term resident or residency requires, at the minimum, some measure of permanency or habitual repetition."  Because residency status is a question of physical fact, intent is not relevant. 

"When inquiring into residency, courts look at objective indicators such as where an individual sleeps, takes her meals, receives mail, and stores personal possessions," as well as which address an individual lists on her driver's license and tax returns, and where she does her banking. 

Importantly, courts have found that if there is more than one reasonable inference to make from the evidence regarding residency, the question of residency is a question of fact for the jury to decide.  

How someone can "reside" at a property when it is in the process of being renovated is a fact-intensive inquiry. It depends on such fact-intensive inquiries as the habitability of the property, the scope and pace of the renovations, and the policyholder's use of the property during the renovations.

Here, Menzies ate at the property at times; kept some of her personal property there, albeit in the garage; visited the property; used the property's address for her personal mail, bank accounts, and tax returns. While this is evidence "tending to show" regular contact with the property, there is also evidence "tending to permit a jury to reach to opposite conclusion." For example, there is evidence that Menzies did not sleep at the property, and she did not list the property as her address on her driver's license.

Ultimately, there are two competing factual narratives here, with a host of competing inferences, which depend on the assessment of the credibility of witnesses and the quality of the evidence.  This requires a factfinder "to resolve the parties' differing versions of the truth at trial." 


Katherine A. Fleming

[email protected]


04/25/24       Kramer v. Nationwide Property and Cas. Ins. Co.
Pennsylvania Supreme Court
No Coverage for Emotional and Mental Distress Damages for Wrongful Death Claim

The trial court granted summary judgment in favor of the Decedent’s Parents, ordering Nationwide Property and Casualty Insurance Company (“Nationwide”) to defend Parents under their homeowners insurance policy (“the Policy”) against wrongful death and survival actions (together “Underlying Lawsuit”) involving the fatal drug overdose of Decedent at Parents’ home. The Superior Court affirmed. The Pennsylvania Supreme Court concluded that its interpretation was erroneous as a matter of law and reversed the decision of the Superior Court.

Decedent’s Mother, as the administrator of Decedent’s estate, sued “Parents” and their son, Kramer, in the Underlying Lawsuit. While Parents were away, Decedent stayed with Kramer at Parents’ home. Mother and Decedent knew that Kramer used and distributed narcotics. Decedent died from a drug overdose. Mother’s wrongful death complaint contended Parents entrusted Kramer with their home when they knew or should have known that he used and distributed narcotics.  Mother also had a cause of action against Parents and Kramer for alleged pain and suffering before Decedent’s death. Parents tendered the complaint to Nationwide for coverage under the Policy. Nationwide issued a denial of coverage letter to Parents. Parents filed a declaratory judgment action to order Nationwide to defend them against the Underlying Lawsuit. In its denial of coverage letter, Nationwide relied on the controlled substances exclusion. The trial court sided with Parents. The Superior Court affirmed on alternative grounds. According to the Superior Court, there was potentially a claim for other types of damages rooted in emotional distress, mental distress or injury, or any similar injury, none of which would be the direct result of bodily harm to the Decedent’s family itself. Because these damages did not fall within the ambit of the Policy’s bodily injury definition, the Superior Court determined that the Policy’s controlled substance exclusion, which excludes coverage for bodily injury resulting from the use of controlled substances, did not apply to those damages.

On appeal to the Supreme Court, Nationwide argued that the Policy only permitted coverage for bodily injury and that the parties had been contesting whether otherwise covered bodily injury claims were subject to the controlled substance or criminal acts exclusions. Nationwide contended that because the Superior Court determined that the alleged emotional distress claims did not constitute bodily injury, the potential for damages on such claims fell outside the Policy’s scope of coverage. Parents argued that the Policy did not limit coverage only to bodily injury, so Nationwide would have to pay for emotional distress and mental damages as a direct result of bodily harm. The Supreme Court reasoned that coverage is triggered by an occurrence, and an occurrence requires a bodily injury. Because the Superior Court determined that Mother did not suffer a bodily injury, there was no coverage for the wrongful death claim. Accordingly, the Supreme Court determined the Superior Court’s interpretation that Nationwide was potentially required to pay out for Mother’s emotional and mental distress damages for the wrongful death claim was contrary to the unambiguous provisions of the Policy and erroneous as a matter of law.


Evan D. Gestwick

[email protected]


04/25/24       Romhem et al. v. Franklin Mutual Insurance Company
Superior Court of New Jersey, Appellate Division
Court Finds Suit Timely Despite Being Brought After Time Prescribed by Suit Limitation Clause

Franklin Insurance denied coverage to the plaintiffs for a theft loss, by letter dated September 17, 2021. The plaintiffs sued Franklin for breach of the policy on September 19, 2022. Franklin moved for summary judgment on the ground that the suit was brought after the expiration of the policy’s one-year suit limitation clause. The trial court agreed with Franklin. This appeal followed.

The policy’s suit limitation clause provided that no action may be brought against Franklin until all policy conditions are complied with, and only if brought within 12 months after the date of the denial of the claim. In New Jersey, a six-year statute of limitations applies to breach of contract claims. However, private parties are free to agree to some other period of time.

The New Jersey Rules of Court provides guidance on computing periods of time that are “fixed by rule or court order.” That provision provides that the day of the event from which the period begins to run is included in the computation. So, too, is the final day, unless the final day falls on a Saturday, Sunday, or legal holiday, in which case, the period runs until the end of the next day that is not a Saturday, Sunday, or legal holiday.

Under the terms of the policy, the plaintiffs had until September 17, 2022—a Saturday—to sue Franklin for denying the claim. Under the New Jersey rules, the plaintiffs would have had until Monday, September 19, to sue. The Appellate Division held that the New Jersey Court rule did not apply in this case, as the plaintiffs’ one year to file the suit was not fixed “by rule or court order,” but rather, by a private contract. The Court also acknowledged that another New Jersey Court rule provides that the courts are always open for filings and other transactions of judicial business.

Despite this, the Court noted that the suit limitation clause in the policy failed to account for what happens if the last day falls on a Saturday, Sunday, or legal holiday, as the New Jersey Court rule does. Reasoning that if Franklin did not wish for Saturdays, Sundays, or legal holidays to extend the insureds’ time to sue it, it would have incorporated that into its suit limitations clause (or at least incorporated that into its letter, in which the suit limitations clause was mentioned), the Court deemed the suit timely.


Ryan P. O’Shea

[email protected]


05/07/24       Sentry Ins. v. Morgan
United States Court of Appeals, Fifth Circuit
Difference in Estimated Values of Loss Satisfies Amount in Controversy in Petition to Appoint Umpire Under Appraisal Provision

Morgan is a business owner, and unfortunately on December 7, 2020, two of his properties suffered wind and hail damage caused by a storm. Sentry insured both properties. Sentry determined the damages totaled $190,768.33. After deducting ordinance and law, recoverable depreciation, and the deductible, Sentry paid Morgan $61,026.93. Morgan estimated the loss was $499,832.29 for the building and $40,593.76 for the contents. He demanded an additional $349,657.22 from Sentry, which it refused to provide. The Sentry policy contained an appraisal clause, which in reads:

If we and you disagree on the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser and notify the other of the appraiser selected within 20 days of such demand. The two appraisers will select an umpire. If they cannot agree within 15 days upon such umpire, either may request that selection be made by a judge of a court having jurisdiction. Each appraiser will state the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding as to the amount of loss.

Morgan demanded appraisal under the policy. The parties’ appointed appraisers could not agree on an umpire within 15 days as required by the policy. So, Sentry filed a petition in district court to select a competent, impartial umpire. Morgan moved to dismiss arguing the district lacked subject matter jurisdiction. The district court dismissed Sentry’s petition finding it failed to satisfy the required amount in controversy.

The Fifth Circuit reversed. The Court of Appeals identified that there is a split among the district courts within the circuit. It noted the district court concluded that the appraisal right is to be protected and since neither appraiser made an estimate, the district court could not assess the value. The Fifth Circuit disagreed and found that appointment of an umpire is often a necessary step before appraisers can even make their estimates; and without the appointment of an umpire Sentry and Morgan run the risk of not being able to adjudicate their claims.

The court further found the amount in controversy requirement was met because Morgan demanded an additional $349,657.22, which must be resolved through appraisal well exceeds the $75,000.00 threshold.

On appeal, Morgan raised two additional challenges to subject matter (1) whether the petition presents a justiciable case or controversy under Article III of the Constitution, and (2) whether the petition constitutes a “civil action” under 28 U.S.C. § 1332. The court noted that while subject matter jurisdiction may be raised at any time and may be examined for the first time on review, the Fifth Circuit is a court of review, not of first view; and the district court did not have the opportunity to consider these additional arguments in the first instance. On these issues, the Circuit Court remanded the case to the district court.


Robert J. Caggiano

[email protected]


05/03/24       Fry v. Doyle 
Appellate Division, Fourth Department
Fourth Department Unanimously Affirmed, Without Costs, a Decision Granting Summary Judgment in Favor of Defendant Dismissing the Complaint Which Included a Claim for Serious Injury for a Posttraumatic Stress Disorder Diagnosis

Plaintiff appealed from an Order of Supreme Court, Niagara County, which granted Defendant Kristina Doyle’s motion for summary judgment dismissing the complaint on the ground that Plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). On review, the Fourth Department unanimously affirmed granting of the motion, finding the evidence presented in opposition failed to raise an issue of fact.

By way of background, this matter stems from a motor vehicle accident which occurred on July 14, 2019, where Plaintiff Linda Fry’s vehicle impacted a vehicle owned and operated by Defendant Kristina Doyle. As a result of the accident, Plaintiff alleged causally related posttraumatic stress disorder. Specifically, she asserted that this diagnosis constituted a serious injury under § 5102 categories significant limitation of use, permanent consequential limitation of use, and 90/180.

At the trial level before Supreme Court, Niagara County, Defendant Doyle moved for summary judgment dismissing the complaint, arguing that Plaintiff had not suffered serious injury pursuant to any claimed category of Insurance Law § 5102(d). The court agreed, and granted Defendant’s motion, prompting appeal by Plaintiff.

On review, the Fourth Department confirmed the lower court’s finding that the Defendant met her initial burden on summary judgment. Specifically, Defendant submitted medical evidence establishing that Plaintiff’s posttraumatic stress order was not causally related – but rather was related to preexisting conditions. Further, Plaintiff’s submissions in opposition were found to be insufficient to raise a triable issue of fact. Specifically, Plaintiff’s submissions did not adequately address how her current posttraumatic stress disorder, in light of her past medical history, was related to the subject accident.


Joshua M. Goldberg

[email protected]


05/08/24       Mora v. Moore
Appellate Division of the Supreme Court, Second Department
Second Department Finds Comparative Fault Issue of Fact

Defendant and its 50-foot tractor trailer was making a left-hand turn from Broadway onto West 179th Street in Manhattan when its left back portion of the trailer came into contact with Plaintiff’s rear right panel of its vehicle. Plaintiff commenced the action seeking to recover damages for personal injuries. Plaintiff moved for summary judgment on the issue of liability and dismissing the affirmative defenses alleging culpable conduct and comparative negligence. The Supreme Court found that Plaintiff established Defendant was negligent and that negligence was the proximate cause of the alleged injuries. However, the Supreme Court found that there was an issue of fact as to whether Plaintiff was comparatively at fault for the accident. Without any additional detail, the Appellate Division affirmed.

Note: A review of the lower court record and decision shows that the issue of fact was whether Plaintiff’s vehicle was illegally parked in a ‘no standing or parking’ zone and if Plaintiff was parked too far from the curb, thereby obstructing the travel lane. Good use of testimony to identify an issue of fact. 


05/09/24       Peart v Carreras
Appellate Division of the Supreme Court, First Department
First Department Upholds Lack of Causation in Serious Injury Question

In an action to recover for alleged personal injuries sustained in a motor vehicle accident, Plaintiff appeals the dismissal of its Complaint on the ground that it did not sustain a serious injury within the meaning of Insurance Law §5102(d). The Appellate Division affirmed the lower court’s finding that defendants met their prima facie burden by submitting the medical report of an orthopedic surgery expert who opined that the plaintiff displayed no signs of any acute spinal or shoulder injury  and any injuries were degenerative in nature and not causally related to the accident. This opinion was supported based upon a biomechanical engineering expert who opined the low impact of the accident could not have caused the plaintiff’s injuries.

The Appellate Division agreed that Plaintiff failed to rebut this showing by failing to submit any admissible evidence of the plaintiff’s condition and treatment contemporaneous with the accident. Plaintiff only submitted an examination report of a pain management physician who examined the plaintiff once two years after the loss. This was “insufficient to reliably connect [plaintiff’s] current symptoms to the accident.”


Isabelle H. LaBarbera

[email protected]

No case to report this week – see you next time!


Heather A. Sanderson
Sanderson Law
Calgary, Alberta

[email protected]


04/18/24       Kelly Panteluk Construction Ltd. v. Lloyd’s
Saskatchewan Court of Appeal
Cumulative, Repetitive Work of a Similar Nature, Like Installing Roof Tiles or Lifts of Dirt to Create an Embankment, Does Not Mean that Each Box of Tile, or Each Lift Placement, is a “Particular Part” in a Work Performed Exclusion to a Liability Policy

The Canadian Pacific Railway (CPR) obtained the contract to ship potash (used in fertilizers) from K+S’s Bethune potash mine near Moose Jaw, Saskatchewan (which, by the way, is where Al Capone hung out from time to time when life in Chicago became difficult), to K&S’s storage facility in Port Moody, British Columbia. There, the potash would be loaded onto ships for international markets.

The mine can produce two million metric tonnes of potash a year. That’s a lot of railcars. However, to discharge that contract, the CPR had to build 30 km (about 18.5 miles) of track across the rural Saskatchewan prairie, the Qu'Appelle Valley, and the Qu'Appelle River. The crossing over the river included a four-kilometre (2.5 mile) embankment. When the line opened in the spring of 2017, CPR declared that this rail line was the most significant engineering project it had undertaken since the mid-1980’s.

However, it seems that no significant engineering project can be completed without a claim.  This one was no exception.

Kelly Panteluk Construction Ltd. (KPCL), based in Regina, Saskatchewan, is a well known western Canadian dirt mover. Under contract with CPR, KPCL, acting as general contractor and performing much of the dirt moving itself, built the earthen embankment to support the rail line crossing the Qu’Appelle Valley. The embankment collapsed. CPR issued a $41 million lawsuit against KPCL and several other entities as result of the collapse and the ensuing delays.

KPCL held a Course of Construction Wrap-Up Policy issued by Lloyds and tendered CPR’s lawsuit to Lloyd’s for a defense.

You would be correct to assume that a project of this magnitude would have an All-Risk Course of Construction (COC)/Builder’s Risk Policy as well as a liability/wrap-up policy. In fact, KPCL’s contract with CPR mandated KPCL to obtain an all-risk COC. But it didn’t. Instead, it just had the wrap-up policy. The untold story is how between CPR and KPCL that massive error in risk management occurred.

Lloyd’s denied a defence citing an exclusion for property damage to ongoing work (which applied only to the particular part out of which the damage arises).

KPCL sued Lloyd’s and brought this application for summary judgment. The language used by the trial judge in his written reasons suggests a lack of familiarity with insurance but the four-corner/duty to defend analysis that he used was impeccable. It is apparent that he listened patiently to the theory of the collapse espoused by KPCL:

  • The collapse was caused by the placement of a last lift; that this last lift was improperly placed, initiating the failure and was ‘the particular part’ to which the exclusion applied.
  • Therefore, so argued KPCL, the damage to the remaining elements of the embankment is covered.

The trial judge pointed out that this theory is not voiced anywhere in CPR’s pleading and the allegations in the pleading control the duty to defend.

In addition, the trial judge stated that the pleadings do not support KPCL’s argument that the embankment was composed of component parts. Of significance is the trial judge’s statement that “Dividing indistinguishable, identical repetitive works … [in this case, lifts] into separate component parts (whether the last tile on a roof or the last fill on an embankment) defies a reasonable interpretation of the exclusion clause.”  His full statement on this important point is below:

[79]       Aside from the pleading not alleging that the last lift of fill was the reason for the embankment failure, I find that successive and repetitive works of an identical nature (one must assume that building this embankment would have taken innumerable layers of fill) cannot be separated into particular or component parts. Implementing the interpretation in Progressive Homes, an insured might reasonably argue for example, that improperly installed slate tiles under a roofing contract are a “particular part” of the building’s construction so that the insurance would cover all repairs to the collapsed building except the defective roof. What KPCL is attempting to argue is that even the defective roof should be covered because the installation of each individual package of slate tile was a particular part of its work and the roof collapsed only after the last package of slate tile was installed.

[80]       Dividing indistinguishable, identical repetitive works into separate component parts (whether the last tile on a roof or the last fill on an embankment) defies a reasonable interpretation of the exclusion clause.

The trial judge agreed with Lloyd’s that it did not owe a duty to defend and directed KPCL to pay Lloyd’s court costs associated with this application.

Two years later, KPCL’s appeal from this judgment was heard by the Saskatchewan Court of Appeal. The appeal was dismissed, leaving LCPL with what will be a very significant liability to Lloyd’s in the form of court costs.

On appeal, KPCL argued that the trial judge misconstrued and misapplied the test to determine if an insurer must defend. It was said that the trial judge made findings of fact following a read of CPR’s statement of claim and then, based upon those facts, determined that no defence was owed. This argument is particularly audacious given that KPCL had presented a theory at trial as to how the embankment collapsed that was not voiced in the statement of claim, and then urged the court to find that there was a possibility of coverage premised upon this theory. The Court of Appeal rejected this contention saying that the trial judge properly applied the test as to whether an insurer must defend. The trial judge determined what the claim was about – its substance and nature – as he was obliged to do.  His conclusion was not unreasonable – no palpable and overriding error was committed and therefore the Court of Appeal did not interfere.  Similarly, no error was committed in the application of the applicable exclusions.

As KPCL lost each of its arguments on appeal, it is unlikely that a leave to appeal application to the Supreme Court of Canada will be successful and therefore anyone dealing with a ‘work performed’ exclusion in Canada must give this decision a close read. In addition to the analysis of what is “a particular part”, the trial judge’s analysis, fully supported by the Court of Appeal, provided useful analysis of “is performing operations” and what elements are within and without the project.


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