Volume XXV, No. 7 (No. 654)
Friday, September 15, 2023
A Biweekly Electronic Newsletter
As a public service, Hurwitz Fine P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York and Connecticut appellate courts and Canadian appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.
In some jurisdictions, newsletters such as this may be considered Attorney Advertising.
If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.
You will find back issues of Coverage Pointers on the firm website listed above.
Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations.
It’s a quiet time in the courts and will be until the first of the post-Labor Day court-reopening decisions are released at the end of the month. This is a terrible lean issue, but we have reported on all the appellate coverage cases in New York released in the past two weeks. The courts are open, appeals are being argued, and a larger group of decisions can be expected over the next few weeks.
Accordingly, we thought we would take the opportunity, for those who don’t know, to reintroduce (or introduce) our New York City metro office team (and remind the three or four of you who may not know) that we have a talented legal staff in the New York City area.
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How far we’ve come, how much further we must go:
For those who are regular followers of this publication, you know we intersperse this cover note with what we call our “100 years ago stories”. I scour the newspapers that were published 100 years ago, to the day of the issue, and present some humorous (and not-so-humorous) news clippings. Some of those clippings are included because they demonstrate that some of the issues facing the nation a century ago are still with us today
In today’s stories, you’ll see several involving the Ku Klux Klan and the efforts, a century ago, to stamp out the racism and antisemitism which was the organization’s hallmark. You’ll also see a story about Johnstown, PA, a city that decided to fight the influx of black Americans from the south, just as some communities seek to stop the influx of immigrants who are looking for new lives in our nation’s community.
Why, you may wonder, did I take this opportunity to tell you about this? I’ll tell you. We have made a great deal of progress with our mutual goal to eradicate racism, sexism, and other forms of discrimination. However, here in 2023, 100 years after some were trying to eradicate the hatred of the KKK, we still face challenges in doing so.
A friend of mine for many years, a distinguished African American lawyer in one of the nation’s great coverage and defense firms, a woman who has practiced law for 37 years, entered a New York federal courthouse and experienced the kind of racial profiling we would hope and expect no longer exists. I will let her tell the story in her own words:
Appeared in the US Southern District of New York Westchester. I was asked if I was a “defendant” by a Marshall manning the lobby machinery. I asked him why he would ask me if I were a “defendant.” He started babbling about cellphones.
I told him he should instead ask whether the individual has the card that allows you to keep your phone in your possession because asking a black female attorney if she is a “defendant” is inappropriate.
37 years of practicing law, gray hair and still I am black, and therefore, a defendant. I am so over racism.
I cannot imagine a Caucasian attorney being confronted by a marshal, and being asked if she or he were a defendant. I’ve entered many courthouses in my career, it’s surely never happened to me.
Racism continues to exist as do other forms of discrimination. Be aware and be sensitive.
Training and More Training:
Schedule your in-house training for 2023. Need a topic? Here are 160 or so coverage topics from which to choose.
Need a mediator?
Coverage mediation is a thing! Subject matter expertise may be useful.
Hey coverage lawyers. Hey professionals. Have you and a friend, adversary, or lawyer for whom who have respect reached a stalemate on a coverage dispute? Look, we know each other. We know that. We don’t want to litigate every coverage disagreement. Why? Because the position we oppose today may be the one we advocate tomorrow. Face it. We all understand that.
Let me help mediate your disagreement to see if there is some mutual agreement, we can reach that will not box us into a corner. Reach out to me. I will be pleased to mediate your dispute.
My partners, Mike Perley and Ann Evanko, are also available to help resolve other challenges.
You don’t want adverse precedent that will bite you next time you might have a slightly different view on coverage issues. You don’t want to spend tens of thousands of dollars to litigate a coverage issue before a motion judge or appellate justice that knows as much about insurance coverage as you do about nuclear physics. For those in the Western District of New York, I am certified by the Court and on the WDNY Mediation Panel as are Mike and Ann.
Try mediation.
Newsletters:
We have other firm newsletters to which you can subscribe by simply letting the editor (or me) know, including a new publication, which was created to advise on business and employment law questions:
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Premises Pointers: This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant, and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!). Please drop a note to Jody Briandi at [email protected] to be added to the mailing list.
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Labor Law Pointers: Hurwitz Fine P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected] to subscribe.
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Products Liability Pointers: Whether the claim is based on a defective design, flawed manufacturing process, or inadequate instructions/warnings, product liability litigation is constantly evolving. Products Liability Pointers examines recent New York State and Federal cases as well as high court decisions from other jurisdictions, keeping our readers up to date with the latest developments and trends, and providing useful practice tips and litigation strategies. This monthly newsletter covers all areas of product liability litigation, including negligence, strict products liability, breach of warranty claims, medical device litigation, toxic and mass torts, regulatory framework, and governmental agencies. Contact Brian F. Mark at [email protected] to subscribe.
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Medical & Nursing Home Liability Pointers. Medical & Nursing Home Liability Pointers provides the latest news, developments, and analysis of recent court decisions impacting the medical and long-term care communities. Contact Chris Potenza at [email protected] to subscribe.
Walt French made his major league debut, 100 years ago today, with the Philadelphia Athletics. He ended up playing nine seasons with the A’s. A right-handed outfielder, he hit .303 with two home runs and 45 doubles in 981 MLB at bats. His claim to fame? He was only one of two players to make the majors after graduating from West Point. He was also the last surviving member of the 1929 world champion Philadelphia A’s team. The other? Chris Rowley, a Toronto Blue Jay pitcher in 2017, pitched a total of 19 1/3 inning, with a not-impressive ERA of 7.91 in eight games.
Peiper on Property (and Potpourri):
Another quiet week for the courts begets another quiet column for your author. Here’s hoping for more to write about in two weeks. See you then.
Steve
Steven E. Peiper
Governor Threatens Legislators With Imprisonment – 100 Years Ago:
Yonkers Statesman
Yonkers, New York
15 Sep 1923
WESTERN SOLONS THREATENED WITH JAIL
OKLAHOMA CITY—Members of the State Legislature will be put in jail “and kept there,” if they attempt to meet in extraordinary session to interfere with his war on flogging, Governor J. C. Walton declared early today. “I don’t intend to stand for any such thing,” the Governor said. With the extension of martial law to new sections of Oklahoma in prospect and a military censorship of the press threatened by Governor Walton, two steps are under way today to curb the powers being assumed by the Executive.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
What a summer. It’s been an exhausting whirlwind and for once we were glad for the school year to start and things to calm down a bit. The pent-up COVID-related demand for travel really hit our household this year. To date in 2023, we have visited four countries outside the U.S., nine States, and more major cities than I could rattle of here readily. And we have even more planned for the fall and winter. Frequent flyer status here we come.
Now, this week in the Wide World of Coverage, we have a couple of quick, far-flung decisions coming your way, both from the Eleventh Circuit Court of Appeals. Mostly they are dealing with federal procedural issues but involving coverage actions so that’s something to note.
First, in Transworld Food v. Nationwide, we have a very brief decision in a coverage case wherein the issue is interlocutory appeal. In short, Federal Circuit Courts only hear matters after ”final” determination of a district court case, i.e., after motions, trial, and everything. That is, any request for appeal before that can only be an interlocutory (mid-case essentially) and generally impermissible. Hence, a good practice point to consider when choosing the venue of your coverage matter is whether you will have appellate rights throughout or at least after any summary judgment decision is rendered (generally in state courts), or only after a full trial on the issues and final judgment.
Meanwhile in Medmarc Casualty v. Yanowitch, the court also addressed interlocutory appeals, but in a different vein. There, the carriers appealed a decision on the duty to defend, but by the time it reached the Circuit Court the underlying action had been dismissed. Since there was nothing to defend at that point, the Court found that the appeal was entirely moot. Another good practice point or takeaway – be mindful of the fact that the cogs of justice turn very slowly. Try to expedite coverage determinations as much as possible or risk the underlying action resolving before the coverage issues do.
Until next time,
Agnes
Agnes A. Wilewicz
Uniforms Banned to Avoid Favoritism and Perks – 100 Years Ago:
The Herald Statesman
Yonkers, New York
15 Sep 1923
FORBIDS FIREMEN TO USE UNIFORMS TO SEE FIGHTS
Fire Commissioner Brennan of New York City forbade firemen in uniforms to go to prizefights, baseball games, racetracks, etc., unless officially assigned to duty. This is to prevent firemen from making themselves guests of the management in excessive numbers and to prevent professional gate crashers from impersonating firemen.
Barnas on Bad Faith:
Hello again:
The Blue Jays are off to a horrible start in their biggest series of the year against their top Wild Card competition and the Bills embarrassed themselves on national television to open the season, so I am not in the greatest of moods as far as the world of sports is concerned. At least Syracuse Football is 2-0, albeit against less than stellar competition. Hopefully, the Bills can bounce back in the home opener this weekend against the Raiders. The Bills home opener is always one of the best days of the year in Buffalo, and it looks like the weather should be pretty good. Fingers crossed.
I have a good decision from the Third Circuit in my column today. The insured’s bad faith and breach of contract claims were dismissed on summary judgment based upon the thorough investigation by the insurer and the insured’s failure to offer admissible expert evidence that the claim was covered. There is also some good language in the decision that the insurer could not bring a breach of contract or bad faith action directly against its insurer’s reinsurer.
Brian
Brian D. Barnas
Insurance Ad – 100 Years Ago:
Dunkirk Evening Observer
Dunkirk, New York
15 Sep 1923
PUT YOUR INSURANCE PROBLEMS UP TO EXPERTS—
Your home garage, factory, store—all need the protection of Fire Insurance.
It is likely that you carry fire insurance but have you enough—are your fire risks covered? For safety’s sake, put your insurance problems up to the experts of this agency who make fire protection their business.
A ‘phone call today may save you loss tomorrow.
KAISER & STARR 425 Central Ave., Phone 3457 Dunkirk, N. Y.
Lee’s Connecticut Chronicles:
Dear Nutmeg Newsies:
It is, once again, a season of renewal. Yes, the calendar has turned to September, pumpkin lattes and Halloween decorations abound, and soon the leaves will turn to shades of brilliant yellow, bright orange, and burnt sienna as they make their way to a certain death. It is in these changes that we find revitalization. In the sports world, the baseball season is ending, but the records are wiped clean as teams either look to the playoffs or to next year. In the NFL, while Aaron Rodgers’ New York Jets career lasted four snaps, his ruptured Achilles tendon is a chance at renewal for the maligned former second pick in the draft (Zack Wilson). This week my family, and surely many people in your lives, will celebrate Rosh Hashana and, soon after, Yom Kippur, the Jewish New Year and Day of Repentance. As with secular New Year, we use this time to reflect on the year gone by and look with hope towards the year to come. It is at times like these that it is important to remind ourselves that we are defined by our effort, by our caring, by our deeds, and by our hope. There is breathtaking power in redemptive hope.
I hope for us all a sweet New Year.
Lee
Lee S. Siegel
Health Tips – 100 Years Ago:
The New York Age
New York, New York
15 Sep 1923
Do You Live By These
16 Rules of Health?
1. Ventilate every room you occupy.
2. Wear light, loose, and porous clothes.
3. Seek out-of-door occupations and recreations.
4. Sleep out if you can.
5. Breathe deeply.
6. Avoid overeating and overweight.
7. East sparingly of meats and eggs.
8. Eat some hard, some bulky, some raw foods.
9. Eat slowly.
10. Use sufficient water internally and externally.
11. Evacuate thoroughly, regularly, and frequently.
12. Stand, sit, and walk erect.
13. Do not allow poisons and infections to enter the body.
14. Keep the teeth, gums, and tongue clean.
15. Work, play, rest, and sleep in moderation.
16. Keep serene.
These are the general rules of healthful living but underlying them all is the first great health commandment of having your body periodically examined and your individual needs ascertained so that you can apply these rules with intelligence.
Every individual has two barriers against disease and sickness—the first that afforded by the State in quarantine, clean streets, pure water and the like; the second, “individual resistance to disease,” gained through practice of correct personal hygiene.
Kyle's Noteworthy No-Fault:
Off to get married! See you in two weeks.
Kyle
Kyle A. Ruffner
[email protected]
Sign Here – 100 Years Ago:
The Nashville News
Nashville, Arkansas
15 Sep 1923
FINE ROAD SIGN
Put Up By Advertising Club Near Ferry at Fulton.
J. A. Fortune, secretary of the Nashville Advertising Club, Wednesday went to Fulton to assist in locating a place to erect a large road sign, which has been erected at the order of the club. The sign, which is a very fine one and large, gives the distances to Nashville, the Highland peach orchards, and the only diamond mines in the United States. There are many tourists who have heretofore been undecided as to which way to go in their route to Little Rock and have missed the many interesting things awaiting them on this route because of the lack of a sign.
Ryan’s Federal Reporter:
Hello Loyal Coverage Pointers Subscribers,
Two kids. Two grades. Two schools. Where did the summer go?
The column is empty this time ‘round, so check back for the next one.
Until Next Time…
Ryan
Ryan P. Maxwell
Race-Based Stock Sales – 100 Years Ago:
The Northwestern Bulletin-Appeal
Saint Paul, Minnesota
15 Sep 1923
NEW STOCK ON THE MARKET
A great deal of the previously thought impossible is being accomplished by our race corporation, especially our insurance companies. One of the best and surest signs is the recent increase in capital stock of several companies. The realization on the part of the executives of the various corporations that the time is ripe for further extension is far-reaching. No greater time than now could be selected to favorably impress on the mass of Negro America the importance of taking advantage of the stock offered by the companies of their own race. The success of the race corporation thus far can be attributed to the financial power placed behind them since their advent into the field of accepting risks. This financial power was supplied by race people and managed by race men. The tremendous success can be augmented if their financial power be increased. This power can be increased if we purchase the new issue of stock with the belief that stock in our own enterprises is equally safe as that of other corporations.
The insurance companies of the other groups are growing more reluctant to accept “colored risks” after having fattened themselves from them in the past fifty years. The only way to help this condition is to have capable insurance companies of our own, backed by sufficient capital and manned by such executives as will make them successful. We have the executives. We have the capital. The thing now needed is the giving of unqualified support to the corporations who have proven themselves masters of their respective businesses. If one company can begin on six dollars and through adverse circumstances build itself into a million-dollar corporation, what ought a hundred thousand dollars, to begin with, do?
We must wake up to our own possibilities. Invest our surplus in surprises that can and will employ our capable men. Every dollar invested in a race company hastens its expansion and makes it possible for our trained men to find employment in channels where they are best fitted.
Rauh’s Ramblings:
Just returning from parental leave. Catch you next time around.
Patty
Patricia A. Rauh
Johnstown, PA Limits Importation of Black Citizens – 100 Years Ago:
The Buffalo Enquirer
Buffalo, New York
15 Sep 1923
JOHNSTOWN JOINS SOUTH BEND
The mayor of Johnstown, Pa., has announced he will see to it that no more negroes are brought into town from the south. Only negroes of seven years residence will be permitted to stay in town. Two thousand negroes have been driven out of town.
The other day the dispatches reported hundreds of negroes scared out of South Bend, Ind.
The south’s problem of keeping its negro labor at home seems to be on the way to solution by the north driving it back home.
Storm’s SIU:
Hi everyone:
Just getting back from visiting the Nation’s capital and an opportunity to see the Dodgers play the Nationals. Great way to end the summer.
Four interesting cases for you this edition:
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Standard for Overcoming the Presumption of Public Access to Judicial Documents to Seal or Redact Commercially Sensitive Information to Protect Confidential Business Interests and Financial Information.
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Exhaustion Defense Affirmed, No Fault Claims That are Timely Denied by an Insurer do Not Hold a Place in the Priority-of-Payment Queue Ahead of Subsequently Filed Claims that Were Approved and Paid by the Insurer.
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Insurer and ALE Vendor Not Liable to Apartment Owner for Rent Payments After ALE Period Terminates and Insured Continues to Reside in Temporary Housing Failing to Pay Rent. All Claims Dismissed Including for Breach of Contract, Breach of Good Faith and Fair Dealing, Fraud, Fraudulent Inducement, and Promissory Estoppel.
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Insurer in Subrogation Action Unable to Invoke Res Ipsa Loquitur and Did Not Established a Prima Facie Case of Negligence, Breach of Contract, or Breach of Implied Warranty as a Matter of Law Because There is No Expert Evidence of Causation.
Talk to you again in two weeks.
Scott
Scott D. Storm
Pretty Woman Acquitted of Murder – 100 Years Ago:
The Buffalo Enquirer
Buffalo, New York
15 Sep 1923
PRETTY FRENCH WOMAN, WHO SLEW HUSBAND, FOUND “NOT GUILTY”
London Jury Acquits Wife of Egyptian Millionaire Who Was Shot During Quarrel in a Hotel—Mme. Fahmy on Verge of Collapse as Verdict is Announced.
(By the Internal News Service.)
London, Sept. 15.—Mme. Marie Marguerite Fahmy, beautiful French woman, today was acquitted in Old Bailey court of the murder of her husband Prince Ali Kamel Bey Fahmy, a young Egyptian millionaire. Mme. Fahmy claimed she shot her husband because she feared he was going to kill her as he had threatened to do many times.
Mme. Fahmy was on the verge of collapse when the jury, which included two women, returned its verdict of not guilty. She does not speak English, but kept murmuring, “Grand merci.” Prince Fahmy, ten years his wife’s junior, was shot to death in the couple’s luxurious apartment in the Savoy hotel on the morning of July 10. Hotel employes, aroused by the shots, dashed into the apartment, where they found Mme. Fahmy with a revolver in her hand and blood stains upon her night gown. She was apparently dazed.
The woman was immediately arrested, charged with murder. She told of numerous violent quarrels between her husband and herself, the last taking place at luncheon the day before the murder. Mme. Fahmy had to undergo an operation and wished to return to Paris for it, whereas her husband wished it performed in London. Servants testified that the married life of the couple was stormy and during their quarrels they abused each other with foul epithets.
When Mme. Fahmy was given her preliminary arraignment in the Bow street court July 21 she fainted in the dock.
She had a number of friends in London, and they gave her all possible assistance. She was defended by one of the cleverest criminal lawyers in Great Britain.
The case lasted almost a week, going to the jury at 12:20 o’clock. The jurors were out less than an hour. …
Fleming’s Finest:
Hi Coverage Pointers subscribers:
Like the true renaissance dog, he is, the dog has discovered both kinds of football and is now giving Air Bud a run for his money in the local parks. Us mere mortals can only aspire to his level of athleticism.
This week’s case from the New Mexico Supreme Court determined that post-judgment payments in satisfaction of final judgment were not subject to the collateral source rule. New Mexico does not allow civil plaintiffs to recover duplicative compensatory damages for the same injuries. Its collateral source rule is an exception to the prohibition of double recovery and allows a plaintiff to recover the same damages from a defendant and a collateral source.
Catch you later …
Kate
Katherine A. Fleming
Anti KKK Group Activates – 100 Years Ago:
The Post-Star
Glens Falls, New York
15 Sep 1923
Anti-Klan
A new secret order known as Knights of the Flaming Circle has appeared in West Virginia and some of the adjoining states and is said to be spreading rapidly. It is openly anti-Klan, and opposition to the Ku KIux is said to be the chief requisite for membership. Leaders of the new movement explain they been driven to it by illegitimate intolerable Klan activities. Feeling themselves struck at in the dark, they prepare to strike back in the dark.
It would be very well to say, "Let them fight it out!" if that could be done without danger. But fires spread. Passion begets passion. There is no telling where this sort of thing will end. To the Fiery Cross and the Flaming Circle there may be added next a Blazing Square or some other appropriate symbol, with nocturnal assemblages and secret violence and private administration of justice--all making the same virtuous and patriotic professions.
"Behold how great a flame a little fire kindleth." It grows plainer every day that the fire should never have been started.
Gestwick’s Greatest:
Nothing newsworthy from the Justices of New York’s trial level this week; see you in two!
Evan
Evan D. Gestwick
Two-Month Trial on Extracted Teeth? Then What? – 100 Years Ago:
The Daily Item
Port Chester, New York
15 Sep 1923
IF YOUR TEETH
Have been extracted or if they are in such a condition that extraction is necessary, I will extract all teeth, make the plates, and allow you two months’ trial.
Moderate prices on all work.
If at the end of two months your plate is not satisfactory, your money will be gladly refunded, and no charge will be made for extraction.
DR. MARSHALL
Tel. 1545-W 33 North Main St.
On the Road with O’Shea:
Readers,
Nothing to report this week on the auto front.
Until Next Time.
Ryan
Ryan P. O’Shea
[email protected]
Pot Movie Released – 100 Years Ago:
The Buffalo Times
Buffalo, New York
15 Sep 1923
Doctors Praise Dope Picture
Mrs. Wallace Reid's dope picture, which will begin a week's showing in Buffalo tomorrow at the Palace Theater, was shown last night after the regular show to an invited audience of city officials, physicians, educators, and social workers. Those who witnessed the advance showing last night could well understand why prominent authorities have given it their approval. The picture will be shown at the Palace Theater all next week, starting Sunday.
Editor’s Note: I wanted to link to this movie, but “Human Wreckage” is considered a lost film, with no known copies in existence.
Louttit’s Legislative and Regulatory Roundup:
Nothing to report this issue. See you in two weeks.
Rob
Robert P. Louttit
KKK – Alive and Well in Erie, PA – 100 Years Ago:
The Buffalo News
Buffalo, New York
15 Sep 1923
KLAN ACTIVE IN ERIE ELECTION; TROUBLE LOOMS
Candidate for Mayor in Pennsylvania City
Has Endorsement of Hooded Order – Bitter Fight in Progress – Police Ultimatum
Erie, Pa., Sept. 15.—The Ku Klux Klan is trying to elect Erie’s mayor. As the result of an endorsement given by the hooded band to William L. Morrison one of the candidates, a better fight is now being waged, which may result in violence, so it is believed.
One attempt has been made to burn the home of a young man prominent in business. Several men who figured in the early chapters of the mayoralty battle have left the city, declaring they will not return until after the primaries, and both sides are issuing dire threats.
The rev. E. C. Hulsey, Klan leader and pastor of the East Tenth Street Methodist church, has called on the police for protection, alleging that anti-Klan organization have threatened him and also threatened to destroy his home and his church. He has turned many anonymous letters over to the police chief.
The clergyman is regarded as head of the Ku Klux Klan in this city. In this letter to the newspapers and to the city authorities he has signed himself as “Imperial Cyclops, Ku Klux Klan.”
Rob Reaches the Threshold:
Hello Readers,
I imagine that many of you feel the same way I do right about now. . . FOOTBALL IS BACK BABY! Eight or so months of anticipation finally led us all back to Week 1, where we can all collectively sink into our couches on Sunday (or Thursday or Monday) and enjoy some great entertainment. Unfortunately, if you are a Giants fan (like me), a Bills fan (like many of my colleagues), or a Jets fan (like many others), Week 1 took some air out of the sails. Here’s hoping that your favorite team, whoever it may be, rights the ship as needed after a weird opening week.
It has been a while since I’ve been able to write to you all, due to a lack of cases on Serious Injury coming out of the Appellate Division. I thought this week would be the same. However, coming in hot at the buzzer, the Second Department provides a case study on why details matter in an expert’s report.
I hope you all enjoy the read.
Rob
Robert J. Caggiano
The Women’s Movement – in Japan – 100 Years Ago:
The Ottawa Citizen
Ottawa, Ontario, Canada
15 Sep 1923
WOMAN SUFFRAGE IN JAPAN IS GROWING
TOKIO. —Japanese women have initiated a campaign for the right to vote and the movement has recently gained so much momentum that is no longer regarded as a joke or as the creation of a handful of cranks.
Not long ago the women of Japan, acting through the Women's Federation, won the right to attend political meetings, a privilege which had previously been withheld from them by police regulations. Having gained this point, the Women's Federation is going after the much more important objective—woman's suffrage.
In the opinion of Mrs. Shinko Kodama, president of the federation, women's right to vote is the shortest cut to rectification of the injustices to which Japanese women are at present subjected. She declares that the federation seeks the privilege for all Japanese women of having an equal voice with men in the drafting of the country's laws in order that discrimination against the sex may be avoided.
North of the Border:
Dear Readers:
When you read this, I will be somewhere over the Pacific, flying home to Calgary, Alberta from Sydney after a fabulous look at the massive continent of Australia. The summer court recess meant that there was a dearth of decisions before I left on August 25. This also means I was unable to write in advance.
Heather
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
Headlines from this week’s issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
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Alcohol and Illegal Drug Use Discoverable in Personal Injury Action
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
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Kohane said it best. See you in two weeks.
WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz
[email protected]
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Eleventh Circuit Court of Appeals Rules in Coverage Action that Where Parties’ Stipulation of Dismissal Did not Resolve All Claims, There Was No Jurisdiction for the Circuit Court to Hear Their Appeal
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Eleventh Circuit Finds Coverage Interlocutory Appeal Moot Where Insurers Already Provided a Defense and the Underlying Actions Had Since Been Dismissed
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
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Bad Faith Claim Dismissed on Summary Judgment Where Insurer Conducted Thorough Investigation and Had Reasonable Basis to Deny Claim
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
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No Connecticut Cases of Interest to Report this Edition
KYLE'S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]
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On the Road to Walk Down the Aisle
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
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Slim Pickings this Time. Check Back Next Time
RAUH’S RAMBLINGS
Patricia A. Rauh
[email protected]
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Just Returning Back from Parental Leave
STORM’S SIU
Scott D. Storm
[email protected]
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Standard for Overcoming a Presumption of Public Access to Judicial Documents to Seal or Redact Commercially Sensitive Information to Protect Confidential Business Interests and Financial Information
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Exhaustion Defense Affirmed, No Fault Claims That are Timely Denied by an Insurer do Not Hold a Place in the Priority-of-Payment Queue Ahead of Subsequently Filed Claims that Were Approved and Paid by the Insurer
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Insurer and ALE Vendor Not Liable to Apartment Owner for Rent Payments After ALE Period Terminates and Insured Continues to Reside in Temporary Housing Failing to Pay Rent. All Claims Dismissed Including for Breach of Contract, Breach of Good Faith and Fair Dealing, Fraud, Fraudulent Inducement, and Promissory Estoppel
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Insurer in Subrogation Action Unable to Invoke Res Ipsa Loquitur and Did Not Established a Prima Facie Case of Negligence, Breach of Contract, or Breach of Implied Warranty as a Matter of Law Because There is No Expert Evidence of Causation
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
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No Double Damages: Post-Judgment Payments in Satisfaction of Final Judgment Not Subject to the Collateral Source Rule
GESTWICK’S GREATEST
Evan D. Gestwick
[email protected]
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Nothing of Particular Note This Week; See You in Two
ON the ROAD with O’SHEA
Ryan P. O’Shea
[email protected]
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The Courts Have Been Quiet this Week on the Auto Front
LOUTTIT’S LEGISLATIVE and REGULATORY ROUNDUP
Robert P. Louttit
[email protected]
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Nothing to Report this Issue
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
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Second Department Affirms Order Granting Summary Judgment for Defendants Finding Plaintiff Did Not Sustain a Serious Injury Under Any Asserted Category of Section 5102(d) Where Plaintiff’s Expert Report Relied Upon in Opposition Was Found to be Insufficient
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
[email protected]
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On the Road this Week; Catch You in Two
Keep those letters coming in. Again, we apologize for the small number of case reviews, but we only have those cases provided by the courts.
Dan
Hurwitz Fine P.C. is a full-service law firm providing legal services throughout the State of New York and providing insurance coverage advice and counsel in Connecticut.
In addition, Dan D. Kohane is a Foreign Legal Consultant, Permit No. 000241, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]
COPY EDITOR
Evan D. Gestwick
[email protected]
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
[email protected]
Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Scott D. Storm
Brian D. Barnas
Eric T. Boron
Robert P. Louttit
Ryan P. Maxwell
Patricia A. Rauh
Joshua M. Goldberg
Diane F. Bosse
Kyle A. Ruffner
Katherine A. Fleming
Evan D. Gestwick
Ryan P. O’Shea
FIRE, FIRST PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Michael F. Perley
Scott D. Storm
Brian D. Barnas
NO-FAULT/UM/SUM TEAM
Dan D. Kohane
[email protected]
Alice A. Trueman
Joshua M. Goldberg
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Diane F. Bosse
Topical Index
Kohane’s Coverage Corner
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Barnas on Bad Faith
Lee’s Connecticut Chronicles
Kyle’s Noteworthy No-Fault
Ryan’s Federal Reporter
Storm’s SIU
Fleming’s Finest
Gestwick’s Greatest
On the Road with O’Shea
Loutit’s Legislative and Regulatory Roundup
Rob Reaches the Threshold
North of the Border
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
09/13/23 Hogdahl v. LCOR 55 Bank Street, LLC
Appellate Division, Second Department
Alcohol and Illegal Drug Use Discoverable in Personal Injury Action
In December 2017, the plaintiff commenced this action against the defendants to recover damages for personal injuries he alleged that he sustained in September 2016 construction accident. His employer, Rebar, was brought into the case as a third-party defendant.
Rebar moved to compel the plaintiff to complete answering questions that were posed to him during his deposition relating to his drug and alcohol use, and the other defendants joined in. The plaintiff opposed.
CPLR 3101(a) provides, in relevant part, that "[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof." "Discovery statutes are to be construed liberally so that there should be disclosure of any material that is even arguably relevant, and supervision of disclosure is generally left to the trial court's broad discretion."
Here, the plaintiff asserted, inter alia, claims for future economic loss, including loss of future wages, pension, annuity, and health insurance coverage, based upon certain work-life and life expectancy ages. These claims affirmatively placed at issue the plaintiff's health and ability to work, and the plaintiff's work-life expectancy In making life expectancy determinations in the course of awarding damages for future lost earnings, juries are permitted to make life expectancy determinations based upon statistical life expectancy tables, together with their own experience and the evidence they have heard in determining what the plaintiff's life and/or work-life expectancy is, based upon the plaintiff's health, life habits, employment, and activities.
Accordingly, under the circumstances of this case, the lower providently exercised its discretion in granting Rebar's motion and those branches of the separate motions of the LCOR defendants and Baker Concrete which were pursuant to CPLR 3124 to compel the plaintiff to answer deposition questions about his drug and alcohol use, particularly where a toxicology report prepared in connection with the plaintiff's lumbar surgery evidenced that the plaintiff tested positive for cocaine, cannabinoids, and benzodiazepines.
Editor’s note: While not a coverage case, per se, it’s an important case nonetheless (particularly where the appellate courts, finishing their summer siestas, haven’t given me a single pure coverage case in the last two weeks).
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
09/13/23 Hogdahl v. LCOR 55 Bank Street, LLC
Appellate Division, Second Department
We had a lot to say about this one, but alas Kohane said it better and said it first.
Please see, supra.
See you in two weeks.
Steve
WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz
[email protected]
09/11/23 Transworld Food Service, LLC v. Nationwide Mutual Ins.
United States Court of Appeals, Eleventh Circuit
Eleventh Circuit Court of Appeals Rules in Coverage Action that Where Parties’ Stipulation of Dismissal Did not Resolve All Claims, There Was No Jurisdiction for the Circuit Court to Hear Their Appeal
TransWorld Foods, et al. asserted 11 claims against its carrier Nationwide, all related to the insurance company’s denial of various insurance claims. In March 2022, the district court granted Nationwide summary judgment on counts 1, 2, 3, 4, 7, and 8. Following a trial, the jury rendered a verdict resolving counts 9 and 11. In August 2022, after judgment was entered, the parties filed a joint stipulation of dismissal regarding the remaining two counts – 5 and 6. The district court took no action in response to the parties’ joint stipulation.
Upon appeal, it was held that the parties’ joint stipulation of dismissal was invalid, and thus did not serve to resolve the two remaining claims, because it was an attempt to dismiss fewer than all of the parties’ claims against each other. That is, since not all claims were resolved, there was no “final” determination in the case. Since the federal appeals court only hears matters following final adjudication, jurisdiction was lacking, and the appeal could not be heard.
08/28/23 Medmarc Casualty Insurance Company v. Yanowitch
United States Court of Appeals, Eleventh Circuit
Eleventh Circuit Finds Coverage Interlocutory Appeal Moot Where Insurers Already Provided a Defense and the Underlying Actions Had Since Been Dismissed
Medmarc Casualty and Noetic Specialty brought declaratory judgment actions against their insureds, Peter Yanowitch and Yanowitch Law, P.A. The carriers sought a judicial determination that they owed no duty to defend or indemnify the insureds in an underlying state court action. The district court ruled that the insurers owed a duty to defend but declined to rule on the duty to indemnify until the state court action resolved. After the insurers filed an interlocutory appeal with the Circuit Court, challenging the ruling on the duty to defend, the state court action was dismissed with prejudice.
The only issue on appeal was whether the insurers owed a duty to defend them in the state court action that is no longer pending. However, since the Circuit Court could not provide the parties with any meaningful relief (given the disposition of the state court action), the appeal was moot. “If the district court later were to award the insureds attorneys’ fees, we could entertain an appeal of the award and review any jurisdictional or other error. But a hypothetical fee award does not create a controversy about the insurers’ duty to defend, which is now moot.” Since the court lacked jurisdiction as a result, the appeal had to be dismissed.
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
08/29/23 Three Rivers Hydroponics, LLC v. Florists’ Mutual Ins. Co.
United States Court of Appeals, Third Circuit
Bad Faith Claim Dismissed on Summary Judgment Where Insurer Conducted Thorough Investigation and Had Reasonable Basis to Deny Claim
Three Rivers Hydrophonics (“TRH”) owned and operated a hydroponic basil-farming greenhouse. It used an ozone-based water sterilization system (ozone system), which has, in part, an ozone generator and an oxidation reduction potential controller (ORP controller). The ORP controller used a sensor to ensure a set ozone level (ORP sensor).
Florists insured TRY for crop loss unless a mechanical breakdown caused or resulted in the loss. The policy also included an equipment breakdown endorsement, which provided that Florists would pay for loss caused by or resulting from an accident to the ozone system components. Accident was defined in part as direct physical loss caused by mechanical breakdown. Loss included perishable goods due to spoilage, but it excluded loss due to design errors, poor workmanship, latent defects, and faulty materials.
In July 2014, TRH filed an insurance claim with Florists, reporting that there were equipment damages to Ozone System because something failed and caused a small explosion/fire in the equipment, but TRH was able to shut it down before it caused any major damage beyond the actual piece of equipment. TRH also reported that this incident resulted in Crop loss. Florists investigated and determined that the ozone generator was damaged and concluded that it was due to operator error, incorrectly sized equipment, or defective equipment. TRH disagreed, arguing that a failure of the ozone system caused crop loss.
The manufacturer inspected the system and determined that an incorrectly installed pipe led to the fire. Florists also retained a greenhouse engineer who inspected the ozone system and ORP controller. Florists determined there was no evidence of a covered accident that caused crop loss and denied coverage.
The court granted Florists’ motion for summary judgment on both breach of contract and bad faith claims under Pennsylvania law. The admissible evidence that TRH presented to show that this type of mechanical breakdown occurred and caused the crop loss was speculative at best and included no admissible expert testimony. The court stated that determining whether a breakdown of the ozone system occurred and then caused crop loss is highly technical and requires expert guidance. Absent any expert evidence, TRH did not meet its burden to establish a covered loss under the policy.
The bad faith claim was also dismissed. Florists quickly investigated TRH’s claim, hired several experts with specialized experience, continued its investigation when TRH pushed back on its initial findings, and paid on the claim for the replacement generator that the policy did cover. This record supported a finding that Florists conducted a thorough investigation and it had a reasonable basis to deny benefits.
TRH also sued Florists’ reinsurer for breach of contract and bad faith. The court dismissed TRH’s breach of contract claim because TRH was not a party or third-party beneficiary to the reinsurance agreement. The bad faith claim was also dismissed because the reinsurer was not the “insurer” who could be subjected to bad faith liability under Pennsylvania statute.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
No Connecticut cases of interest to report this edition.
KYLE’S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]
On the Road to Walk Down the Aisle.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
Slim pickings this time. Check back next time.
RAUH’S RAMBLINGS
Patricia A. Rauh
[email protected]
Just Returning Back from Parental Leave
STORM’S SIU
Scott D. Storm
[email protected]
08/22/23 Rand v. The Travelers Ind. Co
United States District Court, Southern District of New York
Standard for Overcoming the Presumption of Public Access to Judicial Documents in Order to Seal or Redact Commercially Sensitive Information to Protect Confidential Business Interests and Financial Information
[Abridged] On July 25, 2023, the Court issued an order granting Plaintiff's request to maintain ECF Nos. 78 and 78-1 temporarily under seal, and on August 8, 2023, the Court directed the parties to make a joint submission containing proposed redactions for ECF Nos. 78 and 78-1. The court is in receipt of the proposed redactions.
The common law and the First Amendment accord a presumption of public access to judicial documents. To overcome this presumption, the court must make specific, on the record findings for each individual document, which sealing (1) is necessary "to preserve higher values," and (2) "is narrowly tailored to serve that interest." Although the presumption of public access attaches to all judicial documents, "the presumption of public access in filings submitted in connection with discovery disputes . . . is generally somewhat lower than the presumption applied to material introduced at trial, or in connection with dispositive motions..." "Thus, while a court must still articulate specific and substantial reasons" for sealing material filed in connection with a discovery dispute, "the reasons usually need not be as compelling as those required to seal" filings connected to a dispositive motion.
Courts in this District routinely permit parties to seal or redact commercially sensitive information to protect confidential business interests and financial information. In addition, the Court may "exercise its supervisory power over its own records and files to deny access where court files might become a vehicle for improper purposes."
The Court has reviewed the proposed redactions to ECF No. 78. These redactions are limited to confidential information already under seal or redacted pursuant to the Court's previous orders. The Court has reviewed the proposed redactions to ECF No. 78-1. These redactions relate to confidential business information concerning Travelers' employees and teams, including those with responsibility for data security, as well as Travelers' third-party suppliers. Also, public access to such information could lead to its use for improper purposes.
08/31/23 In the Matter of Lan Quan, M.D. v. GEICO Casualty Co.
Supreme Court, New York County
Exhaustion Defense Affirmed, No Fault Claims That are Timely Denied by an Insurer do Not Hold a Place in the Priority-of-Payment Queue Ahead of Subsequently Filed Claims that Were Approved and Paid by the Insurer
[Abridged] Petitioner, Lam Quan, M.D., P.C., a/a/o Arevalo, seeks to vacate the January 27, 2023 award of a master arbitrator, affirming a January 9, 2023 American Arbitration Association award that had denied its claim for first party (no-fault) benefits to reimburse it for medical diagnostic services that it had performed for Arevalo in connection with an automobile accident. The petitioner requests that the court remit the matter to a different arbitrator for reconsideration or, in the alternative, enter judgment in its favor and against the respondent in the sum of $914.94, along with interest at rate of 2% from the date that it submitted a demand to arbitrate until entry of judgment, along with attorneys' fees in the sum of 20% of the combined principal and interest, up to a maximum of $1,360.00. The respondent insurer, GEICO, opposes the petition. The petition is denied, and the award is confirmed.
Arevalo was injured in a January 12, 2022, motor vehicle accident, which was covered by GEICO. He complained that, as a consequence of the accident, he injured his lower leg. On March 9, 2022, the petitioner undertook a lower extremity nerve study on Arevalo. Arevalo assigned the petitioner his claim to recover no-fault benefits, after which the petitioner, on March 23, 2022, made a claim upon GEICO for reimbursement of $914.94 to pay for the nerve study. The respondent processed the claim and timely rejected it by notice dated April 12, 2022, asserting that the amount requested was not in accordance with applicable statutory and regulatory fee schedules, that, based on a peer report, the study was not medically necessary, and that the limits of coverage under the policy already had been exhausted in any event.
The petitioner sought arbitration of the claim before the AAA. At the arbitration hearing, the petitioner argued that the respondent was not entitled to rely on the exhaustion defense because the grounds asserted by GEICO for the denial of the claim were improper, as the study was medically necessary and the amount claimed was valid, and that the subject invoice thus should have been paid before any of Arevalo's other medical, hospital, pharmacy, and healthcare claims that the respondent insurer received subsequent to the petitioner's claim.
The lower arbitrator rejected the Appellant's priority of payment argument and concluded that claims that are timely denied by an insurer do not hold a place in the priority-of-payment queue ahead of subsequently filed claims that were approved and paid by the insurer. The lower arbitrator consequently upheld the insurer's exhaustion-of-benefits defense. The petitioner sought review of the award before a master arbitrator who affirmed the initial arbitration award.
Once a no-fault insurer “has paid the full monetary limits set forth in the policy, its duties under the contract of insurance cease”. An arbitrator's award directing payment beyond the monetary limit of a no-fault insurance policy exceeds the arbitrator's power and constitutes grounds for vacatur of the award. "Based on the foregoing, the Award under review cannot reasonably be assailed as arbitrary, capricious or incorrect as a matter of law."
This proceeding ensued. The grounds specified in CPLR 7511 for vacatur of an arbitration award are exclusive, and it is a "well-established rule that an arbitrator's rulings, unlike a trial court's, are largely unreviewable". An arbitration award may be vacated pursuant to CPLR 7511(b)(1)(iii) where an arbitrator exceeded his or her power, including where the award violates strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator's power. Where, as here, arbitration is compulsory (see Insurance Law § 5105), closer judicial scrutiny of the arbitrator's determination is required under CPLR 7511(b) than that applicable to consensual arbitrations. To be upheld, an award in a compulsory arbitration proceeding must have evidentiary support and cannot be arbitrary and capricious.
Inasmuch as the master arbitrator did not make his own factual determinations, review alleged factual or procedural errors made in the course of the arbitration, weigh the evidence, or resolve credibility issues, he did not exceed his authority.
Moreover, the court concludes that the master arbitrator's determination was not incorrect as a matter law in any event. As the master arbitrator noted, there is a split in appellate authority on the issue of priority of claims in the face of the potential exhaustion of the limits of a no-fault insurance policy. The Appellate Term, First Department, has held that claims that are timely denied by an insurer do not hold a place in the priority-of-payment queue ahead of subsequently filed claims that were paid by the insurer, thus exhausting available coverage. The Appellate Term, Second Department, has held that fully verified claims are payable in the order they were received, and that there was no merit to an insurer's contention that it need not pay an improperly denied claim because its payment of subsequent claims had the effect of exhausting the available coverage.
The Appellate Term, First Department, explained that "contrary to plaintiff's contention, defendant was not precluded by 11 NYCRR 65-3.15 from paying other providers' legitimate claims subsequent to the denial of plaintiff's claims. Adopting plaintiff's position, which would require defendant to delay payment on uncontested claims, or, as here, on binding arbitration awards — pending resolution of plaintiff's disputed claim — `runs counter to the no-fault regulatory scheme, which is designed to promote prompt payment of legitimate claims."
Inasmuch as the master arbitrator's award was not contrary to law or arbitrary and capricious, he properly affirmed the lower arbitrator's award. Hence, the petition to vacate the master arbitrator's award must be denied. Pursuant to CPLR 7511(e), "upon the denial of a motion to vacate or modify" an award, the court "shall confirm the award."
08/30/23 Red Apple 86 Fleet Place Dev. v. State Farm Fire and Cas. Co.
United States District Court, Southern District of New York
Insurer and ALE Vendor Not Liable to Apartment Owner for Rent Payments After ALE Period Terminates and Insured Continues to Reside in Temporary Housing Failing to Pay Rent. All Claims Dismissed Including for Breach of Contract, Breach of Good Faith and Fair Dealing, Fraud, Fraudulent Inducement, and Promissory Estoppel
[Abridged] Red Apple 86 Fleet Place Development, LLC is a New York real estate company that owns a rental building located at 86 Fleet Place in Brooklyn. State Farm Fire and Casualty Company obtained and guaranteed payment for the leases of three units at 86 Fleet Place to house a State Farm policyholder and her family after their home was nearly destroyed. State Farm stopped paying in November 2020, but the Tenants continued living at 86 Fleet Place without picking up the tab. By May 2022, the Tenants had accumulated $192,302 in unpaid rental bills.
On May 27, 2022, Red Apple sued State Farm and ALE Solutions, Inc., in New York state court. The complaint alleged five causes of action: breach of contract, against State Farm (Count I); breach of good faith and fair dealing, against State Farm (Count II); fraud, against both defendants (Count III); fraudulent inducement, against both defendants (Count IV); and promissory estoppel, against State Farm (Count V). Defendants removed the action to this Court.
Both defendants filed motions on August 31, 2022. State Farm moved to dismiss all but the breach of contract claim against it, and ALE moved for judgment on the pleadings for both claims against it. During oral argument on the motions on November 7, 2022, the Court indicated that the counts at issue were insufficiently pled but allowed Red Apple to move for leave to amend the complaint. Red Apple so moved, and both defendants filed oppositions. By "bottom-line order" on November 25, 2022, the Court granted both defendants' motions and denied as futile Red Apple's motion for leave to amend.
On December 2, 2022, State Farm moved for summary judgment on the sole remaining claim, breach of contract. Three days later, Red Apple did the same. The Court now reconfirms and supplies reasons for the November 25, 2022 "bottom-line order," grants State Farm's motion for summary judgment, denies Red Apple's motion for summary judgment, and directs the entry of final judgment.
In a letter to Red Apple on November 21, 2018, State Farm offered the following terms:
Please accept this letter as confirmation of State Farm Insurance Company's commitment to pay for a lease term of six (6) months, with a month to month option thereafter, for three (3) units being rented by the above-referenced insured ... in accordance with the terms of the applicable leases pertaining to the three (3) units. Payments for the units will be made by ALE Solutions on behalf of State Farm.
Red Apple agreed to the terms and entered the three leases "in consideration of Defendants' guaranty of payment."
Unbeknownst to Red Apple, State Farm was simultaneously contesting the policyholder's insurance coverage, litigating its disclaimer of coverage in state court. According to the complaint, Red Apple "would not have entered into the Leases had it known that State Farm was attempting to disclaim coverage and that it was engaged in the Insurance Action."
A. State Farm is entitled to dismissal of Counts II-V against it and ALE is entitled to judgment on the pleadings for Counts III-IV against it.
1. Breach of Good Faith and Fair Dealing Claim (Count II) against State Farm
The crux of Count II is State Farm's alleged failure to disclose its disclaimer of the Tenants' insurance coverage and its litigation with the Tenants in state court. Even accepting as true State Farm's failure to disclose its insurance disclaimer and state court action, such failure does not plausibly support a claim for breach of good faith and fair dealing. The complaint alleges no facts suggesting State Farm's failure to disclose information about its insurance action subverted or destroyed any of Red Apple's contractual entitlements. A claim for breach of the implied covenant of good faith and fair dealing must "allege that the [defendants] sought to prevent the performance of the contract or to withhold its benefits".
To the extent Red Apple argues it would not have entered the contract had it been fully informed, that argument relates to a potential claim for fraudulent inducement, not a breach of good faith and fair dealing.
2. Fraud and Fraudulent Inducement Claims (Counts III-IV) against Both Defendants
Red Apple fares no better with its fraud claims. The complaint fails to meet Rule 9(b)'s heightened pleading standard. The complaint alleges that defendants "knowingly failed to inform Plaintiff" of the insurance action and disclaimer "in order to induce Plaintiff to rely upon [their] promises and enter into the Leases." Such conclusory statements, which contain no particularized allegations of "the circumstances constituting fraud," see Fed. R. Civ. P. 9(b), do not "give rise to a strong inference of fraudulent intent," Indeed, the complaint does little to assure it relies on anything more than "speculation" to support an inference of fraud rather than mere negligence. Therefore, Counts III and IV are dismissed against State Farm, and the Court also grants ALE judgment on the pleadings for both counts.
3. Promissory Estoppel Claim (Count V) against State Farm
To state a claim for promissory estoppel under New York law, a plaintiff must allege "(1) a clear and unambiguous promise; (2) reasonable and foreseeable reliance by the party to whom the promise is made; (3) and an injury sustained ... by reason of that reliance."
"Promissory estoppel is a narrow doctrine designed to enforce a contract in the interest of justice where some contract formation problem would otherwise prevent enforcement." "Where," as here, "a plaintiff also alleges breach of a contract," any promissory estoppel claim must "allege that the defendant had a duty independent from any arising out of the contract."
The complaint here does just the opposite. The "clear and unambiguous promise" that the complaint alleges State Farm made — "to pay the Tenants' rent for six months and thereafter on a month-to-month basis for so long as Tenants occupy the subject premises" — plainly arises from State Farm's November 21, 2018, letter laying out the terms of the contract between the parties.
Red Apple has not pleaded facts alleging a "contract formation problem" that could support a claim of promissory estoppel instead of breach of contract. Instead, the complaint alleges that Red Apple entered leases with the Tenants in reliance on State Farm's "promise to guaranty payments of rent under the Leases." But the complaint fails to allege any details supporting an inference that Red Apple relied on anything other than a contractual agreement.
B. The Court denies Red Apple's motion for leave to amend the complaint.
The Court denies Red Apple's motion for leave to amend the complaint because the proposed amended complaint, "fails to cure prior deficiencies or to state a claim under Rule 12(b) (6)." The proposed amended complaint would whittle down the claims to just breach of contract, fraud, and fraudulent inducement.
Although the proposed amended complaint would plead additional facts in support of the fraud claims, those additional facts are still not enough to clear the hurdle of Rule 9(b). "Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." But the Rule's allowance of generality "regarding condition of mind" is not "a license to base claims of fraud on speculation." The sum of the complaint's allegations must "give rise to a strong inference of fraudulent intent."
The strongest of the proposed additional allegations are that "Defendants knowingly failed to inform Plaintiff regarding State Farm's denial of coverage so as to perpetuate the tenancy ... to Plaintiff's detriment," and that "State Farm had no intention of reimbursing rent beyond 2020 under any circumstances and was not at all concerned about the negative consequences to the Plaintiff." But these allegations of State Farm's intent remain inherently speculative. Moreover, it is hard to square the allegation that "State Farm had no intention of reimbursing rent beyond 2020 under any circumstances" with the separate allegation that State Farm was subject to a court order requiring it to pay for the Tenants' housing "pending the outcome of the Insurance Action." Red Apple cannot allege a "strong inference of fraudulent intent" by merely asserting that State Farm would blithely be willing to defy a court order.
Finally, alleging a "strong inference of fraudulent intent" on the part of a sophisticated insurance company requires a theory of fraud that has at least some semblance of business sense. The proposed amended complaint alleges that "State Farm has an economic incentive not to make a full disclosure to Plaintiff since the Leases provided cheaper temporary housing from hotel accommodations." But Red Apple would also allege that State Farm had worked with Red Apple before to place a different family in the same building for temporary housing. The allegations provide little reason to infer that State Farm would jeopardize a continuing business relationship by defrauding a repeat partner. A plaintiff could virtually always assert that a defendant has a short-term economic incentive to commit fraud. That, however, cannot be enough to support a "strong inference" that the defendant so intended.
C. The sole remaining claim, breach of contract against State Farm, fails at summary judgment.
Because State Farm validly terminated the contract in accordance with its terms, its rental payment obligations ceased in November 2020 and, as a matter of law, there has been no breach. Both parties agree the relevant contractual language comes from State Farm's November 21, 2018, letter. That letter, quoted in full, reads:
Please accept this letter as confirmation of State Farm Insurance Company's commitment to pay for a lease term of six (6) months, with a month-to-month option thereafter, for three (3) units being rented by the above-referenced insured, Tyrana Jones, in accordance with the terms of the applicable leases pertaining to the three (3) units. Payments for the units will be made by ALE Solutions on behalf of State Farm.
As the text of the contract plainly states, State Farm's initial "commitment to pay" lasted only six months. After that point, State Farm had a right to exercise "a month-to-month option" for the Tenants' three units. And, if State Farm did so, that month-to-month option would be governed by "the terms of the applicable leases" for the units. In turn, the leases contained a provision allowing for early termination:
In an email to Red Apple on October 2, 2020, an ALE representative memorialized a conversation in which Red Apple "agreed to release ALE Solutions and the Jones family of any contractual obligation for the three units as of 11/30/2020." The same email notes the Tenants 'intent to vacate" on that date. Although the record does not demonstrate that State Farm, ALE, or any of the Tenants sent Red Apple a notarized letter exercising the termination option, Red Apple does not contest that, on or before October 2, 2020, it "agreed to release ALE Solutions and the Jones family of any contractual obligation" for rental payments beginning on November 30, 2020.
Red Apple shifts the focus elsewhere, emphasizing that the Tenants "never vacated on November 30, 2020, and continue to remain in possession of the Units without paying rent as a month-to-month tenant." Red Apple fails to explain how the Tenants' failure to vacate means that State Farm has violated any obligations. Red Apple points to no provision in the lease agreements that requires State Farm to assume any responsibility for the Tenants' conduct after State Farm's own payment obligations have ceased.
08/25/23 State Farm Fire & Cas. Co., v. Waterbury Kitchen and Bath, Inc.
United States District Court, Eastern District of Pennsylvania
Insurer in Subrogation Action Unable to Invoke Res Ipsa Loquitur and Did Not Establish a Prima Facie Case of Negligence, Breach of Contract, or Breach of Implied Warranty as a Matter of Law Because There is No Expert Evidence of Causation
[Abridged] Lora and Peter Seeley returned home from a vacation to find that their refrigerator had sprung a leak, causing water damage to their house. The Seeleys' insurer, State Farm, sued Waterbury Kitchen and Bath, LLC, Breakwater Plumbing, LLC, and SJM Appliance, claiming that each defendant had been negligent, breached their contracts with the Seeleys, and breached their warranties, which caused the property damage. The court will grant the defendants' motion for summary judgment in full.
In early 2018, Lora and Peter Seeley hired Waterbury Kitchen and Bath LLC to design and renovate the kitchen in their recently purchased home. They bought a new refrigerator to be installed for the renovation. Either a Waterbury worker or the plumber hired by Waterbury, Breakwater Plumbing, LLC, installed the refrigerator and made the connection to an existing water line that was already in place instead of the new water line that came with the refrigerator. The renovation was completed in April 2018.
The refrigerator and water dispenser operated without issue for over a year. In August 2019, a technician for SJM Appliance installed a new water filter for the refrigerator. A few days later, the Seeleys called Mr. Appliance again after noticing a leak around the refrigerator. The Mr. Appliance technician returned and found that a compression nut that held the hose from the water supply to the refrigerator needed to be replaced and performed the work that day. Mrs. Seeley testified that after that repair, the refrigerator operated without any issue until the discovery of the leak that is the source of this litigation, 25 months after the repairs made by Mr. Appliance.
State Farm claims that on September 29, 2021, the Seeley's water supply line catastrophically failed, causing a sudden and substantial water release, and this incident occurred as a direct and proximate result of each of the defendants' improper acts and omissions, in particular a negligent failure to identify a worn-out water-supply line that caused or contributed to the catastrophic leak.
After the September 2021 leak, State Farm sent a property adjuster to review the damage to the Seeleys' house. State Farm then requested that the Seeleys send the subject hose and attachment to State Farm, which in turn sent the subject parts to Donan CTL in Tennessee for examination. A Donan engineer authored a report on the possible cause of the hose failure, but State Farm indicated it has no intention of offering that report into evidence at trial or offering the author of the report as an expert witness. The report does not definitively identify the cause of the leak or draw conclusions as to the responsibility of any of the defendants.
State Farm commenced a lawsuit against Waterbury on February 3, 2022. Waterbury then filed a third-party complaint against Breakwater. On November 29, 2022, State Farm filed an Amended Complaint adding Breakwater and Mr. Appliance as defendants. State Farm asserts claims of negligence, breach of contract, and breach of implied warranties related to the failure of the refrigerator water supply line against each defendant. State Farm's allegations against the defendants include improper "actions of their own, and/or proper worker selection, oversight, direction, training, and work inspection"; negligently failing to competently perform the water supply line installation, or use the new line provided; failing to warn the Seeleys as to their negligent performance as to the water supply line; and failure to retain competent, qualified, or able agents, employees subcontractors, or servants to perform the tasks described. An arbitration hearing was held on March 3, 2023, and a complete defense verdict was entered on State Farm's claims. On March 6, 2023, State Farm appealed the arbitration award for a trial de novo. Mr. Appliance filed its motion for summary judgment, and State Farm filed its response in opposition. Waterbury and Breakwater joined in Mr. Appliance's motion.
State Farm sues all defendants for negligence (Count I), breach of contract (Count II), and breach of implied warranties (Count III).
To prevail on each of these claims at trial, State Farm must prove causation by a preponderance of the evidence. In Pennsylvania, "[t]o prevail in a negligence action, a plaintiff must show that (1) the defendant owed a duty of care, (2) the breach of which (3) caused (4) damages." "[T]he mere happening of an accident or an injury does not establish negligence nor raise an inference or a presumption of negligence nor make out a prima facie case of negligence."
To support a breach of contract claim, the plaintiff must show "(1) the existence of a contract, including its essential terms; (2) a breach of a duty imposed by the contract; and (3) resultant damages."
"To establish a breach of [an] implied warranty ..., a plaintiff must show: 1) the existence of the implied warranty; 2) breach of the implied warranty; 3) a causal connection between the defendant's breach and the plaintiff's injury or damage; and 4) the extent of loss proximately caused by the defendant's breach."
The primary dispute raised by the defendants' summary judgment motion is whether State Farm has accumulated sufficient evidence of causation to present to the jury. Although the question of whether causation has been shown "is usually a question of fact for the jury to decide ... when it is clear that reasonable minds could not differ as to causation, the court may decide this issue." State Farm argues that it has met its burden on causation and that an expert opinion is not required on this point. Moreover, State Farm argues that Mr. Appliance, Breakwater, and Waterbury may be found liable on the theory of res ipsa loquitur.
"Res ipsa loquitur was conceived as a shorthand statement of the evidentiary rule allowing negligence to be established by circumstantial proof...." "It ... provides that a plaintiff may satisfy his burden of producing evidence of a defendant's negligence by proving that he has been injured by a casualty of a sort that normally would not have occurred in the absence of the defendant's negligence."
It may be inferred that harm suffered by the plaintiff is caused by negligence of the defendant when:
(a) the event is of a kind which ordinarily does not occur in the absence of negligence;
(b) other responsible causes, including the conduct of the plaintiff and third persons, are sufficiently eliminated by the evidence; and
(c) the indicated negligence is within the scope of the defendant's duty to the plaintiff.
To satisfy the first prong of the test, State Farm "must produce evidence which would permit the conclusion that it was more probable than not the injuries were caused by the defendants' negligence." This prong is satisfied when there is a "fund of common knowledge from which laymen can reasonably draw the inference or conclusion of negligence" or "where it can be established from expert ... testimony that such an event would not ordinarily occur absent negligence."
State Farm fails to confront this first prong and offers no support for the proposition that the event of a failed water line "ordinarily does not occur in the absence of negligence." The Court is highly skeptical that the average juror could draw upon a fund of common knowledge as to the machinations of refrigerators and the installations of water supply lines to find an inference of negligence from the mere fact of a leak. Nor does State Farm gesture to any expert testimony it has adduced that could establish that point—indeed, it explicitly states that it will not be offering an expert at trial.
State Farm also cannot meet the second prong of the test—ruling out other causes for the water supply line failure. There can be no reliance on the res ipso loquitur doctrine where the injury is "equally as attributable to fluke happenstance as to carelessness" on the part of the defendants. State Farm's own expert report suggests that the tube could have degraded due to an excessive heat source, not the negligent installation or repair of the refrigerator and water supply line, And State Farm's failure to obtain an expert report that is more definitive as to whether the defendants might have caused the leak "is significant because it leaves untested the possibility that the incident ... may have occurred for reasons that have nothing to do with negligence on the part of Mr. Appliance, Breakwater, or Waterbury.
Without the advantage provided by res ipsa loquitur, State Farm now must prove by a preponderance of the evidence that Mr. Appliance, Waterbury, and Breakwater caused damages. The defendants argue that State Farm's expert report does not touch on this issue, and there is no evidence in the record that establishes causation. State Farm argues that no expert testimony is required because the causation of a leak is reasonably within the bounds of a layperson's understanding.
The instant motion focuses primarily on the issue of causation and whether a refrigerator or its accoutrements can spring a leak absent faulty installation or repair. So, to decide this case if it were to go to trial, jurors would need to understand whether a refrigerator installation occurring in 2018 or a refrigerator repair occurring in 2019 could reasonably have caused a property-damaging flood in 2021. Almost certainly such hypothetical jurors would all have refrigerators in their residences, but it is likely well "beyond the ken" of the ordinary layman to determine whether— or which of—Waterbury's, Breakwater's, or Mr. Appliance's actions with regard to the Seeleys' refrigerator caused a water-supply line failure, particularly where 25 months lapsed between when Mr. Appliance last touched the line and there was a catastrophic leak.
Courts in the Third Circuit and state courts in Pennsylvania have found that negligence or products liability cases involving trucks, microwaves, tractor trailers engines, and leaking water coolers all demanded expert testimony on causation. Even viewing all the evidence in the light most favorable to State Farm, absent a showing of the causation element, no reasonable jury could find for State Farm on any of its claims, so a grant of summary judgment is appropriate here.
But even if expert testimony on the point of causation were not necessary, the Court would still grant summary judgment because State Farm has failed to present any non-expert evidence that would show causation.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
06/22/23 Gonzagowski v. Steamatic of Albuquerque Inc.
No Double Damages: Post-Judgment Payments in Satisfaction of Final Judgment Not Subject to the Collateral Source Rule
Plaintiff’s home sustained water damage in a hailstorm, so he asked his insurer, Allstate, to cover the loss. Steamatic was hired to perform water abatement and mold remediation services. Then, Plaintiff claimed he developed a severe and permanent lung condition due to the failure to properly remediate the mold and commenced an action against Allstate and Steamatic for his injuries. Plaintiff’s claim against Allstate was for breach of contract for failing to adhere to the mold remediation provisions in the homeowner’s insurance policy. Plaintiff ended up with just the one claim against Steamatic for negligence based on the failure to properly repair and remediate the mold in his home. Plaintiff sought the same compensatory damages from Allstate and Steamatic.
The district court crafted a special verdict form to permit the jury to allocate responsibility for damages between the parties. The jury found that Steamatic was an independent contractor, that Allstate breached its contract, and that Steamatic was negligent. It also found that Allstate’s breach and Steamatic’s negligence caused Plaintiff’s injuries. However, the jury found Plaintiff failed to mitigate his damages, and the form asked the jury to compare each defendant’s conduct with Plaintiff’s failure to mitigate to determine how much each party’s conduct contributed to Plaintiff’s damages. The jury was also asked to identify the total percentage of compensatory damages caused by each of the three parties. The district court found that Plaintiff suffered $2.5 million in total compensatory damages, of which Allstate caused 30%, Steamatic caused 55%, and Plaintiff caused 15%. The district court entered final judgment accordingly, adjudicating Allstate liable for $0.75 million and Steamatic liable for $1.375 million.
Following entry of final judgment, Allstate settled with Plaintiff and secured full satisfaction and release from the judgment. Shortly after this post-judgment settlement, Plaintiff moved to amend the final judgment as only against Steamatic. Plaintiff contested the damages allocation, and the district court entered an amended judgment setting aside the prior final judgment against Steamatic. The amended judgment specified that Steamatic was liable to the plaintiff for $2 million in compensatory damages.
Steamatic then asked for an offset of $.75 million—the amount reflecting the damages allocated to Allstate in the final judgment—arguing that allowing Plaintiff to accept satisfaction of the judgment against Allstate and to recover $2 million against Steamatic would result in double recovery. Plaintiff argued that an offset was inappropriate because Allstate’s settlement was a collateral source. The District Court agreed with Plaintiff and denied the offset. On appeal, the Court of Appeals reversed the District Court, holding the Allstate payment satisfied a portion of Plaintiff’s damages and reduced the amount of compensatory damages that Plaintiff could recover from Steamatic. The Court of Appeals also concluded that the settlement was not a collateral source, but it concluded the amount of the offset was the amount of Allstate’s settlement.
The New Mexico Supreme Court agreed that the post-judgment settlement was not a collateral source, so Plaintiff’s recovery from Steamatic must be reduced by the damages fully satisfied by Allstate. The Court reasoned that the rule prohibiting double recovery is based on the principle that a claimant is only entitled to one payment for its loss to make the injured party whole, and the ultimate burden of compensating the injured party should not fall on blameless but generous parties. A defendant who settles with the plaintiff before liability is adjudicated does so voluntarily and for both the chance of gaining a better outcome at trial. After adjudication defendants’ payment is no longer voluntary but made in satisfaction of a legal judgment and with full knowledge of the extent of the defendant's liability. The Court did agree that Steamatic became responsible for paying the same damages allocated to Allstate due to an overlapping damages award in the final judgment and amended final judgment (the amended final judgment partially duplicated the 30% share allocated to Allstate in the final judgment), so Allstate’s satisfaction of the duplicative portion of the damages award extinguished Plaintiff’s right to recover those same damages from Steamatic. As a result, Steamatic’s share had to be reduced by $0.75 million to reflect Allstate’s satisfaction with the same damages allocated to Steamatic, and Plaintiff could recover $1.25 million in compensatory damages from Steamatic.
GESTWICK’S GREATEST
Evan D. Gestwick
[email protected]
New York’s trial level Justices have been hard at work developing interesting cases, which you will read all about in the next issue. Until then, happy fall!
ON the ROAD with O’SHEA
Ryan P. O’Shea
[email protected]
The courts have been quiet this week on the auto front.
LOUTTIT’S LEGISLATIVE and REGULATORY ROUNDUP
Robert P. Louttit
[email protected]
Nothing to report this issue.
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
09/13/23 Austin v. Nunez et al.
Appellate Division, Second Department
Second Department Affirms Order Granting Summary Judgment for Defendants Finding Plaintiff Did Not Sustain a Serious Injury Under Any Asserted Category of § 5102(d) where Plaintiff’s Expert Report Relied Upon in Opposition Was Found to be Insufficient.
Plaintiff Zachary Austin appealed an Order from Supreme Court, Suffolk County, which granted separate motions for summary judgment submitted by Defendants, Pedro Nunez and Alyssa Santiago, and 1 Stop Village Auto Care Corp. and Hamid Shahbaz, respectively. Specifically, the Supreme Court’s granting of Defendants’ motions was predicated on a finding that Plaintiff did not raise a triable issue of fact to whether he suffered a causally related serious injury.
By way of background, this matter stems from a motor vehicle accident which occurred on May 14, 2017, on a major parkway located on Long Island, New York. Plaintiff Allen was a passenger in a car operated by Defendant Santiago, owned by Defendant Nunez. The vehicle then contacted a vehicle operated by Defendant Shahbaz, owned by 1 Stop Village Auto Care. As a result, Plaintiff alleged injuries to the left shoulder, left hand/fingers, right hip, right pelvis, and right leg. He claimed to have met threshold under the permanent loss of use, permanent consequential limitation of use, significant limitation of use, and/or the 90/180 category of Insurance Law § 5102(d).
On review, the Second Department found that the evidence submitted by Defendants was sufficient to meet the requisite prima facie burden for summary judgment that plaintiff did not sustain a serious injury under any asserted category. The evidence presented by Defendants included deposition testimony from the parties and respective IME reports.
In opposition, Plaintiff produced a narrative report from a treating physician who opined plaintiff suffered numerous causally related serious injuries. However, the Second Department found that this affirmed report from plaintiff’s expert was insufficient to raise a triable issue of fact, as the provider failed to identify the method utilized to measure the plaintiff’s range of motion. As Plaintiff failed to raise a triable issue of fact, the Order granting Defendants’ motions was affirmed accordingly.
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law
Calgary, Alberta
[email protected]
Across the world, returning from Australia.
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