Volume XXV, No. 8 (No. 655)
Friday, September 29, 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.
We are delighted to bring you this issue of our Coverage Pointers, a publication designed to inform and entertain, to recognize and speak to coverage trends.
My partner in presentation, John Trimble from the Lewis Wagner firm in Indianapolis, and I, conducted a CGL Primer 101 training for an insurer this afternoon. It brought in about 50 claims folks from across the country for a Zoom training. Need a refresher for your claims staff? Let us know.
Lots of us are going back on the road again. I spent a couple of days in Minneapolis on a mediation, Steve and Evan were in NYC for court appearances and mediations, and others are traveling again as some courts are starting to require bodies in the courtroom. So many of our conferences remain virtual and that saves everyone time and money.
Included in this issue are summaries of a First Department case discussing “time-on-the-risk” issued in long-tail asbestos claims where there were periods where no coverage was obtained, a couple of cases (first party and SUM) on residence issues (so many residence issues are being considered by courts in the coverage field), an Eleventh Circuit case involving late notice of opioid lawsuits, a Florida case on consent judgments exceeding policy limits, a Scott Storm win in Nassau County on a water loss/SIU claim, a Ryan Maxwell win in the Eastern District of New York on delivery of policy forms, and a really interesting Canadian offering from our friend Heather Sanderson, on the impact of consent policy limits settlements on second layer excess policies (and a whole lot more)
We do love bringing this newsletter to you.
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.
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.
Baseball Debut – 100 Years Ago Today – Hack Wilson:
Lewis Robert "Hack" Wilson (April 26, 1900 – November 23, 1948) had his baseball debut 100 years ago today on September 29, 1923. He was an American Major League Baseball player who played 12 seasons for the New York Giants, Chicago Cubs, Brooklyn Dodgers and Philadelphia Phillies. Despite his diminutive stature, he was one of the most accomplished power hitters in the game during the late 1920s and early 1930s. His 1930 season with the Cubs is widely considered one of the most memorable individual single-season hitting performances in baseball history. Highlights included 56 home runs, the National League record for 68 years; and 191 runs batted in, a mark yet to be surpassed. "For a brief span of a few years," wrote a sportswriter of the day, "this hammered down little strongman actually rivaled the mighty Ruth.”
While Wilson's combativeness and excessive alcohol consumption made him one of the most colorful sports personalities of his era, his drinking and fighting undoubtedly contributed to a premature end to his athletic career and, ultimately, his premature death. He was inducted into the Baseball Hall of Fame in 1979.
Peiper on Property (and Potpourri):
A quick note from the roadshow this week, as I’m headed to NY County Supreme Court right now. A couple of good ones in the column this week. The Zayed reminds us that if you are the movant on a motion, you are required to do more than point out what the other side cannot prove. While you have the benefit of doing so, perhaps, at trial, but as to the motion you must prove why you are entitled to relief.
The Allstate subrogation case we review is also a good reminder of another quirk in NY law. Absent a public policy, or statutory prohibition (think GOL 5-322.1), parties to a contract can absolve themselves for damage caused by their own negligence. Here, a fuel delivery service very well may have been negligent, but its actions were subsumed by the hold harmless provisions in the service contract.
As a final point, today, September 28th, is National Drink Beer Day. Be guided accordingly.
Now, if you’ll excuse me, I have a holiday to observe. Cheers.
Gender Barrier Broken on American Stock Exchange – 100 Years Ago:
Buffalo Courtier
Buffalo, New York
29 Sep 1923
WOMAN ON STOCK EXCHANGE.
For the first time in history a woman has appeared on the floor of the Amsterdam Stock Exchange. She represents an Amsterdam firm of brokers.
Wilewicz’ Wide-World of Coverage:
Dear Readers,
Happy Autumn! Since our last writing here, we have passed the equinox and started our slow descent into the cooler seasons. While I’m not a big fan of the Fall holidays that come up per se, I do enjoy the changing of the seasons, the autumnal colors, and decorating with harvest-themed goodies around the house (and the porch – can’t be helped). As things cool, school starts up again in force, the practice of law heats up, and we have increasing appearances and hence decisions coming down the pike from the courts. But beware – winter is coming.
Now, this week in the Wide World of Coverage, we bring you another one from the Eleventh Circuit, which seems to be relatively prolific in its coverage determinations of late. In KVK-Tech v. Navigators Specialty, we have a very brief decision from the Federal Appeals court, dealing with a matter out of Alabama. There, in short, the Court found that the insured did not provide its carrier timely notice of underlying opioid litigation. As such, the policy was breached, and those claims were not covered. Let this be a lesson in coverage 101 – notify your carriers as soon as reasonably practicable or possible of any claims if you want to ensure to have even a shot at coverage for them.
Until next time,
Agnes
Agnes A. Wilewicz
Apparently, Only One Sabbath Counts – 100 Years Ago:
Times Union
Brookly, New York
29 Sep 1923
Christian Sabbath Not to Be Disturbed
Morris Weiss Brought to Court for Running Factory on Sunday
“Because a man’s religious faith requires him to observe Saturday as his Sabbath, that does not give him the right to operate a factory on Sunday and disturb the peace of the community,” was the interpretation of the law handed down to Morris Weiss, who conducts a tailoring establishment on Hull avenue, Maspeth, when he appeared before Magistrate Doyle in the Ridgewood Police Court, yesterday afternoon.
Weiss was brought to court by Patrolman William Harrar, of the Newtown precinct, who told Judge Doyle that he could hear the noise of the motor used in Weiss’ establishment a block away.
When Weiss was charged with violation of the Sabbath law, he insisted that he does not work on Saturday, the day he recognizes as his Sabbath. He admitted, however, that he does go back to work on Sunday, and admitted that he had the machinery in his plant operating when the officer gave him the summons.
Judge Doyle, through an interpreter, advised Weiss that his religious belief is strictly individual habit but that it has nothing to do with his factory and that he cannot carry on work in his factory on Sundays. He suspended sentence.
Barnas on Bad Faith:
Hello again:
Since our last issue, the Bills have bounced back with a couple of nice wins, the Blue Jays have put themselves in a good position for the Wild Card, Syracuse football is 4-0, and Tottenham is off to a nice start in the Premier League. Even my Hurwitz Fine fantasy football team is off to a strong 3-0 start. As any sports fan knows, this surely means that a run of misfortune and poor performance is around the corner. Let’s hope it does not start this weekend, as the Bills have a huge early season matchup with the Dolphins in Orchard Park. The Bills-Dolphins rivalry looks like it is back, and I am here for that. Squish the Fish!
I have a short but informative bad faith decision from Florida in my column today. The court succinctly summarizes important prior Florida bad faith case law in holding that State Farm was not required to enter into a consent judgment that would have exceeded the policy limits and allowed the plaintiff to bring a bad faith claim prior to the resolution of the underlying action. Give it a read if you are so inclined.
Brian
Brian D. Barnas
Courting Costs – 100 Years Ago:
Star Tribune
Minneapolis, Minnesota
29 Sep 1923
HIGH COST OF LOVING.
It costs more to get the girl now than it did in the “good old days.” The cost of “courting” has risen in common with all other necessities, and, today, the man who seeks a maid for a life partner must face the alternative of spending a lot of money or having trouble in making the deal.
Once the cost of courting was insignificant. A few dollars spent in buggy rides, a box of candy now and then (and candy in those days did not cost a dollar a pound), an occasional glass of soda water of the foamy kind, and some lemonade at the community picnic generally sufficed to bring the matrimonial deal to the point where a $10 ring would be the only thing lacking.
The girl of today who would Let herself be courted and won on a $25 expenditure would be an object of pity to her sister flappers. The figure now would run into the hundreds, and then the girl would be counted a bargain if the youth was sufficiently in love to throw economy to the winds. —Anniston Star.
Lee’s Connecticut Chronicles:
No Connecticut cases this time; see you in two weeks.
Lee
Lee S. Siegel
Justifiable Filicide – 100 Years Ago:
Buffalo Courier
Buffalo, New York
29 Sep 1923
FREE WOMAN WHO SHOT SON TO SAVE HIM FROM LIFE OF CRIME
Chicago, Sept. 28. —A prosecutor virtually turned defense counsel today and with the “moral law” given precedence over the criminal code, Mrs. Rose Slmiz, who shot her son Desco several weeks ago to save him, as she said, from a life of crime, was discharged in municipal court.
Desco, recovered from his wounds, said he had “learned his lesson,” and had a job. He also pleaded for his mother. The court dismissed the case.
Kyle's Noteworthy No-Fault:
Dear Readers,
Exciting update since my last coverage pointers column … I am officially married! My wife and I, along with our families and group of friends, flew out to Las Vegas last week for the occasion. We had a great time staying at The Paris, exploring the strip, hanging out at the pools, and visiting a casino or two. Our wedding was great, too, of course, I wouldn’t have wanted it any other way, and we even got to take a helicopter tour above the strip to top things off. All in all, an experience we won’t ever forget!
In this week’s case, the plaintiff sued State Farm for the denial of No-Fault benefits for medical services resulting from an automobile accident. State Farm moved for summary judgment on the grounds that the Plaintiff failed to provide additional documentary verification to establish the medical necessity of the billed services and that the operation of Plaintiff’s medical service complied with New York State’s licensing requirements.
Kyle
Kyle A. Ruffner
[email protected]
Compulsory Auto Insurance? Egads! – 100 Years Ago:
The Evening Herald
Fall River, Massachusetts
29 Sep 1923
States Turn Down
Auto Insurance Law
Car owners who have been alarmed his year by a general report that the States almost universally have determined to adopt a compulsory automobile liability insurance law may breathe easier in the assurance, says a Firestone bulletin, that there is little chance for such legislation at this time.
Not a single State has passed such a measure as applying to individually owned cars. In fact, only two States have passed legislation of even a similar character. These were applicable to common carriers only.
Ryan’s Federal Reporter:
Hello Loyal Coverage Pointers Subscribers:
We are several weeks into a riveting NFL season and us Fantasy Football players are in midseason form. The trash-talk is flying, as are the footballs and fumblerooskies (well, maybe not the latter, yet. Those are probably being held in some Offensive Coordinator’s back pocket for later). The results have been mixed, the waiver wire is “lit,” and I have no idea who should start or sit. My head is in the right place this year, but where exactly did I put my helmet?
This edition, I wrote about my own case. It was an interesting one out of the EDNY with a logical conclusion. On that note, I’ll simply let you guess how it ends.
Until next time,
Ryan
Ryan P. Maxwell
Some Things – Like Racism – Never Change – 100 Years Ago:
The Buffalo Commercial
Buffalo, New York
29 Sep 1923
MAYOR FEARS NEGROES
WILL START MALADY
Thinks City-Wide Pestilence May Follow Influx From South
Buffalo is in danger of pestilence and malady because of the influx of infected negroes coming to this city, Mayor Schwab declared today.
The mayor said he has been so informed by medical authorities. He asked Corporation Counsel Rann to look into the legal phase of the situation and check the colored influx, if possible.
“I want every negro that comes to this city to be required to undergo a thorough physical examination before he is allowed to stay,” the mayor said. “If the city has authority to do this I will see that it is done.”
Mayor Schwab said reliable statistics proved that from 300 to 500 negroes are coming here each day.
Health department records also show that the colored immigrants from the south are bringing disease, according to the mayor. Small Pox, yellow fever and venereal diseases are prevalent, he said.
Many negroes come from sections of the south where there is lack of sanitation. Many are driven from the south because they are infected and are not wanted by the whites there, he stated.
According to the mayor, Buffalo is becoming the center for this undesirable element. Negroes are attracted here by steel plants and other factories, he added.
“The city’s health is seriously menaced,” Mayor Schwab concluded. “We must bar these unhealthy negroes from coming to our city or a city-wide epidemic will develop.”
Rauh’s Ramblings:
Back from family leave but moving to a different firm newsletter – stay tuned and thanks for reading.
Patty
Patricia A. Rauh
More on Compulsory Auto Insurance– 100 Years Ago:
Buffalo Truth
Buffalo, New York
29 Sep 1923
COMPULSORY AUTO INSURANCE
ANOTHER safety week is soon to be launched, and while all may agree on the advisability of impressing on the public the need of safeguarding life and property in the operation of motor vehicles, it does seem that a very practical angle of the situation is being overlooked, i.e., adequate provision for the indemnification of people injured on the streets. There was a time when the ownership of a motor car implied financial responsibility of the owner. This is no longer the case. Thousands of car owners today have no such responsibility and as usual in such cases save the expense of liability insurance. The responsible owner of a motor vehicle insures to protect himself; the irresponsible one does not, for he has nothing to fear from a suit for damages. A citizen injured by any one of these non-insured, financially irresponsible automobile operators is without redress, no matter how blameless he may have been in the circumstances. He may lose his legs, arms, his eyesight, or his life, but, insofar as recovering financial indemnity, there isn’t a chance.
The situation is one that requires the attention and action of the legislature and the passage of such law or laws as will force every operator of a motor car to take out liability insurance to the extent of at least $5,000. This is the only way to adequately protect the public against the growing irresponsibility of motor car owners.
Storm’s SIU:
Hi Team:
As also mentioned in my post on LinkedIn, I am pleased to report scoring a win for two clients (insurer and agent) in a litigated first-party property case pertaining to a water loss claim which was being investigated by the Special Investigation Unit. After adjourning their EUOs several times, the insureds failed to show and produced only a small percentage of the documents requested. The court dismissed the case against the insurer due to the insureds' failure to cooperate. Plaintiff’s belated offer to cooperate in litigation was too late to cure the breach. The court also held there was no viable cause of action against the agent.
These summary judgment motions can be lost when legal counsel cites the wrong case law. See my article published in the NY Insurance Association's "Your NY Connection Magazine" titled "Headed in the Wrong Direction". The burden of proof in lack of cooperation cases for 1st-party property losses is different from and less onerous than 3rd-party liability claims. It's critical to know the difference. Citing 3rd-party liability cases in a summary judgment motion on a first-party property claim is not usually advantageous.
Talk to you again in two weeks. Can’t wait!
Scott
Scott D. Storm
Compulsory Arbitration Considered – 100 Years Ago:
Times Union
Brooklyn, New York
29 Sep 1923
Stuynes and Forum Hits
Lawyers and Courts
Lawyers, the courts and their administration of justice, compulsory arbitration and legal ethics came in for some caustic comment last night at the weekly meeting of the Stuyvesant Heights Forum held in Public School 35, Lewis Avenue and Decatur Street.
Frank Duffy, the head of the Forum, who presided, gave a lengthy reading on the origin and evolution of law and its practices, and then discussion followed on the merits of compulsory arbitration to supersede the general processes of law in effect today. Such arbitration was objected to on the ground that it was arbitrary and high-handed, and smacked of the same kind of legislation that prohibition and the ‘blue laws’ are supposed to be.
The argument advanced for the adoption of compulsory arbitration as a means of settling disputes was that the present legal system is based on compulsory methods even to the issuance of summonses and subpoenas.
A resolution introduced instructing the chairman to appoint a committee to formulate a concrete basis for the enactment of compulsory arbitration was not carried.
One of the speakers, in a spirited controversy over the comparative honesty of lawyers, made the statement that “no criminal lawyer can escape being a criminal." This led to much talk about lawyers and ethics.
Fleming’s Finest:
Hi Coverage Pointers subscribers:
Happy Autumn. The leaves are changing, and spooky decorations are creeping out of basements across the country. Much to the disgust of my family and friends, I have been consuming copious amounts of pumpkin spice foods.
This week’s case from the Delaware Supreme Court looked at whether a False Claims Act investigation and settlement arose out of a mortgage lender’s professional services. Since the FCA investigation and settlement arose out of false certifications to the government, the management liability policy at issue provided coverage.
Catch you later,
Kate
Katherine A. Fleming
Daylight Savings Time– 100 Years Ago:
The Buffalo Commercial
Buffalo, New York
29 Sep 1923
SET YOUR CLOCKS BACK TONIGHT
Daylight saving time takes the count at two o’clock tomorrow morning. Those who set their clocks ahead on last April 29, may set them back to confirm with standard time before they retire tonight.
All railroad ticket sellers, information clerks, etc., will hold their annual celebration when at two o’clock in the morning they realize that for at least several months they will not have to answer the questions one thousand or more times a day: “Is that railroad time or city time?”
Simultaneously, in about 350 cities and towns in the United States and several eastern states, according to an Associated Press compilation daylight saving time will give way to standard clocking. New York and New Jersey are principal Eastern states in which under local ordinances daylight saving has been holding sway.
Gestwick’s Greatest:
Dear Readers:
The Bills have turned it around since their disappointing Week 1 loss to the Jets with back-to-back victories. While a 37-3 win over the Commanders was nice, I nearly lost it when I saw the Dolphins put up 70. Not only that, but Tyreek Hill called the Bills’ fanbase “average.” Bills fan or not, you know that’s not true. My prediction for Tyreek Hill this Sunday: 3 catches, 41 yards, no scores. Your “average” wide receiver performance. See what I did there?
The New York County Supreme Court held this week that an insured’s failure to attend their EUO in connection with a claim for no-fault benefits violates the policy and vitiates coverage. The Court also held that this means the medical providers are now not entitled to payment. Taking it a step further, the Court held further that this relieves the no-fault carrier of the requirement, under the no-fault regulations, to issue the denial within 30 days of completion of the EUO.
To some this may make sense, since the regulation only requires denial after receipt of verification and considers the EUO part of that verification—to that camp, the argument would be that if the carrier never gets to complete its EUO—part of the verification—then there really is no time requirement. Others may look at prior case law, and recognize that, generally, the carrier must prove that it timely issued the denial after the insured failed to attend its EUO. What camp are you in? I’m in the latter—just issue the denial on time, and don’t find yourself explaining to the judge later why you didn’t. State Farm got lucky here, but will you?
Evan
Evan D. Gestwick
Airplane Speed Shattered with Speed of 230 MPH – 100 Years Ago:
Buffalo Courier Express
Buffalo, New York
29 Sep 1923
HIGH SPEED IN AIR
Army aviator makes almost
four miles a minute.
Saint Louis, Mos., Sept. 28 (A.P.).—The first test by an army entrant in the international air races here next week shattered by 25 miles an hour, the mark set by Lieutenant R. L. Maughan, winner of the Pulitzer trophy at Detroit last year, when Lieutenant Alexander Pearson attained a speed of more than 230 miles an hour in a trial flight yesterday afternoon.
The speed attained, air officials declared, indicated that a record of better than four miles a minute may be expected during the coming week.
Four of the United States navy’s fastest pursuit ’planes are entered in competition with the United States army for the Pulitzer trophy. In recent flights the navy planes attained a speed of 244 miles per hour.
On the Road with O’Shea:
Hey Readers,
September flew by in the blink of an eye. Not much going out in rural Rochester other than celebrating a few birthdays. However, this will abruptly change in the next few months as the holiday season kicks into gear. For now, I’ll enjoy the momentary pause for the next few weeks.
This week I have a case from the Second Department affirming the stay of a SUM arbitration based upon lack of timely notice of the claim. It appears the appellate division found the insured did not have a valid excuse for the delay.
See you in October,
Ryan
Ryan P. O’Shea
[email protected]
Safety First – 100 Years Ago:
The Buffalo News
Buffalo, New York
29 Sep 1923
Watch Your Step.
DANGER lurks everywhere in the streets.
A hole in the pavement, a broken board, a banana peel, or an icy spot on the sidewalk may upset you and injure more than your dignity. It may throw you in the way of a passing streetcar or auto.
When walking on the sidewalk or crossing the street, don’t become too absorbed in the sporting page or the comics. Don’t lose yourself in thought or conversation, however lofty it may be. Don’t get off a streetcar backward. Keep alert and remember that all accidents don’t happen on Friday the 13th.
Take no chances trying to beat a car to the crossing. You may save a minute, but you may lose weeks in the hospital. Don’t place too much confidence in horseshoes, rabbits’ feet, and four-leafed clovers.
SAFETY FIRST!
Louttit’s Legislative and Regulatory Roundup:
Nothing to report this issue. See you in two weeks.
Rob
Robert P. Louttit
Hosiery Thefts – 100 Years Ago:
The Buffalo News
Buffalo, New York
29 Sep 1923
BANDITS STEAL 18,000
PAIRS OF SILK HOSE
PHILADELPHIA, Sept. 29. —Four masked bandits forced an entrance into the United States Silk Knitting company plant at Langhorne, near here, early today, handcuffed a night watchman and escaped with 18,000 pairs of silk stockings, valued at $25,000, police here were notified.
Rob Reaches the Threshold:
Hello Readers,
Fall is in the air - the leaves are beginning to turn, we have some beautiful golfing weather, and football is back on all day Sunday. However, for one of the first time in a long time, I will not have Yankee playoff baseball to enjoy (or be disappointed by) this October. Sometimes you must take the good with the bad…
Unfortunately, this time around I do not have anything worth reporting from the Appellate Division on Serious Injury.
Please enjoy the wonderful articles from my colleagues, and I’ll be back in two weeks.
Rob
Robert J. Caggiano
Phone Wires Safe Lives – Literally – 100 Years Ago:
The Star Press
Muncie, Indiana
29 Sep 1923
’PHONE WIRES SAVE
2 GIRLS FROM DEATH
Chicago, Sept. 28. —Four persons were injured Friday when the front wall of a rubber goods factory was blown out by an explosion of chemicals.
Two negro girls catapulted from the factory, fell on telephone wires, and hung suspended until removed by volunteer rescuers.
North of the Border:
I’m now back from my travels in Australia and settling into the routine of fall. My oldest grandson has started pre-school, my second oldest is now in full-time day care and our youngest grandchild is now four months old. Time flies right out the door when you are not looking. But all is good. Very good.
My column this week discusses an interesting liability case arising from a significant high-rise fire in Toronto that happened over a decade ago. The backlog of civil cases in Canadian courts is creating an access to justice issue that cannot be ignored. In the meantime, some useful legal principles were developed in this case. Have a read. Until next time.
Heather
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
Headlines from this week’s issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Time-on-the-risk Analysis in Asbestos Coverage Litigation. Insurer is Not Required to Cover Costs Outside of Policy Period
- No Recovery for Attorney’s Fees in Errors and Omissions Claim Against Insurance Broker
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Residence Premises Requirement Upheld, Again
- Limitation of Liability Clause in Service Contract Protects Fuel Supplier from Damages Arising out of Burst Pipes
- Movant Carries Burden on Motion to Dismiss Contractual Indemnity Claims
WILEWICZ’S WIDE WORLD of COVERAGE:
Agnes A. Wilewicz
[email protected]
- Eleventh Circuit Holds that Insured Failed to Notify its Carrier of Opioid Lawsuits in a Timely Manner, Thus Obviating Coverage
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
- Insurer Had No Duty to Enter into Consent Judgment Agreement Exceeding the Policy
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- Nothing new this time; see you in two.
KYLE'S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]
- Court Rejects State Farm’s Summary Judgment Motion, Denying No Fault Benefits, Due to Failure to Present Admissible Evidence for Investigating Plaintiff Medical Provider’s Ineligibility to Receive Benefits
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
- Court Rules that Insured Cannot Obtain Benefit of Coverage from Base Policy Form Without Being Subject to the Exclusions Contained Therein
RAUH’S RAMBLINGS
Patricia A. Rauh
[email protected]
- Nothing new this time; see you in two.
STORM’S SIU
Scott D. Storm
[email protected]
- Action Against the Insurer and Agent Dismissed Due to Insureds’ Failure to Cooperate With 1st-Party Property Investigation and Failure to State a Cause of Action Against the Agent.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- False Claims Act Investigation and Settlement Did Not Arise Out of Mortgage Lender’s Professional Services
GESTWICK’S GREATEST
Evan D. Gestwick
[email protected]
- Court Holds that Where No-Fault Claimant Fails to Attend EUO, Carrier Not Required to Pay Medical Providers, and Not Required to Deny No-Fault Claim Within 30 Days
ON the ROAD with O’SHEA
Ryan P. O’Shea
[email protected]
- A Little too Late, Delayed Notice of Sum Claim Vitiates Coverage
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]
-
Nothing to report this issue.
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
[email protected]
- The Agreement of a Primary and First Excess Liability Insurer to Exhaust its Limits in Settlement of Claims Does Not Trigger the Second Excess Liability Policy where that Agreement was Made Without the Consent of the Second Excess Insurer
That’s all there is and there is no more. We have run out of summer and are enjoying the last three weeks of our beach house in Canada. To me, it’s a sad time of the year.
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]
09/26/23 The Travelers Indemnity Company v. Fishbach, L.L.C.
Appellate Division, First Department
Time-on-the-risk Analysis in Asbestos Coverage Litigation. Insurer is Not Required to Cover Costs Outside of Policy Period
Travelers made a motion for partial summary judgment finding that indemnity costs incurred by Travelers in connection with the asbestos liabilities of defendants' subsidiary should be allocated on a pro-rata time-on-the-risk basis and was successful. The First Department affirmed.
Travelers was not liable to cover costs incurred by the insured that occurred outside of the policy period and that any costs it was entitled to cover should be allocated pro rata over the entire period during which damages (personal injuries) occurred. This appeal is controlled by Keyspan Gas E. Corp. v Munich Reins. Am., Inc. (31 NY3d 51, 61 [2018]), where the Court of Appeals found that the so-called "unavailability rule," which would require insurers to bear the risk for periods when applicable insurance coverage was not available in the marketplace, was "inconsistent with the contract language that provides the foundation for the pro rata approach—namely, the 'during the policy period' limitation—and that to allocate risk to the insurer for years outside the policy period would be to ignore the very premise underlying pro rata allocation."
Thus, with respect to insurance policy language like that here, which limited "indemnification to losses and occurrences during the policy period" the insured, and not the insurer, "[bore] the risk for those years during which such coverage was unavailable".
“Other insurance" clauses "apply when two or more policies provide coverage during the same period, and they serve to prevent multiple recoveries from such policies". New York law is clear that "other insurance" clauses do not apply to successive insurance policies; thus, despite the fact that the subject provision contains no temporal or policy period limitation, when harmonized with the definition of bodily injury, the "other insurance" provision within the Travelers policies pertains to concurrent policies that named defendants (or their subsidiaries) as additional insureds.
09/20/23 WFB Realty, LLC v. R & W Brokerage, Inc.
Appellate Division, Second Department
No Recovery for Attorney Fees in Errors and Omissions Claim Against Insurance Broker
Another E&O claim against an insurance brokerage firm. WFB sued R&W Brokerage claiming that R&W failed to procure insurance coverage for the plaintiff. Among the claims in the complaint was a request for an award of attorney's fees.
New York follows the general rule that attorney's fees are incidents of litigation, and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute, or court rule. Here, the there was no agreement, statute, or court rule which would entitle the plaintiff to an award of attorney's fees should it prevail against the defendant (see
The plaintiff's contentions that attorney's fees may be recoverable pursuant to a statutory exception or as consequential damages where a policyholder commences a breach of contract action against an insurance company were not advanced before the Supreme Court in opposition to the defendant's motion. These contentions, raised for the first time on appeal, are not properly before this Court. Sort of a late-filed, Bi-Economy argument, which the court would not consider.
It appears that the court has not yet reached the question as to whether or not the broker is liable for not procuring whatever coverage is at issue.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property
09/27/23 Fritz v. Kurmel Brokerage, Ltd.
Appellate Division, Second Department
Residence Premises Requirement Upheld, Again
Plaintiff Fritz was the owner of a single-family home that he insured with defendant Mountain Valley. Fritz, however, did not reside at the premises, but rather his brother did. The premises were damaged in a fire that occurred in August of 2019.
Upon learning that plaintiff did not reside at the premises on the date of the loss, Mountain Valley disclaimed coverage therein citing the requirement that the dwelling be considered a residence premises (of the named insured) for coverage to trigger. The brothers Fritz commenced a lawsuit against both Mountain Valley and Kurmel as their agent who procured the policy.
With regard to Mountain Valley’s denial, the Court reversed the trial court and held that Mountain Valley met its burden when it produced deposition testimony from Fritz that he had not lived at the premises for approximately two years prior to the fire. In reaching this conclusion, the Court rejected plaintiffs’ argument that Mountain Valley waived, or should otherwise be estopped, from asserting the residency limitation. The Court explained that estoppel does not “create insurance coverage where none exists under the policy as written.”
Peiper’s Point – there is a bit of a corollary here that should not be overlooked. Estoppel can create coverage where it otherwise doesn’t exist, but only if the carrier has affirmatively assumed a coverage obligation and the insured is prejudiced as a result. Here, Mountain Valley never accepted coverage, but rather denied coverage on residency from the outset. The mere fact that they issued a policy on the premises which did not provide Coverage A-Dwelling protection does not change this result.
09/20/23 Allstate Ins. Co. v. Parkside Fuel, Inc.
Appellate Division, Second Department
Limitation of Liability Clause in Service Contract Protects Fuel Supplier from Damages Arising out of Burst Pipes
Allstate commenced this action in subrogation after it paid a sizable loss involving water damage which was caused by burst pipes within its insured’s residence. Allstate argued that the pipes were caused to freeze due to the negligence of Parkside Fuel and commenced a claim for breach of contract based upon the language found within the Parkside service contract. Parkside, therein, had agreed to provide fuel oil and to service the home’s boiler/heating system.
Unfortunately for Allstate, the contract also specifically provided that Parkside would not be responsible for, nor would they have any maintenance responsibility over, piping. Because parties can agree, in a contract, to absolve someone from their own negligence, it followed that Allstate was precluded by the plain terms of the contract.
Potpourri
09/26/23 Zayed v. NYC Dept. of Design and Construction
Appellate Division, First Department
Movant Carries Burden on Motion to Dismiss Contractual Indemnity Claims
Iron Bridge moved for summary judgment dismissing claims of contractual and common law indemnification as commenced by defendant Schivone. The incident involving the plaintiff occurred when, as a subcontractor working for Iron Bridge, he was struck by an unsecured entrance gate. Testimony suggested that Iron Bridge employees had keys to unlock the gate, and apparently did so on multiple mornings before this incident. However, there was no testimony on who, if anyone, unlocked the gate prior to the incident.
Nevertheless, in denying Iron Bridge’s motion, the Court noted that it was Iron Bridge’s burden, as movant, to demonstrate that the incident did not arise from its work. It was not enough, as Iron Bridge had done, to merely point out lack of evidence in opposition to the motion.
In a similar vein, the Court also affirmed denial of the motion to dismiss Schivone’s common law indemnity claim. Iron Bridge both failed to demonstrate that it was not negligent, and, likewise, failed to establish some level of negligence that was attributable to Schivone.
WILEWICZ’S WIDE WORLD of COVERAGE
Agnes A. Wilewicz
[email protected]
09/21/23 KVK-Tech, Inc. v. Navigators Specialty Ins. Co.
United States Court of Appeals, Eleventh Circuit
Eleventh Circuit Holds that Insured Failed to Notify its Carrier of Opioid Lawsuits in a Timely Manner, Thus Obviating Coverage
The language of the insurance policies at issue required that the insured KVK-Tech (an opioid manufacturer) provide its excess carrier Navigators with notice “when a covered claim was ‘first made’ against it during the policy period or ‘as soon as practicable’” thereafter.
In this case, it was undisputed that the insured had notice of the first-made opioid lawsuit against it on or before August 31, 2017 (while the Navigators 2017-2018 policy was in effect). Thereafter, the insured had 30 days from the expiration of the Navigators’ policy (i.e., September 20, 2018) to provide notice of those claims to its carrier. However, while the insured notified its other excess carriers around June 25, 2019, KVK-Tech failed to notify Navigators of any opioid lawsuits against it until January 27, 2020. This, despite having notice nearly three years before and notifying its other excess carriers the year prior. As such, since notice to Navigators was untimely, there was no coverage due to the insurance policy contract breach.
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
09/15/23 Markuson v. State Farm Mutual Auto Insurance Company
District Court of Appeal of Florida, Second Division
Insurer Had No Duty to Enter into Consent Judgment Agreement Exceeding the Policy
The underlying case arose out of a 2006 automobile accident involving Erik Saterbo and Mr. Markuson. At the time of the accident, Erik was operating a vehicle owned by his father, Stephen. Due to his injuries, Mr. Markuson sued the Saterbos on September 10, 2008. The Saterbos had an insurance policy with State Farm which provided policy limits of $300,000.00. On January 15, 2009, State Farm authorized the Crawford Law Group, P.A.—the firm retained by State Farm to defend the Saterbos—to make a settlement offer to Mr. Markuson to resolve his case for the policy limits. The offer was not accepted.
Instead, in 2011 and 2012, Mr. Markuson issued two settlement offers to State Farm's insureds that would have required State Farm to (1) tender the $300,000.00 policy limits to Mr. Markuson; (2) authorize State Farm's insureds to enter into a consent judgment in the amount of $1.9 million that would not be recorded or enforced against the Saterbos; and (3) authorize the Saterbos to assign their rights in any claims against their insurance agent. In return, Mr. Markuson would execute a release of all his claims against the Saterbos and a satisfaction of the aforementioned consent judgment. The proposal made no indication that State Farm would be released from any bad faith liability. State Farm declined to accept these proposals, and the case continued to trial. Following a jury trial, Mr. Markuson recovered a total of $3,084,074.00.
The settlement offers by Mr. Markuson formed the basis of a bad faith complaint against State Farm. The alleged bad faith occurred when State Farm failed to settle the personal injury action by declining three of Mr. Markuson's proposals for settlement. State Farm moved for partial summary judgment, asserting that it did not act in bad faith because the proposals for settlement included consent judgments above the policy limits and pursuant to Kropilak, it owed no duty to its insured to enter into a consent judgment in excess of the limits of its policy. To the extent the bad faith claims rested on other basis, it did not seek summary judgment.
The trial court granted partial summary judgment for State Farm, finding that pursuant to Kropilak, State Farm had no duty to enter into a consent judgment that was in excess of the policy limits as a matter of law. The trial court found that each of the three proposals exposed State Farm to extracontractual claims for payment and that nothing suggested State Farm would be released by entering into the proposed consent judgments. It further found that State Farm never withdrew its offer of the policy limits. Thus, the trial court determined that "State Farm did not act in bad faith when it did not agree to or negotiate with respect to any of the three proposals."
The appellate court discussed the Eleventh Circuit's decision in Kropilak, which was the basis of the trial court’s holding. In Kropilak, Eleventh Circuit held that "an insurer owes no duty under Florida law to enter into a so-called Cunningham agreement and likewise owes no duty to its insured to enter into a consent judgment in excess of the limits of its policy. In Cunningham, the parties entered into an agreement to try the bad-faith action before trying the underlying negligence claim. The parties further stipulated that if no bad faith was found, the Cunninghams' claims would be settled for the policy limits, and the insured would not be exposed to an excess judgment. Ordinarily, to commence a bad faith action against a liability insurer, a party must first obtain a judgment against the insured in excess of the policy limits. However, the parties' stipulation voluntarily eliminated this procedural prerequisite. Thus, the stipulation was the functional equivalent of an excess judgment.
Here, the thrust of the bad faith case turned on State Farm's refusal to enter into a Cunningham-type agreement—that is, State Farm, in the plaintiffs' view, had a duty to authorize its insureds to consent to a judgment more than five times the amount of the policy limit (thereby expediting the availability of a bad faith claim) and to do so without releasing State Farm from liability. But as the Eleventh Circuit observed, Florida law is clear that an insurer has no duty to enter into a Cunningham agreement.
Thus, the court concluded as a matter of law that the trial court correctly determined that State Farm had no duty to enter into a Cunningham-type agreement. Thus, where there was no duty to accept the proposals, declining the proposals could not serve as the basis of the bad faith claim. However, the court noted that the trial court erred by entering a final judgment in favor of State Farm where the plaintiffs raised other bad faith theories.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
Nothing to report this time; see you in two weeks.
KYLE’S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]
09/11/23 Jiang Acupuncture, P.C., a/s/o Soto v. State Farm Ins. Co.
Civil Court of the City of New York, Queens County
Court Rejects State Farm’s Summary Judgment Motion, Denying No Fault Benefits, Due to Failure to Present Admissible Evidence for Investigating Plaintiff Medical Provider’s Ineligibility to Receive Benefits
The Plaintiff, Jiang Acupuncture P.C., brought this action against State Farm to recover $2,114.99 in unpaid No-Fault benefits for medical services provided to Plaintiff's assignor Soto from January 29, 2019, to May 8, 2019, due to an automobile accident on September 11, 2018. State Farm moved for summary judgment dismissing the complaint on the ground that Plaintiff failed to provide additional documentary verification within one-hundred twenty (120) days. In addition, Plaintiff cross-moved for summary judgment against State Farm.
Generally, insurers must pay or deny No-Fault benefit claims within thirty days after the receipt of proof of claim. However, the court explained that New York law prohibits unlicensed individuals from organizing a professional service corporation for profit and, further, a healthcare provider is not eligible for reimbursement under the Insurance Law if the provider fails to meet the applicable New York State or local licensing requirement necessary to perform such service in New York. 11 NYCRR § 65-3.16[a][12]; Nationwide Affinity Ins. Co. of Am. v Acuhealth Acupuncture, P.C., 155 AD3d at 886; Liberty Mut. Ins. Co. v Raia Med. Health, P.C., 140 AD3d at 1031; One Beacon Ins. Group, LLC v Midland Med. Care, P.C., 54 AD3d at 740. In the No Fault context, corporate practices evincing a willful, material noncompliance with licensing and incorporation statutes may establish a medical provider's ineligibility to receive reimbursement. However, the elements of common law fraud do not need to be shown if noncompliance with the above licensing requirement is established through admissible evidence. Failure to establish timely payment or denial of the claim precludes the insurer from offering evidence of its defense to non-payment, however, the defense that a health care provider is ineligible to receive No Fault insurance benefit payments is not subject to preclusion.
Here, State Farm acknowledged receiving the bills and mailed a "First Verification Request" for additional verification in a series of letters to the plaintiff. The Plaintiff had one-hundred twenty (120) days to provide State Farm with the requested verification under Plaintiff's control or possession or a written explanation supporting Plaintiff's failure to comply. Further, State Farm made follow up requests, labelled “Second Verification Request”, for the requested documents. Plaintiff did not dispute that the documents were not provided to State Farm. According to State Farm, these documents were necessary to verify the medical necessity of the billed services and whether the operation of the Plaintiff’s medical practice complied with New York State Licensing requirements. The Plaintiff argued that State Farm failed to establish that the requests were necessary and, further, argued the EUO transcripts were inadmissible hearsay because they were not signed by the Plaintiff.
The court determined that, contrary to the Plaintiff’s contention, requested documents such as tax returns and bank statements were probative of whether the medical service provided complied with licensing laws. However, while allegations of fraud would be sufficient to sustain a motion to compel discovery of evidence of noncompliance, State Farm sought summary judgment, which requires admissible evidence. In this case, the court held that State Farm failed to support its good cause with admissible evidence for investigating Plaintiff’s alleged noncompliance.
State Farm presented an affidavit dated December 22, 2020, in which an investigator in State Farm's Special Investigative Unit detailed the investigation of Plaintiff, as part of an alleged scheme of non-compliance with licensing laws, leading to the Verification Request at issue. As a result, an examination under oath was requested and conducted. The affidavit of the investigator quoted the medical provider owner’s testimony to argue it did not resolve State Farm’s questions as to whether the provider’s services were reimbursable. However, the transcript produced was not signed by the owner, which did not comply with the requirement of CPLR 3116 that the transcript must be submitted to the witness for examination and signature.
Therefore, the court held it was unclear based on the Motion if the transcript was ever presented for signature and, since State Farm failed to present a signed transcript support its Motion, the investigators account of the owner’s EUO testimony was hearsay. The court determined that because State Farm simply relied on the truth of the EUO testimony to establish good cause for requesting verification from the plaintiff, State Farm failed present the necessary admissible evidence to support its prima facie entitlement to a judgment as a matter of law. Accordingly, State Farm’s motion was denied.
With respect to the plaintiff’s cross-motion, the court explained that the plaintiff had the burden to show it submitted the claim forms indicating the amount of loss sustained and that the payment of No-Fault benefits was overdue. State Farm’s denial of claim forms acknowledging receipt of Plaintiff’s claims constituted prima facie evidence that State Farm received the claims, and that the denial was overdue. However, the court determined that State Farm had identified the existence of evidence in Plaintiff's control which raised the issue of Plaintiff' ineligibility to receive No Fault benefit payments and, because the requested verification outstanding, factual issues existed as to Plaintiff' eligibility to receive benefits. Since State Farm’s defense of Plaintiff's ineligibility to receive benefits was not precluded by its untimely denial of Plaintiff's claims, and since Plaintiff had not provided the requested verification, the Court also denied Plaintiff's Cross-Motion
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
09/20/23 Adirondack Ins. Exchange v. Russo, et al
Eastern District of New York
Court Rules that Insured Cannot Obtain Benefit of Coverage from Base Policy Form Without Being Subject to the Exclusions Contained Therein
At the outset, I’ll note that this was my case, and, in a well-reasoned decision, the court agreed with us; it is always a better day when that happens. I do not like writing about my cases, but this one is part of a larger trend and is worth a read (its relatively short—for federal court standards, that is).
To summarize what would otherwise be an overly complicated fact pattern for what this ultimately was, Adirondack issued a homeowners insurance policy to its spouse-insureds, Laura, and Angelo Russo. After an unfortunate tree fall accident resulting in the death of her brother, the Russos were sued by the decedent’s estate and Adirondack agreed to provide coverage for that lawsuit. Thereafter, Laura filed her own suit, alleging that she sustained emotional injuries due to being in the zone of danger. That suit was filed against the Russos’ neighbor, Interlaken, which in turn filed a third-party action against Angelo Russo. Interlaken alleged that Angelo was responsible for the tree and, ipso facto, damages for any injuries sustained by Laura. Adirondack disclaimed coverage for the claim against Angelo because the only alleged injuries involved were those of Adirondack’s own insured, Laura—and there is an exclusion for that.
The court agreed with Adirondack that its exclusion applied (as did the defendants):
“Defendants do not attack the substance of the Adirondack Policy's exclusions or the Disclaimer. Indeed, the exclusions literally preclude coverage for Laura's damages because she is an ‘insured’ under the policy; and separately because she regularly resides at the ‘insured location.’”
However, the Russos principally argued in opposition that “there is an issue of fact regarding whether the relevant exclusions are enforceable because the Russo Defendants never received any copies of the Adirondack Policy.” On this point, however, the court also agreed with Adirondack.
The defendants conceded that “neither delivery nor actual possession by the insured is essential to the completion of contract of insurance,” and the court found that the “law is clear” on this point.
Still, the defendants contended that “even assuming the Russo Defendants did receive ‘some version of the subject insurance policy,’ the renewal policy they purportedly received is not enforceable because it did not include the Homeowners Special Form as an attachment.” This did not move the needle either, because
“[w]hether the attachment was provided with the renewal policy is inconsequential because receipt is not required to enforce an insurance contract. This is particularly true where, as here, the Homeowners Special Form was incorporated by reference in the renewal policy.”
In fact, not only was it incorporated by reference, but “the Russo Defendants previously relied on the Homeowners Special Form of the Adirondack Policy and cannot now deny its enforceability.” Specifically:
“The Russo Defendants made a property damage claim to Adirondack for damage caused by the fallen tree and received coverage under the Homeowners Special Form. (Citation omitted). The Russo Defendants also received coverage under the Homeowners Special Form for litigation arising from the tree fall incident. Specifically, Adirondack provided the Russo Defendants with coverage in the Wrongful Death Action. (Citation omitted). Separately, Adirondack is paying for Angelo's defense in the Third-Party Action until such time as this Court makes a determination on the Disclaimer. (Citation omitted). Accordingly, the record evidence shows that Defendants have received the benefits of coverage under the Homeowners Special Form of the Adirondack Policy several times, and Defendants cannot now avoid the exclusions that limit their coverage.”
The EDNY granted Adirondack its requested declaratory relief, because the “exclusions to coverage at issue simply preclude coverage for the Underlying Action and Third-Party Action.”
Maxwell’s Minute Entry: Anecdotally, I have seen an uptick in insureds claiming they were not notified of certain policy provisions during policy renewals. Although this case involved an exclusion on the base coverage form—a form that also contains the insuring agreement that the insured must rely upon to be entitled to coverage in the first instance—your case may involve a separate exclusionary endorsement or other stand-alone form. Have any questions? Send me an email and I’m happy to discuss the nuances involved with these types of arguments.
STORM’S SIU
Scott D. Storm
[email protected]
08/14/23 Kaikov v. State Farm Fire and Casualty Co.
Supreme Court Nassau County
Action Against the Insurer and Agent Dismissed Due to Insureds’ Failure to Cooperate With 1st-Party Property Investigation and Failure to State a Cause of Action Against the Agent.
As also mentioned in my post on LinkedIn, I am pleased to report scoring a win for two clients (insurer and agent) in a litigated first-party property case pertaining to a water loss claim which was being investigated by the Special Investigation Unit. After adjourning their EUOs several times, the insureds failed to show and produced only a small percentage of the documents requested. The court dismissed the case against the insurer due to the insureds' failure to cooperate. Plaintiff’s belated offer to cooperate in litigation was too late to cure the breach.
These summary judgment motions can be lost when legal counsel cites the wrong case law. See my article published in the NY Insurance Association's "Your NY Connection Magazine" titled "Headed in the Wrong Direction". The burden of proof in lack of cooperation cases for 1st-party property losses is different from and less onerous than 3rd-party liability claims. It's critical to know the difference. Citing 3rd-party liability cases in a summary judgment motion on a first-party property claim is not usually advantageous.
The court also held there was no viable cause of action against the agent. The plaintiff failed to adequately set forth a cause of action of the defendants alleged breach of the duty of good faith and fair dealing. The court dismissed the cause of action for negligence and malpractice against the agent as the plaintiff failed to plead the necessary elements, including an allegation that he made a specific request for insurance that the agent failed to ultimately procure. There was also no nexus between State Farm’s coverage denial and the causes of action asserted against the agent. The claim under GBL § 349 failed as the conduct alleged in the complaint did not affect the public interest but rather was a private contractual dispute over coverage under the policy. The claim for punitive damages failed to meet the heightened pleading requirements necessary in N.Y. and the court confirmed attorneys’ fees are not recoverable in this action.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
09/14/23 Ace Am. Ins. Co. v. Guaranteed Rate Inc.
Supreme Court of Delaware
False Claims Act Investigation and Settlement Did Not Arise Out of Mortgage Lender’s Professional Services
Guaranteed Rate Inc. (“GRI”), a mortgage lender, purchased a Management Liability Insurance policy and a professional liability policy from ACE American Insurance Company (“ACE”). Only the Management Liability Policy was at issue on appeal. GRI sought coverage under the policies for an investigation and eventual settlement of claims brought by the federal government under the False Claims Act (“FCA”). GRI is an approved lender in the government’s Direct Endorsement (“DE”) mortgage insurance program. GRI can endorse single-family residential mortgage loans for insurance and guaranty by the Federal Housing Administration (“FHA”) and the United States Department of Veterans Affairs (“VA”). Under the DE program, lenders like GRI certify to the government that each loan and the lender’s loan program meets FHA and VA program rules. If the mortgage loan is endorsed by an approved lender and the borrower defaults, then the lender can submit a claim to the government to cover certain losses from the default. A former GRI employee brought a qui tam action against GRI, alleging that GRI violated the FCA by falsely certifying to the government that the loans it endorsed were eligible for government issuance and that it complied with all lending requirements. The government issued a civil investigative demand (“CID”) to GRI.
GRI notified ACE that it received the CID. Under the Management Liability Policy, ACE agreed to insure loss (including settlements and defense costs) GRI became obligated to pay by reason of a claim for any wrongful acts. However, under the Management Liability Policy, ACE was not liable for a loss from any claim in connection with the rendering or failure to render professional services. GRI and the government settled, and GRI admitted that it underwrote and originated government-insured loans that were not eligible under the FHA and VA programs and that it did not comply with all requirements.
Then, ACE denied coverage for the settlement payment under the Management Liability Policy based on the professional services exclusion. GRI sued ACE for coverage for the settlement amount and defense costs for the government investigation and the qui tam action. The parties filed cross motions for partial judgment on the pleadings. The Superior Court held that the CID triggered ACE’s duty to advance defense costs because it fell within the definition of a “claim,” and the FCA investigation and settlement did not arise out of GRI’s professional services. Since the FCA investigation and settlement arose out of false certifications made to the government, the professional services exclusion did not bar coverage.
On appeal, ACE disputed the lower court’s rulings on the professional services exclusion. The parties agreed that GRI was not providing professional services while engaging in wrongful activities that violated the FCA. The parties disagreed whether the FCA claims arose out of GRI’s loan originating and underwriting services, triggering the professional services exclusion under the Management Liability Policy. The Delaware Supreme Court found they did not and distinguished between the underlying conduct used to demonstrate the falsity of the claims and the FCA violations. GRI provided professional services to borrowers through mortgage banking, mortgage underwriting, and loan servicing. The FCA charges, however, did not relate to the performance of professional services it provided to others. Instead, GRI settled charges that it defrauded the government under the FCA by falsely certifying that loans met FHA and VA insurance requirements. GRI’s alleged misconduct arose out of the false certifications—not the professional services GRI provided to borrowers. The Court was not persuaded by ACE’s arguments that the FCA claims arose out of GRI’s professional services because there was no causal connection between the failure to perform professional services and the damages alleged by the government. Thus, the Court held the FCA charges and eventual settlement did not fall within the professional services exclusion in the Management Liability Policy.
GESTWICK’S GREATEST
Evan D. Gestwick
[email protected]
09/14/23 State Farm Mut. Auto. Ins. Co. v. Abetree Chiro., P.C. et al.
New York State Supreme Court, County of New York
Court Holds that Where No-Fault Claimant Fails to Attend EUO, Carrier Not Required to Pay Medical Providers, and Not Required to Deny No-Fault Claim Within 30 Days
After its insured was involved in an auto collision, State Farm began an investigation. At some point during its investigation, State Farm realized that its insured may have made misrepresentations on his application for the policy with respect to his residence and/or the primary garage location of the vehicle it undertook to insure.
In light of this, State Farm noticed its intent to take the EUO of its insured to learn more about the claim. When the claimant failed to appear for that EUO, State Farm noticed a second EUO, and when the claimant again failed to appear, State Farm denied coverage, taking the position that it was not required to pay for any of the medical services rendered to its insured by the medical provider defendants in this lawsuit that followed. In response, the medical provider defendants argued principally that State Farm failed to establish that its EUO requests were timely made, or that it timely denied the Claimant’s claim of no-fault benefits.
11 NYCRR 65-3.5 is one of the governing New York regulations when it comes to no-fault benefits, and certainly it is the important one here. That regulation provides that a no-fault carrier has the right to seek “additional verification,” if it believes such is necessary, in order to establish proof of a claim. “Additional verification,” as used in this context, includes the right to conduct an Examination Under Oath. The regulation provides that any EUO shall be scheduled to be held within 30 calendar days from the date of its receipt the insured’s completed claim verification forms. It also requires that the carrier deny the claim within 30 days of receipt of this verification, which, in the EUO context, means 30 days from the date of completion of the EUO.
To deny a no-fault claim based on the insured’s failure to attend an EUO, the carrier must prove: (1) that it requested the EUOs within the required timeframes provided by the regulation; and (2) that the insured did not appear. Here, the Court held that State Farm met that burden, and granted its summary judgment motion declaring that the claimant was not owed such benefits under its policy. The Court also ruled that, given the insured’s breach of the policy conditions, State Farm was not required to issue the denial of coverage letter within the statutorily provided timeframe of 30 days.
Editor’s Note: While the regulation itself does not specify whether the 30-day denial requirement is waived where the insured breaches the policy conditions, other cases have held that, to uphold a no-fault carrier’s denial of no-fault benefits to its insured on the ground of the insured’s non-attendance at an EUO, the carrier must prove three things: (1) that the EUO notices were timely sent, in accordance with the regulation; (2) that the insured failed to appear at the scheduled EUO; and (3) that it issued a timely and proper denial letter, within 30 days of the insured’s failure to attend the most recently-noticed EUO. See Nationwide Affinity Ins. Co. of Am. v. George, 183 A.D.3d 755 (2d Dep’t 2020), citing DVS Chiro., P.C. v. Interboro Ins. Co., 36 Misc.3d 138(A) (2d Dep’t 2012).
ON the ROAD with O’SHEA
Ryan P. O’Shea
[email protected]
09/28/23 United States Automobile Association v. Mickens
Appellate Division, First Department
Where Does the Claimant Reside? Only a Framed Issue Hearing Can Resolve the Question of Fact.
On or about October 16, 2021, while riding home on a "Citi Bike," Mickens was struck head on by a can in Manhattan. Following the accident, he submitted a No Fault application to USAA and USAA denied his claims for potential uninsured motorist bodily injury or underinsured motorist bodily injury because he did not reside with his mother, who was the policyholder, at the time of loss.
Mickens then made a demand for arbitration which USAA petitioned to stay.
The First Department found that the evidence presented by the parties raised an issue of fact as to whether respondent "reside[d] primarily" with his mother.
While USAA submitted hospital billing records and no-fault benefits application listing a New York address as respondent's residence, the police accident report it submitted reflected the mother's Pennsylvania address as respondent's home address. Respondent produced, among other things, his driver's license, voter registration card, and recent tax documents showing the Pennsylvania address as his residence. Mickens claimed that he leased his New York City apartment eight months before the accident in anticipation of his employer reopening its New York office after the COVID-19 pandemic and moved in two months later, but that he continued to work remotely from his family's home in Pennsylvania and was in New York approximately 40% of the time.
On to a framed issue hearing for a factfinder to make the decision.
Editor’s Note: We are seeing SO MANY residency questions coming up in coverage lawsuits.
09/27/23 Matter of Travelers Personal Ins. Co. v. Dratch
Appellate Division, Second Department
A Little too Late, Delayed Notice of Sum Claim Vitiates Coverage
Travelers filed a petition pursuant to CPLR Article 75 to permanently stay the arbitration of a supplementary uninsured motorist (“SUM”) benefits claim for an alleged hit-and-run accident involving its insured, Dratch, on February 15, 2018. Travelers based its position on Dratch’s failure to give timely notice of the claim as required by the Travelers policy. The trial court granted the stay without a hearing. Dratch appealed.
The Second Department affirmed the stay noting the party seeking a stay of arbitration has to show the existence of sufficient evidentiary facts to establish the stay. After which the burden shifts to the opposing party to rebut the prima facie showing, only if a triable issue of fact is raised then a framed-issue hearing must occur.
The court found the Travelers policy required Dratch to comply with the condition of coverage that he notify Travelers of his SUM claim “as soon as practicable.” The court noted “as soon as practicable” means notice must be given within a reasonable time in view of all the circumstances; and without a valid excuse, the failure to satisfy the condition vitiates coverage.
Travelers submitted an employee affidavit and business records that show it did not receive notice of the claim until four months after the accident. A look at the underlying records show Travelers included a letter from Dratch’s counsel dated June 20, 2018. Meanwhile, in opposition, Dratch stated he completed and filed a MV-104 form with the DMV, but no MV-104 was entered as an exhibit. Additionally, Dratch’s opposition contained a worker’s compensation C-3 form. Based on this evidence, the Second Department found Dratch failed to meet his burden.
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]
Nothing new to report this issue.
NORTH of the BORDER
Heather A. Sanderson
Sanderson Law
Calgary, Alberta
[email protected]
09/08/23 Greenwin Inc. et al. v. St. Paul Fire and Marine Ins. Co.
The Agreement of a Primary and First Excess Liability Insurer to Exhaust its Limits in Settlement of Claims Does Not Trigger the Second Excess Liability Policy where that Agreement was Made Without the Consent of the Second Excess Insurer
In September of 2010, Stephen Vassilev lived in apartment 2424 at 200 Wellesley Street, in Toronto’s St. James Town. Vassilev rented his one-bedroom apartment from the building owner, the Toronto Community Housing Corporation, which offered subsidized rent to those on the margins.
At the time, Vassilev was engaged in a convoluted dispute with several banks about the loss of multiple investment properties that he owned in Elliott Lake, Ontario. The balcony of Vassilev’s apartment, together with his living room, kitchen and bedroom were each filled to the ceiling with loose and boxed paper associated with that dispute.
At about 5:00 p.m. on September 24, 2010, when Vassilev was not home, a cigarette dropped onto the balcony of apartment 2424, igniting the paper stored there. The fire built, melting the glass door and windows of Vassilev’s apartment that faced the balcony. The fierce winds blowing that day blew the flames inside, igniting the mountain of paper within.
This building was built before sprinklers in high-rises were mandatory. According to a July 5, 2011, statement from the Fire Marshal’s office that was reported in the Toronto Star, the “tremendous growth and spread of the fire’’ was a result of the staggering amount of “combustible materials’’ stored inside the unit and out. Other reports in the Star say that the hoarded papers acted like a fuel cell. The overhead lights melted in long gooey strings of plastic; aluminum from the casings fell in droplets. Visibility was zero for the Toronto firefighters who arrived on scene in response to the six-alarm blaze. The fire burned for six hours, and hot spots continued to flare into the next day. Several fire fighters were injured, and several residents suffered smoke inhalation injury, but, fortunately, and unbelievably, there were no deaths.
Lessons from that fire have transformed the way in which the City of Toronto and other fire departments in other North American cities fight high-rise fires … but, as those lessons were being disseminated, an insurance dispute raged for about a decade. That dispute resulted in this decision from the Ontario Supreme Court that was released September 8, 2023.
The building owner, the Toronto Housing Corporation (THC), had a contract with Greenwin Inc. to manage the building. A class action on behalf of the residents of the building was filed against THC. THC third partied Greenwin for failing to properly address the fire risk created by Stephen Vassilev’s hoard of paper.
Greenwin held two layers of liability insurance: A primary CGL issued by Zurich and a follow form excess policy issued by Chubb.
The class action was settled – a compensation plan for the residents was put in place.
THC held a single, composite, commercial policy, issued by AIG that offered first party property damage coverage that covered the damage to the building. The same policy also contained CGL coverage that extended to the liability lawsuits that THC faced. There were two excess layers of liability coverage over that AIG primary policy.
The first excess layer was also issued by AIG and consisted of a follow form excess or umbrella policy that was excess to the primary policy. There was a second excess follow-form liability policy issued by Travelers/St. Paul that stated it was excess to both the primary AIG policy and the first excess AIG liability policy.
AIG paid for the damage to the building under its first party property coverage. AIG then commenced a subrogated claim in the name of THC against Greenwin. Greenwin’s liability insurers, Zurich, and Chubb, defended Greenwin against this claim.
Greenwin was also an unnamed insured under the primary AIG CGL issued to THC as Greenwin was THC’s real estate manager.
Various applications to settle priorities of cover under the various policies were filed.
Greenwin (and its excess liability insurer, Chubb) challenged the right of AIG to subrogate, stating that Greenwin is an unnamed insured under the primary AIG liability cover under the commercial package policy and the first party cover in the same policy contained an anti-subrogation clause.
St. Paul monitored this litigation due to its possible exposure as an excess insurer of Greenwin (following the form of the AIG policy) but did not participate in those applications as the AIG liability limits had not been reached.
After several years of wrangling, Chubb reached an agreement with AIG to settle the entire dispute under which AIG paid an amount to THC that exhausted its limits. St. Paul was informed that settlement was being discussed and was also informed of the considerations involved in that settlement. However, St. Paul did not consent to that settlement and did not respond to Chubb’s demand that St. Paul participate in that settlement.
Following that settlement, Chubb brought this application against St. Paul demanding that St. Paul contribute to the settlement that it had reached with AIG. The facts in support of Chubb’s demand are convoluted and dissected in this judgment. The Court in this judgment ultimately found that St. Paul had no obligation to contribute to that settlement.
There are several important findings of fact and law that led to this determination:
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The coverage of a real estate manager under an unendorsed CGL for its liability for damage to the property that it manages is not nullified by the “owned property” exclusion – if it were so, then the coverage offered to real estate managers would be illusory.
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The AIG policy provided that AIG waived its right of subrogation against “any Insured under this Policy.” The AIG policy is a single policy. The anti-subrogation provision is in the AIG property coverage section of the single composite policy. Greenwin is insured under the liability section of the same policy.The Court stated that “it does not seem to make sense for AIG to be allowed to pay itself for property claims out of the insured’s liability insurance limit.” For that reason, it is unlikely that AIG had a right to subrogate against Greenwin, but no specific finding on that point was made, as the Court was not compelled to do so, in order to determine whether St. Paul had an obligation to contribute to the settlement reached between AIG and Chubb.
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According to its policy, St. Paul’s duty to defend arose only when “your scheduled immediate underlying liability insurance policy no longer has a duty to defend solely because its limit of coverage has been used up.” As the underlying insurance had not been used up, St. Paul’s layer of insurance had not been reached prior to the settlement that AIG reached with Chubb.
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Re-stated for emphasis, the AIG limits did not exhaust until the settlement between AIG and Chubb was executed.
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The Court stated “
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St. Paul was informed of the settlement that AIG and Chubb were discussing. St. Paul was asked to participate in that settlement. No deadline was given to respond. Before St. Paul responded, and without its knowledge, AIG and Chubb settled with each other.
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That settlement was affected without St. Paul’s consent. Therefore, Greenwin/Chubb violated the St. Paul policy and in view of that policy violation, St. Paul did not have any liability to contribute to the settlement.
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As to whether Greenwin (in effect Chubb) should be granted relief from forfeiture of its coverage under the Insurance Act of Ontario, the Court stated “the failure to obtain St. Paul’s approval of the settlement was not inconsequential or trifling. When … [AIG and Chubb] … proceeded to settle the case without St. Paul’s approval, … [Greenwin]… breached a fundamental term of the insurance contract…” and relief from forfeiture is not appropriate. The Court went on to say that if it is wrong in that determination, relief from forfeiture should not be granted as “[t]he breach was grave. The prejudice to St. Paul is great: they lost the opportunity to make a decision as to whether they would deny coverage, accept coverage, reserve rights, or seek a coverage determination from the court. They lost the right to participate in the settlement, to properly assess the settlement and the opportunity to determine whether the limits were properly exhausted. The damage caused by the breach was great and this is not an appropriate case for relief from forfeiture.”
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