Coverage Pointers - Volume XXVI No. 10

Volume XXVI, No. 10 (No. 683)
Friday, October 25, 2024
A Biweekly Electronic Newsletter
 

As a public service, Hurwitz Fine P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York and Connecticut appellate courts and Canadian appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.

In some jurisdictions, newsletters such as this may be considered Attorney Advertising.

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.

You will find back issues of Coverage Pointers on the firm website listed above.

 

 Dear Coverage Pointers Subscribers:

Do you have a situation? We love situations. An early Happy Hallowe’en.  Apostrophe intentional, story below.

Before we get into the substance of our letter (and the newsletter is attached for those who have recently joined our subscription list) we send our congratulations to

 

 

Congratulations to our Victoria Heist and Noah Neale, distinguished alumni of the Buffalo Law School. Kohane/Peiper Insurance Law course and proud UB Law graduates, on passing the New York State Bar Examination!  Victoria is part of coverage team, Noah, part of our medical mal defense team.  We are so proud of them!

And warmest wishes to coverage team member and esteemed copy editor Evan Gestwick, on his engagement. 

Special kudos to our friend and columnist, Heather Sanderson, who, at the DRI Annual Meeting in Seattle last week, received the Fred H. Sievert award which DRI has presented annually since 1988 in recognition of a current or former president of a national or state defense bar organization who has made a significant contribution towards achieving the goals and objectives of the organized defense bar.  Heather was president of the Canadian Defence Lawyers and a great advocate for the defense bar in North America.

 

Lunch and Learn Program

Writing an Effective Coverage Letter under New York Law

Friday, December 13, 2024, at 12:00 Noon Eastern Time

Register here for the NY Lunch and Learn “Effective Coverage Letter” Program

 

 

Attention claims professionals and lawyers who are writing New York coverage letters.  Answer each question “yes” or “no”:

• Ready to send out a reservation of rights letter?

• About to let your insured – only – know of a coverage defense?

• Thinking of not mailing out that denial letter to the claimant because in some jurisdictions it would be bad faith if you did so?

• In receipt of a claim letter, but thinking of awaiting the lawsuit before you take a coverage position?

• You’re an excess carrier and you don’t think the claim will reach your layer, so you decide not to send out a coverage letter?

• Reserving your rights on late notice?

• Your insured refuses to answer your phone calls or emails and you’re frustrated enough to deny coverage based on lack of cooperation?

If you answered YES to any of these seven questions, you may need good coverage counsel in the days, weeks, and months to come.  While we can help you with that, we would rather teach you the right way to craft and send an appropriate and effective coverage letter.

How about on Tuesday, December 13, 2024, at 12:00 Noon via Zoom?  Click below to register.

Register here for the NY Lunch and Learn “Effective Coverage Letter” Program

Or drop me an email at [email protected].

Thanks to the Big I:

Big I, the Independent Insurance Agents and Brokers of America, Inc., updated its Virtual University Page today. We were pleased and delighted to find Coverage Pointers at the top of the list of a small number of excellent insurance coverage newsletters:

https://tinyurl.com/5n8t9w4b

Virtual University | Newsletters Every Agent Should Subscribe To
 

Hurwitz Fine’s Coverage Pointers Newsletter

This coverage-packed newsletter provides current insurance coverage court decisions from both trial courts and appellate courts. While they mainly cover New York, Connecticut, and Canadian decisions, they are not afraid to occasionally ride into the fray of other states or federal court decisions.

From bad-faith cases to violations of states’ unfair insurance practices law, this biweekly newsletter is a must subscribe, especially for those agents and adjuster handling claims in the northeast.

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 and New Jersey.

If you know of others who may wish to subscribe to this free publication, or if you wish to drop your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900. If you are on his email list, you may also receive invitations to occasional webinars his firm presents.

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

Hey coverage lawyers.  Hey professionals. Have you and a friend, adversary, or lawyer for whom 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.

 

 

Preparing for this issue, I could not help coming into contact with a number of stories about upcoming “end of the month” parties (complete with ghouls, goblins, and pumpkins).  For example, the headline on page 7 of the Riverside (ca) Daily Press was “YOUNG PEOPLE HAVE HALLOWE’EN SOCIAL,” and on page 2 of the Wilmington, Delaware Evening Journal, there was a story entitled “TRICKS AND GAMES FOR HALLOWE’EN.

Of course, since I don’t have much of a life, I began wondering about the apostrophe between the two e’s. So, I spent the better part of a non-billable hour, digging deeper.  Here’s the story,

You may wonder where Halloween gets its name (or you may not). Halloween is a holiday celebrated each year on October 31 originating with the ancient Celtic festival of Samhain, where people would light bonfires and wear costumes to ward off ghosts. In the eighth century, Pope Gregory III designated November 1 as a time to honor all saints, those that are hallowed. Soon, All Saints Day incorporated some of the traditions of Samhain. The evening before was known as All Hallows' Evening, also known as Hallowe’en, it marks the beginning of Allhallowtide, a three-day period to remember the dead. It's celebrated on October 31, the evening before All Saints' Day.  The apostrophe appropriate to shorten word “evening”

The apostrophe faded away over the years, but traditionalists still realize it belongs there!

 

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:

• 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.

   

• 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.

   

• Products Liability Pointers:  Whether the claim is based on a defective design, flawed manufacturing process, or inadequate instructions/warnings, product liability litigation is constantly evolving.  Products Liability Pointers examines recent New York State and Federal cases as well as high court decisions from other jurisdictions, keeping our readers up to date with the latest developments and trends, and providing useful practice tips and litigation strategies.  This monthly newsletter covers all areas of product liability litigation, including negligence, strict products liability, breach of warranty claims, medical device litigation, toxic and mass torts, regulatory framework, and governmental agencies.  Contact V. Christopher Potenza  at [email protected] to subscribe.

   

• Medical & Nursing Home Liability Pointers.  Medical & Nursing Home Liability Pointers provides the latest news, developments, and analysis of recent court decisions impacting the medical and long-term care communities. Contact Elizabeth Midgley at [email protected] to subscribe.

 

Peiper on Property (and Potpourri):

Just a quick update from the confines of Propery and Potpourri.  No property this week, but we do have a couple of interesting indemnity cases out of the Second Department.  In the Cooper case,  the Court found the first sentence in the indemnity clause to be exceedingly broad.  Unfortunately for the party looking for indemnity, the last sentence of the same clause seemed to reduce the scope of permissible indemnity. The result was a question of fact, and, we trust, a very unhappy client. 

Say little and be clear.  Always good rule to follow when talking about contractual language.

The second case looks at the interplay between the anti-subrogation rule and additional insured status.  Remember, it is the insured status of the party seeking indemnity that drives anti-subrogation.  If the purported indemnitee is insured under the very same policy that will be paying the loss, the indemnity claim is barred.  If, however, the exposure of the purported indemnitee exceeds the amount of coverage, the indemnity clause is preserved for exposure beyond the policy limit. 

This week is also marked by annual return to the UB Insurance Law class for the First Party portion.  We already hit insurable interest, the standard 165 requirements, mortgagee rights and innocent insured.  I really do enjoy my time with the class each year, and this year is no different.  Next week brings us compliance with claim submission conditions and various policy defenses.  Can’t wait.

That’s it for this week.  See you in two more.

Steve
Steven E. Peiper
[email protected]

 

Suspended Sentence for Drunk who Killed Cop – 100 Years Ago:

The Buffalo News
Buffalo, New York
25 Oct 1924

MOTORIST WHO KILLED
COP MUST PAY WIDOW

Harry Deichman, 30 years old, 2 Albany Street, was sentenced to Auburn prison from three to seven years for manslaughter, second degree, by Judge Noonan in County court. Execution of the sentence was suspended and Deichman was put on probation to make restitution of $2000 to the widow of Patrolman William T. Quinn. Quinn was killed by Deichman’s automobile in Ferry street. Deichman admitted to being drunk at the time of the accident and pleaded guilty to the manslaughter charge.

 

Barnas on Bad Faith:

We are rapidly approaching the 2024 DRI Insurance Coverage and Practice Symposium coming up December 4-6, 2024, at the Sheraton New York Times Square in New York City.  It should be a great program with interesting topics including Winning the Institutional Bad Faith Battle, the Intersection Between Coverage and Artificial Intelligence, and Weaponization of Discovery in Coverage Cases.  There is still plenty of time to register, and rooms at the discounted rate in the hotel block are still available.  Register today here, and I hope to see you in New York City in early December!

Brian
Brian D. Barnas

 

No Drinking Across the Border – 100 Years Ago:

Democrat and Chronicle
Rochester, New York
25 Oct 1924

ONTARIO VOTES
TO RETAIN DRY
LAW ON BOOKS

Temperance Act Approved by Large Majority of Voters in Provincial Poll

WOMEN VICTORIOUS

Returns in Rural Districts Prove Deciding Factor in Plebiscite

CITIES IN WET COLUMN

First Referendum on Liquor Question since 1919; Act Passed 1916

Toronto, Oct. 24. – (By the Associated Press). – Revised figures in the Ontario liquor plebiscite today gave a majority of 30,167 for the Temperance Act. The figures in the “dry” column continue to mount as returns are received from the rural sections.

The Revised Figures

The revised figures from 5,863 to the 7,332 subdivisions were: For the Temperance Act 177,3224; for Government control, 147,157. Virtually all of the subdivisions yet to be heard from are in rural districts and it is generally conceded that the “dry” majority will continue to mount to higher figures as the returns are completed.

The women’s votes, especially in the rural districts, constituted the principal deciding factor in the balloting in favor of the Temperance Act. Their votes reversed the lead of the “wets” in virtually all of the larger towns and cities.

Moderation leaders who led the fight to have the Temperance Act repealed and substituted for it a system of Liquor distribution under Government license and control, indicated that they would next undertake to achieve some measure of local option. Only under local option, they said the citizens of towns and cities could escape being ruled by the rural communities.

 

Lee’s Connecticut Chronicles:

Dear Nutmeggers:

COVID is still not fun. I got it, again. Luckily, instead of weeks out of action, this time it was only a couple of days, although the cough still lingers (as anyone of you who’ve had a Zoom or telephone conference with me can attest). Please, get your shots, mask up if you’re not feeling well, get Paxlovid if you’re sick, as COVID is still serious business.

Until next edition, keep keeping safe.

Lee
Lee S. Siegel
[email protected]

 

Hooch Hunting – 100 Years Ago:

The Buffalo News
Buffalo, New York
25 Oct 1924

Good Liquor Is Scarce,
According to Analysis

WASHINGTON, Oct. 24. – More than 99 per cent, of the liquor being seized by prohibition officers throughout the country is spurious, and a large part of it is actually poisonous, Prohibition Commissioner Haynes declared today on the basis of analysis made by chemists of the Internal Revenue bureau.

Seven million gallons of illicit liquor were seized during the year he said, and 90,000 samples were analyzed, representing fairly the kind of liquor now on the market and including seizures from every state.

Ruffner’s Road Review:

Dear Readers,        

Happy Halloween! I finally made it out to my first Bills game this year with my wife and a few friends – got great weather for an October game, perfect for tailgating, and got to see a convincing win over the Titans.

I have two no-fault cases this week. Both share a common theme, emphasizing that the failure of a claimant to comply with a condition precedent to coverage, i.e., failing to attend an examination under oath or produce requested documentation, entitles an insurer to deny all claims, regardless of whether the denial is timely issued. This is because a denial premised on breach of a condition precedent voids the policy, and the insurer cannot be precluded from asserting a defense premised on no coverage.

Kyle
Kyle A. Ruffner
[email protected]

 

Fidelity? – 100 Years Ago:

The Buffalo News
Buffalo, New York
25 Oct 1924

Should a Woman Leave Her Husband?

“But, some women argue, if a women is not economically independent, how can she leaver her husband, who, at least, continues to support his family? Well, many a woman of the working class has left a husband who reeled home drunk every night and supported herself and her brood by taking in washing or going out by the day, until the children were old enough to work. It seems odd if a woman of education cannot find some means of self-support when her home becomes intolerable, and her children are subjected to the worst possible example and influence.

“That excuse was acceptable in days gone by before women had ever heard the term ‘economic independence,’ but hardly today when all avenues are open to them. Many women, of course, have the parasite temperament and will cling to a drunkard because he is at least able to support them.”

 

Ryan’s Federal Reporter:

Hello Loyal Coverage Pointers Subscribers:

My son has his first travel baseball team practice tonight and I am excited to see the first of many regular repetitions at the field and at the plate. The sky is the limit as to how he will grow and develop, so long as he is willing to put in the work. Much of the benefit gained, however, is ensuring that it remains fun for everyone involved, and I intend to remind him to enjoy every moment he has with his friends on the playing surface, whatever it might be.

This edition, my column includes a Summary Order out of the Second Circuit Court of Appeals discussing the merits of an argument that a declaration of non-coverage by default has preclusive effect upon a judgment-creditor pursuing a direct action under Insurance Law §3420. The concepts in this decision (and the practical lesson that the carrier will now litigate the coverage issue twice) is precisely why we usually name the claimant as an interested party at the front-end. See Maroney, v. N.Y. Cent. Mut. Fire Ins. Co., 5 N.Y.3d 467, 471 n.1 (2005) (“Because the insurer joined the insured in seeking a declaration of its rights, the [claimant’s] failure to obtain a judgment in the underlying personal injury action prior to suing the tortfeasor’s insurer as required by Insurance Law § 3420 does not preclude consideration of the coverage issues in this case.”). If someone is going to contest the merits eventually, it might as well be sooner rather than later. Who knows, maybe they default as well…

Until next time,

Ryan
Ryan P. Maxwell
[email protected]

 

Women Take to the Ballot Box – 100 Years Ago:

Daily News
New York, New York
25 Oct 1924

500,000 OF CITY’S
WOMEN TO VOTE,
STATES VOORHIS

Of the nearly 1,500,000 votes to be cast in New York City this year about 500,000, or one-third, will be those of women.

That was the announcement yesterday of the board of elections of which John Voorhis is chairman. The board made public final figures compiled on the total of registrants.

The board said that the enrolment of voters was a record one, topping 1922’s figure by 50,000. In that year only 394, 136 women were enrolled. This year the number of women voters is 542,842.

 

Storm’s SIU:

Hi Team:

Due to statutory and case law, success on the coverage defense of late notice is onerous with respect to third-party liability claims.  However, the law is sensationally different with respect to first-party property claims, where New York courts have held as a matter of law on numerous occasions that inexcusable delays ranging from 10 to 53 days in providing notice discharged an insurer's obligation to provide coverage.  In this edition we will consider a case where the court granted summary judgment to the insurer based upon a six-month delay.

Insurers often consider bifurcation of liability and damages with respect to the defense of personal injury cases.  But it also saves time and $ in first-party property cases (and fraud cases where damages are not intertwined with the fraud defense).  We examine a case where the court discusses when bifurcation may be appropriate.

The cases we consider in this edition include:

• Because New York Courts Have Repeatedly Held in First-Party Property Cases Notice Delays of Less Than Two Months to be Unreasonable as a Matter of Law, and Because the Plaintiff has Failed to Show a Viable Excuse to Justify Its Six-Month Delay, the Court Concluded the Plaintiff’s Notice Was Untimely.  A Choice-of-Law Clause Was Enforced and the Substantive Law of New York Determined to Govern.

• Bifurcation of Liability and Damages Appropriate Where it Will Further Convenience, Avoid Prejudice, or Promote Efficiency, and Where There is No Overlap of the Issues.

• Court Finds That Damage Resulting From the Starter's Mechanical Breakdown and Confined to the Starter Itself is Excluded From the Policy, but the Fire-Related Damage to the Vehicle is Not Excluded, Even if it Remains Undisputed That Mechanical Failure Sparked the Fire.

• PIP Medical Provider’s Motion to Quash Subpoena for its Bank Records Denied as a Legitimate Basis Exists to seek Verification of Claims and the Provider’s Financial Records Have a Clear Capacity to Shed Light on Whether its Bills Were Proper, Whether There is a Legitimate Basis for it Not to Comply With the Verification Demands, or Whether it has Not Complied Because it Appreciates That its Bills Were Improper.

Dodgers v. Yankees Friday night.  I’m betting on the Dodgers!  Sorry Yanks fans. 

Scott
Scott D. Storm
[email protected]

 

Poison Liquor in Syracuse – 100 Years Ago:

Buffalo Courier
Buffalo, New York
25 Oct 1924

CRUSADE AGAINST
“POISON LIQUOR”
JOINTS CONTINUES

Syracuse, N.Y., Oct. 24. – Continuance of the police crusade against Syracuse saloons alleged to be selling “poison” liquor, was marked today by a raid on the establishment of Fred Foster in West Fayette Street, where the raiding officers say they found a small quantity of liquor.

The place was one of several named recently by Dr. Levi Owens, Rochester dentist, who was found unconscious in the Onondaga hotel. His condition was due to liquor which he confessed he drank in this city.

 

Fleming’s Finest:

Hi Coverage Pointers Subscribers:

This week’s case comes from the Supreme Court of Hawaii and considered whether there was a duty to defend fossil fuel companies in suits for climate change-related harms. The federal district court certified two questions to the Court:  (1) whether an accident includes recklessness; and (2) whether greenhouse gases are pollutants for the purposes of the policies’ pollution exclusion. It’s an interesting read given the public debate about climate change.

As we near election day, early voting has started in some places. I am looking forward to early voting this weekend. It is hard to believe that by next edition, November 5th will have come and gone.

See you in a fortnight,

Kate
Katherine A. Fleming
[email protected]

 

The Years for a Phony $20 – 100 Years Ago:

Daily News
New York, New York
25 Oct 1924

$10 COUNTERFEIT
PAYS – 10 YEARS

Charged with three others with passing a counterfeit $10 bill at a roller coaster ticket window at Coney Island last July, Frank D’Alba, 285 Hamilton Ave., Brooklyn, yesterday got ten years at Atlanta, Ga., penitentiary in Brooklyn Federal Court. The others were freed, and one, Vincent Morcado, was put on probation.

 

Gestwick’s Garden State Gazette:

Dear Readers:

Big news this week—I’m engaged! And we couldn’t be happier. Now, time for the wedding planning to start … a scary thought indeed, but I guess it’s festive.

The case I have for you this week discusses New Jersey’s no-fault statute. Under the statute, an injured party who failed to secure medical expense benefits coverage for themselves is barred from recovering economic or non-economic benefits from the responsible party. Why? Because the no-fault statute was meant to be the exclusive remedy for payment of out-of-pocket expenses. But who is subject to the statute? Just the owner of the car? Well, that’s complicated. Read on to find out why.

See you in two weeks.

Evan
Evan D. Gestwick
[email protected]

 

Precursor to Labor Law 240(1) Claims? – 100 Years Ago:

Buffalo Courier
Buffalo, New York
25 Oct 1924

LABORERS HURT AS
SCAFFOLD FALLS

One Man May Die as Result of Crash

WORKING ON SCHOOL

Two men were injured, one perhaps fatally, when a scaffold on which they were working yesterday at the new public school building, Franklin and Orange streets, Lackawanna, collapsed.

They are Andrew Ahamed, twenty-one years old, No. 404 Simon Avenue, Lackawanna, and Mohammed Said, Twenty-six years old, No 454 Gates Avenue, Lackawanna. They are in Our Lady of Victory hospital.

Physicians at the hospital said last night that Ahamed is suffering from a fractured skull and internal injuries. Said is suffering from a fractured right leg.

Lackawanna police were told that the men were working on the outside wall at the second story of the building when the accident happened. The men fell a distance of about thirty feet. They were both employed as laborers.

 

O’Shea Rides the Circuits:

Hey Readers,

This weekend I’m off to the Capital District for a wedding. Anyone willing to watch our dogs, please submit inquiries below (I jest). Hopefully, the venue serves the Rochester delicacy that is the garbage plate, instead of chicken wings, as the former is superior to the latter. In other news, the Ottawa Senators look improved and hopefully can avoid another lost November.

This week I have a case dealing with Other Insurance Clauses and the material non-contributory language that resulted not only in an additional $500,000 award, but also additional prejudgment interest.

Until Next Time …

Ryan
Ryan P. O’Shea
[email protected]

 

Neigh Sayers – 100 Years Ago:

Buffalo Courier
Buffalo, New York
25 Oct 1924

FINES FOUR PERSONS BECAUSE
HORSES LACKED BEDDING

Judge Woltz in City Court yesterday imposed fines of $100 each on four persons arraigned by agents of the humane society for failing to provide proper bedding for their horses. Each pleaded guilty to a charge of cruelty to animals. Those fined were Charles Fusicaro, No. 271 Front Avenue; Albert Bonfoglia, No. 138 Front Avenue; Nicholas Miuri, NO. 120 Maryland Avenue, and Joseph Restro, No. 136 Trenton Avenue.

Humane agents testified that they visited a stable at No. 257 Front Avenue and found that no bedding had been provided for the horses.

 

Rob Reaches the Threshold: 

Dear Readers,

When I last addressed you all, I had dreams of a Subway Series World Series between my beloved Yankees and the electric Mets across town. Fast forward - the dream is dead - and instead, we get one of the most anticipated World Series in recent memory, Yankees v. Dodgers (not a bad consolation prize). Before we look forward, as a genuine lover of the game of baseball, I must send kudos to both the Mets and the Guardians for electric moments throughout the playoffs. Specific to the latter, I lived and died on every pitch in the ALCS - and Game 3 was one of the best games I've seen in a long time (I aged horribly in the span of the last four innings).  And now I look forward to my impending heart attack that is the World Series. Aaron Judge, Shohei Ohtani, Juan Soto, Mookie Betts, Gerrit Cole, Freddie Freeman, etc., etc. --- *baseball nerd screams*  

Now that I got that out of my system, we can focus on Serious Injury Threshold. After an impressive run of Second Department cases, we finally shift gears over to the First Department, who provides us with a nice analysis which focuses on the substance of each party's submissions. 

I hope you all enjoy the read.
Go Yankees. 

Rob
Robert J. Caggiano
[email protected]

 

Dry’s Beat Wet’s in the Land of the Blue Martinis – 100 Years Ago:

The Buffalo News
Buffalo, New York
25 Oct 1924

Fort Erie Women Make
Merry Over Wet Defeat

A number of Fort Erie women celebrated the temperance victory at the polls when partly masked to resemble certain characters, such as Queen Alcohol, etc., they called at a number of homes armed with a number of bottles of pure Niagara water which they offered to disappointed males.

 

LaBarbera’s Lower Court Library:

Dear Readers:

Looking forward to some upcoming weekend celebrations. Kicking off the weekend strong to celebrate my boyfriend passing the Bar Exam (woohoo!) and ending with a Bills watch party.

This week I am reporting on a case in New York County Supreme Court where an arbitration award was vacated after the court found that the award was irrational, arbitrary, and capricious. 

Until next time…

Isabelle
Isabelle H. LaBarbera
[email protected]

 

Elopers Returned – 100 Years Ago:      

Wilkes-Barre Times Leader
Wilkes-Barre, Pennsylvania
25 Oct 1924

ELOPERS BROUGHT
BACK TO THE CITY BY
COUNTY OFFICIALS

Man Placed in Prison, While Woman Returns to Her Family

Bruno Katulski and Mrs. Clara Klopak, the eloping Nanticoke couple, who were arrested in Buffalo, N.Y., some time ago on complaint made by the district attorney’s office, were extradited yesterday in the above city and taken back to Wilkes-Barre today by County Detectives Clemens and Dempsey.

Immediately on their arrival, Katulski was taken to the county jail, while Mrs. Klopak was taken back to her husband and two children she deserted. Both have been indicted on the charge of larceny and adultery and will be tried during the next term of criminal court.

Katulski is originally from Buffalo, but he came to Nanticoke about five months ago and resided close to the Klopak home. He became acquainted with the family and was a frequent visitor. As a result of his visits, it is alleged that he urged Mrs. Klopak to desert her husband, taking two of the children with her and leaving two at home. It is also alleged that she took $250 of her husband’s money with her to Buffalo.

 

Lexi’s Legislative Lowdown:

Dear Readers,

I hope everyone is enjoying the last few days of warm weather!

This week’s column is an interesting one. The Senate has delivered a bill to the Assembly that would remove the diligent effort requirements for commercial insurance policies placed by retail insurance brokers through unaffiliated wholesale excess line brokers. The reasoning behind this seems logical, the retail broker is not going to use a wholesale excess line broker, and share the commission, unless they absolutely have to. Therefore, intuitively they are making diligent efforts to place risks with licensed insurers.

This bill was introduced in 2021-2022 as well as S8128 and did not get past the Assembly. Stay tuned to see what happens this session!

Lexi
Lexi R. Horton
[email protected]

 

Reds Make Coverage Claims – 100 Years Ago:

Times Union
Brooklyn, New York
25 Oct 1924

SOVIET SENDING EXPERTS
ON INSURANCE CLAIMS

MOSCOW, Oct. 25. – A commission of lawyers and insurance experts has been sent to the United Stats by the Soviet Credit Bureau to press claims of over three thousand Russian policyholders against American insurance companies. Total claims reach 10,000,000 gold rubles, most of which are being sought from Equitable Life.

 

North of the Border:

I spent the back half of last week at the DRI Annual Meeting in Seattle, Washington, where my good friend, Anne Talcott, took over the helm as DRI President for 2024-2025 and Sara Turner was elected as the Second Vice-President.  Great to see.

I was also pleased to receive the Fred H. Sievert award which DRI has presented annually since 1988 in recognition of a current or former president of a national or state defence bar organization who has made a significant contribution towards achieving the goals and objectives of the organized defence bar.

I was the President of Canadian Defence Lawyers in 2023-2024 and, apparently, I did enough things right to persuade someone to nominate me for this award. I still do not know who to thank. I am humbled that out of fifty or so candidates the award committee saw fit to give me the nod.

Back to work this week with the renewed vigour that comes with spending time with my accomplished friends in the defence bar.

Ironically, this week’s article deals with, yet another case of residential structural damage caused by subsidence.

Best,

Heather
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada

 

Here are this week’s headlines, all stories found in the attached newsletter:

 

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

• Under a Liability Policy, “Property Damage” Includes Loss of Use, ALE, Rent Abatement and Attorneys’ Fees

• Court Properly Precluded Discovery of “Common Interest” Documents Secure from Non-Party by Subpoena

 

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]

• “Performance of Work” Trigger in Indemnity Clause

• Anti-Subrogation Rule Bars Third-Party Indemnity ONLY to the Extent of Available Coverage for Both Indemnitee and Indemnitor

 

BARNAS on BAD FAITH
Brian D. Barnas

• Amended Version of Fla. Stat. § 624.1551 Applied and Barred Bad Faith Cause of Action where Insured Had Not Obtained Final Adjudication Policy was Breached since Cause of Action for Bad Faith Accrued After Statutory Amendment

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]

• Negligent Assault is Not a Thing

 

RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]

• Default Judgment Granted Against Non-Answering Defendants, as Claimant Failed to Attend EUO

• Summary Judgment Granted to Insurer, as Claimants Failed to Comply with Conditions Precedent to Coverage

 

RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]

• Judgment Creditor is Not Bound by Insured’s Default in Coverage Action, and Holds Right to Direct Action Under Insurance Law §3420

 

STORM’S SIU
Scott D. Storm
[email protected]

• Because New York Courts Have Repeatedly Held in First-Party Property Cases Notice Delays of Less Than Two Months to be Unreasonable as a Matter of Law, and Because the Plaintiff has Failed to Show a Viable Excuse to Justify Its Six-Month Delay, the Court Concluded the Plaintiff’s Notice Was Untimely.  A Choice-of-Law Clause Was Enforced and the Substantive Law of New York Determined to Govern

• Bifurcation of Liability and Damages Appropriate Where it Will Further Convenience, Avoid Prejudice, or Promote Efficiency, and Where There is No Overlap of the Issues

• Court Finds That Damage Resulting From the Starter's Mechanical Breakdown and Confined to the Starter Itself is Excluded From the Policy, but the Fire-Related Damage to the Vehicle is Not Excluded, Even if it Remains Undisputed That Mechanical Failure Sparked the Fire

• PIP Medical Provider’s Motion to Quash Subpoena for its Bank Records Denied as a Legitimate Basis Exists to seek Verification of Claims and the Provider’s Financial Records Have a Clear Capacity to Shed Light on Whether its Bills Were Proper, Whether There is a Legitimate Basis for it Not to Comply With the Verification Demands, or Whether it has Not Complied Because it Appreciates That its Bills Were Improper

 

FLEMING’S FINEST
Katherine A. Fleming
[email protected]

• Accident Includes Recklessness and Greenhouse Gases are Pollutants for Pollution Exclusion in Suit Against Fossil Fuel Companies for Climate Change-Related Harms

 

GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]

• Car Crash Victims Are Not Entitled to Economic or Non-Economic Damages if They Fail to Maintain Their Own Medical Expense Benefits Coverage, Whether They Owned that Car or Were a “Beneficial Owner” of that Car

 

O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]

• Noncontributory Language in Other Insurance Clause Results in Additional $500,000 Award With Additional Prejudgment Interest

 

ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]

• First Department Modified the Decision Granting Defendants’ Summary Judgment Motion Dismissing the Complaint on the Ground That Plaintiff Did Not Sustain a Serious Injury Pursuant to §5102(d) Where Plaintiff Raised Triable Issues of Fact Only to a Claimed Cervical Spine Injury Under Specific Categories of §5102(d)

 

LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]

• Petition to Vacate Granted Based on Arbitrary and Capricious Finding Regarding Policy Exhaustion

 

LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]

• A Potential Act to Amend Insurance Law to Permit a Waiver of the Diligent Effort Requirement in Limited Circumstances for Certain Insurance Coverage to be Placed by Licensed Excess Line Brokers with Unauthorized Insurers

 

NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]

• Anti-Concurrent Cause Language Serves to Exclude Damage Caused by Subsidence and Settlement Due to Drainage of an Underground Aquifer

 

Happy Hallowe’en.

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 and New Jersey.

In addition, Dan D. Kohane is a Foreign Legal Consultant, Permit No. 0119144, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]

 

COPY EDITOR
Evan D. Gestwick
[email protected]

 

INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]

Steven E. Peiper, Co-Chair
[email protected]

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Scott D. Storm

Brian D. Barnas

Ryan P. Maxwell

Kyle A. Ruffner

Katherine A. Fleming

Evan D. Gestwick

Ryan P. O’Shea

Isabelle H. LaBarbera

Lexi R. Horton

 

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]

Kyle A. Ruffner
[email protected]

 

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]

 

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri
Barnas on Bad Faith

Lee’s Connecticut Chronicles

Ruffner’s Road Review

Ryan’s Federal Reporter

Storm’s SIU

Fleming’s Finest

Gestwick’s Garden State Gazette

O’Shea Rides the Circuits

Rob Reaches the Threshold

LaBarbera’s Lower Court Library

Lexi’s Legislative Lowdown

North of the Border

 

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

10/17/24       Atlantic Mut. Ins. Co. v. Greater New York Mut. Ins. Co.
Appellate Division, First Department
Under a Liability Policy, “Property Damage” Includes Loss of Use, ALE, Rent Abatement and Attorneys’ Fees

The court correctly granted summary judgment in favor of the Co-Op for defense and indemnification. The underlying action involved water damage to an apartment in the Co-Op's building. GNY had the duty to cover the amounts awarded because they were sums that the Co-Op became "legally obligated to pay as damages because of . . . 'property damage'" within the meaning of the policies, which define "property damage" to include not only physical injury to tangible property but also resulting loss of use of that property.

This was sufficient to require GNY to cover alternate living expenses, rent abatement and attorneys' fees.

Because attorneys' fees are covered, the court also properly found that GNY must defend the Co-Op in the hearing on attorneys' fees in the underlying action.

 

10/15/24       Allied World Nat. Assur. Co. v. AIG Specialty
Appellate Division, First Department
Court Properly Precluded Discovery of “Common Interest” Documents Secure from Non Party by Subpoena

Allied World and Endurance American commenced this action for a declaratory judgment that AIG was obligated to defend and indemnify a joint venture in the underlying action. Defendant Ironshore Specialty claims Supreme Court erred by granting Allied World's motion for a protective order prohibiting the use of certain documents produced by nonparty Ironshore in response to Allied World's subpoena.

The Supreme Court providently exercised its discretion in granting the motion for a protective order.  That Ironshore decided to let Allied World bear the costs of the declaratory judgment action, or that they never expressly agreed to the litigation strategy, does not change the fact that they had a "common interest" with the other joint venture carriers in ensuring that Allied World's Total Pollution Exclusion, to which Endurance and Ironshore Indemnity's policies followed form, would be applied and enforced.  Ironshore Indemnity's own internal emails reveal that a favorable ruling for Allied World would be a favorable ruling for Ironshore Indemnity.

Contrary to Ironshore Specialty's argument, the motion court, after two in camera reviews of the documents at issue, correctly determined that the documents were attorney-client and attorney work-product privileged documents, that the common interest privilege applied, and that the withholding of these documents would not impact the outcome of this case.

 

PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]

10/15/24       Cooper v. Bldg. 7^th Street LLC
Appellate Division, Second Department
“Performance of Work” Trigger in Indemnity Clause

The dispute in this appeal centers on an indemnity clause in the contract between Bldg. 7^th Street and Global Pest Control.  The first sentence of the indemnity provision has a "performance-of-the-work” trigger in that indemnity is owed if the loss arose from, or was connected with, Global’s performance of work.  According to the Court, indemnity is then owned if it is demonstrated that plaintiff’s action occurred in the course of his work with Global. 

However, the last sentence of the agreement referenced potentially reducing indemnity where “any liability imposed over the above that percentage attributable to actual fault, whether by statute, by operation of law, or otherwise.”  Because the Court was not clear what this sentence was meant to convey, it found a question of fact on the scope of Bldg. 7^th Street’s right to indemnity.

There was a second issue involving an alleged failure to procure insurance.  Global demonstrated that a contract existed, and that a policy existed which extended additional insured coverage as required by the trade contract.  Global also provided a Declarations Page which showed coverage was affirmed.  Based on that Record, the Court held that Global met its burden. 

 

10/15/24       Urquia v. Deegan 135 Realty, LLC
Appellate Division, First Department
Anti-Subrogation Rule Bars Third-Party Indemnity ONLY to the Extent of Available Coverage for Both Indemnitee and Indemnitor

The principal area of dispute is over the application of Labor Law 241(6), but there is an interesting insurance/indemnity discussion at the end.  If you’re interested in the outcome of the Labor Law portion, please do check out our sister publication Labor Law Pointers where you’ll get a full review and analysis. 

The issue we focus on here, however, is the third-party action between Deegan and Capital Concrete.  Because Capital arranged to have Deegan added as an additional insured under its CGL policy, it followed that Deegan’s contractual indemnification claim was barred by the anti-subrogation rule.  But, importantly, it was only barred to the extent of Capital’s CGL coverage.  The reason being, of course, that after the Capital CGL policy is exhausted, Deegan (or, more than likely its own CGL) will bear the full burden of the risk. 

The Court noted that if Capital had arranged to have Deegan added to a Commercial Umbrella policy, then any indemnity claim under that policy might also have been barred by anti-subrogation.  Here, however, the Record shows that Capital procured no such umbrella coverage even though Deegan/Capital Contract required it.  Accordingly, Capital’s attempt to dismiss the breach of contract claim in its entirety was rejected. 

 

BARNAS on BAD FAITH
Brian D. Barnas

10/22/24       Isaacson v. QBE Specialty Insurance Company
United States District Court, Middle District of Florida
Amended Version of Fla. Stat. § 624.1551 Applied and Barred Bad Faith Cause of Action where Insured Had Not Obtained Final Adjudication Policy was Breached since Cause of Action for Bad Faith Accrued After Statutory Amendment

Plaintiffs’ property was damaged by Hurricane Ian.  They filed a claim with Defendant.  After investigating the claim (the thoroughness of which is disputed), Defendant estimated and issued the Replacement Cost Value for covered Dwelling damages of $165,01.86 (after the deductible).  Plaintiffs felt this amount undervalued the true amount of loss, so they conducted their own investigation.  They ultimately provided Defendant with a damage estimate in the amount of $1,679,639.04 (RCV) for Dwelling and $91,174.18 (RCV) for Other Structures.

Plaintiffs served a Civil Remedy Notice on April 28, 2023.  A demand for appraisal was made.  On September 1, 2023, a Final Appraisal Award was entered that included an RCV of $892,025.63 for Dwelling and $89,284.41 for Other Structures.  Eighteen days later, Defendant tendered the remaining amount owed in insurance benefits. 

Plaintiffs commenced a bad faith action.  Defendant moved to dismiss arguing that the case was premature because there was no adverse adjudication that the policy was breached.

Fla. Stat. § 624.1551, in its amended form, provides that a bad-faith claim “shall not lie” until the insured “has established through an adverse adjudication by a court of law that the property insurer breached the insurance contract, and a final judgment or decree has been rendered against the insurer.” It continues, explaining that “the payment of an appraisal award does not constitute an adverse adjudication under this section.” Defendant, relying on this section, argued this case must be dismissed because there has not been an adverse adjudication against it.  And, as the statute makes clear, the fact Defendant paid out the appraisal award is insufficient.  The court agreed.

Plaintiffs argued in opposition that the statute was amended December 16, 2022, and the policy was issued prior to that date and that the amendment could not be applied retroactively.  The court concluded that the statute was not being applied retroactively.  A bad faith cause of action accrues when the last element constituting the cause of action occurs.  The bad faith claim did not accrue until after the September 1, 2023, appraisal award. 

Accordingly, the court dismissed the complaint with prejudice because the Plaintiffs had not obtained a final adverse judgment against Defendant that it had breached the policy.

 

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
l[email protected]

10/07/24       NLC Ins. Cos.  v. Hardgrove, et. al
Superior Court of Connecticut, New Britain
Negligent Assault is Not a Thing

The trial court granted NLC Insurance’s motion for summary judgment, finding that it had no duty to defend or indemnify its insured for claims of “negligent assault.” NLC’s homeowner insured, Hardgrove, was sued by the Cedenos for allegations that Hardgrove “violently assaulted and punched” them, causing both economic and non-economic damages. The carrier defended under ROR and brought this action, claiming that the allegations in the underlying complaint are not an occurrence and are otherwise excluded by the policy’s expected or intended and physical abuse exclusions.

The court found that claims of a violent assault are not an accident, even if labeled as a “negligent assault.” The court wrote that, “The result is that even when an action is pleaded as an unintentional tort, such as negligence, the court examines the alleged activities in the complaint to determine whether the insured intended to commit both the acts and the injuries that resulted. If so, regardless of the title of the action, the court holds the action to be outside the coverage of the policy. Furthermore, harmful intent may be inferred at law in circumstances where the alleged behavior in the underlying action is so inherently harmful that the resulting damage is unarguably foreseeable.” (citations omitted).

Intoxication, the court concluded, does not convert an assault into an accident. “[E]vidence of voluntary intoxication may never, in any case, serve to negate intent for insurance purpose,” the court stated, quoting a Third Circuit decision that the Connecticut Supreme Court has relied upon. The court also found that the physical abuse exclusion does not require any proof of intent and, otherwise, applies.

 

RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]

10/07/24       Hereford Insurance Company v. A to Z Supplies Services, et al
Supreme Court, New York County
Default Judgment Granted Against Non-Answering Defendants, as Claimant Failed to Attend EUO

The insurer commenced this action seeking a declaratory judgment that it was not obligated to pay no-fault benefits for any medical treatment the defendants received for injuries sustained in a motor vehicle collision. In support of its motion for default, the insurer asserted the defendant breached a condition precedent to coverage by failing to appear for several independent medical examinations and also failed to subscribe their examinations under oath ("EUO") transcripts, another condition precedent to coverage.

In order to establish a default judgment pursuant to CPLR 3215, a plaintiff must submit proof of (1) service of the summons and complaint; (2) the facts constituting the claim; and (3) defendants' default in answering or appearing. Here, the courts denied the motion as to certain defendants, holding that because the plaintiff only submitted affidavits of non-service, it did not establish that it served the summons and complaint. The motion was granted, however, with respect to the defendant to whom the insurer established service of the summons and complaint. Further, the court determined that the insurer provided sufficient proof of the facts constituting the claim through the affidavit of Joronda McBurnie, who attested to the failure of these defendants to subscribe their EUO transcripts as well as the failure to appear for scheduled LME's on two occasions, in violation of 11 NYCRR 65-1.1.

Accordingly, the court held that, with respect to the defendants who failed to comply with conditions precedent to coverage, the insurer had no duty to pay any no-fault benefits.

 

10/22/24       State Farm Mut. Auto. Ins. v. Equinox Physical Therapy, P.C.
Appellate Division, First Department
Summary Judgment Granted to Insurer, as Claimants Failed to Comply with Conditions Precedent to Coverage

In this case, the court determined the plaintiff insurer established its prima facie entitlement to summary judgment on its first cause of action for declaratory relief by submitting evidence that claimants failed to appear at properly scheduled examinations under oath (EUOs), “vitiating the insurance”. A claim specialist submitted affidavits of service for the EUO notices sent to the claimants' residences directing them to appear for two separate EUOs and attorney's affirmation asserting that the claimants failed to appear for their scheduled EUOs, attaching their nonappearance transcript statements.

Therefore, as the insurer provided sufficient proof that it mailed its notices to the claimants. Further, since this was done before the insurer received defendants' no-fault verification forms, it did not have to comply with the 15-day time frame for sending EUO notices required by 11 NYCRR 65-3.5. In opposition, defendants offer nothing more than speculation to support their argument that they need further discovery. Accordingly, the court held the policy was vitiated, State Farm did not have to establish that it timely denied defendants' claims (see PV Holding Corp., 188 AD3d at 430).

This decision confirms extensive precedent under the No-Fault law that the breach of condition precedent to coverage allows insurer to deny all claims, not on a bill by bill basis, regardless of timeliness of denial. In other words, failure to appear for a duly scheduled examination under oath, failure to produce post-EUO documents, and/or failure to sign an EUO transcript are non-precludable defenses to coverage. As the court stated in State Farm Mut. Auto. Ins. Co. v. Anchor Rx Pharmacy, Inc. et al., Supreme Court, New York County, 2024 NY Slip Op 32049(U):

Failure to comply with a condition precedent entitles an insurer to deny all claims retroactively to the date of loss, regardless of whether denials were timely issued (Nationwide Gen. Ins. Co. v South, 223 AD3d 411 [1st Dept 2024]; Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC, 82 AD3d 559, 560 [1st Dept 2011]). A coverage defense based on failure to appear for an examination under oath applies to "any claims" and is not determined on a bill-by-bill basis (PV Holding Corp. v AB Quality Health Supply Corp., 189 AD3d 645, 646 [1st Dept 2020]). The logic in this rule is that denial premised on breach of a condition precedent voids the policy ab initio, meaning the insurer cannot be precluded from asserting a defense premised on no coverage (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]).

 

RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]

10/23/24       Weiss, et al v. Cont’l Indem. Co.
United States Court of Appeals, Second Circuit
Judgment Creditor is Not Bound by Insured’s Default in Coverage Action, and Holds Right to Direct Action Under Insurance Law §3420

Ri Xian Wang suffered a spinal cord injury while working at a construction site owned by some of the Appellants. Wang sued them in the Supreme Court of New York for Kings County in 2016, and they then filed a third-party complaint against Wang’s purported employer, Bulson Management LLC (“Bulson”), for contribution and indemnity. Bulson turned to its insurer, Continental Indemnity Company (“Continental”), for a defense and possible indemnification.

In May 2020, while that state action was ongoing, Continental sued Bulson in the United States District Court for the Southern District of New York (Furman, J.), arguing that Bulson had failed to disclose Wang as an employee on its payroll, in violation of its policy with Continental. See Cont’l Indem. Co. v. Bulson Mgmt., LLC, No. 20-CV-3479 (JMF) (S.D.N.Y.). Continental claimed breach of contract, fraud, and unjust enrichment, and sought a declaratory judgment that it need not cover the third-party claims brought against Bulson in the state action. When Bulson failed to appear, Continental moved for default judgment. Appellants, however, moved to intervene.

In November 2020, the district court denied Appellants’ intervention motion, reasoning that their interest in Bulson’s ability to satisfy a potential judgment in the

ongoing state action was then too contingent to justify their intervention. The district court reasoned that Appellants’ interest “depend[ed] on two contingencies”—both the success of Wang’s claims against Appellants, and Appellants’ third-party claims against Bulson. App’x 154 (citation omitted). The district court granted Continental’s motion for default judgment against Bulson, declaring that Continental did not owe any duty to defend or indemnify Bulson in the state action and that Bulson was liable to Continental for fraud, breach of contract, and unjust enrichment.

A month later, Appellants sued Continental for breach of contract, claiming that Continental violated its policy with Bulson by failing to defend and indemnify Bulson in the state action, and sought a declaratory judgment that Continental must do so. Continental removed the action to the United States District Court for the Eastern District of New York (Kovner, J.), and moved to dismiss Appellants’ complaint, arguing that the claims were precluded by Continental’s default judgment against Bulson in the S.D.N.Y. action.

In 2023, while Appellants’ E.D.N.Y. action remained pending, New York Supreme

Court for Kings County awarded judgment to Wang and his wife against Appellants for $21,000,000 in damages. The Supreme Court also awarded judgment to Appellants, on their third-party claims for common-law and contractual indemnification from Bulson. In the E.D.N.Y. action, the district court subsequently granted Continental’s motion to dismiss Appellants’ complaint. Although Appellants were not parties to the contract between Continental and Bulson, the district court recognized that New York Insurance Law § 3420 permits a party who has obtained a judgment against an insured to bring action against the insurer upon a liability insurance policy to enforce a right of contribution or indemnity. However, because Appellants’ § 3420 action was based on Continental’s obligation to insure Bulson, the district court concluded that Continental’s declaratory judgment to the contrary precluded Appellants’ claims.

Outlining the relevant rules for claim preclusion, the Second Circuit noted that generally, “one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.” However, “there are exceptions, including in circumstances of pre-existing substantive legal relationships, or, in certain limited circumstances, when a nonparty is adequately represented by someone with the same interests who was a party.” (Internal quotation marks omitted).

Looking at New York’s preclusion rules, the Second Circuit found little support for the notion “that Continental’s default judgment against Bulson had claim-preclusive effect as to Appellants’ § 3420 action.” New York generally does not recognize issue preclusion following a prior judgment obtained by default. And relative to claim preclusion, New York courts have found that a default judgment against one party does not have a preclusive effect against a different party. This is because a default judgment is not rendered after “the relevant issue had been fully litigated,” and would cut against the “general concepts of fairness”.

Looking at fundamental due process rights, the Second Circuit discussed the concept of “privity,” which is used in this context to describe “The substantive

legal relationships justifying preclusion” between “preceding and succeeding owners of property” or “assignee and assignor.” However, while the district court correctly determined that a direct action under Insurance Law §3420 creates a privity relationship between the judgment creditor and an insured, the key is to determine at what point in time the relationship was formed. “[T]he legal relationship between Appellants and Bulson did not arise under § 3420 until the Appellants were awarded judgment against Bulson in the state action, which came after Continental’s default judgment against Bulson in the S.D.N.Y. action.” Indeed, Appellants tried unsuccessfully to intervene in that action because their legal interests in coverage were, at that point, entirely contingent.

 

STORM’S SIU
Scott D. Storm
[email protected]

09/30/24       HKB Hospitality LLC, d/b/a Quality Inn Brownsville v. Mt. Hawley Ins. Co.
United States District Court, S.D. New York
Because New York Courts Have Repeatedly Held in First-Party Property Cases Notice Delays of Less Than Two Months to be Unreasonable as a Matter of Law, and Because the Plaintiff has Failed to Show a Viable Excuse to Justify Its Six-Month Delay, the Court Concluded the Plaintiff’s Notice Was Untimely.  A Choice-of-Law Clause Was Enforced and the Substantive Law of New York Determined to Govern

Mt. Hawley issued Commercial Property Policy to HKB covering property in Brownsville, Texas for "special [causes of loss] including equipment breakdown excluding earthquake and flood."  The Policy imposes a condition that in the event of loss or damage, HKB must "[g]ive [Mt. Hawley] prompt notice of the loss or damage [and] [i]nclude a description of the property involved."  A Windstorm or Hail Loss Reporting Limitation Addendum to the Policy ("Addendum") further provides:

Regardless of anything to the contrary in this policy to which this endorsement is attached, the following limitations apply in reference to reporting of claims under this policy:

With respect to loss or damage caused by windstorm or hail, including any named storm, you must give us prompt notice of the loss or damage and include a description of the property involved, and as soon as possible give us a description of how, when and where the loss or damage occurred. In no event may a claim be filed with us later than one year after the date of the loss or damage that is the subject of the claim.

A choice-of-law clause in the Policy states that "[a]ll matters arising hereunder including questions relating to the validity, interpretation, performance and enforcement of this Policy shall be determined in accordance with the law and practice of the State of New York (notwithstanding New York's conflicts of law rules)."

According to HKB, a windstorm damaged the Property's roof and exterior elevations on September 30, 2021.  HKB's owner and corporate representative, Hemant Bhakta, was present at the Property during the storm.  Bhakta testifies that he noticed "some broken bricks, debris[,] [and] lifted shingles," although he did not access the roof.  Bhakta further testifies that because he had limited experience with construction or property insurance, he did not immediately report the loss to Mt. Hawley, but rather "wait[ed] to see what insurance he had, what had occurred, and whether there was any damage."  He contacted a lawyer to handle the matter.

On April 1, 2022, HKB, through its attorney, reported a claim under the Policy for the windstorm damages.  After investigating the claim, Mt. Hawley informed HKB on July 21, 2022, that "no payment can be made at this time" because "the cost of repair is less than the $25,000.00 windstorm deductible" under the Policy.  While Mt. Hawley characterized much of the damage as wear and tear, HKB contends that "no . . . part of the property had previously leaked or experienced water penetration."

HKB commenced this action against Mt. Hawley on January 27, 2023, asserting a breach of contract claim based on Mt. Hawley's alleged failure to conduct a reasonable investigation and refusal to pay the damages due.

Although the Policy contains a choice-of-law provision selecting New York law, HKB argues that the provision "is invalid under general contract principles and the Texas Insurance Code."

This Court sits in New York and therefore applies New York's choice-of-law rules.  Section 5-1401 of New York's General Obligations Law provides that the parties to any contract involving a transaction of at least $250,000 "may agree that the law of this state shall govern their rights and duties in whole or in part, whether or not such contract, agreement or undertaking bears a reasonable relation to this state." N.Y. Gen. Oblig. Law § 5-1401. Section 5-1401 applies to the Policy at issue, which has a per occurrence loss limit of $2,944,779.  Under New York law, "the need for a conflict-of-laws analysis is obviated by the terms of the parties' agreement" if "there is an express choice of New York law in the contract pursuant to General Obligations Law § 5-1401." 

The courts of New York have refused to consider the public policy of foreign states to overturn an otherwise valid contractual choice of law provision.  The Court concludes that the choice-of-law clause must be enforced, and the substantive law of New York will govern.

Under New York law, "compliance with a notice-of-occurrence provision in an insurance policy is a condition precedent to an insurer's liability under the policy."  The failure to provide timely notice "relieves the insurer of its coverage obligation, regardless of prejudice."   "When an insurance policy requires that notice of an occurrence or claim be given promptly, like the one at issue here requiring notice `as soon as possible,' notice must be given within a reasonable time in view of all of the facts and circumstances." 

"A notice obligation is triggered when `the circumstances known to the insured . . . would have suggested to a reasonable person the possibility of a claim.'"  The windstorm occurred on September 30, 2021. HKB's corporate representative Hemant Bhakta was present at the Property that day and observed damage to its roof, including "broken bricks, debris[,] [and] lifted shingles."  Although these evident damages suggested to HKB the possibility of a claim by September 30, 2021, HKB did not notify Mt. Hawley until April 1, 2022—after a six-month delay.  "New York courts have held as a matter of law on numerous occasions that . . . inexcusable delays [of two months or less] in providing notice discharged an insurer's obligation to provide coverage." Am. Home Assur. Co. v. Republic Ins. Co., 984 F.2d 76, 78 (2d Cir. 1993) (collecting cases that hold delays ranging from 10 to 53 days unreasonable as a matter of law); see also Minasian, 676 F. App'x at 31 (collecting cases ranging from 29 to 51 days); Am. Ins. Co. v. Fairchild Indus., Inc., 56 F.3d 435, 440 (2d Cir. 1995) ("Under New York law, delays for one or two months [in notifying the insurer] are routinely held `unreasonable.'").

Having delayed six months in notifying Mt. Hawley about its loss, HKB bears the burden of showing a reasonable excuse for its delay.  In opposition, Plaintiff must "raise a triable issue of fact as to whether it had a reasonable excuse for the 52-day delay." HKB explains that it "was waiting to see what insurance [it] had, what had occurred, and whether there was any damage," and that it wanted to hire an attorney because "the insurance policies are very complex in the wordings," which HKB was "not very good at understanding."  These excuses, however, are inadequate. To the extent that HKB did not know what insurance it had, "a lack of knowledge of an insurance policy does not excuse a delay in notification of an occurrence."  To the extent that HKB had not made a specific assessment of its damages, that does not negate the fact HKB was alerted to "the possibility of a claim" on September 30, 2021, and was required to notify Mt. Hawley within a reasonable time thereafter.  To the extent that HKB had trouble understanding the Policy or determining its coverage, "it is true that a justifiable lack of knowledge of insurance coverage may excuse a delay in reporting an occurrence."  But to prevail on this theory, the insured must prove that it "made reasonably diligent efforts to ascertain whether coverage existed," and HKB has adduced no evidence to that effect.  Thus, HKB lacks a valid excuse for its six-month delay in notice.

HKB's primary contention, rather, is that it is entitled to a longer notice period based on the Policy's Windstorm or Hail Loss Reporting Limitation Addendum, which provides:

Regardless of anything to the contrary in this policy to which this endorsement is attached, the following limitations apply in reference to reporting of claims under this policy:

With respect to loss or damage caused by windstorm or hail, including any named storm, you must give us prompt notice of the loss or damage and include a description of the property involved, and as soon as possible give us a description of how, when and where the loss or damage occurred. In no event may a claim be filed with us later than one year after the date of the loss or damage that is the subject of the claim.

HKB argues that the last provision "expressly allows for hail/wind losses to be reported up to one (1) year from the date of loss."

"As with the construction of contracts generally, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court."  In doing so, the court will avoid, if possible, "an interpretation of a contract that has the effect of rendering at least one clause superfluous or meaningless." HKB's proposed interpretation of the Addendum is unavailing for two reasons. First, the provision that a claim may never be filed more than one year after the date of loss, by its plain meaning, does not suggest that a claim filed within one year is always timely. Second, if that provision were interpreted to mean that the insured only needs to notify the insurer within one year, that would render the prior sentence—mandating that the insured "must give . . . prompt notice" and a description of the loss "as soon as possible"— superfluous.  By contrast, Mt. Hawley's proposed interpretation would give full meaning to each of the two provisions: "that wind and hail claims reported within one year are still subject to the general `prompt notice' requirement, but wind and hail claims reported more than one year after the reported loss are untimely regardless of the circumstances surrounding the delay."  In other words, the Addendum imposes two independent requirements: (1) HKB must give prompt notice to Mt. Hawley—within a reasonable time from when it should have become aware of "the possibility of a claim,"  and (2) HKB must file a claim within one year of the date of loss or damage, regardless of when HKB might discover its claim. When interpreted this way, the two provisions are independently enforceable. This accords with the word "limitations," in plural form, in the first sentence of the Addendum. It is the only reasonable interpretation that follows from the plain language of the Policy and does not render one of its two clauses superfluous.

The New York Appellate Division recently reached the same outcome in a similar case. See Menlo Energy Fla., LLC v. Certain Underwriters at Lloyds London, 213 A.D.3d 494 (1st Dep't 2023). There, the notice provision of an insurance policy read: "It is a condition precedent to liability that in the event of loss or damage insured under this Policy the insured shall give notice of loss or damage to Underwriters hereon as soon thereafter as practicable, and in any event within sixty (60) days of the date of loss after which any claim shall become forfeit."  Following the "principles of contract interpretation [that] preclude a court from adopting a construction of a policy that leaves a provision without force and effect," the court concluded that the policy "required the insured to satisfy two distinct conditions to satisfy its notice obligations: (i) to provide Underwriters with notice of the loss or damage as soon as practicable; and (ii) to provide Underwriters with notice within 60 days of the date of loss."  Thus, the court held that even if the insured provided notice 51 days after it learned of the loss—within the 60-day period—notice was untimely as a matter of law. 

Because New York courts have repeatedly held notice delays of less than two months to be unreasonable as a matter of law, and because HKB has failed to show special circumstances or excuses to justify its six-month delay, the Court concludes that HKB's notice to Mt. Hawley was untimely, relieving Mt. Hawley of its coverage obligations.

 

10/04/24       HDI Global Ins. Co. v. Kuehne + Nagle, Inc.
United States District Court, S.D. New York
Bifurcation of Liability and Damages Appropriate Where it Will Further Convenience, Avoid Prejudice, or Promote Efficiency, and Where There is No Overlap of the Issues

The Court finds that bifurcation is appropriate. District courts have broad discretion to bifurcate trials "of any kind of issue in any kind of case," where such bifurcation "will further convenience, avoid prejudice, or promote efficiency."  A district court may order separate trials on its own motion and may revisit the issue if future developments in the case change the calculus. 

In this case, the Court finds that a bench trial solely on the issue of the package limitation will further convenience and promote efficiency. There is limited to no overlap of the package limitation issue with the remaining issues in the case and allowing the parties to limit the presentation of proof to the package limitation proof therefore will serve the interests of promoting efficiency and furthering convenience without creating any prejudice. Moreover, it may eliminate the need to litigate further issues in the case. "If a single issue could be dispositive of the case or is likely to lead the parties to negotiate a settlement, and resolution of it might make it unnecessary to try other issues in the litigation, separate trial of that issue may be desirable to save the time of the court and reduce the expenses of the parties."

 

10/01/24       O’Connor v. Progressive Advanced Ins. Co.
United States District Court, M.D. Pennsylvania
Court Finds That Damage Resulting From the Starter's Mechanical Breakdown and Confined to the Starter Itself is Excluded From the Policy, but the Fire-Related Damage to the Vehicle is Not Excluded, Even if it Remains Undisputed That Mechanical Failure Sparked the Fire

This is a breach of contract and insurance bad faith dispute.  The policy coverage applies to losses "not caused by collision," including "fire." But the Policy excludes from this coverage any losses "due and confined to wear and tear" and "mechanical, electrical or electronic breakdown or failure." Even where a loss is covered, the Policy only reaches losses sustained after a $1,000 deductible is reached.

After O'Connor's car spontaneously caught fire in his garage, Progressive's claims adjustor concluded that the fire was caused by corrosion on the main ground wire, induced by "normal wear and tear." He estimated $633.31 in damages to the car. O'Connor states in a denial that according to his mechanic, who witnessed a subsequent examination, Progressive's adjustor only "glanced" at the car rather than performing an adequate inspection. Nevertheless, O'Connor agrees in his brief in opposition that "the vehicle fire in question was due to a mechanical failure."

Count 1 of O'Connor's complaint alleges a breach of contract claim, while Count II alleges an insurance bad faith claim. "[T]hree elements are necessary to plead a cause of action for breach of contract: (1) the existence of a contract, including its essential terms, (2) a breach of the contract; and (3) the resultant damages." 

Progressive argues that the damage does not exceed the Policy's $1,000 deductible because O'Connor has not put forward any facts showing more than $1,000 in damage. Next, it argues that because a mechanical breakdown caused the fire, the fire damage was "due and confined to" mechanical failure and excluded by the Policy. Finally, Progressive seeks dismissal of the bad faith insurance claim as there is no duty to provide coverage where no coverage is due, and alternatively because the denial of coverage was reasonable. I deny the motion in full.

The first issue relates to whether the damage to O'Connor's vehicle exceeds Policy's $1,000 deductible. Progressive argues that the only evidence of damage to O'Connor's vehicle is provided in its claims adjustor's report, which opined that the vehicle sustained $633.31 in damages; hence, there is no genuine dispute that there is less than $1,000 in damage to the vehicle. O'Connor states in his brief in opposition that "the Defendant's argument regarding the ensuing damages amount is premature, in that Defendant has yet to be provided with Plaintiff's expert report, which is expected to speak to the cause of the fire and the resultant total loss of the vehicle, in addition to the value of the vehicle lost." Because O'Connor's expert report could create a genuine issue on this material fact, granting summary judgment on this issue would be premature. If it so desires, Progressive will be permitted to move for summary judgment again after expert discovery concludes.

Progressive next argues that it is undisputed that the fire was caused by a mechanical, electric, or electronic breakdown or failure, and therefore, any resulting damage should be excluded under the Policy. O'Connor responds by arguing that the Policy explicitly covers damage caused by "fire," even if a non-covered cause of damage initiates the fire. The issue is therefore whether the Policy's exclusion of "loss . . . to any vehicle that is due and confined to . . . mechanical, electrical or electronic breakdown or failure" excludes fires caused by a mechanical failure. As fact discovery has concluded, and this is an issue of contract interpretation which is unaffected by any testimony from the parties' expert witnesses, it is not premature to rule upon it.

Part IV of the Policy states that Progressive "will pay for sudden, direct and accidental loss . . . that is not caused by collision." "A loss not caused by collision includes . . . fire." The Policy then sets out exclusions which are not covered, notwithstanding this earlier section of Part IV. "Coverage under this Part IV will not apply for loss . . . to any vehicle that is due and confined to . . . mechanical, electrical or electronic breakdown or failure." "[M]echanical breakdown" includes "[a]ny situation where a machine fails to function correctly," including failures caused by corrosion. It is undisputed that the fire was sparked by a mechanical breakdown, so the question is whether damage then caused by the fire is "due and confined to" the mechanical breakdown.

"Many insurers use forms developed by the Insurance Services Office, Inc. (ISO), an organization that provides statistical, actuarial, underwriting, and claims information to the property and casualty insurance industry. The ISO also develops and supplies policy forms. Among these forms are the personal auto insurance policy (PAP)." The Policy's due-and-confined-to clause appears verbatim in the ISO's PAP, and identical language has been incorporated into other types of insurance contracts.

While Pennsylvania courts have not weighed in on the meaning of this due-and-confined-to clause, a small body of case law has developed interpreting this language. Considering general principles of Pennsylvania contract interpretation as well as the cases interpreting such due-and-confined-to exclusions, the best reading of the Policy under Pennsylvania law is that it only excludes from coverage damage, which is both caused by mechanical breakdown, and confined to the machinery itself because of its breakdown.

Under Pennsylvania law, "[t]he fundamental rule in contract interpretation is to ascertain the intent of the contracting parties." "In cases of a written contract, the intent of the parties is the writing itself . . . When the terms of a contract are clear and unambiguous, the intent of the parties is to be ascertained from the document itself." "The document is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense."

The canon against surplusage reasons that interpretations rendering words in a written instrument pointless should be disfavored. Here, by using the conjunction "and," the phrase "due and confined to" sets out a conjunctive test: the loss must both be due to mechanical failure and confined to mechanical failure. The ordinary meaning of "due to" is "caused by." "Confined to" must therefore mean something else if the phrase is to have any meaning. The most natural reading of "confined to" is that the excluded damage must be to the broken machinery itself because of its breakdown. Reading the Policy as an integrated whole, this reading of "confined to" also harmonizes the Policy's explicit coverage of fire-related damage with its comparatively opaque exclusion of damage "due and confined to" mechanical breakdown. Although this "narrower view" represents a "minority" approach to understanding this kind of exclusionary clause, I am persuaded that the decisions reaching this outcome best measure the intent of the parties.

The Court finds that damage resulting from the starter's mechanical breakdown and confined to the starter itself is excluded from the Policy, but the fire-related damage to O'Connor's vehicle is not excluded from the Policy, even if it remains undisputed that the mechanical failure sparked the fire. The Court rejects Progressive's proffered interpretation of the Policy and denies summary judgment on this issue.

 

10/04/24       State Farm Mut. Auto. Ins. Co. v. Linden Ortho., P.C.
United States District Court, S.D. New York
PIP Medical Provider’s Motion to Quash Subpoena for its Bank Records Denied as a Legitimate Basis Exists to seek Verification of Claims and the Provider’s Financial Records Have a Clear Capacity to Shed Light on Whether its Bills Were Proper, Whether There is a Legitimate Basis for it Not to Comply With the Verification Demands, or Whether it has Not Complied Because it Appreciates That its Bills Were Improper

Linden Orthopaedic moves to quash a third-party subpoena served upon TD Bank by State Farm. In this litigation, State Farm seeks, inter alia, a declaratory judgment that Linden's reimbursement claims for medical services rendered to State Farm's insureds are non-compensable under New York law. The subpoena at issue seeks Linden's bank records. State Farm contends that the subpoenaed records will help establish that — or whether — Linden billed for unnecessary healthcare treatments. For the reasons that follow, the Court sustains the subpoena, subject to the scope limitations to which State Farm has agreed in its opposition letter.

Under Federal Rule of Civil Procedure 45, a party may serve a subpoena on a non-party for the production of documents. See Fed. R. Civ. P. 45(a)(1). The Court must quash or modify a subpoena that subjects the recipient to an undue burden or requires the disclosure of privileged information. See Fed. R. Civ. P. 45(d)(3)(A). To survive a motion to quash, "the party issuing the subpoena must demonstrate that the information sought is relevant and material to the allegations and claims at issue in the proceedings." However, "[t]he movant bears the burden of persuasion." 

In general, a party does not have standing to "challenge subpoenas issued to non-parties on the grounds of relevancy or undue burden."  However, courts have recognized exceptions for parties who have a personal privacy right or privilege in the subpoenaed documents.  Financial information of a commercial entity is not the type that courts typically recognize as protectible under the personal privacy exception. 

Here, State Farm seeks production of "[s]ignature cards and all records referencing individuals who may withdraw money on [Linden's] account," and "[s]tatements and checks" for the period covering January 1, 2021, through September 21, 2024. Linden does not claim that these documents are privileged, and Linden lacks standing to challenge the third-party subpoena based on relevance or undue burden.

In any event, even if Linden had standing, the Court would deny the motion to quash. Linden contends that the records that have been subpoenaed are irrelevant to this litigation because, in seeking a declaratory judgment that Linden's claims are not compensable, State Farm is relying on Linden's alleged failure to comply with State Farm's verification demands. That argument is unpersuasive. "[R]elevance, for purposes of discovery, is an extremely broad concept."  State Farm's verification demands cannot be artificially separated from the purpose for those demands: to enable it to determine whether, as it has claimed, Linden's billing practices were improper so as to make its bills non-compensable under state law. Linden's financial records would have a clear capacity to shed light on whether its bills were proper, whether there is a legitimate basis for Linden not to comply with the verification demands, or whether, as State Farm suggests, Linden has not complied because it appreciates that its bills were improper. Linden's financial records are apt to bear on whether State Farm had a legitimate basis to seek verification of Linden's claims. These records are relevant to the claims and defenses in this litigation.

To the extent that Linden remains concerned about confidentiality, the parties are at liberty to submit a proposed protective order, permitting them to designate particular records as meriting heightened protection.

 

FLEMING’S FINEST
Katherine A. Fleming
[email protected]

10/07/24       Aloha Petroleum Ltd. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA
Hawaii Supreme Court
Accident Includes Recklessness and Greenhouse Gases are Pollutants for Pollution Exclusion in Suit Against Fossil Fuel Companies for Climate Change-Related Harms

The City and County of Honolulu and the County of Maui sued several fossil fuel companies for climate change-related harms. The suits alleged that the fossil fuel industry knew that its products would cause catastrophic climate change beginning in the 1960s but concealed their knowledge, promoted climate change denial, and increased their production of fossil fuels. The defendants’ actions allegedly increased carbon emissions, which have caused and will cause significant damage to the counties. The lawsuits asserted five causes of action for trespass (entry of ocean water onto county property), public and private nuisance (unreasonable sale of fossil fuels interfering with property rights), negligent and strict liability failure to warn, and breach of duty to warn the public about the dangers of their products. The counties’ alleged injuries included: increased planning costs, erosion and beach loss, flooding, decreased fresh water, damage to water infrastructure, harm to endemic species, increased risk of extreme heat and storms, and damage to Native Hawaiian cultural resources. The counties requested an unspecified amount of compensatory and punitive damages, equitable relief, disgorgement of profits, attorney fees, and costs.

Aloha sought defense from two insurers (collectively referred to as AIG) under commercial general liability policies. The U.S. District Court for the District of Hawaii certified two questions to the Hawaii Supreme Court: (1) whether an “accident” includes an insured’s reckless conduct; and (2) whether greenhouse gases (GHGs) are “pollutants” as defined in the policies’ pollution exclusions. In addition to the pollution exclusion, AIG argued that Aloha’s conduct was intentional since it understood climate science, making climate-caused damage expected rather than fortuitous. Aloha argued that an accident includes recklessness, and GHGs are not pollutants. Under Aloha’s reading of the policy, the pollution exclusion was meant to cover environmental clean-up costs from hazardous wastes resulting from the insured’s operations—not liability from its finished products. Aloha also argued that the coverage would be worthless if the exclusion barred coverage for product liability claims related to its primary business of selling gasoline. The parties cross-moved for partial summary judgment on the duty to defend.

The Court answered that an accident includes reckless conduct. The counties alleged that Aloha acted recklessly by emitting and misleading the public about the dangers of emitting greenhouse gasses despite knowledge of climate risk. The Court reasoned that its precedent has held that recklessness may be an occurrence, the plain meaning of accident supports the proposition, and interpreting accident to include reckless conduct honors the principle of fortuity.

As for the second question, the Court answered that GHGs are pollutants under the policies’ total pollution exclusion clause, which bars coverage for emitting (or misleading the public about emitting) GHGs. Climate-heating gases are an example of “traditional environmental pollution,” a plain-language reading would include GHGs within the definition of a pollutant, and the Court’s “legal uncertainty” rule did not prompt a duty to defend because the uncertainty about the exclusion did not affect the outcome, and GHGs are pollutants under any reasonable interpretation. Further, Aloha’s reasonable expectation of coverage did not stretch to encompass traditional pollution claims.

 

GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]

10/16/24       Henderson v. Martinez, et al
Superior Court of New Jersey, Appellate Division
Car Crash Victims Are Not Entitled to Economic or Non-Economic Damages if They Fail to Maintain Their Own Medical Expense Benefits Coverage, Whether They Owned that Car or Were a “Beneficial Owner” of that Car

Henderson was driving a Cadilac that he used to own, but that he gave to his “common law wife,” Ms. Olmstead, when he collided with a bus operated by Martinez and owned by New Jersey Transit. Henderson brought this lawsuit to recover for his injuries.

During discovery, it was learned that the Cadilac was uninsured on the day of the accident. Upon learning this, the defendants moved for summary judgment under the New Jersey No-Fault Statute. N.J.S.A. 39:6A-4.5(a) provides as follows:

Any person who, at the time of an automobile accident resulting in injuries to that person, is required but fails to maintain medical expense benefits coverage . . . shall have no cause of action for recovery of economic or noneconomic loss sustained as a result of an accident while operating an uninsured automobile.

In a nutshell, the no-fault statute says that where an injured party fails to maintain medical expense benefits coverage for themselves, on their own vehicle, they are no entitled to recover economic or noneconomic loss incurred while operating the vehicle that lacked such coverage. As this Court wrote, the no-fault statute was intended to be an exclusive remedy for prompt payment of out-of-pocket expenses. It is meant to ensure that an injured, uninsured owner does not draw on accident-victim funds to which they did not contribute.

The plaintiff argued he should not be subject to the statute because he was not the owner of the Cadilac, and it was therefore not his responsibility to maintain the required coverage. The plaintiff explained that, while he used to own the Cadilac, he gave it to his common law wife, as she did not have a car of her own. The plaintiff explained further that, even though the Cadilac was principally garaged at his common law wife’s house (which was not plaintiff’s residence), he used it with her permission on various occasions. Plaintiff also reassumed ownership of the Cadilac sometime in 2018, after the accident.

Elsewhere in the no-fault statute, the concepts of an “owner” and a “beneficial owner” are discussed. A beneficial owner, according to the statute, is someone who maintains at least partial possession and control over the automobile, especially regarding its use.

Finding that the plaintiff was a beneficial owner of the Cadilac, the Court reasoned that the plaintiff had regular access to and control of the Cadilac, and that he had the ability to operate it whenever he liked. As plaintiff was a beneficial owner, the Court found that he was subject to the statute, and therefore barred from recovering economic or non-economic damages.

 

O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]

10/23/24       Gemini Ins. Co. V. Zurich Am. Ins. Co.
United States Court of Appeals, Eleventh Circuit
Noncontributory Language in Other Insurance Clause Results in Additional $500,000 Award With Additional Prejudgment Interest

In this case we look to “other insurance clauses” to determine primacy, as well as the amount of prejudgment interest. Zurich and Gemini insured FSR Trucking (“FSR”) who’s employ struck and killed Jose Vallejo. Zurich’s policy contained a $1 million limit, while Gemini’s contained a $3 million limit. FSR leased the tractor from Ryder and a trailer from Commercial Trailer Leasing.

Vallejo’s claim settled from $3 million with Gemini contributing $2 million and Ryder contributing the other million dollars. Zurich and Gemini agree they owe a share of $2 million but disagree on how much each must contribute. Zurich believes the share is pro rata, with Zurich contributing $500,000 and Gemini contributing $1.5 million.

Gemini sued Zurich over the issue and sought a $1 million award plus interest for claims of contractual subrogation or equitable subrogation/contribution. Zurich tendered its $500,000 to Gemini, but Gemini continued to litigate the outstanding $500,000, plus interest, it believed it was owed. The district court granted Zurich’s motion for summary judgment, fining the respective policies other insurance clauses “mutually repugnant”, thus, creating a pro rata share. But prior to the grant of summary judgment, Zurich already tendered its $500,000 share.

Nonetheless, the court entered judgment in favor of Gemini and that it was entitled to prejudgment interest unless certain equitable factors weighed against the award. Finding equity in favor of Gemini, the court awarded Gemini $500,000 in prejudgment interest. The interest was calculated from the date Gemini unilaterally settled the claim, February 7, 2019, to the date Zurich tendered its pro rata share, March 4, 2022.

Both insurers appealed. Zurich on the issue of prejudgment interest and Gemini to recover the remaining $500,000 of its initial claim. Gemini asserted the pro rata rule did not apply. Meanwhile, Zurich argued that Gemini did not receive a final judgment because it was not the prevailing party; even if Gemini was prevailing the award was an abuse of discretion; and if the award was proper, then interest ceased accruing on November 10, 2020, when Zurich acknowledge its obligation to pay its pro rata share.

Florida, much like New York, looks to each policy’s other insurance clause to determine whether pro rata contribution occurs, or whether a policy is actually excess. The relevant clauses read:

Gemini’s Other Insurance Clause:

This insurance is excess over and shall not contribute with any of the other insurance, whether primary, excess, contingent or on any other basis. This condition will not apply to insurance specifically written as excess over this policy.

When this insurance is excess, we will have no duty under Coverage A or B to defend the insured against any “suit” if any other insurer has a duty to defend the insured against that “suit”. If no other insurer defends, we will have the right to do so, but we will be entitled to the insured's rights against all those other insurers.

          Zurich’s Other Insurance Clause:

a. For any covered “auto” you own, this Coverage Form provides primary insurance. For any covered “auto” you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance. However, while a covered “auto” which is a “trailer” is connected to another vehicle, the Covered Autos Liability Coverage this Coverage Form provides for the “trailer” is:

(1) Excess while it is connected to a motor vehicle you do not own; or

(2) Primary while it is connected to a covered “auto” you own.

* * *

d. When this Coverage Form and any other Coverage Form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of Insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis.

Gemini claimed its other insurance clause was a true excess because it states that it is excess and noncontributory. The Court of Appeals agreed. Florida law identical to New York law holds that “we shall not contribute” or noncontributory language within an other insurance clause places that insurer in an excess position. To the detriment of Zurich, the Eleventh Circuit reversed in favor of Gemini and remanded entry for judgment of the principal amount of $1 million. Essentially, the remaining $500,000 Zurich owed.

Since the appellate court remanded the determination, Gemini was now the prevailing party which mooted Zurich’s first issue on cross-appeal. The court noted Zurich initially only agreed to the $500,000 payment in exchange for a full release of the remaining $500,000. Because Zurich’s offer was conditioned on the release, Gemini was forced to litigate the issue. For this reason, the court determined prejudgment interest continued to run until Zurich tendered the $500,000, unconditionally, on March 4, 2022. Thus, there was no finding for abuse of discretion on the calculation of prejudgment interest.

Regarding Gemini’s additional award in the proscribed amended judgment, the court ruled interest accrued from Gemini’s payment on February 7. 2019, to the date of the amended final judgment.

 

ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]

10/15/24       Burgos v. Diamond Bricks Inc., et al
Appellate Division, First Department
First Department Modified the Decision Granting Defendants’ Summary Judgment Motion Dismissing the Complaint on the Ground That Plaintiff Did Not Sustain a Serious Injury Pursuant to §5102(d) Where Plaintiff Raised Triable Issues of Fact Only to a Claimed Cervical Spine Injury Under Specific Categories of §5102(d)

By way of background, this matter stems from an incident on July 30, 2014, where Plaintiff Carmen Burgos alleged personal injury after she was a passenger of a vehicle involved in a motor vehicle accident vehicle on the FDR Drive in New York City. Amongst others, Plaintiff sued Defendants Codou Thiam and Diamond Bricks, Inc. She alleged injury to her lumbar spine, cervical spine and right knee. She further alleged serious injury under the following categories of Insurance Law § 5102: permanent consequential limitation of use, significant limitation of use, and ‘90/180’.

Relevant to this decision, the aforementioned Defendants moved for summary judgment to dismiss the complaint arguing Plaintiff did not sustain any serious injury pursuant to § 5102(d). In support, Defendants submitted a medical report from an orthopedic physician who performed an IME of the Plaintiff, an expert radiology report, and medical records which proffered that Plaintiff had sustained injuries to her lumbar spine and knees in an unrelated trip-and-fall accident predating the subject motor vehicle collision. At the trial level, the Supreme Court, New York County, granted Defendants’ motion in full.

On review, the First Department agreed that Defendants’ proof demonstrated, prima facie, that Plaintiff did not suffer serious injury under any claimed category of § 5102(d). Specifically, Defendants’ orthopedic expert found normal ranges of motion in Plaintiff’s cervical spine, lumbar spine, and right knee. Defendants’ radiology expert opined that there was no evidence of an acute spinal injury, and rather any injury was preexisting in nature – which was further supported by the medical records indicating the prior trip-and-fall accident.

In opposition, the First Department found that Plaintiff did not raise a triable issue of fact regarding her lumbar spine and right knee injuries. Specifically, Plaintiff’s physicians failed to sufficiently opine that her limitations stemmed from acute injuries from the motor vehicle accident, rather than her preexisting injuries. Her medical expert’s conclusionary opinion proffered in opposition, which said that preexisting injuries were exacerbated by the subject accident, was merely speculative since the provider admitted he did not review medical records which predating the accident. Similarly, Plaintiff failed to raise an issue of fact regarding the ‘90/180’ category of § 5102(d), where she did not rebut the prima facie showing that she was not seriously curtailed from performing her usual activities for 90 out of the initial 180 days following the accident.

However, the First Department disagreed with the lower court regarding Plaintiff’s claim of injury to her cervical spine under the significant and permanent limitation of use categories of § 5102(d). Her medical providers found reduced range of motion in all planes of the cervical spine, both shortly after the accident and two years later. Unlike her other injury claims, there was no evidence that Plaintiff sustained a prior injury to her cervical spine, or that she had any degenerative conditions. In light of this evidence, Plaintiff successfully raised an issue of fact with regard to her cervical spine claim.

Accordingly, the First Department unanimously modified the Order of the Supreme Court, New York County, to deny the motion with respect to Plaintiff’s claims of serious injury involving “significant” and “permanent” limitations of use of her cervical spine.

 

LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]

10/11/24       Galaxy RX, Inc. v. Geico Gen. Ins. Co.
New York State Supreme Court, County of New York
Petition to Vacate Granted Based on Arbitrary and Capricious Finding Regarding Policy Exhaustion

On December 11, 2020, Rancelis Saavedra (“assignor”) was injured in an automobile accident. Galaxy RX, Inc (“petitioner provider”) provided pharmaceuticals to assignor on June 9, 2021. At the time of the accident, assignor was insured under an automobile policy issued by Geico General Ins. Co. (“Geico”).

On July 15, 2021, petitioner provider submitted a claim to Geico in $1,910.00 in health care costs for assignor. In turn, Geico issued a denial, five months later denying payment based on the exhaustion of the policy. Thereafter, petitioner provider commenced an arbitration proceeding. The petitioner provider’s claim was denied by the lower arbitrator based on the policy’s exhaustion. When the matter proceeded to the master arbitrator, the award was affirmed.

Within the award, the arbitrator reasoned that petitioner provider’s interpretation of the facts runs contrary to the no-fault regulatory scheme, requiring the insurer to delay payment on uncontested claims pending resolution of plaintiff’s disputed claims. 

As a result, a petition was filed in New York County Supreme Court pursuant to CPLR § 7511(b) to vacate the award, arguing that the arbitration award was arbitrary and capricious. The petitioner provider alleged that the award does not address the time the policy was exhausted, making it impossible to determine whether the claim should have been paid prior to exhaustion of the policy.

Under CPLR § 7511(b), an arbitration award is to be vacated when a party was prejudiced by (1) corruption, fraud or misconduct in procuring the award; (2) partiality on the part of the arbitrator; (3) the arbitrator exceeding its power or so imperfectly executing it that a final and definite award was not made; and (4) failure to follow the procedure of article 75. In instances the arbitration is compulsory, an award must have evidentiary support and cannot be arbitrary and capricious.

New York No-Fault regulations require that payments for basic economic loss shall be made in the order in which each service was rendered, or expense occurred, provided the claims were made to the insurer prior to the exhaustion of the $50,000.00 limit. See 11 NYCRR 65.315.  If a claim is submitted after the policy is exhausted, the insurer is not liable to pay such late claims. Id. In instances a carrier receives claims by a number of providers at the same time, the payments shall be made in the order of services rendered. Id.

Here, the trial court reviewed the lower arbitrator’s award and noted the lack of factual findings regarding whether the policy was exhausted pursuant to 11 NYCRR 65-3.15. Additionally, there was no determination or discussion regarding precisely when the Geico policy was exhausted, or whether the policy was exhausted at the time the claim was submitted. Instead, the award stated that the policy was exhausted at the time of the arbitration.

Geico, in turn, argued that the findings were sufficient because based on the policy’s exhaustion, Geico has no further obligations to pay in excess of the policy limits.

The New York County Supreme Court dismissed Geico’s argument, stating that by accepting it, insurers would be freely allowed to disregard the priority of payment rule, contrary to New York State regulatory requirements. In short, stating that insurers would be able to pick and choose which claims are paid, facing no consequences for failing to comply with the priority of payment rule so long as the policy is exhausted prior to the arbitration proceeding. 

Therefore, the court found that the master arbitrator’s award was irrational, arbitrary and capricious, and lacked evidentiary support. Accordingly, the court granted the petition to vacate and ordered a framed issue hearing as to whether Geico had properly exhausted its policy in compliance with 11 NYCRR 65-3.15.

 

LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]

10/23/24         New York Senate Bill S5896
A Potential Act to Amend Insurance Law to Permit a Waiver of the Diligent Effort Requirement in Limited Circumstances for Certain Insurance Coverage to be Placed by Licensed Excess Line Brokers with Unauthorized Insurers

This bill which was delivered to the Assembly on May 23, 2024, would exempt certain commercial lines insurance transactions placed by wholesale insurance brokers from the excess line diligent effort requirement. It would eliminate both a process and excessive data reporting. The purpose of the bill reasons that this will allow brokers to stop spending time on data reporting which provides no benefit to the insureds and instead allow brokers to focus on providing services to consumers.

The excess line market exists to insure risks which New York admitted insurers choose not to underwrite because the risks are distressed, unique, volatile, or involve new businesses or coverages without loss history. This provides a secondary market to insure risks that licensed insurers will not undertake.

Currently, the law requires that brokers make a good faith attempt to seek coverage from a licensed insurer before turning to the excess lines market. This is the diligent effort requirement. Diligent efforts are found when three licensed insurers have considered and rejected the risk.

The law would exempt commercial insurance policies placed by retail insurance brokers through unaffiliated wholesale excess line brokers from the diligent effort requirement.

Diligent efforts would still apply to all personal lines policies as well as commercial lines policies that are not placed through an unaffiliated wholesale excess broker.

The Justification for Bill S5896 provides that a substantial portion of excess line risks are placed by small street retail insurance brokers who turn to wholesale excess line brokers when they have exhausted their options. Further, it is inherent that the retail brokers will exhaust all licensed market options before seeking excess line coverage through a wholesale broker. Retail brokers will not choose to split their commission with wholesale excess brokers unless they have tried all other options. Therefore, the diligent efforts requirement is unnecessary and the process and data reporting causes unnecessary delays.

 

NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]

10/18/24       Carl Tremblett also known as Carl Tremblet v. TD Insurance Direct Agency Ltd., Primmum Insurance Company, et al
British Columbia Court of Appeal
Anti-Concurrent Cause Language Serves to Exclude Damage Caused by Subsidence and Settlement Due to Drainage of an Underground Aquifer

The Okanagan (pronounced Oak-a-nog-on) Region of Central British Columbia is sometimes referred to as Canada’s Napa Valley. True the award-winning vineyards that populate the shores of the long and narrow Okanagan Lake leave you spoiled for choice. But this region of British Columbia is more than its wines –in the summer it is a market garden of fruit and vegetables; it’s a water sports mecca; it is replete with wonderful golf, hiking and biking opportunities and in the winter, there are two very respectable ski hills in the region. The mild temperatures throughout the year have attracted many transplants from Alberta wishing to retire in a more forgiving climate.

Between Penticton and Oliver on Highway 97 (the main highway through the Okanagan), lies the small, unincorporated community of Okanagan Falls, known as OK Falls to the locals. Despite being on the shores of Skaha Lake and Shuttleworth Creek (a tributary of the Okanagan River), water is precious resource in the community. The surrounding vineyards and golf courses, as well as the 10-acre Keogan Sports Field, crave it.

Carl Tremblett lives in a single-storey bungalow, just down the road from the Keogan Sports fields (actually, almost across the street). Water from Shuttleworth Creek which replenished underground aquifers, kept the ball diamonds and cricket pitch of the sports fields lush to the detriment of the surrounding scrub land and the Tremblett property which remained dry throughout the growing seasons.

In July 2020, following a brief four-day holiday, Mr. Tremblett returned to his home to find sinkholes in his backyard and cracks to the foundation of his house. He promptly reported the damage to his home insurer, Primmum Insurance Company, part of the TD Group.

Primmum retained a geotechnical engineering firm who prepared what seems to have been a thorough report on the damage to the property. That report concluded that groundwater flow caused subsidence to the rear yard of the property which, in turn, caused the structural damage.

It seems that there was an underground aquifer under Mr. Tremblett’s property. Over time, water was pumped from that aquifer to irrigate the nearby sports fields. That reduced the pressure within the aquifer.  The reduced pressure caused the walls of the aquifer to compress. As the underground layers compacted, the surface above the aquifer gradually sunk.  This caused the sink holes and non-uniform cracking and tilting of the foundation of Mr. Tremblett’s house. Through no fault of his own, Mr. Tremblett found himself with a financially crippling structural issue impacting his home.

Mr. Tremblett argued that he was covered against that damage by the extended water damage endorsement to his policy which read:

Primmum argued that the damage was not caused by water – it was caused directly or indirectly by subsidence, which was an excluded peril:

Mr. Tremblett retained counsel and filed an action for coverage. The matter was heard summarily, and the trial court agreed with Primmum. Mr. Tremblett appealed to the British Columbia Court of Appeal.

The British Columbia Court of Appeal agreed with the trial judge. Primmum correctly determined that the structural damage to the insured property was caused directly or indirectly by subsidence and therefore it was excluded. That Court stated “By its clear language, …coverage … [is excluded] …where the subsidence in question contributes causally to the loss, damage, or expense for which a claim is brought. This is so whether the subsidence contributes causally directly or indirectly, and whether it does so solely, concurrently, or in sequence with other causes as part of a chain of events.”

This result is in line with the Swaine decision from the Manitoba Court of King’s Bench, which reviewed the meaning of ‘settlement’. [See the October 11, 2024, edition of this newsletter, Volume XXVI, No. 9 (No. 682)]. The Tremblett decision, reviewed here, turned on causation and whether the anti-concurrent cause language in the policy applied to exclude a loss where a potentially covered peril – water – was an indirect cause.

As climate change induced drought causes water to become a precious resource in many communities, sympathetic cases like this will become more commonplace. This appeal level decision and the trial level decision in Swaine ought to largely insulate the P&C industry from this type of structural damage.

 

10/10/24       Loblaw Companies Limited, Shoppers Drug Mart Inc. and Sanis Health Inc. v. Royal & Sun Alliance Insurance Company of Canada, AIG Insurance Company of Canada, Aviva Insurance Company of Canada, Liberty Mutual Insurance Company, and Zurich Insurance Company Ltd.
Supreme Court of Canada
The Ontario Court of Appeal Decision in Loblaw Remains Undisturbed as the Supreme Court of Canada has Denied Leave to Appeal in Both Appeals Arising from this Judgment

Multiple issues in the defence of an opioid class action, including allocation across multiple years and layers of primary policies; management of the conflicts created by the coverage issues; access to the insured’s privileged materials in the defence of the insureds by those insurers disputing coverage; as well as coverage for pre-tender defence costs were decided by the Ontario Court of Appeal in a seminal February 27, 2024 decision.  This Court of Appeal decision has been reviewed twice in this newsletter, (see June 7, 2024 and March 1, 2024).

On October 10, 2024, the Supreme Court of Canada denied the two leave to appeal applications from this duty to defend decision and now that decision remains undisturbed.

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