Volume XXVI, No. 12 (No. 685)
Friday, November 22, 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. Our 685th edition of Coverage Pointers is attached. That’s a lot of pointers!
Monday, I teach my final Insurance Law class of the semester at the University of Buffalo Law School. Along with Steve Peiper, who teaches the property end of the class, it’s always bittersweet when the semester comes to an end. This, I think, was my 38th year of teaching Insurance Law.
Happy Thanksgiving. Surely my favorite holiday. Our office celebrated it by having the shareholders prepare a Thanksgiving feast for the attorneys and staff, from appetizers to desserts. It was terrific.
Writing an Effective New York Coverage Letter Zoom Program
December 13th at noon, Eastern
Only 34 openings left
Our December 13, 2024, Zoom program on Writing an Effective New York Coverage Letter is a virtual sellout, we have well over 960 registered and we max out at 1,000 virtual seats. We announced the program in the previous issue of CP, two weeks ago. If you haven’t signed up, we can take a few more reservations, but then will move to a wait list. If there are companies that want to gather folks in a conference room, they will get a preference. Of course, if there are insurers or law firms that have signed up individual registrants and now tell me that they can combine into a conference room, I’d be appreciative. That will allow others to attend. Let me know your pleasure at [email protected].
Hurwitz Fine Ranked by Chambers USA in the 2025 New York Regional Spotlight Guide
Tuesday, November 12th, 2024
Hurwitz Fine P.C. is proud to announce that the firm has been ranked in the second annual Chambers 2025 New York Regional Spotlight Guide for General Commercial Litigation.
According to Chambers, “Hurwitz Fine P.C. is noted for taking the lead on some of the more complex insurance disputes in the local market. Their caseload is complemented by additional strength in general commercial litigation.” In addition, Chambers notes, “the Buffalo-based firm handles an array of disputes. Working with local and regional business clients, the firm advises on sexual misconduct, toxic tort, securities, and labor & employment litigation. The group is active in the healthcare and construction industries.” This is the second time that Hurwitz Fine has made the Chambers' Spotlight guide, having ranked last year in this practice area.
Hurwitz Fine is one of only eight Buffalo law firms featured in the Spotlight, and one of only three featured for litigation and insurance. The Spotlight rankings are awarded at firm-wide level, recognizing firms that are well-known for their expertise in certain selected practice areas.
This ranking recognizes firms that do “remarkable work which results in an impressive regional reputation” and offer a “credible alternative to Big Law.” Chambers' insight into the legal market has seen a trend of large companies seeking specialized support from smaller firms at a state or local level, who can respond more effectively and efficiently to in-house counsel needs. Chambers Regional Spotlight builds bridges between in-house counsel, who want more choice when purchasing legal services, and small to medium size firms.
A Chambers Spotlight ranking is achieved through an independent research process conducted by Chambers USA. The firms ranked in the USA Regional Spotlight Guide were selected based on in-depth market analysis, coupled with an assessment of their experience, expertise, and caliber of talent. Chambers’ conclusions were supported by comparative analysis drawing on their decades of knowledge of the U.S. legal market.
Chambers Spotlight New York highlights 210 law firms across seven regions and 24 distinct practice areas. Divided into 52 different ranking tables, these firms are well-positioned to advise local, regional, and national companies on a range of complex matters. These ranked firms frequently handle complex commercial litigation and arbitration matters, fueled by an uptick in civil disputes. Many of the firms identified have broad transactional expertise taking on sophisticated work in the funds, securities, and bankruptcy spaces, as well as the labor & employment and immigration spaces.
Best Insurance Fraud Story of the Year
Four people have been arrested after allegedly filing fake insurance claims stating that a bear had damaged the interiors of three luxury cars. Video footage submitted to insurers as evidence showed what appeared to be the animal climbing into the front seat of Rolls Royce, then clawing its way toward the back.
The footage drew suspicion from investigators with the California Department of Insurance, who after executing a search warrant, found a bear costume in the suspects’ home. "Upon further scrutiny of the video, the investigation determined the bear was actually a person in a bear costume," the department said in a press release.
The four Los Angeles-area residents have been charged with insurance fraud and conspiracy after having received $141,839 in insurance payments.
To confirm the footage showed a costumed human and not a bear, department officials asked for assistance from a California Department of Fish and Wildlife biologist, who determined that "it was clearly a human in a bear suit".
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Need a Mediator for an Insurance Dispute? Give Me a Call
Coverage mediation is a thing! Subject matter expertise may be useful. What are the benefits of coverage mediation?
Time and Cost Efficiency
Mediation is generally much faster and more cost-effective than traditional litigation:
- The process can typically be completed within weeks, compared to months or years for court cases
- It avoids expensive court fees, attorney costs, and other litigation-related expenses.
Control and Flexibility
- Parties have more control over the outcome in mediation.
- They can actively participate in crafting solutions tailored to their specific needs and circumstances.
- There's flexibility to explore creative resolutions that may not be available through court proceedings.
Confidentiality
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Mediation proceedings are typically confidential, which offers several benefits:
- Parties can discuss sensitive matters openly without fear of public disclosure
- It avoids the publicity and public record associated with lawsuits and trials.
Relationship Preservation
- The less adversarial nature of mediation can help maintain or improve relationships between parties:
- It fosters open communication and collaboration1.
This can be especially valuable in disputes involving ongoing business relationships.
Risk Mitigation
- Mediation helps alleviate some of the risks associated with litigation.
- It avoids precedent that may provide unfortunate results for parties – or for the industry -- in the future.
- It offers a compromise-based approach, reducing the "all-or-nothing" risk of a court decision.
- Even if unsuccessful, the process can provide valuable insights into the strengths and weaknesses of each party's position4.
Empowerment and Communication
- Mediation empowers parties in ways that litigation often doesn't.
- Clients have a more active role in the process and outcome.
- It provides a forum for parties to tell their stories and feel heard4.
While mediation isn't suitable for every situation, these advantages make it an attractive option for resolving many insurance coverage disputes efficiently and effectively.
Newsletters:
We have other firm newsletters to which you can subscribe by simply letting the editor (or me) know, including a new publication, which was created to advise on business and employment law questions:
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Premises Pointers: This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant, and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!). Please drop a note to Jody Briandi at [email protected] to be added to the mailing list.
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Labor Law Pointers: Hurwitz Fine P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected] to subscribe.
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Products Liability Pointers: Whether the claim is based on a defective design, flawed manufacturing process, or inadequate instructions/warnings, product liability litigation is constantly evolving. Products Liability Pointers examines recent New York State and Federal cases as well as high court decisions from other jurisdictions, keeping our readers up to date with the latest developments and trends, and providing useful practice tips and litigation strategies. This monthly newsletter covers all areas of product liability litigation, including negligence, strict products liability, breach of warranty claims, medical device litigation, toxic and mass torts, regulatory framework, and governmental agencies. Contact V. Christopher Potenza at [email protected] to subscribe.
- Medical & Nursing Home Liability Pointers. Medical & Nursing Home Liability Pointers provides the latest news, developments, and analysis of recent court decisions impacting the medical and long-term care communities. Contact Elizabeth Midgley at [email protected] to subscribe.
Avoid Hitching a Ride – 100 Years Ago:
Buffalo Courier
Buffalo, New York
22 Nov 1924
Warn School Girls
Not to Ride With
Strange Autoists
Syracuse, N.Y. Nov. 21. – Principals of all Syracuse schools were asked today by Chief of Police Martin L. Cadin to warn their girl pupils against accepting automobile rides with strangers as the results of several recent complaints of kidnapping, brought to the attention of the police.
“The warning is intended mainly for the innocent youngsters who line the streets after school and flag passing drivers to pick them up.” Chief Cadin explained, “The practice is dangerous.”
Peiper on Property (and Potpourri):
No note from me this week, as I’m on trial. But I do have an interesting case in my column. Check it out and have a great Thanksgiving.
Steve
Steven E. Peiper
[email protected]
Turkey Dinner a Bargain – 100 Years Ago:
Buffalo Courier
Buffalo, New York
22 Nov 1924
Barnas on Bad Faith:
Maybe you saw that the Bills played the Chiefs last weekend. About 31 million people did apparently. It was an unbelievable game, one of the best regular season games I have ever attended at that stadium. The atmosphere was electric. I hope it came across on television. Now we just need to beat them when it counts the most in January.
I have a bad faith from the appellate court level in Florida my column today. It appears the main issue in the case was a mix up about whether a modified release was received by the insurer from the claimant’s counsel. After the court found no meeting of the minds on a settlement of the compensatory damages claim for the policy limit, the claimant took an excess verdict and brought a bad faith action. A jury returned a finding of bad faith, and the appellate court affirmed.
I hope everyone enjoys their Thanksgiving. I have so much to be thankful for. Enjoy the holiday with your friends and loved ones.
Brian
Brian D. Barnas
[email protected]
No City Pork – 100 Years Ago:
Buffalo Courier
Buffalo, New York
22 Nov 1924
CITY CANNOT APPEAL
Under the law the city cannot appeal to the higher courts from the appellate division’s decision in the piggery case according to Assistant Corporation Counsel Robertson. The decision dismissed the city’s appeal from the entering of the piggery abandonment contract as a final judgement in the case. “It appears that the council will have to carry out its contract to close the piggery by next April 15.”
Lee’s Connecticut Chronicles:
Dear Nutmeggers:
After some delays and false starts, our kitchen renovation has begun. Fortunately for you, I can’t import a WAV file into the newsletter. Rest assured, it is loud and persistent, with the occasional, cringe-worthy crashing sound. Who knew that chipping and sawing would generate so much noise? Only 11 weeks to go.
This edition, we’ve found a couple of UM cases, the most interesting one involves a New York driver in a one-car accident in Connecticut and the conflict between the two states regarding non-contact accidents. This one came out for the carrier, but just maybe if the case had been brought before a New York judge interpreting Connecticut law, the outcome could have gone the other way. If you have a thought on that, drop me a note.
Until next time, keep keeping safe.
Lee
Lee S. Siegel
Women Win Love Contest – 100 Years Ago:
The Buffalo News
Buffalo, New York
22 Nov 1924
WHY WOMEN DEFEAT MEN IN LOVE
“Men care about beating other men. Men care about careers - making more money, getting a better job, wielding more power than their rivals. Women care about being loved. That is why the race of men is so regularly defeated by the race of women in the field of love and marriage. The average man doesn’t want to fall in love…But the average man does fall in love, does marry, and does divide his income with his wife and children.
“The average man does all this because the average woman wants him to. And what is more she frequently does such a good job of it that he imagines it was his own idea. Nor does she permit him to change his mind.”
Ruffner’s Road Review:
Hello Everybody,
I have two auto/no-fault cases for discussion this week. In the first case, the insurer brought a summary judgment motion arguing the injured party breached a condition precedent to coverage by failing to attend a medical examination. In the second case, the plaintiff brought a motion to dismiss multiple affirmative defenses of the defendant, which sought to limit plaintiff’s recovery pursuant to provisions of the No-Fault law and require the plaintiff to prove he sustained a serious injury under the Insurance law. The plaintiff argued he should not be subjected to the no-fault rubric due to the insurer’s denial of his claim on the basis he was operating a motorcycle at the time of the accident.
Happy Thanksgiving and Go Bills!
Kyle
Kyle A. Ruffner
[email protected]
Fake Coverage – 100 Years Ago:
The Daily Freeman
Kingston, New York
22 Nov 1924
Fake Insurance
For Motorists
American Automobile Association Calls Attention to Efforts to Drive out Fakers Who Sell Meaningless Service and Insurance.
By telegraph to the Freeman
Washington, D.C., Nov. 22. – With the attorney general of New York state succeeding in a relentless war on fly-by-night concerns engaged in selling meaningless “service” contracts to automobile owners, and with these fake insurance and motor organizations fleeing for safety to other parts of the country, motorists throughout the nation should be on their guard and have dealings only with reputable clubs and insurers, according to a warning just issued here by President Thomas P. Henry, of the American Automobile Association.
The warning is being broadcast to all affiliated A.A.A. clubs with recommendations for advising all motor club members to warn their friends against being defrauded by this spreading wave of graft.
Mr. Henry’s message disclosed the fact that the A.A.A. in its work of prosecuting fake organizations of this character found more than fifty operating in various parts of the country, gullible car owners being “sod” every conceivable kind of service, from accident insurance to discomfort privileges at hotels.
“While we are making headway in our fight against this evil,” Mr. Henry states, “It is obvious that the campaign against the numerous fakes will have a pronounced tendency to spread the evil. Whether the action on the part of the judiciary of New York will break up the practice of mulcting the unwary motorist, or merely re-locate it, depends largely upon the average care owner’s familiarity with the evil.
Ryan’s Federal Reporter:
Hello Loyal Coverage Pointers Subscribers
Nothing from me this edition. Happy Thanksgiving!
Until Next Time,
Ryan
Ryan P. Maxwell
[email protected]
The World Famous “Neurocalometer” – 100 Years Ago:
The Daily Messenger
Canandaigua, New York
22 Nov 1924
Announcing
The Neurocalometer
At the Lyceum held at Davenport, Iowa, from August 24 to August 29, inclusive, the Neurocalometer was formally and scientifically announced and demonstrated. It has been one of the greatest sensations of the century in the Chiropractic world. You Naturally ask, “Well, what is the Neurocalometer? What is this all about?” To the layman we would say that it will dispel any doubts which he may have regarding the efficacy of the Science of Chiropractic. If you are sick and consult a Chiropractor who has a Neurocalometer he will place it over the entire spine. It is so sensitive that it will immediately register a certain degree of pressure showing exactly where the interference to transmission is. Thus, your Chiropractor can tell to a nicety just what vertebrae to adjust. He gives you the adjustment and then the Neurocalometer is again applied. Wonderful as it may seem, it in many cases registers zero and in all cases a considerable reduction; the nerve pressure has been relieved and normal transmission is present. Could anything be more convincing?
Storm’s SIU:
Hi team:
Check out “Lexi’s Legislative Lowdown” below and her discussion on Bill S1471 which seeks to prevent staged accidents and no-fault fraud by permitting insurance companies to retroactively cancel policies issued if the initial payment was faulty.
I have three interesting decisions for you this edition:
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A Suit Limitation Provision is Not a Denial of Coverage but the Time Period in Which a Suit Regarding Coverage Must Be Filed (a Bar to Litigation). An Insurer Does Not Waive a Suit Limitation Defense by Omitting it From Its Denial Letter or Its Original Answer.
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Court Grants Summary Judgment to Insurer Dismissing a Breach of Contract Claim by Landlord on the Ground That, Under the Terms of the Guaranty Entered into in Response to an ALE Claim, the Insurer Was Not Obligated to Pay Rent on Behalf of the Tenant-Insureds After the Termination of the Leases.
- No-Fault Medical Provider’s Claim of Unlawful Interference with Protected Rights Pursuant to New York Civil Rights Law § 70-b Dismissed.
Go Bills! They just have to do that to the Chiefs one more time in the playoffs!
I hope you have an awesome Thanksgiving with family and friends! We will talk again in two weeks.
Scott
Scott D. Storm
[email protected]
GOP Overspends in Campaign Contributions – 100 Years Ago:
Elmira Star-Gazette
Elmira, New York
22 Nov 1924
REPUBLICANS
FILE STATEMENT
OF MONEY ISSUED
Total of $6,976 Was Spent in Recent Election Campaign, While Receipts Were $6,471 – File Report With Secretary of State.
During the campaign for the general election November 4, the republican County Committee spent $6,976.87, according to a report filed with the secretary of state by Wallace W. Seely, treasurer. Besides the money contributed the committee spent $550.87.
Fleming’s Finest:
Hi Coverage Pointers Subscribers:
This week’s case comes from the Alaska Supreme Court. A construction company chartered a freight barge, but the barge was returned with damage to the hull. The insurer denied coverage for the damage, and the question was whether the claims against the broker and insurer were time barred. Since the denial letter put the insured on notice that there would be no coverage, and that the broker may not have satisfied its obligations to the insured, the discovery rule did not toll the applicable statute of limitations.
Hope you have a nice Thanksgiving and see you in a fortnight,
Kate
Katherine A. Fleming
[email protected]
The World to End Shortly – 100 Years Ago:
The Chat
Brooklyn, New York
22 Nov 1924
MISS PANHURST PREDICTS
WORLD’S END IN HER TALK
Christobel Pankhurst, English Suffragist and evangelist, addressed a large audience Sunday night at the Bushwick Avenue Baptist Church, Weirfield Street and Bushwick Avenue.
Prophesying the end of the world in the near future, Miss. Pankhurst declared:
“God has condemned human ways. He has decreed that the present evil world shall end. He has declared it will be superseded by a better world. It will be as in the days of Noah and Sodom and Gomorrah, but more people will be reading the writing on the wall this time.
“The world can’t go on this way. Look at the widespread poverty. And that is not the worst of our evils. Look at our state of morality, or, rather, immorality. Look at the breaking up of our homes. Look at the spread of anarchism. And think of the preparations to make the next war even more terrible than the last.”
Gestwick’s Garden State Gazette:
Dear Readers:
In case you missed it, the Bills beat the Chiefs. Now, let’s hope that the Bills reverse course a bit and also beat them in the playoffs, where it counts. And hey, the Sabres won last night too (or two nights ago, depending whether you’re a Thursday night or a Friday morning reader)! Also, I get to write about a sport I don’t watch regularly—boxing. The Taylor-Serrano fight was infinite times more entertaining. Hopefully, Netflix doesn’t have the same lagging errors when it errs the Christmas Day NFL games.
I have a case for you this week which, if nothing else, will help you with the difference in rescission standards between New York and New Jersey. In New York, the insurer need not show that the applicant intended to deceive the carrier. But in New Jersey, the carrier must show that the applicant intended for the carrier to rely on their misrepresentation, and that the carrier did in fact rely to its detriment.
Happy Thanksgiving.
Evan
Evan D. Gestwick
[email protected]
Funny Clothes – 100 Years Ago:
Press and Sun-Bulletin
Binghamton, New York
22 Nov 1924
NEW YORK, Nov. 22 – Reminiscence week is over. Fifth Avenue has celebrated its one hundredth birthday. The shop windows were full of India shawls and gauzy dresses that were long in the leg and short in the neck and fuzzy hats that our grandpas wore. Wonder how funny our clothes will seem 1000 years from now?
The stone that marked the fifth mile on the “Boston Road” was there. Grandma sometimes rode behind grandpa on a pillion and the best coaches only made five miles a day through the mud. Yesterday a hawk-faced kid flew to Boston and back in three hours.
O’Shea Rides the Circuits:
Hey Readers,
Time is flying by this November. In a blink of an eye Thanksgiving is already around the corner. Despite my counsel to my wife, I have a “friendsgiving” that I do not recall RSVPing for next week. In other news, Reggie White’s birthday is also next week. Not the Hall of Famer, but the egregiously large dog I procured two years ago. He’s thinking venison is on the menu, but we disagree.
This week I have a case from the Eleventh Circuit that involves an odd situation where an insurer was insulted from a demand for payment. Essentially, a co-payee on the policy cashed several claim settlement checks unbeknownst to the other payee; and the financial institution cashed the checks.
Happy Thanksgiving,
Ryan
Ryan P. O’Shea
[email protected]
Too Many (Italian) Immigrants – 100 Years Ago:
The Oneonta Star
Oneonta, New York
22 Nov 1924
THE ITALIAN OVERFLOW
A newly arrived Italian considers himself lucky to get into the country, because the yearly immigration quota of Italy is about 4,000 and there are 400,000 applications for admission. He points out the simple mathematical fact that it will take more than 100 years, at the present rate, for the half-million Italians to gain access to the United States. And by that time there may be several more millions damned up and waiting.
It is ana annoying situation for the Italian people, with whom America is so popular, and also for the Italian government which encourages an overflow of its surplus population to the country. Yet people and government both might as week accept the situation recognizing that America has nothing at all against these popular immigrants but can make no exception in their case.
When a lake fails to find an outlet in one direction, it usually finds one in another direction. A total drainage failure is a rarity. There is no reason why a living nation should become a still lake or dead sea. The world is full of places where Europeans may go in large numbers if they like, and where they may thrive almost as well as in the United States. South America, which needs and welcomes them, would be an especially congenial field.
Rob Reaches the Threshold:
Nothing from me this edition. Happy Thanksgiving.
Rob
Robert J. Caggiano
[email protected]
Disease to End in 50 Years – 100 Years Ago:
Wisconsin State Journal
Madison, Wisconsin
22 Nov 1924
PROMISE OR MENACE?
The head of a great American chemical manufacturing concern predicts the end of all disease in fifty years. He included the dread cancer, within the scope of his prophecy, which he bases on the progress new being made in chemical science.
The prediction does not come within the realm of the impossible. In fact, many unversed in chemistry of medicine have long been confident that mankind would soon conquer the last of its disease enemies. This confidence has been strengthened and rewarded by the progress made in the battle against tuberculosis and the virtual elimination of disease epidemics in the United States.
Chemicals have long been employed effectively in the destruction of the enemies of vegetable life. Why should they not be as effective against the germs which prey upon human life? Already chemistry and surgery have made great headway against disease.
But what it will avail chemical science if it frees humanity from the menace of disease only to destroy humanity with poison gases, devastating explosives, and other fiendish munitions of war? Some of the very chemical formulas devised to rid mankind of its invisible enemy disease are more invisible and a thousand times more deadly to man than the germs for the eradication of which they are intended.
Upon chemistry is civilization dependent in great part for its future happiness and welfare. Chemical research must not be interrupted nor restricted. There is no menace to man in the advance of chemical science. The menace is the use to which man puts his chemical knowledge. The world must see to it that this knowledge is employed for the protection of man not for his destruction.
LaBarbera’s Lower Court Library:
Dear Readers:
This week our firm had its first annual Thanksgiving Luncheon. Any possible Thanksgiving delicacy you could think of was included, and homemade too! It was one of the most delicious meals I had in a while. The only downside was that when the tryptophan set in, I definitely needed some extra caffeine to help me through the rest of the day.
This week I have two New York County decisions. The first, reminding everyone of the importance of the ever-so-reliable suit limitation provision. The second, an interesting discussion regarding an often times glanced-over portion of liability policies, Supplementary Payments.
See you in two weeks…
Isabelle
Isabelle H. LaBarbera
[email protected]
Oil to Run Out in 20 Years – 100 Years Ago:
The Tweed Daily
Murwillumbah, New South Wales, Australia
22 Nov 1924
WORLD’S PETROLEUM
Supplies Exhausted Within 20 Years. Sir George Knibb’s Prediction
SYDNEY, Friday. - According to Sir George Knibbs (Director of the Federal Bureau of Science and Industry), at the present rate of consumption petroleum production cannot possibly continue much longer nor can there be any relief from the growing demand for spirit for power and burning.
He considers that the world’s supplies will be exhausted within 20 years.
Lexi’s Legislative Lowdown:
Dear Readers,
I am gearing up to host my entire family for Thanksgiving for the first time! I am looking forward to a house full of people and lots of delicious food. Although, I am a little concerned about living up to the standards my grandmother has set as far as cooking goes. I am hoping she will be willing to share some of her top-secret recipes with me in the next few days!
This week we discuss automobile insurance fraud. Bill S1471 seeks to prevent staged accidents and no-fault fraud by permitting insurance companies to retroactively cancel policies issued if the initial payment was faulty. This bill passed the Senate in March and is now with the Assembly.
Interestingly, we are only one of eight states that currently do not allow for the retroactive cancellation of polices. I wonder what, if any, impact this would have on insurance premiums in New York.
Thank you!
Lexi
Lexi R. Horton
[email protected]
Radio Photography a Dream – 100 Years Ago:
The Buffalo News
Buffalo, New York
22 Nov 1924
Officer Prophesies Radio Photography
WASHINGTON, Nov 22. – Radio messages of the future, including diagrams, photographs, and the sender’s signature, will be transmitted by radio frequency at a rate ten times faster than is now possible by hand transmission, according to Brig. Gen Charles M McK. Saltzman, chief signal officer of the army in his annual report released today.
“Mechanical transmitters with higher speed qualities are becoming stabilized and American invention seems to be making further and rapid progress in associating photography with radio, which bids fair to revolutionize fundamental methods of transmission,” General Saltzman points out. “Military messages of the future, particularly in active operations, may contain diagrams and sketches or even entire sheets of maps, all transmitted as part of the same message, and in a method by which possibility of detection or listening in will be reduced to a very low minimum, he continues.
North of the Border:
The forecast for this past Sunday called for snow flurries overnight. That didn’t happen. Instead, we were greeted on Monday morning with almost a foot of snow accompanied by temps in the mid-teens Celsius, and with that we were plunged into winter. We knew it was coming and, quite honestly, the snow-covered fields and woodlots south of us boasting their blanket of snow are beautiful. I know that all of that will wear very thin come March, but right now … right now … the change in seasons is refreshing.
My column this week reviews a startling decision from the British Columbia Court of Appeal impacting who is insured under wrap-up liability policies.
Heather
Heather A. Sanderson
Sanderson Law
Calgary, Alberta, Canada
[email protected]
Headlines from this week’s issue, attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- An Assault Is an Assault, and Not an Occurrence for Which a Defense Is Required Under a Homeowner’s Policy
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Ambiguity in Release Language Results in Question of Fact Dooming Broker’s Summary Judgment Motion
- Negligence Trigger in Indemnity Clause Is Not Satisfied on Record Submitted to Court
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
- Bad Faith Verdict Upheld Despite Claimant’s Cashing of Settlement Check Where Court Found No Meeting of the Minds on Terms of Settlement and Subsequent Excess Verdict Was Awarded
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- No UM Coverage Absent Physical Contact, for Non-Connecticut Vehicle
- No UM Coverage for Plaintiff Operating an ATV
- MVA Plaintiff Has No Direct Right of Action Against Defendant’s Insurer
RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]
- Insurer Failed to Meet Its Burden of Proof for Mailing of IME Notices
- Court Denies Motion to Dismiss Affirmative Defenses Based on Denial of No-Fault Claim Due to Exclusion for Use of Motorcycle
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
- Nothing from me this edition. Happy Thanksgiving!
STORM’S SIU
Scott D. Storm
[email protected]
- A Suit Limitation Provision is Not a Denial of Coverage but the Time Period in Which a Suit Regarding Coverage Must Be Filed (a Bar to Litigation). An Insurer Does Not Waive a Suit Limitation Defense by Omitting it From Its Denial Letter or Its Original Answer.
- Court Grants Summary Judgment to Insurer Dismissing a Breach of Contract Claim by Landlord on the Ground That, Under the Terms of the Guaranty Entered into in Response to an ALE Claim, the Insurer Was Not Obligated to Pay Rent on Behalf of the Tenant-Insureds After the Termination of the Leases.
- No-Fault Medical Provider’s Claim of Unlawful Interference with Protected Rights Pursuant to New York Civil Rights Law § 70-b Dismissed.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- Construction Company’s Claims Time Barred – Not Tolled by Discovery Rule – Due to Notice Provided by Denial Letter
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
- No Rescission in New Jersey if Insured’s Misrepresentation Was Unintentional or Inadvertent
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
- Bank’s Improper Cashing of Settlement Checks to Single, Non-Alternative Co-Payee, Without Other Co-Payee’s Endorsement, Acknowledgement, or Consent, Insulates Insurer From Breach of Contract Claim
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
- Nothing from me this time; see you in two weeks.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
- Suit Limitation Provision Results in Dismissal of Claim Against Insurer
- Supplementary Payment Provision Regarding Prejudgment Interest is Inapplicable to Post-Verdict Settlement
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
- Proposed Legislation to Amend Insurance Law and Vehicle and Traffic Law or Permit an Insurer to Rescind or Retroactively Cancel a Policy in Certain Circumstances
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
- Depending Upon the Definition of ‘Insured’ in Wrap-Up Liability Policies, Manufacturers and Fabricators of Components Incorporated into Things Like Windows on Construction Projects and Who are Remote From Those Projects, May Be Within the Definition of an Insured Under Those Policies, and, Therefore, Covered for Product Failure
With all that, we wish you, again, the happiest of Thanksgiving holidays.
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
Peiper on Property and Potpourri
Barnas on Bad Faith
Ruffner’s Road Review
Ryan’s Federal Reporter
Gestwick’s Garden State Gazette
LaBarbera’s Lower Court Library
Lexi’s Legislative Lowdown
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
11/13/24 Nationwide Mutual Fire Insurance Company v. Nelson
Appellate Division, Second Department
An Assault Is an Assault, and Not an Occurrence for Which a Defense Is Required Under a Homeowner’s Policy
In August 2019, Nelson and Paolino were involved in a physical altercation at a hotel. During the altercation, Nelson punched and kicked Paolino several times, causing injuries. Paolino sued Nelson alleging, inter alia, that Nelson assaulted him, and that Nelson negligently and recklessly caused his injuries (“underlying action”). Nelson was insured under a Nationwide homeowners policy issued to Harding.
In June 2021, Nationwide commenced this declaratory judgment action seeking a determination that it is not obligated to defend or indemnify Nelson and Harding in the underlying action.
An insurer's duty to defend its insured arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the policy. The duty is not triggered where it may be concluded, as a matter of law, that there is no possible factual or legal basis upon which the insurer might eventually be held to be obligated to indemnify the claimant under any provision of the insurance policy.
This policy provides coverage for, among other things, bodily injury caused by an "occurrence," which is defined as "bodily injury or property damage resulting from an accident." Although the term "accident" is not defined in the policy, "in deciding whether a loss is the result of an accident, it must be determined, from the point of view of the insured, whether the loss was unexpected, unusual and unforeseen". The policy also contains an exclusion for bodily injury which is "caused intentionally" or "caused by or resulting from an act or omission which is criminal in nature."
Nationwide established, prima facie, that the incident at issue was not an "occurrence" giving rise to policy coverage. Despite the manner in which the cause of action in the underlying action was labeled by Paolino, the assault alleged therein was an intentional act, which did not constitute an "occurrence" within the meaning of the policy
Since there was no legal basis upon which the plaintiff could be held liable for coverage, it had no obligation to defend or indemnify Nelson and Harding. Moreover, coverage for Nelson's conduct was also barred by exclusions in the policy for bodily injury caused by, or resulting from, intentional or criminal acts of the insured.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property
11/13/24 Grove Realty Enters., Inc. v. Budde Agency, Inc.
Appellate Division, Second Department
Ambiguity in Release Language Results in Question of Fact Dooming Broker’s Summary Judgment Motion
Grove owned a property that was damaged by fire. At the time of the fire, the property was insured with a policy issued by Arch. The policy was procured for Grove by its broker, Budde. The loss was adjusted, apparently without incident, between Grove and Arch. This culminated in the issuance of two General Releases. The first, dated April 8, 2016, Released Arch, etc., for payments related to the damage to the building and the business personal property stored therein. The second Release, dated June 28, 2016, released Arch, etc., for damages related to Business Income and Extra Expense.
After the settlement with Arch, in June of 2020, Grove commenced what appears to be a broker malpractice claim against Budde. Budde moved to dismiss the Complaint on the basis of the two Releases Grove issued to Arch. Budde argued that Releases applied to Arch and to, in relevant part, “adjusters, agents, brokers, experts, servants, brokers and legal representatives.” Because it was a broker, Budde reasoned that the Releases between Arch and Grove applied to it.
The Supreme Court denied Budde’s motion. On appeal, the Second Department affirmed. The decision recognized that Budde was a broker, and that the Releases did certainly mention brokers. However, the Releases also indicated they only applied to actions “which [Grove] now has against [Arch]. Further, although the Releases stated that applied to all actions sounding in contract, quasi-contract or tort arising out of the fire loss, the also specifically only applied to the policy Arch issued to Grove.
Based on the possible inconsistencies in the language, the Appellate Division found a question of fact existed as to whether Budde could rely upon the language to avoid Grove’s seemingly separate broker malpractice claim that Budde did not procure the proper policy.
Potpourri
11/07/24 Pressley v. 535 Greenwich, LLC
Appellate Division, First Department
Negligence Trigger in Indemnity Clause Is Not Satisfied on Record Submitted to Court
Greenwich was sued for personal injuries allegedly sustained by Pressley. In response, Greenwich commenced a third-party action against RJC, and eventually moved for summary judgment. RJC opposed the motion because it maintained its engagement with Pressley, whatever it was, did not involve any negligent actions.
Importantly, the indemnity provision in the contract between Greenwich and RJC was only triggered upon a showing of RJC’s negligence. Where there was a question of fact as to any allocation of negligence against RJC, it followed that Greenwich’s motion had to be denied on a question of fact. For the same reasons, Greenwich’s motion for common law indemnification had to also be denied. A party is not entitled to common law indemnification unless they are able to show that they are free of negligence, and the target indemnitor has at least some degree of assigned fault.
BARNAS on BAD FAITH
Brian D. Barnas
[email protected]
11/06/24 Safeco Insurance Company of Illinois v. Heikka
District Court of Appeal of the State of Florida, Fourth District
Bad Faith Verdict Upheld Despite Claimant’s Cashing of Settlement Check Where Court Found No Meeting of the Minds on Terms of Settlement and Subsequent Excess Verdict Was Awarded
Heikka’s claim against Safeco’s insured arose out of a January 2007 car accident, where the insured’s car rear-ended a motorcycle on which Heikka was a passenger. The insured was charged, and later convicted, of driving under the influence of alcohol, and leaving the scene of an accident. Heikka suffered severe injuries, requiring a lengthy hospital stay.
The insured had a policy with Safeco with a $25,000 limit for bodily injury. Safeco reached out to Heikka’s attorney after the accident and learned that she had already incurred nearly $200,000 in medical bills. Safeco agreed to tender the policy, but Heikka refused to release any claims for punitive damages, UM coverage, other parties, and dram shop claims. Heikka’s attorney made changes to a proposed release received from Safeco to reflect this. Heikka’s counsel sent the amended release back to Safeco signed by Heikka and cashed the check. Safeco claimed it never got the release.
Several months later, a suit was filed against the insured for compensatory damages as a predicate to amend to seek punitive damages. Since Safeco did not receive the amended release, it believed counsel had agreed to the full release and moved to enforce the settlement. Counsel responded in writing demanding that Safeco honor the settlement that only resolved compensatory damages. The letter warned that if the release as amended was not accepted within sixty days, Heikka would file a bad faith claim. Heikka also filed a motion to voluntarily dismiss the claim for compensatory damages if the court found sufficient evidence for punitive damages.
Rather than accepting the amended release under the letter’s terms, Safeco and the insured sought to enforce the full release in a declaratory action. The trial court denied their claims that a settlement had been reached, instead finding no meeting of the minds. Because the court found no settlement had been reached, Heikka was able to proceed against Safeco’s insured for both compensatory and punitive damages. The case proceeded to trial, and Safeco provided its insured with a defense. The jury returned a verdict against Safeco’s insured, awarding Heikka $1,169,292.83 in compensatory damages, but the jury did not award punitive damages. Heika moved to amend to add a bad faith claim.
The bad faith claim proceeded to trial. The trial court granted a directed verdict. The court found that Safeco had not tendered the policy limits, because the check came with a release that did not include the conditions that counsel and the adjuster had discussed. The court held that because both the insured’s liability and the extent of Heikka’s damages were clear, Safeco had a duty to settle the general negligence claim for the policy limits, rather than refusing to settle at all based on the desire to release punitive damages as well, where the burden of proof was higher. The trial court entered a final judgment against Safeco for the amount of the excess judgment, minus the $25,000 policy limits.
The appellate court affirmed. It reasoned that the obligation to attempt to settle in good faith requires the insurer to do more than just initiate settlement negotiations. Safeco did not fulfill its good-faith duty to its insured merely by initiating settlement discussions. Safeco also had an obligation to attempt in good faith to settle the claim when, under all the circumstances, it could and should have done so.
The facts most favorable to Safeco show that the claims adjuster tendered the policy limits together with a release of all claims, which Heikka’s attorney had already told the adjuster would be unacceptable. After receiving Safeco’s proposed release, counsel reiterated that he would not settle without a carve-out for punitive damages and other parties, and that he would revise the release accordingly. When counsel filed suit against the insured, believing that the amended release had been accepted, Safeco maintained that the full release together with the cashing of the settlement check should be enforced. Counsel then wrote to the attorney whom Safeco had appointed to represent the insured, advising him of his discussions with the claims adjuster regarding the modified release, and formally demanding that the modified release be accepted with the exception for punitive damages. Counsel’s letter stated that if Safeco refused, the release would be void, and he would demand both compensatory and punitive damages in the personal injury suit and sue Safeco for bad faith. The adjuster advised the insured that he could be liable for punitive damages. Safeco did not settle. The jury returned a verdict of $1.6 million dollars for compensatory damages and no punitive damages, resulting in a judgment for that amount against the insured. These facts do not show that Safeco complied with its obligations to its insured.
Safeco also argued that its policy did not cover punitive damages and that if it had settled only the compensatory claim the insured would not be entitled to a defense for punitive damages. However, the court found no evidence that Safeco had adequately explained the proposed settlement to the insured. The insured could not recall Safeco explaining the proposed settlement to the insured or explaining that the proposed settlement would prevent a large compensatory award from being assessed against the insured which would not be covered by Safeco. By not advising the insured of this offer, Safeco breached its good-faith duty to the insured. While Safeco did advise of the likelihood of an excess judgment, Safeco did not explain what that might mean to the insured.
Safeco focused heavily on arguing that it promptly tried to settle the case and had reason to believe that Heikka had accepted the full release, because counsel had cashed and disbursed the check. Nonetheless, when Heikka filed the lawsuit against the insured, it became clear that the parties did not have a meeting of the minds and that no settlement had been reached. Thus, even if it was not clear at first that Heikka was offering to release the compensatory damages claim for the policy limits subject to a carve-out for punitive damages, it was clear after she had filed suit that the release with the punitive damage exception was the only available means to limit the insured’s exposure. Counsel’s response to Safeco’s motion to enforce its purported settlement re-offered these terms. Thus, Safeco acted in bad faith by not accepting Heikka’s clear and unambiguous offer to settle the compensatory claims for the policy limits, leaving only a claim for punitive damages.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
11/13/24 Lall v. Progressive Advanced Ins.
Superior Court of Connecticut, Bridgeport
No UM Coverage Absent Physical Contact, for Non-Connecticut Vehicle
The court issued judgment in favor of Progressive, denying uninsured motorist benefits to the plaintiff, whose vehicle was struck be road debris. In 2020, the plaintiff was driving southbound on I-95 near Bridgeport, when a large piece of metal stuck the windshield and caused the plaintiff to lose control of the vehicle. The plaintiff made a UM claim, which Progressive denied, and this suit followed. The court, finding that the plaintiff’s accident did not involve contact with an unidentified vehicle, held for Progressive. “The subject policy language is clear and unambiguous. Physical contact is required, and the parties have stipulated that there was no physical contact with an unidentified vehicle in the subject accident,” the court wrote.
Significantly, while the plaintiff’s vehicle was insured and garaged under a New York auto policy, the plaintiff argued that he was entitled to benefits under Connecticut law. In Connecticut, an insured can collect UM coverage for non-contact accidents, if the insured proves the incident by a fair preponderance of the evidence. The court, however, found that the plaintiff was not entitled to the benefits of Connecticut law. “Although the subject accident occurred in Connecticut, the plaintiff is not afforded the “minimum provisions” per Connecticut General Statute § 38a-334 because his vehicle was not registered or principally garaged in Connecticut. As such, the minimum provisions provided by Connecticut General Statute § 38a-334 does not apply to the instant matter.”
11/07/24 Haskell v. Perez
Superior Court of Connecticut, Waterbury
No UM Coverage for Plaintiff Operating an ATV
New South Insurance Company did not owe UM coverage for its insured who was operating an ATV. Haskell was hit head-on by Perez who was driving a rented Altima but was uninsured. NSIC denied coverage, relying on the ATV exclusion in its policy. The policy defined a covered auto as a four-wheeled private passenger vehicle designed for operation on public roadways. The policy went on to provide that an auto does not include “5. Any type of all-terrain or quad vehicle, dune buggy, go-cart or golf cart.” The UM/UIM Endorsement also provided that an:
“‘uninsured motor vehicle’ does not include any vehicle or equipment: ... [among other types] offroad recreational vehicle.... 8. That is not required to be registered as a motor vehicle....” . . . B. We do not provide Uninsured/Underinsured Motorist Coverage for any insured for bodily injury arising out of the ownership, maintenance or use of: 1. Any vehicle... which is designed for use mainly off public roads such as any all-terrain or quad vehicle.... 2. Any vehicle which is not insured for Uninsured/Underinsured Motorist Bodily Injury Coverage under this policy, that is: a. Owned by you...
NSIC made it abundantly clear that there was no coverage for anything to do with an ATV and the court readily agreed, finding that the accident involving the ATV was excluded from coverage.
11/04/24 Weston-Keldo v. Ramo-Rodriguez
Superior Court of Connecticut, New Britain
MVA Plaintiff Has No Direct Right of Action Against Defendant’s Insurer
The trial court dismissed the plaintiff’s counts against Progressive Casualty Insurance Company, holding that the plaintiff lacked standing. Plaintiff was injured in a motor vehicle accident, allegedly caused by Progressive’s insured. The plaintiff sued the driver and Progressive, alleging breach of contract to pay because the insured driver admitted fault. Progressive successfully moved to dismiss the claims against it.
The plaintiff argued that she is a third-party beneficiary to the insurance contract and therefore had standing to sue Progressive directly. She also asserted CUTPA and CUIPA bad faith allegations. The court dismissed the claims, finding that neither the insurance contract nor statute vested the plaintiff with third-party beneficiary status. “It is undisputed that the plaintiffs are not parties to the insurance contract and not named or additional insureds. Further, the complaint alleges no facts to support their allegation that they are third-party beneficiaries. Indeed, the complaint is devoid of facts that could support a claim that Ramos-Rodriguez and Progressive intended to create a direct obligation between a promisor and the plaintiffs,” the court wrote. Further, the statutory requirement for drivers to carry auto insurance for the purpose of satisfying claims does not confer such status. Rather, the statute only establishes the obligation to prove financial responsibility, and not an insurer’s obligation to create third-party beneficiary rights when issuing policies.
The court recognized that Connecticut law creates a direct right of action, but only after the plaintiff obtains a judgment against the insured. “The court is not willing to create an alternative path for the plaintiffs to directly sue Progressive other than those that already exist.”
RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]
11/08/24 AVK RX Inc. a/a/o Hassan Shuaib v. Progressive Adv. Ins. Co.
Civil Court of the City of New York, Richmond County
Insurer Failed to Meet Its Burden of Proof for Mailing of IME Notices
AVK RX Inc., as assignee of Hassan Shauib brought this action against Progressive Advanced Insurance Co. to recover first-party No-Fault insurance benefits for medical treatment provided to the Assignor for medical treatment provided for injuries that occurred due to a motor vehicle accident. The insurer brought a summary judgment motion, arguing that the injured party failed to attend medical examinations, which is a condition precedent to paying the claims. To prevail on such a defense, an insurer must demonstrate the policyholder/assignor was properly notified of the examinations and failed to attend.
The provider opposed the motion on the basis that the insurer did not sufficiently demonstrate the IME notices were properly and timely mailed. The court outlined the burden of proof for mailing in a summary judgment motion, indicating that proof that an item was properly mailed gives rise to a rebuttable presumption that the item was received. The presumption may be created by either proof of actual mailing or proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed, however, for the presumption to arise the office practice must be geared so as to ensure the likelihood that the item is always properly addressed and mailed.
In this case, the insurer offered the affidavit of Ms. Tracy Simpson, a Manager at ExamWorks, Inc., as evidence that the notice of the IME was properly addressed and mailed to the examinee. ExamWorks Inc. is a third-party vendor that schedules the IME's, notifies the examinee, and provides the resulting doctor's report on behalf of the Defendant. Ms. Simpson described actual knowledge of the mailing of the notices for the IME to the Assignor, demonstrating the standard office practice or procedure to address and mail the vendor's notices. However, the court held the affidavit did not prove compliance with the mailing procedure or process. While an insurer can still prove the mailing of an IME notice by providing a business record, the Defendant did not offer any business record evidencing the mailing of the documents, such as a U.S. Postal Service receipt or an inventory of the outgoing mail. Therefore, Ms. Simpson's affidavit was deemed to be unsatisfactory for that purpose.
Therefore, without proving a standard office practice or procedure designed to ensure that items are properly addressed and mailed or providing a business record evidencing the mailing of the document, the court held that the insurer failed to meet its burden of proof for summary judgment. Therefore, the Court concluded there was an issue of fact for trial regarding whether the notices for the IME were properly addressed and mailed by the Defendant.
11/06/24 Nokia Sterline v. Jose Diaz
Supreme Court, Bronx County
Court Denies Motion to Dismiss Affirmative Defenses Based on Denial of No-Fault Claim Due to Exclusion for Use of Motorcycle
In this motor vehicle negligence action, the plaintiff, pursuant to CPLR §§ 3211 and 3212, sought dismissal of certain affirmative defenses based upon Article 51 of the Insurance Law, arguing the defenses were inapplicable because he was the operator of a motorcycle at the time of the underlying accident. Plaintiff's cause of action arises from personal injuries allegedly sustained when a truck owned by Diaz came in contact with him as he was operating a moped in Bronx County, New York. The plaintiff sought dismissal of defendants second affirmative defense limiting plaintiff's recovery pursuant to Article 51 of the Insurance Law and third affirmative defense barring plaintiff's causes of action under Article 51 of the Insurance Law.
In support of his contention that the vehicle he was driving is considered a motorcycle under the New York State "No-Fault" Insurance Law, the plaintiff submitted a New York Motor Vehicle No-Fault Insurance Law Denial of Claim Form, stating that the plaintiff did not qualify for coverage as he did not meet the definition of an Eligible Injured Person while occupying a motorcycle. Therefore, plaintiff argued that the defendant should be collaterally estopped from subjecting him to the no-fault rubric, the application of which would further burden him with proving that he sustained a serious injury as that term is defined by Section 5102[d] of the Insurance Law. The court disagreed, as the judicial doctrine of collateral estoppel does not apply to prior determinations of a matter by a private corporation or concern.
The court agreed it is well settled that motorcyclists injured in a vehicular accident are excluded from receiving first party benefits under New York's no-fault law. However, that is not the case for every type of vehicle that qualifies as a motorcycle under New York Vehicle and Traffic Law, which identifies three subsets of "limited use" motorcycles, at least one of which is entitled to first party benefits under no-fault law. For example, a "limited use motorcycle" is defined as follows: A limited use vehicle having only two or three wheels, with a seat or saddle for the operator. A limited use motorcycle having a maximum performance speed of more than thirty miles per hour but not more than forty miles per hour shall be a class A limited use motorcycle. A limited use motorcycle having a maximum performance speed of more than twenty miles per hour but not more than thirty miles per hour shall be a class B limited use motorcycle. A limited use motorcycle having a maximum performance speed of not more than twenty miles per hour shall be a class C limited use motorcycle (VTL § 121-b).
Courts have found that the operator of a class C limited use motorcycle is entitled to no-fault benefits in the absence of any other statutory preclusion. Therefore, regardless of whether plaintiff was denied no-fault benefits by defendants' insurance carrier, he might have been entitled to those benefits and subject to the no-fault statutory rubric if the motorcycle he was riding was a class C motorcycle For example, if the plaintiff was riding a moped as he claimed, and the vehicle fits the classification of a class C motorcycle, then plaintiff may have been entitled to first-party no-fault benefits and subject to the remaining no-fault rubric including the requirement that he prove a serious injury to recover noneconomic damages. Stated otherwise, while plaintiff's vehicle may be considered a class of motorcycle under the Insurance and Vehicle Traffic laws, there is an issue of fact as to what "class" of motorcycle it is, as that classification affects whether the vehicle's operator is subject to the no-fault legislative rubric including the "serious injury" threshold.
Therefore, the court held the plaintiff was not entitled to have defendants' affirmative defenses based upon Article 51 of the Insurance law dismissed and denied the plaintiff’s motion.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
Nothing from me this edition. Happy Thanksgiving!
STORM’S SIU
Scott D. Storm
[email protected]
11/12/24 Civic Conversations, LLC v. Mt. Haley Ins. Co.
United States District Court, S.D. New York
A Suit Limitation Provision Is Not a Denial of Coverage but the Time Period in Which a Suit Regarding Coverage Must Be Filed (a Bar to Litigation). An Insurer Does Not Waive a Suit Limitation Defense by Omitting It From Its Denial Letter or Its Original Answer
Plaintiff submitted a claim regarding damage that its office building allegedly sustained during Hurricane Sally to its property insurers, defendants Mt. Hawley Insurance Company and Renaissance Re Syndicate 1458 Lloyd's. Defendants refused to cover the costs of replacing a skylight in the lobby and various other windows, said to be damaged by improper installation and maintenance and subsequent wear and tear predating the hurricane — none of which was covered by the policy. Defendants now move for summary judgment. The Court grants the motion.
In 2017, plaintiff purchased a nine-story office building in Pensacola, Florida. With the help of a general contractor and two subcontractors, plaintiff proceeded to conduct various renovations on the building, including installing a skylight over the main lobby in 2018. The skylight leaked upon installation. Although the general contractor and subcontractors made several attempts to repair the skylight, it continued to leak through 2020.
In 2020, defendants agreed to insure the building from August 2020 to August 2021.
On September 16, 2020, Hurricane Sally struck Florida. Two days later, plaintiff timely notified defendants of a claim for resulting damage, including damage to the skylight and various other windows. The parties disagreed on the amount of covered loss and plaintiff invoked appraisal. On March 27, 2023, after considering both parties' submissions, an impartial umpire entered an appraisal award that included the cost of replacing the skylight and windows. In a letter dated April 21, 2023, defendants agreed to pay the award minus the costs associated with the skylight and windows.
On February 5, 2024, plaintiffs filed suit in New York Supreme Court, alleging that defendants breached the policy by failing to pay the full appraisal award. Two months later, the Court granted defendants' unopposed motion to amend their answer to include a new affirmative defense which raised the policy's two-year suit limitation for the first time. The policy provided that "[n]o one [could] bring a legal action against [defendants]" unless "[t]he action [was] brought within 2 years after the date on which the direct physical loss or damage occurred."
Defendants argue that plaintiff brought this action outside the policy's two-year limitation period.
Plaintiff does not dispute that the damage at issue allegedly occurred on September 16, 2020, and that it filed suit almost three-and-a-half years later on February 5, 2024. Instead, plaintiff argues that defendants waived their suit limitation defense by raising it for the first time in their amended answer.
The building suffered damage on September 16, 2020, so the suit limitation period for its claim ran through September 16, 2022. Defendants denied coverage outside the limitation period on April 21, 2023, shortly after the appraisal process concluded. Even though defendants therefore "possess[ed] sufficient knowledge ... of the circumstances regarding the unasserted defense" when they denied coverage, they did not raise the policy's suit limitation provision in either their denial letter or their original complaint. According to plaintiff, defendants therefore waived their right to raise a suit limitation defense in this case.
Defendants do not contest that they raised the defense for the first time in their amended answer. Instead, they argue that they asserted a general reservation of rights in the denial letter which was sufficient to reserve its right to raise the policy's two-year suit limitation in its amended answer.
The Court sides with defendants. The suit limitation defense is materially different from other defenses that can be waived by lack of timely assertion. Specifically, a suit limitation provision is, unlike the waivable defenses relating to scope-of-coverage, a prohibition on an insured's belatedly bringing suit, and hence need not be invoked until an insured attempts to bring a suit.
At least one district court in the Second Circuit has specifically considered whether, under New York law, an insurer waived its suit limitation defense by failing to raise it when it denied coverage and concluded that it had not — albeit on the ground that its correspondence denying coverage included a general reservation of rights like the one that defendants invoke here.
This case concerns a bar to litigation, not insurance coverage. A suit limitation provision is not a denial of coverage but the time period in which a suit regarding coverage must be filed. Insurers necessarily raise defenses based on suit limitation provisions if and when insured parties file suit against them, not when they deny coverage. After all, when insurers deny coverage, they do not yet know whether (or, for that matter, when) insured parties will file suit against them. In theory, insurers could preemptively raise their right to invoke suit limitation defenses in their pre-litigation correspondence with insured parties. However, given that insurers have "no duty to advise an insured of a limitations period," the Court sees no reason to require them to do so in order to preserve those defenses.
The Court is similarly reluctant to recognize a bright-line rule requiring insurers to raise suit limitation defenses in their original answers. "[A] defendant may amend its answer under [Federal] Rule [of Civil Procedure] 15 to add affirmative defenses.". However, "[g]rant of leave to amend the pleadings pursuant to Rule 15 ... is within the discretion of the trial court." "[L]eave to amend may only be given when factors such as undue delay or undue prejudice to the opposing party are absent." In light of the existing protections baked into Rule 15, the Court declines to articulate and apply an additional requirement with respect to suit limitation defenses only.
For all these reasons, the Court holds that an insurer does not waive a limitation defense by omitting it from its denial letter or its original answer.
Returning to the facts of this case, both parties agree that plaintiff filed suit outside the limitation period, almost three-and-a-half years after its office building was allegedly damaged by Hurricane Sally. Defendants timely sought dismissal of the complaint in their amended answer on the grounds that plaintiff violated the litigation bar by bringing suit more than two years after the claim accrued. The burden therefore shifted to plaintiff to establish that an exception to the limitation period applies.
The Court concludes that plaintiff has not met its burden. Plaintiff has not identified any evidence suggesting that defendants "engage[d] in a course of conduct which lull[ed] [plaintiff] into inactivity in the belief" that defendants would pay the full appraisal award or that plaintiff was "induced by fraud or misrepresentation to refrain from commencing a timely action." Nor has plaintiff demonstrated that defendants affirmatively and explicitly relinquished their right to raise a suit limitation defense either in their prelitigation correspondence or while litigating this action.
That is the end of the matter. However, to the extent plaintiff also challenges the district court's grant of defendants' application to amend their answer, plaintiff has not established that it suffered any undue prejudice from such grant. As a party to the policy, plaintiff was aware of and agreed to abide by the suit limitation provision as early as August 2020. Defendants moved to amend their answer to add a new affirmative defense just two months after they filed their original answer and well before the close of discovery and the commencement of summary judgment motions practice. And plaintiff explicitly consented to defendants' application to amend. Under these circumstances, plaintiff was not prejudiced by the amendment.
For the reasons stated above, the Court hereby grants defendants' motion for summary judgment based on the policy's suit limitation provision.
11/13/24 Red Apple 86 Fleet Pl. Dev., LLC v. St. Farm Fire & Cas. Co. et al.
United States Court of Appeals, Second Circuit.
Court Grants Summary Judgment to Insurer Dismissing a Breach of Contract Claim by Landlord on the Ground That, Under the Terms of the Guaranty Entered into in Response to an ALE Claim, the Insurer Was Not Obligated to Pay Rent on Behalf of the Tenant-Insureds After the Termination of the Leases.
Red Apple 86 Fleet Place Development, LLC appeals from the district court's grant of summary judgment, pursuant to Federal Rule of Civil Procedure 56, in favor of State Farm on Red Apple's claim for breach of contract, as well as the denial of its motion for leave to amend its complaint to re-plead its fraud and fraudulent inducement claims against both State Farm and ALE Solutions, Inc.
Red Apple's claims arise principally from a dispute over the scope of a guaranty agreement between State Farm and Red Apple that obligated State Farm to pay the rent for three residential apartment leases entered into by Red Apple and a State Farm policyholder and her family (the "Tenants"). Specifically, when the Tenants were forced to vacate their residence after it was rendered uninhabitable due to damage from construction occurring in an adjoining lot, State Farm and its agent, ALE Solutions, assisted the Tenants in finding temporary housing, and eventually secured leases for them for three apartments in a building owned by Red Apple. In connection with these leases, State Farm entered into an agreement with Red Apple (the "Guaranty") pursuant to which it made a "commitment to pay for a lease term of six (6) months, with a month-to-month option thereafter . . . in accordance with the terms of the applicable leases pertaining to the three (3) [apartment] units." State Farm paid the rent on behalf of the Tenants for the three apartments from November 2018, when the leases began, until November 2020, when the leases were terminated. Despite the termination of the leases, the Tenants neither vacated the apartments nor paid rent while they retained possession of the property.
In May 2022, Red Apple filed a complaint against State Farm and ALE Solutions to recover the unpaid rent. The district court granted summary judgment to State Farm on Red Apple's breach of contract claim, holding that State Farm's obligation to pay rent ended when the leases were terminated in November 2020.
On appeal, Red Apple argues that the district court erred by: (1) granting summary judgment in State Farm's favor and dismissing the breach of contract claim on the ground that, under the terms of the Guaranty, State Farm was not obligated to pay rent on behalf of the Tenants after the termination of the leases; and (2) denying its motion to amend its complaint to re-plead its fraud and fraudulent inducement claims on the ground that the proposed amendments were futile.
New York law dictates that a guaranty agreement is interpreted consistent with ordinary principles of contract interpretation. To that end, "[a] guarantor should not be bound beyond the express terms of the written guaranty," and the guaranty must be "strictly interpreted in order to assure its consistency with the lease terms."
Red Apple argues that the district court erred in dismissing its breach of contract claim on the theory that, when read together, the Guaranty and leases obligated State Farm to pay the Tenants' rent, even after the leases were terminated. In particular, Red Apple asserts that the Guaranty required State Farm to pay rent on behalf of the Tenants, in accordance with the terms of the leases. Moreover, Red Apple notes that, pursuant to terms in Section 18 of the leases, in the event a tenant does not vacate an apartment at the time a lease is terminated, "[they] must pay an equal amount [of rent] for what the law calls `use and occupancy' until [they] actually move out." Red Apple reasons that, because the Guaranty does not limit State Farm's obligations to the period during which the leases were in effect and requires State Farm to make rent payments in accordance with the terms of the leases, it is responsible for the use and occupancy costs the Tenants incurred by not vacating the property. Based upon the unambiguous language in the Guaranty and leases, we find this argument unpersuasive.
Here, the terms of the Guaranty state that State Farm made a "commitment to pay" for an initial six-month lease that could be extended on a month-to-month basis. The Guaranty contains no language explicitly expanding State Farm's obligations beyond that commitment. Further, it is undisputed that Red Apple agreed to release the Tenants and ALE Solutions from their obligations under the leases after November 30, 2020, as memorialized in a Notice of Intent to Vacate that ALE Solutions sent to Red Apple. Taken together, the plain language of the Guaranty required State Farm to pay rent on behalf of the Tenants while the leases were in effect, and, once those leases were properly terminated, State Farm was not obligated to pay any subsequent use or occupancy costs incurred due to the Tenants' failure to vacate. Accordingly, we conclude that the district court properly dismissed Red Apple's breach of contract claim.
Red Apple next argues its proposed amendments to the complaint were sufficient to state a claim for fraud and fraudulent inducement, and thus the district court erred in denying its motion for leave to amend as futile. We disagree. As the district court correctly held in denying the motion, Red Apple's proposed amendments would be futile because they did not contain facts that satisfied the heightened pleading standard for fraud claims pursuant to Federal Rule of Civil Procedure 9(b).
Under Rule 9(b), fraud claims must be pleaded with particularity. Fed. R. Civ. P. 9(b). To satisfy this requirement, a plaintiff must: "(1) detail the statements (or omissions) that the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where and when the statements (or omissions) were made, and (4) explain why the statements (or omissions) are fraudulent." Although Rule 9(b) allows for "[m]alice, intent, knowledge, and other conditions of a person's mind [to] be alleged generally," Fed. R. Civ. P. 9(b), a plaintiff must still allege facts "that give rise to a strong inference of fraudulent intent.”
Here, the proposed amended complaint alleged that, unbeknownst to Red Apple, at the time the leases and Guaranty were executed, State Farm and the Tenants were litigating in New York state court (the "New York litigation") over whether the Tenants were entitled to repair costs for their apartment under their State Farm policy, and that Red Apple would not have entered into the leases with the Tenants had it known about this dispute. Red Apple further proposed alleging that State Farm "knowingly failed to inform [Red Apple]" about the New York litigation "to [Red Apple's] detriment" and that "State Farm had no intention of reimbursing rent beyond 2020 under any circumstances."
These allegations, however, do not explain why State Farm's failure to disclose the New York litigation demonstrates that State Farm intended to defraud Red Apple. Red Apple does not dispute that State Farm provided a guaranty and paid rent on behalf of the Tenants until the leases were terminated in November 2020, and even acknowledged that State Farm was required to pay these temporary housing costs pursuant to orders issued in the New York litigation. Moreover, Red Apple's proposed amendments included no allegations that State Farm knew or should have known that the Tenants would not vacate the apartments at the conclusion of the leases, nor did it include facts supporting the allegation that State Farm actively concealed information about the litigation from Red Apple to induce it to enter into leases with the Tenants. At bottom, Red Apple's proposed additional allegations are speculative and conclusory, and do not "give rise to a strong inference of fraudulent intent," as is required to satisfy Rule 9(b). Accordingly, the district court properly denied Red Apple's motion to amend its complaint.
11/04/24 Colin Clarke, M.D. v. Government Employees Ins. Co.
United States District Court, E.D. New York
No-Fault Medical Provider’s Claim of Unlawful Interference with Protected Rights Pursuant to New York Civil Rights Law § 70-b Dismissed.
Colin Clarke is a physician who is licensed to practice medicine in New York, and Colin Clarke, M.D., P.C. provides medical care to patients within the state. The Clarke Parties operate multiple medical offices in New York State. The Clarke Parties assert a claim of unlawful interference with protected rights pursuant to New York Civil Rights Law § 70-b ("§ 70-b"). GEICO moves to dismiss the Complaint for failing to state a claim under Federal Rule of Civil Procedure 12(b)(6). GEICO's motion is granted.
There are two bases for this alleged interference. First, GEICO on June 21, 2023, initiated an earlier lawsuit against the Clarke Parties in this Court alleging fraud and RICO violations. Second, separate from that lawsuit, GEICO previously required the Clarke Parties to submit to examinations under oath ("EUOs") concerning insurance claims by sending requests to the Clarke Parties' practice locations, and requested voluminous information from them prior to paying insurance claims.
Contrary to the Clarke Parties' allegations, these actions are not cognizable as unlawful interference with medical care under § 70-b.
The thrust of GEICO's Rule 12(b)(6) argument is that the statute does not apply to the type of medical care described in the complaint, and that the pleaded facts do not amount to the type of interference with protected rights against which § 70-b aims to provide protection.
The defensible, reasonable interpretation of § 70-b is that it provides a cause of action for interference to those who have been targeted by litigation in response to their seeking or providing reproductive or gender-affirming medical care, or possibly in narrow additional circumstances—not to those sued in connection with any provision of medical care whatsoever. Accordingly, the Clarke Parties have not pleaded facts alleging they exercised or attempted to exercise a protected right "to obtain or provide the medical care described in § 70-b(6)."
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
11/08/24 Swalling Constr. Co. Inc. v. Alaska USA Ins. Brokers, LLC
Alaska Supreme Court
Construction Company’s Claims Time Barred – Not Tolled by Discovery Rule – Due to Notice Provided by Denial Letter
Swalling Construction Company, Inc. entered into a charter agreement with Pool Engineering, Inc. for a freight barge. Swalling turned to its insurance broker, Alaska USA Insurance Brokers, to obtain insurance for the barge. Alaska USA obtained insurance from Atlantic Specialty Insurance Company, and Swalling agreed to a policy with Atlantic. When Swalling returned the barge, Pool had the barge inspected, and there was damage to the barge’s hull. Pool notified Swalling of the damage, Swalling notified Alaska USA, and Alaska USA notified Atlantic. Atlantic denied coverage because it asserted there was no evidence that an insured peril damaged the barge’s hull and that there was late notice.
Pool sued Swalling in federal court for breach of the charter contract. Atlantic did not defend Swalling. Pool and Swalling ultimately stipulated to a final judgment.
Swalling then sued Alaska USA and Atlantic in state court, alleging breach of contract by Atlantic and bad faith and negligence against both parties. Alaska USA and Atlantic moved for summary judgment, arguing the statute of limitations barred Swalling’s claims. The superior court denied the motion as to Alaska USA, reasoning that Swalling’s “duty to inquire” into Alaska USA’s alleged failures was triggered when Atlantic declined to defend Swalling based on the provisions in its policy. Alaska’s “discovery rule” can toll an applicable statute of limitations, delaying the start of the clock until the claimant discovers, or reasonably should discover, that the elements of a cause of action exist. The court determined that Atlantic’s denial letter identified “specific policy provisions,” and should have placed Swalling on notice “of the possibility that [Alaska USA] had failed to acquire adequate coverage.” But the court found that a question of fact remained as to whether Alaska USA made reassurances to Swalling that could have delayed Swalling’s duty to inquire. The court scheduled an evidentiary hearing and found that while Alaska USA did take actions to reassure Swalling, there was no indication that the assurances caused a delay in filing suit, Swalling moved for reconsideration, arguing the court had erred in its determination that Swalling’s claims against Alaska USA were time barred. The superior court denied the motion and entered final judgment in favor of Alaska USA. The court also determined the claims against Atlantic were time barred, and Atlantic had no duty to defend or indemnify.
Swalling moved for reconsideration, arguing that because its policy with Atlantic was a “pure indemnity” policy, its claim against Atlantic had not accrued until final judgment was entered in the Pool lawsuit. The superior court agreed with Swalling that its claim against Atlantic had not accrued until final judgment was entered in federal court, reasoning that before judgment was entered, “there was no demand capable of enforcement and no cause of action.” The court held Swalling’s claim against Atlantic was timely but maintained that Atlantic owed no duty to defend or indemnify Swalling.
On appeal, the Supreme Court found that Swalling’s claims against Alaska USA were time barred since the denial letter provided notice to Swalling that the broker may not have satisfied its obligations to Swalling. The Supreme Court also agreed there was no evidence Swalling relied on assurances from Alaska USA. As for Atlantic, the claims were time barred because the clock began running when Atlantic declined to defend Swalling.
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
11/18/24 Blum v. Positive Physicians Ins. Co. et al.
No Rescission in New Jersey if Insured’s Misrepresentation Was Unintentional or Inadvertent
In 2008, Dr. Blum performed a cesarean delivery of a baby. As alleged in a 2019 lawsuit, Dr. Blum negligently and improperly attempted a maneuver dubbed a “vacuum extraction,” which caused intracranial bleeding resulting in cerebral palsy to the baby. Following the incident, Dr. Blum prepared an “event notification form” to send to his then-insurance carrier. Before he did so, his colleagues convinced him that there was no causal relationship between his performance of the procedure and the baby’s cerebral palsy. Indeed, Dr. Blum continued to treat the baby’s mother for another year following the procedure.
When Dr. Blum notified the defendant about the 2019 lawsuit, the carrier issued a reservation of rights letter, explaining that although the carrier would provide a defense to Dr. Blum in the lawsuit, it reserved its right to rescind the policy on the basis that Dr. Blum made a material misrepresentation by responding “no” to the following application question:
Do you have knowledge of any potential claim in which you may become involved, including without limitation, knowledge of any alleged injury arising out of the rendering or failure to render professional services which may give rise to a claim or suit even if you believe the claim or suit would be without merit?
***
The policy also contained the following provision:
This insurance will be voidable as of the effective date at the option of the Company if its agreement to issue this insurance was materially based on information supplied by any insured that was later found to be false or fraudulent, but this condition does not apply to any inadvertent or unintentional error or omission made by an insured in applying for this insurance.
***
In the plaintiff’s deposition, when asked why he did not report the 2008 incident, Dr. Blum testified that he simply did not recall the incident at the time he applied for insurance with the defendant.
The carrier argued on summary judgment that Dr. Blum could not have honestly believed that a claim would not be filed against him as a result of the 2008 incident. The defendant based this assertion on plaintiff’s deposition testimony, where he testified that it is possible for an adverse outcome to result in a claim, even if the claim ends up lacking merit due to lack of causation.
The plaintiff cross-moved for summary judgment, arguing that under New Jersey law, a carrier must show that the policy applicant intended for the carrier to rely on their misrepresentation. Here, Dr. Blum argued, he simply forgot about the 2008 incident, and did not intend to deceive the carrier. Dr. Blum also argued that he had no prior indicia that the mother of the baby would be making a claim, since she allowed him to treat her for another year following the claim.
Dr. Blum also pointed out that that policy provided that it would be voidable if the defendant’s agreement to issue the policy was materially based on information supplied by the insured that was later found to be false—and that this provision does not apply to any inadvertent or unintentional error or omission made on the application.
The Court denied both motions. As the Court aptly noted, a New Jersey insurance carrier may rescind a policy by showing: (1) a material misrepresentation of a presently existing or past fact; (2) the maker’s intent that the other party rely on it; and (3) detrimental reliance by the other party. Here, the Court held, the total circumstances of Dr. Blum’s decision to include the 2008 incident on his policy application probe into Dr. Blum’s intentions and credibility, since he contends he made an honest mistake. As is the law in most jurisdictions, including New Jersey, summary judgment is not the place for a Court to make credibility determinations.
Accordingly, both motions were denied.
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
10/30/24 VFS Leasing Co., v. Markel Ins. Co.
United States Court of Appeals, Eleventh Circuit
Bank’s Improper Cashing of Settlement Checks to Single, Non-Alternative Co-Payee, Without Other Co-Payee’s Endorsement, Acknowledgement, or Consent, Insulates Insurer From Breach of Contract Claim
Markel issued joint settlement checks to VFS and Time Definite Leasing, LLC (“TDL”). VFS leased trucks to TDL from 2016 to 2018 and required TDL to insure the trucks, as well as name VFS as an additional insured, loss payee, or both on the relevant policies. TDL bought coverage through Markel and named VFS as a loss payee on certificates of insurance. Through the life of the lease, TDL filed claims to Markel for damages to the trucks. Markel issued checks to TDL and VFS as co-payees. But VFS never saw the funds. Instead, TDL unilaterally cashed the checks.
VFS brought a breach of contract claim against Markel. VFS’s basis for its claims was that Markel was required to notify VFS for claims, issue joint checks, and pay VFS for all losses, all of which Markel failed to do.
On summary judgment, Markel argued that it had issued the checks to both TDL and VFS, thus requiring the insured parties to negotiate and cash the checks. Markel cited Florida Uniform Commercial Code Art. 3 that the responsibility of verifying payments is not on the maker, but the party processing the instrument. Thus, VFS has a conversion claim against the cashing bank, not a breach of contract claims against the insurer. Markel also noted the policies contained no provisions obligating it to oversee and/or monitor what happens to settlement payments after the payments were properly issued. VFS contested these grounds citing another UCC provision that since the checks were for joint payment, which VFS did not endorse, Markel’s obligation to VFS was not discharged.
The District Court applying Florida Law found for VFS. On appeal Markel cited Florida Statute § 673.4141(3) relieves it from liability; and VFS countered that the argument was waived because Markel never cited the specific statute in district court. The Appellate Court looked at the arguments in two prongs (i) whether Markel waived the argument; and (ii) if not, whether Markel’s obligations were discharged after the bank improperly accepted the joint check.
On the waiver issue, the court looked to whether Markel properly raised the issue and noted that parties may make new arguments with additional case authority in support of its position. Meaning, even though Markel did not cite the specific statute, its theory of non-liability has remained consistent throughout litigation. Indeed, Markel repeatedly argued in district court that the financial institution is the party responsible for improperly cashing the joint checks. VFS also acknowledged that one of Markel’s chief arguments was that VFS’s exclusive remedy was with the offending bank. As such, Markel did not waive the issue or argument.
As to Markel’s obligations, the case was a matter of first interpretation of the statute. Whether a drawer who issued a joint check to nonalternative co-payees remains liable to one co-payee where the drawee bank improperly accepts checks being cashed by only one of the co-payees, without the other co-payee’s knowledge, involvement, or endorsement. The Florida Statute § 673.4141(3) reads:
“[i]f a draft is accepted by a bank, the drawer is discharged, regardless of when or by whom acceptance was obtained.”
VFS argued another provision, § 673.1101(4), which states:
“an instrument is payable to two or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them.”
Since it was a matter of first impression, Markel pointed to a case from the Seventh Circuit, the only Circuit Court to have addressed the issue. Thirteen Inv. Co. v. Foremost Ins. Co. Grand Rapids Mich., 67 F.4th 389 (7th Cir. 2023). VFS pointed to a Texas Supreme Court that favored VFS’s position. McAllen Hospitals, L.P. v. State Farm County Mutual Insurance Co. of Texas, 433 S.W.3d 535 (Tex. 2014).
The Eleventh Circuit agreed with its sister circuit court. It noted that § 673.1101(4) expressly provides that co-payees must act together regarding a joint instrument. Thus, all co-payees are the holder of the instrument. The court noted McAllen Hospitals found the obligation was not discharged because payments were never made to a holder under Texas’s statutory equivalent of § 673.1101(4), reasoning that the statute simply advises banks who it should recognize as the holder of an instrument.
Looking to § 673.4141(3), that statute explicitly states that when an instrument is accepted by a bank, the drawer is discharged from liability, regardless of when or by whom acceptance was obtained. This language was held to dispositively insulate the drawer. While TDL was not a holder under § 673.1101(4), the bank’s acceptance of the draft discharged Markel under § 673.4141(3).
For the above reasons, summary judgment in favor of VFS was reversed.
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
Nothing from me this time; see you in two weeks.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
11/04/24 Pramukhraj Group, LLC v. Starr Surplus Lines Ins. Co.
Supreme Court of the State of New York, New York County
Suit Limitation Provision Results in Dismissal of Claim Against Insurer
Plaintiff, Pramukhraj Group, LLC (the “Insured”) brought an action seeking to recover damages following a loss that occurred on February 21, 2021, against Starr Surplus Lines Insurance Company (“Starr”).
Starr made a motion to dismiss, in part, on the submission of documentary evidence, alleging that the insurance policy utterly refutes the Insured’s factual allegations, conclusively establishing a defense as a matter of law. Starr alleged that the action was time barred, based on the suit limitation provision within the policy, which states that “[n]o one may bring a legal action against us under this Coverage Part unless: […] [t]he action is brought within 2 years after the date on which the direct physical loss or damage occurred.” The property damage alleged by the Insured occurred on February 21, 2021, while the instant action was not commenced until February 7, 2024.
In opposition, the Insured argued that Starr policy was ambiguous, pointing to another provision in the Starr policy, entitled “Choice of Law and Choice of Venue,” which stated that “any suit, action, or proceeding against the company for recovery of any claim under this Policy shall not be barred if commenced within the time prescribed in the statutes of the State of New York.”
The Court agreed with Starr and found that the underlying contract must be read as a whole to determine if there is ambiguity. Reading the Starr policy as a whole, the Court found that any possible ambiguity was cleared, stating that there is no need to refer to New York State statutes of limitations, where the contract itself provides a specific period to commence a suit.
As such, the Court dismissed the complaint, finding it is time barred based on the two-year suit limitation provision contained in the Starr policy.
11/14/24 Starr Indem. & Liab. Co. v. State Natl. Ins. Co.
Supreme Court of the State of New York, New York County
Supplementary Payment Provision Regarding Prejudgment Interest is Inapplicable to Post-Verdict Settlement
Starr Indemnity and Liability Company (“Starr”) commenced a declaratory judgment action, seeking a declaration that State National Insurance Company (“State National”) and New York Marine & General Insurance Company (“NY Marine”) must reimburse Starr for prejudgment interest paid in relation to a settlement of an underlying Labor Law action. The basis of the lawsuit alleges that Starr is entitled to be reimbursed for prejudgment interest that accrued between the judgment on liability and the jury verdict, based on the Supplementary Payments provision within the policies.
It was undisputed that State National provided primary and non-contributory additional insured coverage to non-party Willtrout Realty, LLC, NY Marine provided a second layer of excess coverage, and Starr provided excess coverage above both previously mentioned carriers.
On December 19, 2019, the underlying court granted the Labor Law plaintiff summary judgment on liability. On November 22, 2022, the jury verdict resulted in a finding of $5,812, 000.00.
After a verdict was awarded, the underlying parties proceeded to post-trial mediation, and a settlement of $5,250,000.00 was reached. Prior to the settlement, both State National and NY Marine had tendered their respective $1,000,000 and $2,000,000 policy limits.
Under the Supplementary Payments provision of the policies, the carriers were obligated to pay, “with respect to any claim we investigate or settle, or any ‘suit’ against an insured we defend… f. Prejudgment interest awarded against the insured on that part of the judgment we pay. If we make an offer to pay the applicable limit of insurance, we will not pay any prejudgment interest based on that period of time after the offer.”
Starr alleged that NY Marine and State National were obligated to treat the settlement as a judgment and pay prejudgment interest pursuant to Supplementary Payments over and above the respective policy limits. In contrast, NY Marine and State National argue that the Supplementary Payments provision specifically requires payment on a judgment, and the payment here was made in relation to a settlement. Further, it is argued that interest was not included calculation of the settlement, as supported by the record.
After discussing the rules of contract interpretations under New York law, the Court clarified that a settlement, as a basic premise, is not a final judgment, citing to CPLR § 5002. The Court further iterates that a settlement agreement that does not include an award of interest does not give rise to an award of interest.
The Court pointed to the evidence submitted in support of the motion, showing that Starr’s submitted proof shows only that prejudgment interest was contemplated by the parties, but does not provide that prejudgment interest was incorporated into the settlement. The verdict and release made no reference to prejudgment interest.
The Court highlighted that without the settlement agreement, there is no proof in the record that any portion of the settlement incorporated accrued interest. As such, the Court found that State National and NY Marine’s motion for summary judgment was granted and dismissed the action. The Court declared that State National and NY Marine were not liable for any prejudgment interest pursuant to the Supplementary Payments provisions in the policies.
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
08/14/24 New York State Senate Bill S1471
Proposed Legislation to Amend Insurance Law and Vehicle and Traffic Law or Permit an Insurer to Rescind or Retroactively Cancel a Policy in Certain Circumstances
The bill, which passed the Senate in March of 2024, would allow for the retroactive cancellation in New York of newly issued automobile insurance policies in an effort to prevent staged accidents.
Within the first 60 days of an automobile, commercial automobile or assigned risk plan policy being issued an insurer could rescind the policy if the initial premium payment is dishonored due to
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The nonexistence of a bank account,
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The unauthorized use of an account, or
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The unauthorized use of a credit card
The Justification for Bill S1471 provides that currently automobile insurers are not permitted to retroactively cancel policies for nonpayment of premiums. This has led bad actors to procure an automobile policy with the intent of submitting a fraudulent claim. In a significant number of these cases the person secures the policy by submitting bad payment, and as the law in New York stands, insurers are not permitted to retroactively cancel the policy. The time between when the policy is “purchased” to the time it is cancelled provides ample opportunity for no-fault fraud. Bill S1471 seeks to prevent such fraud.
Notably, New York is currently one of only eight states that do not allow retroactive cancellation of automobile policies. By passing Bill S1471 New York would remove incentives to stage accidents and commit insurance fraud.
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
11/12/24 Honeywell International Inc. v. XL Insurance Company Ltd.
British Columbia Court of Appeal
Depending Upon the Definition of ‘Insured’ in Wrap-Up Liability Policies, Manufacturers and Fabricators of Components Incorporated Into Things Like Windows on Construction Projects and Who Are Remote From Those Projects, May Be Within the Definition of an Insured Under Those Policies, and, Therefore, Covered for Product Failure
According to the Michelin Guide, the Shangri-la Hotel on West Georgia Street in downtown, west end, Vancouver, is a very special stay in a mixed use, Asian influenced, multi-use tower. The building incorporates offices, retail, dining and residential space in addition to 15 hotel floors on floors 1-15, all of which look over highly livable, scenic Vancouver through its extensive window walls.
Unfortunately, soon after completion of the tower, the insulated glass units (IGUs) in the window walls began to fail…one after another such that by the time legal proceedings were instituted against the developers, designers and contractors, manufacturers and installers, over half of the IGUs suffered from the formation of condensation with water ingress. According to the pleadings that were filed, all IGUs were expected to fail over the next several years following the filing of the action.
The alleged cause of the failure was a problem with the desiccant. Who knew that desiccant is so important in IGU’s? Akin to the little gel packs that one finds in packaging to keep shipped and stored stuff dry (branded with the prohibition ‘do not to eat’), desiccant absorbs moisture and prevents condensation within the sealed air space between the panes of glass of an IGU. By removing moisture from the air space, desiccant helps prevent the formation of condensation or fog on the interior surfaces of the glass panes. This ensures clear visibility through the window and maintains its insulating properties. In most IGUs, the desiccant is incorporated into the spacer bar that separates the glass panes. This allows it to effectively absorb moisture from the entire air space while remaining hidden from view.
Various parties to the massive action brought by the various building owners alleged that the desiccant in the IGUs was deficient. That desiccant was manufactured by Honeywell. Honeywell found itself facing multiple third-party claims alleging that it manufactured and supplied faulty desiccant. Honeywell applied to the British Columbia Supreme Court in this action for coverage under a wrap-up liability insurance policy issued by XL. The wrap-up had typical language that included the liability of sub-contractors. The terms “contractors” and “sub-contractors” were defined as
“Contractors [”] and “sub-contractors” include all persons or organizations who perform any part of the work under the Insured Project but do not include:
a. Suppliers whose only function is to supply materials, machinery, or other supplies to the project and who do not carry out any installation, construction, or supervisory work on the Insured Project.
Honeywell argued that it was a supplier other than those specifically excluded from the coverage. All suppliers except those specifically excepted from coverage are, it argued, insureds. As an insured, Honeywell would have coverage for its defence costs.
Honeywell argued that it is not alleged to have played the limited role that would bring it within the class of sub‑contractors excluded from the definition; Honeywell was described in the third-party claims as a manufacturer of a product incorporated in the project. Accordingly, Honeywell argued that as it was alleged to have performed a function other than supplying materials, machinery or other supplies to the project, and, on that basis, it is a supplier insured under the wrap-up.
This aberrant argument was heard in a summary trial before a judge of the British Columbia Supreme Court. In a judgment released May 10, 2022, that judge concluded that Honeywell is not an insured under the wrap-up and dismissed its claim against XL for defence costs. Honeywell appealed but placed its appeal in abeyance pending resolution of the underlying actions. That occurred and it appears that the only remaining issue from this litigation was Honeywell’s appeal from its claim of entitlement to its defence costs.
The trial court found that the essential nature of a wrap-up policy is to provide coverage for those involved in a construction project. Honeywell’s argument does not fit well with the “commercial atmosphere” of a wrap-up liability policy as Honeywell was many steps removed in the supply chain and not involved in the project in any way. Further, the supplier must be involved in the project in some way beyond the mere supply of goods or materials. Those insured are “all persons or organizations who perform any part of the work under the Insured Project” and to those suppliers who “carry out any installation, construction, or supervisory work on the Insured Project”.
On appeal, the British Columbia Court of Appeal held that the onus is on Honeywell to satisfy the court that it is an insured under the policy. Words that exclude persons or organizations from the definition of who is insured are to be construed restrictively against the interests of the insurer and those that confer insured status are to be read broadly.
The Court of Appeal then noted, without citing authority, that wrap‑up policies occasionally specifically exclude “off‑site fabricators”. “It is not clear to me, (wrote Justice Willcock on behalf of the three-member panel of that court) that there is a generally recognized rule that wrap‑up policies do not afford coverage to off‑site fabricators or manufacturers of component parts.” “Clearly” (per Justice Willcock), such manufacturers can be sub‑contractors involved in a project. There was no evidence before the court below to the effect that there was a specific intent or industry practice to exclude them from the definition of insured sub‑contractors.
The Court of Appeal stated that the intent of the parties to the insurance policy is to be found within the four corners of the insurance policy and not the “nature” of a wrap‑up policy as defined by legal commentators.
Looking solely at the wording, the Court of Appeal held that suppliers who do not carry out any installation, construction, or supervisory work on the Insured Project are excluded from the definition of insured if, and only if, they do not perform any function other than supplying materials, machinery or other supplies to the project. That court then reasoned that by implication, suppliers:
a) who carry out installation, construction, or supervisory work on the Insured Project, or
b) who perform some function other than supplying materials, machinery, or other supplies to the project, are included in the definition of contractors and sub‑contractors.
All arguments raised by XL to the contrary did not consider this wording (which is standard, commonly found wrap-up wording). Accordingly, the allegation that Honeywell negligently manufactured the desiccant used in the IGUs is an allegation that it performed some function other than supplying materials to the project. That allegation brings Honeywell within the definition of an “Insured” sub‑contractor.
Time will tell if XL opts to appeal this decision to the Supreme Court of Canada. As the decision is couched in the wording in issue, an appeal may not succeed. In the meantime, this is a very significant decision that vastly expands the group of persons and entities entitled to claim coverage under wrap-up policies. Depending upon the unique definition of insured in the policy in issue, such policies may apply to the liabilities of manufacturers, fabricators, distributors and suppliers who do not perform work on the project but supply component parts for the project. Underwriters must react to this decision by modifying the wording or issuing a carefully worded exclusionary endorsement.
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