Volume XXVI, No. 14 (No. 687)
Friday, December 20, 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.
Merry Christmas, Happy New Year. All good things for you and yours in the coming year. Health and happiness!
Writing an Effective NY Coverage Letter Program
Thanks to the many hundreds of attendees at our Writing an Effective NY Coverage Letter program on Friday the 13th. The reviews have been outstanding. For those who want PowerPoint or access to the recording, let me know.
Thanks to my friends in Richmond, VA for a warm welcome last week. It was nice being with you.
The Annual Bad Faith Count
26 years, six months and 10 days (or 9690 days) since the last time a NY appellate court upheld a bad faith verdict against an insurer, first or third party.
The last time an appellate court in the State of New York held an insurer liable for bad faith, in any kind of insurance case, was Jun3 11, 1998. Each year we watch and count.
St. Nick’s Christmas Poem
For the past several years, in the issue just before Christmas, we include an insurance/Christmas poem I penned many years ago, with colleague elves. This year, I asked Perplexity AI to write one for you, and this is its offering:
'Twas the night before Christmas, all snug in his sleigh,
Santa checked his policies, ensuring they're okay.
For a jolly old elf with a world to explore,
He knew that insurance was something to adore.
His homeowner's coverage protected the North Pole,
Against blizzards and storms that might take their toll.
The workshop was covered for fire and theft,
Ensuring the toys would be safe if he left.
Liability insurance, he had quite a lot,
In case he should land on a roof that's too hot.
Or if Rudolph's red nose should cause someone fright,
Santa wouldn't be sued on that magical night.
Health insurance for elves was part of the plan,
To keep them all working as hard as they can.
Dental coverage too, for those sweet-toothed sprites,
Who nibble on cookies on long winter nights.
His sleigh was insured, comprehensive and collision,
In case of a crash or a faulty decision.
The reindeer had coverage, from antlers to hooves,
To fly them through chimneys and over the rooves.
Business interruption, a wise Santa knows,
Protects Christmas spirit if workshop doors close.
Cyber insurance guards his naughty-nice list,
From hackers who'd love to give that data a twist.
Workers' comp for the elves who might slip on the ice,
Or strain from toy-making (it's not always nice).
Product liability for all of those toys,
That might malfunction for good girls and boys.
Travel insurance for globe-trotting flight,
In case he's delayed on that one special night.
And life insurance, though immortal he seems,
To care for Mrs. Claus and all of her dreams.
So as Santa took flight on that Christmas Eve,
He felt quite secure, with no cause to grieve.
For whatever might happen on land, sea, or sky,
His coverage was thorough, no need to ask why.
With a wink and a nod, he rose out of sight,
"Merry Christmas to all, and to all a good night!"
His laughter rang out as he flew with good cheer,
Fully insured for another great year.
The Case Count: A Look Back at CP’s 2024 Activity:
We love producing this newsletter for our thousands of subscribers. It is the product of the dedication of our column editors and our biggest supporters, Donna Boice and Sarah McCandless. To publish this newsletter, we read and digest every New York and Connecticut appellate decision, opinions from the high courts and federal circuits throughout the country, and, with the help of Heather Sanderson, the courts in Canada as well. We try to digest and foresee trends and advise you, in advance, of what we see developing in the field.
We so appreciate your feedback when we receive it, knowing that our publication has a positive impact on your company or in your practice. In the last issue of each calendar year, we pause to look back on the previous 12 months’ activities. We were pleased to provide over 400 reviews and commentaries this year, and again, we want to thank our HF CP team for all they do for you. That’s 39 more reviews than last year.
This year I had 59 summaries, as compared to last year’s 61. An easy year for me. Special thanks to Lexi Horton for her help this year with the count:
Kohane’s Coverage Corner 59
Storm’s SIU 48
Peiper on Property (and Potpourri) 42
Lee’s Connecticut Chronicles 42
Ruffner’s Road Review 36
Barnas on Bad Faith 33
O’Shea Rides the Circuits 26
North of the Border 26
Louttit’s Legislative and Regulatory Roundup 26
Gestwick’s Garden State Gazette 25
Fleming’s Finest 25
LaBarbera’s Lower Court Library 25
Ryan’s Federal Reporter 24
Rob Reaches the Threshold 22
Lexi’s Legislative Lowdown 11
Goldberg’s Golden Nuggets 1
Total 471
Coverage Mediator
Give Me a Call – 716-849-8942
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:
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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 is flexibility to explore creative resolutions that may not be available through court proceedings.
Confidentiality
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Mediation proceedings are typically confidential, which offer 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 collaboration.
- 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 position.
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 heard.
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.
Flying Bikes – 100 Years Ago:
The Buffalo Enquirer
Buffalo, New York
20 Dec 1924
A CHANCE
We used to think the bicycle that ran around on the ground, if propelled, was a wonder. Now we have word from Berlin that an inventor is perfecting an aerial bicycle. He hopes to “stock the world with the flying bike.”
The account does not say so, but presumably any child can use it. “The propeller of the plane is said to be operated with less effort than walking and to be as efficient as if inspired by an engine.”
Soon, perhaps, we shall be buying the aerial bicycle for Christmas to enable son and daughter to go out and catch snowbirds.
Peiper on Property (and Potpourri):
Happy Holidays to all!
Steve
Steven E. Peiper
[email protected]
If Not There, Then Where? – 100 Years Ago:
Buffalo Courier Express
Buffalo, New York
20 Dec 1924
SALOONKEEPER FINED
FOR HARBORING DRUNKS
A fine of $25 was imposed yesterday by Judge Standard upon Valentine Horvath of No. 385 South Park avenue, charged with harboring drunks in his soft drink resort. Captain Thierfeldt and Detective Joseph Fitzgerald took three drunks from the place on Monday night. Each was fined $10 the following morning.
A certified copy of the conviction will be sent to the city clerk’s office and to Mayor Schwab with a view to revoking the man’s soft drink license.
Lee’s Connecticut Chronicles:
Dear Nutmeggers,
I am spending yet another week living out of a suitcase. But this time the destination was merely around the corner. Our renovation project reached the flooring stage. So, with the main level floors being replaced, sanded, stained, and coated with polyurethane there was no room in the house for man or beast. So, my wife, two of our kids, and the dog are taking a luxury vacation to our local Hilton Home 2 Suites, a brand-new hotel with all the comforts of home. Mocha, our dog, is the hit of the staff, as she explores all the nooks and crannies of the hotel. We’re hoping to be back home by the time you read this, but all our furniture has to remain in the garage for another week regardless, to protect the new floors. We keep reminding ourselves that this will all have been worth it….
This week we have an interesting case that limits the effect of the Soto decision (the case involving the Sandy Hook families against Remmington) to advertising, leaving undisturbed the long-standing rule that injured plaintiffs have no standing to bring claims against a defendant’s insurer. Oh, and we added a good risk transfer case just to remind you of the basics.
Until the next edition, keep keeping safe and Happy Holidays.
Lee
Lee S. Siegel
[email protected]
The St, Lawrence Seaway Didn’t Open Until 1959 under President Eisenhower – 100 Years Ago:
The Buffalo News
Buffalo, New York
20 Dec 1924
A CHALLENGE TO THE STATE
The President appears to be firmly convinced that the Saint Lawrence seaway plan is commercially feasible. This is indicated in his communication to Speaker Gillett urging a congressional appropriation of $275,000 to complete the survey for the enterprise and to prepare estimates on the work.
It is not necessary to dwell on the fact that the proponents of the seaway project have for the two years represented that the plans as prepared by the engineers of the International Joint commission were complete and that the commission’s estimate of $252,000,000 stood as the final cost of the work. It appears now that these plans were merely preliminary and that the estimate was no more than a rough guess. At least it is something gained that we are done with this fiction of figures.
A significant thing in the President’s communication is that he talks in terms of the saving in cost.
Ruffner’s Road Review:
Dear Readers,
I have just one auto/no-fault case this week. After the plaintiff was injured while operating a tractor trailer in the course of his employment, he sought no-fault coverage from the insurer of the vehicle’s leasing company because his employer did not possess Workers’ Compensation coverage. However, the court granted the insurer’s motion for Summary Judgment dismissing the challenge to insurer’s denial. Even though the employer did not have Workers’ Compensation coverage, the plaintiff may have received payment from another source such as the Uninsured Employers’ Fund. Therefore, the plaintiff was required to seek Workers' Compensation benefits as the primary source of payment for his basic economic loss, and only thereafter could he seek payment of no-fault benefits.
I hope everyone has a great Christmas and New Year!
Go Bills,
Kyle
Kyle A. Ruffner
[email protected]
It’ll Never Be Popular – 100 Years Ago:
The Buffalo Enquirer
Buffalo, New York
20 Dec 1924
WILL TRY IT.
Out in California they are planning to start a professional basketball league. The indoor game has gained quite a hold on the Pacific coast. Now it is proposed to commercialize the sport out there. It is to be hoped that the move gets better popular support than professional basketball does up this way.
Ryan’s Federal Reporter:
Hello Loyal Subscribers:
Attended my youngest son’s holiday concert earlier this morning, Carols and Cocoa. The magic of song and dance is strong with that one and I would not have it any other way. Here’s to hoping I had enough of that magic to rub off on me to make it to New Years!
This edition, I have a quick summary of a SDNY case involving a motion to compel arbitration. When confronting an arbitration clause, it is important that you pay close attention to whose interests you are attempting to enforce.
Until next time,
Ryan
Ryan P. Maxwell
[email protected]
Intoxicated Fish– 100 Years Ago:
The Buffalo Enquirer
Buffalo, New York
20 Dec 1924
Whiskey Destroyed
George Yox and H.C. Bradford, deputy federal marshals, poured 100 cases of whiskey down the sewer in the presence of Milton C. Strebel, assistant federal attorney. The liquor was seized in Youngstown about a year ago and was ordered destroyed by Judge John R. Hazel.
Storm’s SIU:
Hi Team:
Merry Christmas and Happy Hanukkah!!!
Four interesting decisions in this edition:
- Question of Fact Whether Insured Fabricated Repair Invoices Breaching Concealment or Fraud Condition in Light of Conflicting Testimony Creating a Credibility Issue for Determination by the Jury.
- First-Party Property Claim Denial Upheld Due to the Insureds’ Failure to Submit Proof of Loss Form. Submission to an EUO did not Satisfy the POL Condition. Claims for Breach of the Implied Covenant of Good Faith and Fair Dealing, and Violation of New York's General Business Law Also Dismissed.
- Insurer Did Not Meet its Burden to Show that it Prepared Redacted Portions of the Claim Notes in Anticipation of Litigation Rather Than in the Ordinary Course of Business. Therefore, the Work Product Doctrine Did Not Apply.
- Declaratory Judgment Granted to Liability Insurer as the Property Did Not Constitute a “Residence Premises”. Sworn Deposition Testimony Trumps a Later Inconsistent Affidavit. The Insured Signed the Application and One Who Signs a Document is Presumed to Have Read and Understood its Contents Despite an Alleged Language Barrier.
I hope you have wonderful Holidays with your family and friends filled with many happy memories!
We will talk again in two weeks. Let’s Go Buffalo!
Scott
Scott D. Storm
[email protected]
[INSERT HEADLINE HERE] – 100 Years Ago:
The Buffalo News
Buffalo, New York
20 Dec 1924
On Broadway 3 Years,
She Never Drank, Smoked
NEW YORK, Dec. 20. – Ula Sharon, 18-year-old musical comedy dancer, whose real name is Ula S. Robinson and who came from Kansas City to be a Broadway star, is to marry Carl Randall, her dancing partner.
In revealing the engagement today, Mrs. J. R. Robertson said her daughter, although on Broadway for three years, had never smoked a cigarette or drunk a drop of liquor.
Fleming’s Finest:
Hi Coverage Pointers Subscribers:
The dog is overjoyed that the weather is finally getting cold and snowy. There is nothing he enjoys more than frolicking in the snow. Little does he know that we have a grand day out planned this weekend to his favorite state park (complete with snacks).
This week’s case from the Ohio Supreme Court considers whether the insurers of a paint company that marketed and sold lead paint are obligated to indemnify the paint company for payments made into an abatement fund to mitigate the hazards of lead paint. Long story short, the payments into the abatement fund are to provide prospective relief as opposed to compensation for past harm, so they do not constitute damages.
Happy Holidays!
Kate
Katherine A. Fleming
[email protected]
Where’s Santa? – 100 Years Ago:
Daily News
New York, New York
20 Dec 1924
KIDNAP HUNT ENDS
AS BOY, OUT TO FIND
SANTA, COMES BACK
Well, they did everything but turn out the national guard to find Nick DeMarinis – and then they didn’t find him.
He disappeared from his home at 328 East 11th St., just after breakfast.
Nick is only 4; and his mother, Mrs. Rina Demarinis, knew he couldn’t go far away, and believed he must be kidnapped.
She screamed, and everybody on the east side began looking for him.
And then Nick came home. He’d been looking for Santa Claus all day and hadn’t found him. And his mother scolded him in two languages and said he was naughty. But you needn’t think she wasn’t glad to see him because of that.
Gestwick’s Garden State Gazette:
It’s been an eventful two weeks, with Holiday preparations and wedding planning. I have to keep this note short so I can run out with my fiancé to look at a possible wedding venue. This week, I have a case that discusses the difference between a worker’s compensation policy and an employer’s liability policy, and the circumstances in which neither may respond to a claim.
Happy Holidays to all!
Evan
Evan D. Gestwick
[email protected]
How Much is Life Worth? – 100 Years Ago:
The Kentucky Post
Covington, Kentucky
20 Dec 1924
$3500 IN DEATH
IS ‘PITTANCE’
Marx So Decides, Refusing New Trial to Defendant.
WIDOW WINS JUDGEMENT
Judge Says He’d Have Given $10,000 in Case
“A verdict of $3500 in the death of a man 30 years old, whose expectancy of life is 30 more years, is a great outrage.”
This Statement was made by Judge Robert S. Marx in Superior Court Saturday when he overruled a motion of Attorney Charle E. Dornette for a new trial.
Dornette represented Clem. J. Meyer, chauffeur. Camp Denison, O., whose auto killed Harvey Anderson, 30, of 5008 Cushman St., Jan. 17, on Madison Rd. near the observatory.
Verdict is Pittance
“If the defendant is guilty of negligence in Killing Anderson the verdict is a mere pittance to the widow for the loss of her husband, father of four children,” Judge Marx said.
“After various costs and fees are paid the widow will have left about $1500, invested at 6 per cent, will give only $90 a year in place of a possibly $1000 earning of her husband.”
“The jury might have compromised the case. It is not right for a jury to decide cases that way. There was ample evidence, as I view it, to find for the plaintiff. It was shown that Meyers drove his auto 15 to 20 miles an hour for more than 50 feet, admitting he was blinded by headlights of another machine.
For Higher Judgement
“Had I decided the case I would have given at least a $10,000 verdict or found the defendant not guilty and given nothing.”
O’Shea Rides the Circuits:
Hey Readers,
After a break from last edition, I write this week regarding the invalidation of an assignment of an auto policy under Kansas law. By agreeing to comply with a nonclaim statute, the assignee terminated her standing to pursue a multi-million-dollar judgment against the auto insurer.
As the holidays come into full effect, I freshly laundered the Griswold jersey for Christmas Day. Some may dispute the following claim, but it is an objective fact, Christmas Vacation is the greatest holiday movie.
While it may not have the dancing or singing as other favorites nor elaborate traps set by a child, it does have the most relatable element of all. The coming together of family at this time of year, along with their specific idiosyncrasies.
Until Next Time
Ryan
Ryan P. O’Shea
[email protected]
Tears for Conviction – 100 Years Ago:
The Akron Beacon Journal
Akron, Ohio
20 Dec 1924
WOMEN JURORS WEEP
Break Down As Verdict Is Announced To Court
By Foreman Of Venire In Case
William Schuck, 530 Gridley Ave., indicted on a charge of murder in the first degree for the death of Alex Harkins, June 30, is guilty of manslaughter.
A jury of eight men and four women deliberated for nearly three hours Friday night and reported the verdict shortly after 9 o’clock to presiding Judge E. H. Boylan.
Attorney Floyd A. Roes, chief counsel for Schuck, had the jury polled. As the question, “Is this your verdict?” was asked of each juror the replay was, “It is.”
Believed In Acquittal
The defense had asked for an acquittal.
Assistant County Prosecutor Walter B. Wanamaker who conducted the case for the state, was satisfied with a conviction for manslaughter.
The court remanded Schuck back to jail to await sentence. It will probably be imposed Monday unless the defense files a motion for a new trial.
The penalty for manslaughter is imprisonment in the state penitentiary for not less than one or more than 20 years.
There was no scene when the verdict was announced, save for the weeping of Mrs. Minnie Musser, 2713 Kenmore Blvd., and Mrs. Elizabeth Ries, 74 S. Portage Path, two members of the jury. They had given way to tears during the summing up by the lawyers in the afternoon and were crying when the jury filed into the courtroom with the verdict.
Editor’s Note: This was a neighbor v. neighbor dispute that turned deadly. He was sentenced to 10-20 years in state prison.
Rob Reaches the Threshold:
Dear Readers,
As 2024 winds down, I find myself reflecting upon the year from a personal standpoint. I got married, moved into our first home, developed new relationships, gained evolving knowledge in new areas of law in my career, went to Augusta to see the Masters, witnessed another (heartbreaking) Yankees World Series run, and so much more. I hope you all have had a wonderful year to look back and reflect upon as well, and I want to extend my warmest wishes to you all for the upcoming Holidays.
For an early Christmas gift, the Court of Appeals issued a decision that analyzes a question which splits jurisdictions in the state – specifically whether prejudgment interest should begin to accrue as of a finding of "liability" or upon a subsequent finding that a plaintiff sustained "serious injury" as defined by Insurance Law Section 5102(d). Unfortunately, the majority for the Court of Appeals punted for the time being, but a scathing dissent by the thin minority provides a powerful insight into how the Court may approach this issue in the future. Hope you all enjoy the read.
Merry Christmas and Happy Holidays,
Rob
Robert J. Caggiano
[email protected]
Fake Padre – 100 Years Ago:
The Akron Beacon Journal
Akron, Ohio
20 Dec 1924
“Ex-Priest” Admits He
Never Was Ordained
DAYTON, Dec. 20. – Rev. William C. Tanner, self-claimed “ex-priest,” has been sentenced to one year at the Dayton work farm on conviction of a charge of contributing to the delinquency of a minor child. Three 15-year-old boys accused Tanner of enticing them to his hotel room. Tanner admitted at the trial that he never had been ordained a Roman Catholic priest. He has been delivering anti-Catholic lectures throughout Ohio. It developed at the trial that Tanner’s advance agent served in a like capacity for Helen Jackson, self-claimed “ex-nun” lecturer.
LaBarbera’s Lower Court Library:
Dear Readers:
It is my first time hosting for the holidays this year. I am getting both antsy and excited for the guests to start arriving. It will be a dash to finish preparation before Saturday, but I am truly looking forward to it all. I am most excited to put together stockings, filled with trinkets and treats. Especially the stockings for the dogs. Hoping everybody has a happy and safe holiday season. It’s hard to believe we are entering into the New Year so soon…
This week I am reporting on a New York County decision denying an insurer’s motion to dismiss. After a disclaimer of coverage was issued in a first-party claim, the insured filed suit against its carrier. The insurer filed a motion to dismiss, stating that the policy terms establish a defense to the breach of contract and implied covenant of good faith claims, as a matter of law. However, the court denied the motion and stated that the insured had submitted evidence sufficient to establish that there was, at least, a question regarding whether the property was “vacant or unoccupied” at the time of the fire, sufficient to defeat a motion to dismiss.
See you in 2025!
Isabelle
Isabelle H. LaBarbera
[email protected]
Poisoned Mind, Poisoned Wife – 100 Years Ago:
Daily News
New York, New York
20 Dec 1924
DAUGHTER CALLS
HIGHT VICTIM OF
DISORDERED MIND
Mt. Vernon, Ill., Dec. 19. – Hildred Hight, sweet faced 17-year-old daughter of Lawrence M. Hight, former Methodists minister, here today in took the stand the insanity defense of her father who is said to have killed her mother with poison.
She gave testimony to which alienists will base their conclusions that the former clergyman is suffering from a disorder of the mind described as a sort of presenile dementia.
The girl said her father had a great penchant for exaggeration, that he argued whether he was right or wrong: that he sometimes didn’t appear to know what he was doing; that he has queer hallucinations.
“Father,” she said, “had the flue when we lived down at Thebes, Ill., four years ago. He has always had terrible headaches since then and always carried aspirin around with him. After he got well from the flu he cried out and grabbed his head one day. He has been doing that since very often.”
Two boyhood friends of the preacher testified how he had fallen on his head a number of times during his school days.
The defense of Mrs. Elsie Sweetin, who is on trial with Hight for the poisoning of her husband, Wilford, closed late yesterday.
Lexi’s Legislative Lowdown:
Dear Readers,
I hope everyone is enjoying the holiday season. I am looking forward to getting to see much of my extended family in the next couple of weeks. Luckily my grandma is hosting this time, so I am off the hook!
This week’s column addresses the new Workers’ Compensation legislation signed by Governor Kathy Hochul on December 6, 2024. It will allow for Workers' Compensation claims for mental injuries that are premised upon extraordinary work-related stress.
Thanks for reading,
Lexi
Lexi R. Horton
[email protected]
Two Wives are Better than … – 100 Years Ago:
Brooklyn Eagle
Brooklyn, New York
20 Dec 1924
CONVICTED OF BIGAMY.
SENTENCE IS SUSPENDED
Mineola, L. I., Dec. 20 – Charged with bigamy, Martin Thorn of Hempstead, a chauffeur employed by Dr. Roy D. Grimmer, was arraigned before Supreme Court Justice James C. Van Siclen yesterday and was given a year in jail. Sentence was suspended, however, pending his good behavior.
Thorn comes from Ireland and when he came to this country he left a wife on the old sod. He evidently forgot that, because he took unto himself another after he came to this country but declares that he never lived with her.
North of the Border:
"... Better Watch Out, Better not Cry, Santa Claus may be delivering a coverage dispute to an insurer near you ..."
Many of our offices will be closed between Christmas and New Year’s. It is a time to slow down and reflect – or catch up!
Experience shows that the holiday season may turn out to be a gift that keeps on giving, as it may generate coverage disputes in the New Year. Not to put a damper on the season's festivities but:
- Just because Mom invites you over for the Christmas turkey and stuffing doesn't mean you are member of her household (and therefore an unnamed insured under her homeowners' policy): Sequeira v. Sequeira, 1995 Cani 1222 (BC SC).
- In fact, even the decision of your 20-something to come home from school for the Christmas holidays can give rise to a coverage dispute: Personal Insurance Company v. Allstate Insurance Company, 2009 Cani 64827 (ON SC), as to whether the student who was attending school on a scholarship was a dependent of his parents and therefore entitled to accident benefits under their auto policy.
- Care must be taken, even while Christmas shopping, as just going to the Mall can generate a coverage dispute: Jakubik v. Liberty Mutual Insurance Company, 2001 ABAC 836 (A claim for a stolen purse, Christmas gifts and the van that housed the purse and gifts was allowed as the insurer was unable to prove firstly that the insured never actually paid for the van from its former owner and secondly that the insured was a party to a plan to strip and damage the van, to ensure recovery of the full value for the van via the insurance proceeds.)
- If you do suffer loss or injury over the Christmas break, give notice without delay, because the festive holidays won't excuse a failure to give timely notice under a claims-made policy: Stuart v. Hutchins et al.; American Home Assurance Company et al., third parties, 1998 Cani 7163 (ON CA).
- Even while drinking your eggnog, it is always key to keep priorities in mind. Who will have the duty to defend when the company Christmas Party held at the Boss’ home gets out of hand? The homeowner's insurer of the residence where it happened or the GL insurer of the business who paid for the party? In keeping with the belief that it is better to give than to receive, the answer is probably both! Doucet v State Farm Fire and Casualty Company, 2017 ONSC 1222 (Cani).
- While watching your Yule log burn, coverage issues should never be far from your mind. What is the peril of ‘fire’ and when does ‘self-ignition’ occur? A shipment of Christmas tree wreaths was extensively damaged while being transported from Nova Scotia to New England in the trailer in November 1985. When the driver opened the trailer door at the destination, there was a gust of warm air which blew the door open. There was no evidence of actual smoke or fire in the trailer. Many of the wreaths were described as "dead brown" while others were partially affected. The trial judge and the Nova Scotia Court of Appeal both held that heat alone is not fire: Where there is no smoke, charring, or flame there is no fire and therefore no ignition: Duncanson v. Continental Insurance Co. (1990), 96 N.S.R. (2d) 159 (CA).
- When is a Christmas tree not a Christmas tree? When it is a riser, splitting the flow of propane from a propane tank farm to outbuildings and living quarters at a work camp: Slocan Forest Products Ltd. v. Trapper Enterprises Ltd. and Daryl H. Zimmerman, 2011 BCCA 351; when it is an assembly of valves, spools, pressure gauges and chokes fitted to the wellhead of a completed well to control production: Canadian Superior Oil Ltd. v. Paddon-Hughes Development Co., 1969 Cani 716 (AB CA).
- Even when the holiday passes, the danger of a Christmas coverage dispute is not over. Did the kids receive a snowmobile under the tree (or, at least in the driveway)? No, while Mom and Dad had bought it at Christmas for the kids to use, they retained ownership, compelling their insurer to defend and indemnify against its negligent use and operation by their children: Cleworth v. Zaccaria, 1987 Cani 2686 (BC CA).
Best Wishes and Happy Holidays to all!
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]
- One of the First Cases Deciding that an Insured Failed to Disprove Prejudice after Notice was Delayed Over Two Years
- Either a Party is an Insured, or it is Not. In this Case, it is Not
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Number of Families Misrepresentation Supports Carrier Rescission
- Total Loss Does Not Automatically Bar Application of Co-Insurance Type Penalties
- Reciprocal Insurer Could Not Avoid Assessments to Statutorily Created Defendant Simply Because it did Not Issue Homeowners Policies
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- Underlying Plaintiff Lacks Standing for CUTPA/CUIPA Claim Against Insurer
- Grange’s Technical Defenses to AI Coverage Quashed by Court
RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]
- Plaintiff Was Required to Seek Workers’ Compensation Benefits for Basic Economic Loss Prior to Pursuing his No-Fault Claim
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
- Court Grants Carrier’s Motion to Compel Arbitration Of Claim For Additional Insured Coverage
STORM’S SIU
Scott D. Storm
[email protected]
- Question of Fact Whether Insured Fabricated Repair Invoices Breaching Concealment or Fraud Condition in Light of Conflicting Testimony Creating a Credibility Issue for Determination by the Jury
- First-Party Property Claim Denial Upheld Due to the Insureds’ Failure to Submit Proof of Loss Form. Submission to an EUO did not Satisfy the POL Condition. Claims for Breach of the Implied Covenant of Good Faith and Fair Dealing, and Violation of New York's General Business Law Also Dismissed
- Insurer Did Not Meet its Burden to Show that it Prepared Redacted Portions of the Claim Notes in Anticipation of Litigation Rather Than in the Ordinary Course of Business. Therefore, the Work Product Doctrine Did Not Apply
- Declaratory Judgment Granted to Liability Insurer as the Property Did Not Constitute a “Residence Premises”. Sworn Deposition Testimony Trumps a Later Inconsistent Affidavit. The Insured Signed the Application and One Who Signs a Document is Presumed to Have Read and Understood its Contents Despite an Alleged Language Barrier
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- Insurers of Paint Company That Marketed and Sold Lead Paint Not Obligated to Indemnify Paint Company for Payments Made into Abatement Fund to Mitigate Hazards of Lead Paint
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
- Supreme Court Holds Employee’s Injury is Covered Under Neither Worker’s Compensation Policy Nor Employer’s Liability Policy
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
- Lack of Consideration Invalidates Assignment of Policy Rights, Thus Barring Standing to Recover Multi-Million Dollar “Judgment”
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
- Majority for the Court of Appeals Refuses to Answer the Certified Question of Whether Prejudgment Interest Accrues When There is a Finding of Liability or When There is a Finding of Serious Injury as Defined by Insurance Law § 5102(d) After Determining This Question Was Not Properly Preserved Before the Trial Court
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
- Motion to Dismiss Denied, as Court Held that Policy Terms did Not Establish Entitlement to Relief under CPLR §3211(a)(1) or (7)
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
- Legislation to Allow New Yorkers to Apply for Workers’ Compensation for Extraordinary Work-Related Stress
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
- Absent Exceptional Circumstances, the Duty of a Liability Insurer to Defend is to be Determined in Proceedings Separate and Apart from the Underlying Action
Merry Christmas and Happy New Year. See you in 2025.
Dan
Hurwitz Fine P.C. is a full-service law firm providing legal services throughout the State of New York and providing insurance coverage advice and counsel in Connecticut and New Jersey.
In addition, Dan D. Kohane is a Foreign Legal Consultant, Permit No. 0119144, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]
COPY EDITOR
Evan D. Gestwick
[email protected]
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
[email protected]
Michael F. Perley
Agnieszka A. Wilewicz
Lee S. Siegel
Brian F. Mark
Scott D. Storm
Domenica D. Hart
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
NO-FAULT/UM/SUM TEAM
Dan D. Kohane
[email protected]
Ryan P. O’Shea
[email protected]
Kyle A. Ruffner
[email protected]
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Topical Index
Peiper on Property and Potpourri
Lee’s Connecticut Chronicles
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]
12/12/24 244 Madison Realty Corp. v. Utica First Insurance Company
Appellate Division, First Department
One of the First Cases Deciding that an Insured Failed to Disprove Prejudice after Notice was Delayed Over Two Years
Utica First’s (“UFIC”) commercial general liability policy was issued to nonparty Pirgos Food Corp., which leased space from plaintiffs 244 Madison Realty Corp. and Maxwell-Kates, Inc. and employed the plaintiff in the underlying action. The UFIC policy required an insured to "promptly give notice" to defendant once it became aware of any fact indicating that there might be a claim against it.
The insureds did not give defendant notice of the underlying personal injury claim against 244 Madison Realty Corp. and Maxwell-Kates for nearly two and a half years after the personal injury action was commenced, irrespective of any excusable delay. As a result, plaintiffs had the burden of showing that defendant was not prejudiced by the delay (see Insurance Law § 3420[c][2][A][ii]).
The insureds failed to sustain their burden. The court rejected plaintiffs' argument that defendant's June 2017 letter disclaiming coverage did not explain in sufficient detail how defendant suffered actual prejudice from the delay. Under the facts presented here, where plaintiffs failed to timely give notice of a claim, the burden rests on plaintiffs to show a lack of prejudice, not on defendant to show that the prejudice exists (id.). In any event, defendant did sufficiently show that it was prejudiced by the two-and-a-half-year delay, as the delay prevented defendant from examining site conditions near the time of the incident or interviewing witnesses while their memories were still fresh.
Similarly, the court rejected the argument that the insurer was not prejudiced because it participated in the underlying litigation. UFIC participated in the litigation to address contractual and common-law indemnification and contribution claims, not the tort issues raised in the personal injury action.
We also reject plaintiffs' argument that defendant waived its policy defenses because it did not disclaim with the requisite specificity. Even if the June 2017 disclaimer letter failed to acknowledge that 244 Madison and Maxwell-Kates, Inc. were additional insureds under defendant's policy, the letter correctly and unambiguously disclaimed coverage based on plaintiffs' delay in informing defendant of the claim. As a result, the disclaimer properly barred coverage.
12/10/24 New Sower Christian Church, Inc., v. Wesco Insurance Co.
Appellate Division, First Department
Either a Party is an Insured, or it is Not. In this Case, it is Not
A party that is not named an insured or additional insured on the face of the policy is not entitled to while plaintiff argues that Wesco should be estopped from rescinding the Wesco policy on the basis of reformation, "[a] claim for reformation of a written agreement must be grounded upon either mutual mistake or fraudulently induced unilateral mistake". Based on the undertaking agreement between the parties, defendant Cabrera Realty Corp.'s identification as the sole insured on the Wesco policies after the sale was no mistake, but rather, the parties' conscious choice.
Even where the nature of the risk the insurer intended to cover remains unchanged by the conveyance, courts have found that a third party is not entitled to coverage, unless the insurer, before the loss, consented to the policy's assignment In this case, there was never an agreed-to transfer pursuant to the no-transfer clause of the Wesco policy. The fact that plaintiff has an insurable interest in the premises does not entitle it to coverage under the Wesco policies but rather merely entitled it to procure its own coverage.
Since plaintiff is not the named insured on the subject policy, the arguments made as to rescission, unjust enrichment, and estoppel are unavailing.
Editor’s Note: Attaboy Max.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property
12/18/24 Estiverne v. MIC Gen. Ins. Corp.
Appellate Division, Second Department
Number of Families Misrepresentation Supports Carrier Rescission
Plaintiff applied for coverage from MIC. In the application, plaintiff represented the insured dwelling was a two-family property. In fact, it was a three-family dwelling.
The premises were damaged by fire, and the misrepresentation of the number of families was discovered during the subsequent investigation. At which time, MIC issued a complete rescission of the of the policy based upon the materiality of the misrepresentation made in the underwriting process. Here, MIC was able to show materiality because it would not have issued the same policy had an accurate number of families been disclosed.
In affirming the rescission, the Second Department noted that even if the application was submitted without plaintiff’s “actual or apparent authority” she ratified the representation when she accepted the policy written for a two-family dwelling only.
12/12/24 Moshe v. Church Mutual Ins. Co.
Appellate Division, Third Department
Total Loss Does Not Automatically Bar Application of Co-Insurance Type Penalties
Plaintiff was engaged in the construction of a new elementary school, and as part of its duties, secured a $2.7 million builders risk policy with Church. Approximately six months later, plaintiff recognized that it needed to increase the limits of the policy to $3.5 million. To do this, it allegedly requested the increase from its broker, Fairmont.
We are advised that Fairmont allegedly sent an email requesting the expanded policy limit. It is disputed whether Church actually received the request, but it is undisputed that no one from Church ever agreed to raise the limits requested by plaintiff. It is further undisputed that Church both mailed, and emailed, copies of the policy to Fairmont well in advance of the loss, and that the policies unambiguously provided a limit of $2.7 million.
Importantly, the policies contained a “Need for Adequate Insurance” (“NFAI”) clause which operated akin to a co-insurance clause. Specifically, the NFAI provided a mathematical formula through which the adjusted loss was run. The result of that equation, then, set what the insurer was obligated to pay. If the policy limit was less than the total claimed loss, it followed that the NFAI clause would trigger and limit the amount of coverage available.
Plaintiff did not dispute that the NFAI clause existed, nor did he dispute that the NFAI clause was appropriately calculated by Church’s overseeing claims professional. Plaintiff’s argument was that the NFAI clause operated like a co-insurance clause, and like co-insurance it should be inapplicable where, as here, there was a total loss of the insured structure.
Interestingly, the Appellate Division agreed that the NFAI clause worked and operated like a more traditional co-insurance clause. The court, however, rejected the argument that a total loss precluded the application of the clause. The court noted that under a traditional co-insurance clause, a total loss usually mooted the impact of the clause and, as such, it was not applied because doing so would be pointless. Or, as the Third Department described, you would not apply a co-insurance penalty when to do so would still result in a payout calculation that exceeded the applicable policy limit. Here, of course, the NFAI calculation did not result in a loss in excess of the policy, but rather approximately a 25% reduction in the amount of coverage available.
As a final point, the court rejected plaintiff’s arguments that it reasonably relied upon the fact that its request for increased limits was processed by the broker. The court noted that plaintiff was in possession of the policy well in advance of the loss, and thus was on notice of the limits of coverage. This is the case whether plaintiff actually reviewed the policies or not.
Potpourri
12/11/24 New York Schools Ins. Foundation, Inc. v. New York Prop. Ins. Underwriting Association
Appellate Division, Second Department
Reciprocal Insurer Could Not Avoid Assessments to Statutorily Created Defendant Simply Because it did Not Issue Homeowners Policies
Plaintiff operates as a reciprocal insurer under Insurance 5402. Under Section 5402, parties seeking to operate as a reciprocal must be a member of the New York Property Insurance Underwriting Association. This, as detailed in the opinion, required all members to pay assessments to maintain active membership.
Plaintiff argued that it was not compelled to be a member of the Underwriting Association because it did not issue homeowners policies. Its argument is based on the language of the statute which provides “consisting of all insurers authorized to write and engaged in writing within this state, on a direct basis, fire and extended coverage, including insurers covering such perils in homeowners and commercial multiple peril package policies.” The Underwriting Association disagreed with plaintiff’s interpretation and argued that while carriers issuing homeowners policies are included within the scope of the Section, it did not exclude those carriers who did not issue such policies. As such, the counter-claimed for a declaration that plaintiff was a member of the Underwriting Association and that it owed the now past due assessment.
The Appellate Division, Second Department, agreed with the defendant Underwriting Association. It noted that the language of Section 5402 does not exclude anyone, and certainly not carriers who elect not to issue homeowners policies. Indeed, there is nothing in the section which compels members to issue such policies. Accordingly, the defendant’s application was granted, plaintiff was deemed to be a member of the Underwriting Association, and plaintiff was further directed to issue payment for the delayed assessments.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
12/10/24 Johnson v. Farmers
Superior Court of Connecticut, New Haven
Underlying Plaintiff Lacks Standing for CUTPA/CUIPA Claim Against Insurer
The Superior Court granted Farmer’s motion for summary judgment against Johnson, finding that Johnson lacked standing to sue Farmers. Johnson originally was an underlying plaintiff, suing Farmer’s insured for a 2019 motor vehicle accident. In 2020, Johnson made a $1.25 million offer of judgment that was rejected. In 2022, however, the case settled for $1.25 million.
One would think that this would be the end of the dispute, but not so. Johnson brought this action against Farmers, seeking statutory bad faith damages for the two-year delay in reaching the settlement, chiefly about $150,000 incurred in obtaining a prejudgment remedy and additional attorney’s fees. Johnson argued that Farmers acted in violation of CUTPA/CUIPA by making low ball offers, putting its insureds’ assets at risk, causing plaintiff to take further litigation action, and Farmer’s negotiation tactics represent a trend by it and other insurance companies where they have failed to make fair and reasonable offers during negotiations.
Johnson argued that under the Sandy Hook ruling, in Soto v. Bushmaster, that direct privity was no longer a requirement for standing to bring a CUTPA/CUIPA claim. The court did not see it that way, agreeing with Farmers that the law remained unchanged. In Carford v. Empire, the Connecticut Supreme Court held that a third-party plaintiff has no standing against the defendant’s insurer (absent either privity of contract or a judgment or assignment). The court determined that Soto addressed claims of unfair trade practices in advertising which was not at issue in the present case and did nothing to abrogate the privity requirement in the insurance dispute context.
12/16/24 A-Quick Pick Crane Service, Inc. v. Grange Mutual Casualty Co.
United States District Court, D. Connecticut
Grange’s Technical Defenses to AI Coverage Quashed by Court
The court found that Grange owed additional insured coverage to the plaintiff, AQP, for a crane accident. Luis Meza was injured by a crane while working on an apartment construction project in Norwalk. The project’s general contractor was US Framing, which leased a crane from AQP and in a separate agreement leased a crane operator from AQP.
Because of delays elsewhere, the crane identified in the agreement was not available and a crane of the same type but bearing a different serial number was delivered. In addition, the contract called for a four-month rental, however, the rental agreement was extended verbally for two additional months during which the accident occurred.
AQP tendered the claim to Grange as an additional insured under the US Framing policy. Grange denied coverage, arguing that the Short Term Crane Agreement (for the operator) did not satisfy the policy’s automatic additional insured provision for Leasor of Leased Equipment. It further argued that the accident occurred after the original four-month rental period and that the oral extensions violated the agreement and therefore did not afford coverage. Ironshore, AQP’s CGL carrier, afforded a defense and settled the underlying case. Ironshore was a co-plaintiff on an equitable subrogation basis.
The court found that the Crane Lease Agreement clearly satisfied Grange’s automatic additional insured endorsement. The Endorsement provided:
XI. Additional Insured – Lessor of Leased Equipment – Automatic Status When Required In Written Lease Agreement With You
A. SECTION II – WHO IS AN INSURED is amended to include as an additional insured any person or organization from whom you lease equipment when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy. Such person or organization is an insured only with respect to liability for “bodily injury”, “property damage”, or “personal and advertising injury” caused, in whole or in part, by your maintenance, operation or use of equipment leased to you by such person or organization. A person's or organization's status as an additional insured under this provision XI. ends when their contract or agreement with you for such leased equipment ends.
Additional Insureds under the Grange Policy, the court wrote, include “any person or organization from whom you”—the Named Insured—“lease equipment when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.” The Lease did so. It required US Framing, the Named Insured, to name AQP as an additional insured on a primary basis. The court declined to only look to the Crane Agreement as opposed to the Lease Agreement.
The lease preceded the Crane Agreement, and the court concluded, the Crane Agreement does not modify or replace the insurance terms of the Lease Agreement. “The Crane Agreement is a different kind of contract than the Lease. It identifies the crane's lessee, the job site location, the crane operator, and the crane operator's hours. See Crane Agreement, Doc. No. 49-7 at 2. The Crane Agreement and the Lease overlap insofar as they both contain provisions identifying the crane(s), indemnification provisions, and merger clauses.”
The court also rejected Grange’s argument that that Lease was not fulfilled because a different piece of equipment was delivered than identified in the Lease. “That argument is unavailing. To become an Automatic Additional Insured under the Grange Policy, AQP must (a) enter into a contract with US Framing that requires AQP to be added as an additional insured, (b) lease equipment to US Framing, and (c) lease the equipment to US Framing while its lease of that equipment was in effect. AQP has met those three requirements…..Despite the cranes’ different years and serial numbers, AQP leased a crane to US Framing during the Lease's contractual period.”
Next, the court rejected Grange’s argument that that accident did not happen during the term of the Lease because it could only be extended by written agreement. The Lease provided that it could not be modified, except in writing. The court reasoned that the Lease was extended either orally or by conduct but that did not operate to modify the Lease. Therefore, the Lease was still in place on the date of loss.
As a result, the court held that AQP was an additional insured under the Grange policy and that Grange was obligated to reimburse Ironshore for its defense and indemnity of the insured. [AQP’s claim for breach of the covenant of good faith and fair dealing easily denied.]
RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]
12/12/24 Gary Quick v. State Farm Mut. Auto Ins. Co.
Appellate Division, Third Department
Plaintiff Was Required to Seek Workers’ Compensation Benefits for Basic Economic Loss Prior to Pursuing his No-Fault Claim
The plaintiff was operating a tractor trailer, which had been leased from a company insured by the defendant State Farm, in the course of his employment when he was injured. Plaintiff applied for no-fault benefits through the insurer and stated on his application that although he was eligible for workers’ compensation, his employer did not have worker's compensation insurance. State Farm notified plaintiff that, due to the question of whether he was eligible for workers’ compensation coverage, it was denying coverage for his no-fault claim. State Farm advised the plaintiff to provide verification if his workers’ compensation claim was denied so it could consider his no-fault claim.
Plaintiff commenced this action challenging the denial, arguing he was an independent contractor, and his employer had no workers’ compensation insurance. Plaintiff sought recovery of lost wages, medical expenses and other economic losses arising from the accident. State Farm moved for Summary Judgment dismissing the complaint on the basis that plaintiff was required to seek workers’ compensation benefits before seeking no-fault coverage. The Supreme Court granted the insurers motion, holding the action was improper because plaintiff failed to first seek benefits through the Uninsured Employer’s fund.
As a general rule, when an employee is injured in the course of his or her employment, his or her sole remedy against the employer lies in his or her entitlement to a recovery under the Workers' Compensation Law. Where an employer fails to secure such coverage, an injured employee can simultaneously pursue a personal injury action. Here, the parties did not contest that plaintiff's employer did not have workers' compensation coverage at the time plaintiff sustained his injuries, and, therefore, plaintiff was able to commence a plenary action against his employer. Plaintiff commenced a separate personal injury action that settled, with his recovery limited pursuant to Insurance Law Section 5104, which precludes recovery for basic economic loss for personal injuries arising out of negligence in the use or operation of a motor vehicle. Therefore, plaintiff sought no-fault coverage to recover basic economic loss.
Pursuant to the No-Fault Law, automobile insurers must provide up to $50,000 of coverage for an insured's basic economic loss. (Insurance Law § 5102 [a]). However, because no-fault benefits and workers' compensation benefits are meant to cover the same types of loss, payments to reimburse a person for basic economic loss for personal injury arising out of the use or operation of a motor vehicle may be reduced by the amount recoverable under workers' compensation benefits. Workers’ compensation is primary, and an injured party may not elect between workers' compensation benefits and no-fault benefits even when the employer has failed to provide workers' compensation coverage, because the Uninsured Employers' Fund steps into the shoes of the carrier by acting as a surety. Therefore, the court determined that the fact that plaintiff's employer did not possess workers' compensation coverage at the time of the accident did not render him ineligible for Workers' Compensation benefits. Rather, it changed the potential source of payment. As such, plaintiff was required to seek workers' compensation benefits as the primary source of payment for his basic economic loss, and only then could he seek payment of no-fault benefits with his recovery correspondingly reduced by what he received through workers' compensation.
Accordingly, the Appellate Court Upheld the Supreme Court’s decision granting the insurer’s motion for summary judgment dismissing the plaintiff’s complaint.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
12/17/24 The Ohio Sec. Ins. Co. v. Kinsale Ins. Co.
United States District Court, S.D. New York
Court Grants Carrier’s Motion to Compel Arbitration Of Claim For Additional Insured Coverage
The Ohio Security Insurance Company (“Ohio Security”) sued Kinsale Insurance Company, seeking additional insured coverage for Ohio Security's insureds, Equinox Hudson Yards, Inc., Equinox Holdings Inc., Ery Tenant LLC c/o The Related, Ery North Tower RHC Tenant LLC, Eclipse Development Inc., and The Related Companies, L.P. (collectively the “Equinox Entities”), in connection with a personal injury lawsuit brought against the Equinox Entities and Defendant Black Bull Builders LLC (“Black Bull”). Kinsale denied any obligation to defend or indemnify either Black Bull or the Equinox Entities under the Kinsale Policy.
Before reaching that issue, however, Kinsale moved to compel arbitration of Ohio Security's claims and Black Bull's crossclaims based on an arbitration provision in the Kinsale Policy. Ohio Security argued that it is not bound to the terms of the arbitration provision because it is not a signatory to the Kinsale Policy and also that its claims are not within the scope of the provision.
The Court compelled arbitration. In seeking relief, Ohio Security necessarily invoked the Kinsale Policy—and its terms. Its entitlement to declaratory judgment depends entirely on the scope of the Kinsale Policy's coverage provisions and whether the Equinox Entities qualify as “additional insureds”. Courts frequently found non signatories to arbitration provisions in insurance policies to be bound by the provisions where the non-signatories sought declarations that their insureds were “additional insureds” under those policies and thereby entitled to coverage.
While Ohio Security also sought equitable subrogation, that claim too fell under the arbitration provision of the Kinsale Policy. Despite attempting to reframe its claim as one for equitable contribution, Ohio Security explicitly and unambiguously asserted that “consistent with the equitable subrogation right afforded to [it] under New York law, [it] is subrogated to the rights of the [Equinox Entities], and further that it is “entitled to reimbursement of all defense fees.” Ohio Security's equitable subrogation claim did not seek a proportional reimbursement of defense fees as would be consistent with a theory of contribution, such that the Court declined to characterize the claim as such.
Maxwell’s Minute: The Court does cite two cases for the idea that a contribution claim by an insurer to enforce its independent rights outside of the contract may be different. Danaher Corp. v. Travelers Indemnity Co., 10-cv-121 (JPO), 2014 WL 7008938, at *8-9 (S.D.N.Y. Dec. 12, 2014); Certain Underwriters at Llyod's, London v. Allied Professionals Insurance Company, 22-cv-14 (WMS) (HKS), 2023 WL 4449570, at *4-6 (W.D.N.Y. July 11, 2023). The outcome of this case may very well have been different had Ohio Security sought equitable contribution expressly in the complaint in order to enforce its own interest in contribution, rather than equitable subrogation in order to stand in the shoes of its insured, as a party in privity with the other carrier.
An important distinction.
STORM’S SIU
Scott D. Storm
[email protected]
11/15/24 Goldstein v. Amguard Ins.
United States District Court, E.D. New York
Question of Fact Whether Insured Fabricated Repair Invoices Breaching Concealment or Fraud Condition in Light of Conflicting Testimony Creating a Credibility Issue for Determination by the Jury
[Abridged] Goldstein brings this breach of contract action against AmGUARD seeking coverage under a policy for losses related to a flood that damaged Plaintiff's home. Before the Court is Defendant's motion for summary judgment, seeking to dismiss the complaint in its entirety, and for summary judgment in favor of Defendant on its Counterclaims against Plaintiff on the theory that Plaintiff vitiated coverage by violating the concealment or fraud provision of the policy. For the reasons set forth below, Defendant's motion is denied in its entirety.
Plaintiff resides in a home in Brooklyn for which AmGUARD issued Homeowner's Insurance Policy which was effective when Plaintiff's personal and physical property were destroyed by a flood. Plaintiff hired non-party Medina Contractors LLC to perform repairs on the Premises. Jonathan Medina testified that he was paid for work performed at the property.
Defendant has paid Plaintiff insurance proceeds totaling $51,751.50 for his claim. However, Plaintiff asserts that Defendant owes additional monies, giving rise to this lawsuit.
Plaintiff's insurance policy contains a provision prohibiting concealment or fraud. Defendant explains that it denied coverage because, it says, Plaintiff submitted fraudulent construction invoices in support of his damages claims and provided false testimony regarding these invoices and the work performed.
The first invoice Plaintiff provided was a text-searchable PDF titled "Invoice for Mottel Goldstein" for $60,000.00, created by Medina Contractors, who identified the Premises' address, included a job description, and was on "Medina Contractors LLC" and "Johnathan Medina" letterhead.
Plaintiff produced a second invoice titled "Invoice for Mottel Goldstein" for $15,000. During his deposition, Plaintiff stated that the $15,000 Invoice was provided by Medina Contractors as an estimate for the additional repair work that needed to be completed at the Premises; was disclosed as a text-searchable PDF; identified the Premises address; was provided on "Medina Contractors LLC" and "Johnathan Medina" letterhead; included a section titled "Job Description;" was created by Medina Contractors; and that the items listed under Job Description were not completed on the subject premises.
Mr. Medina testified he did not recall Medina Contractors creating any documents related to construction work at the Premises. Mr. Medina also testified that he nor anyone else from Medina Contractors created the $60,000 Invoice. However, Plaintiff points out that Mr. Medina's testimony was inconsistent.
Plaintiff stated (1) he did not know who created the $60,000 Invoice, (2) he did not create it, and (3) that Medina Contractors created it. Plaintiff testified he received the $60,000 Invoice from Medina Contractors. However, Defendant says Mr. Medina testified that he never provided Plaintiff with an estimate for additional future work to the floors, which would include the $15,000 Invoice. Plaintiff again "admits" this testimony occurred but notes that Mr. Medina contradicted himself many times during his deposition. Medina stated in his deposition that he never saw the $15,000 Invoice prior to the deposition, that he did not prepare the $15,000 Invoice, and that no one else on behalf of Medina Contractors prepared it.
Plaintiff has not asserted that Medina Contractors definitively created the $15,000 Invoice — rather, Plaintiff stated in his deposition "I assume so" when asked twice about whether Medina Contractors created the $15,000 invoice, and that he did not create it himself Additionally, Plaintiff admits Mr. Medina testified that he never provided Plaintiff with an estimate for additional work. Notably Mr. Medina testified that he did not remember if Medina Contractors prepared estimates for the work. Conversely, Plaintiff testified that Medina Contractors prepared estimates for the repair work.
Defendant says Mr. Medina testified that neither he nor Medina Contractors performed four of the line items in the $60,000 Invoice: "Doors," "New Vanity," "Wiring," or "Outlets." However, Plaintiff asserts that Medina Contractors did in fact perform such repair work including "the painting, molding, doors, the floors, base molding, everything that ... was necessary to be done that [was] caused by the water overflow."
Plaintiff's testimony directly contradicts Mr. Medina's. Plaintiff testified that each of the line items (vanity, wiring, outlet, and doors) in the $60,000 Invoice were completed (presumably by Medina Contractors. Plaintiff notes that Mr. Medina did not remember the answer to many questions and contradicted himself repeatedly during his deposition such that his testimony cannot be trusted or used as the basis for Defendant's Motion.
Defendant asserts that it is entitled to summary judgment because Plaintiff violated the insurance policy provision prohibiting concealment or fraud. Defendant contends Plaintiff intentionally concealed or misrepresented material facts or circumstances by presenting two invoices, one for $60,000 and another for $15,000, as proof of damages. Defendant asserts the Invoices were not prepared by Medina Contractors, which Plaintiff knew or should have known before exchanging them with Defendant in discovery. Defendant further contends that Plaintiff lied under oath by claiming in his deposition the Invoices were created by Medina Contractors. Thus, Defendant asserts that Plaintiff engaged in fraudulent conduct therefore voiding insurance coverage.
Under New York law, an insurance contract is void on the basis of fraud if the insurer can show (1) "the insured willfully made a false and material statement under oath" and (2) did so "with the intent to defraud the insurer." A fraudulent proof of loss, such as a written misrepresentation, will undercut recovery of insurance proceeds so long as the misrepresentation was both material and willful. Fraud must "be proven by clear and convincing evidence to ensure that unintentional false statements do not form the basis for vitiating coverage."
First, Defendant has failed to establish that there is no genuine question as to whether the Invoices were, in fact, fraudulent. Defendant relies solely on Mr. Medina's testimony asserting that he, nor anyone at Medina Contractors, created the Invoices. At numerous points in his deposition, Mr. Medina stated that he did not remember various aspects of the job and did not recall communications related to the work performed or the creation of the Invoices.
The record clearly shows there is a genuine dispute as to the falsity of the invoices. As discussed above, Plaintiff has claimed in his deposition that he did not create the $60,000 invoice, does not know who did, and believes Medina Contractors created it. Notwithstanding the high bar for proving insurance fraud under New York law, whether the invoices were falsified clearly turns on the credibility of both Mr. Medina and the Plaintiff. Credibility is, as in almost all cases, an issue for the trier of fact.
Defendant's argument that, because Mr. Medina's first name — "Jonathan" — was misspelled on both the Invoices and a check signed by Plaintiff, Plaintiff must have fraudulently created the invoices, is unavailing. This Court will not grant summary judgment without conclusive evidence as to the falsity of the statements at issue.
Further, there remain genuine questions of fact whether Mr. Medina had any email or text communications with Plaintiff, whether Plaintiff created the Invoices submitted by Plaintiff in discovery, and therefore whether the Invoices are fraudulent. In his deposition testimony, Plaintiff claimed he did not recall how he received the Invoices, and that Mr. Medina had forwarded Plaintiff text messages and emails in the past. The parties go back and forth in their motion papers over what communications Plaintiff proffered or should have proffered during discovery. Clearly, there remains a question of fact about what communications occurred between Plaintiff and Mr. Medina. Furthermore, Defendant's insistence that the searchable PDF demonstrates Plaintiff fraudulently created the Invoices, without more, is not conclusive evidence warranting summary judgment in its favor.
Second, AmGUARD has not established that there is no genuine issue of fact as to whether, as it argues, Plaintiff misrepresented that Medina Contractors completed all of the work set forth in the $60,000 Invoice, specifically four line items: "Doors," "New Vanity," "Wiring," or "Outlets." Defendant asserts that Mr. Medina testified that he and his company did not perform any of the line items: that he did not work on the "doors," "vanity," and "outlets." However, Defendant misrepresents Mr. Medina's deposition testimony as it relates to "wiring." Medina did not claim that he did not work on the "wiring", he "stated that he did not remember removing or installing any wiring at the Premises."
Furthermore, Defendant mischaracterizes Mr. Medina's testimony by claiming he testified the company also did not perform any of the line items on the $60,000 invoice. Defendant's line of questioning asked "Did you remove or install" the four line-items. Nowhere in the deposition transcript does Medina or defense counsel clarify whether anyone else from Medina Contractors performed the line-item tasks. Therefore, Defendant has not met its burden. Even if Plaintiff's statements were in fact misstatements, a material misstatement cannot provide the basis to void a contract unless it was made with the intent to defraud. While AmGUARD points to inconsistencies in Plaintiff's testimony, again, this is a question of credibility that is proper for a jury to decide. Therefore, there remains a material question of fact whether Plaintiff misstated the repairs performed on his property.
Finally, AmGUARD has not presented evidence that any of Plaintiff's purported misstatements were made with the intent of defrauding. A fact finder, with the opportunity to judge the witnesses' credibility in person, must determine the authenticity of the invoices, and, by extension, the truth of Plaintiff's and Mr. Medina's statements under oath.
02/21/24 Pager v. Chubb Grp. of Ins. Companies
United States District Court, E.D. New York
First-Party Property Claim Denial Upheld Due to the Insureds’ Failure to Submit Proof of Loss Form. Submission to an EUO did not Satisfy the POL Condition. Claims for Breach of the Implied Covenant of Good Faith and Fair Dealing, and Violation of New York's General Business Law Also Dismissed
[Abridged] Insureds brought action in state court against property insurer alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of New York's General Business Law, arising from insurers purportedly denying coverage for their dock and gangway, which mysteriously vanished from their property. Chubb moved for summary judgment.
The court held that: Chubb was not liable to insureds for breach of insurance contract under New York law; claim for breach of the implied covenant of good faith and fair dealing was dismissed as redundant; and Chubb was not liable for violation of New York's General Business Law.
The plaintiffs had a Policy with GNIC. The Policy covered, among other things, the plaintiff's property in Brooklyn, New York.
On April 29, 2021, the plaintiffs discovered that their gangway and floating dock, which they had seen earlier that week, had inexplicably disappeared. The property was equipped with security cameras, but unfortunately the cameras that were trained on the dock were not functioning on that date, although they were working two days before the loss.
Six days later, the plaintiffs reported the loss to GNIC. On June 24, 2021, GNIC sent a letter with a proof of loss form via certified mail to the plaintiffs' home address, directing the plaintiffs to complete and return the proof of loss form and to submit to examinations under oath. The return receipt reflects that the letter was delivered to the plaintiffs' address on June 30, 2021. Although the plaintiffs did not sign the receipt, the postal worker did, which signified that the letter had been delivered. The plaintiffs claim that they never received the letter.
After multiple postponements, the plaintiffs eventually participated in separate examinations under oath; during those examinations, GNIC showed each plaintiff the demand letter from June 24, 2021. GNIC explained that the plaintiffs could have "cured their prior defaults" if they had submitted the sworn proof of loss by the "extended or enlarged" deadlines. Although GNIC advised the plaintiffs that they could not process the claim without the proof of loss form, the plaintiffs never provided a signed and sworn proof of loss. In a May 9, 2022, letter to the plaintiffs, GNIC denied their claim because they did not establish a covered loss, complete a sworn proof of loss form, or produce the documents that GNIC requested.
The plaintiffs brought this lawsuit on September 7, 2021—about eight months before GNIC completed its investigation into the loss and denied the insurance claim in May 2022. Even though the claim had not yet been denied, the plaintiffs alleged that the defendants breached the insurance contract because they refused to reimburse them for the loss, unreasonably denied the insurance claim, and acted in bad faith.
GNIC moved for summary judgment arguing that it is entitled to judgment as a matter of law because it did not breach the insurance agreement. GNIC says that the plaintiffs did not comply with the Policy condition requiring a signed and sworn proof of loss and did not establish they suffered a covered loss in the first instance. GNIC also maintains that it had a reasonable basis to deny the insurance claim. It argues that the plaintiff's bad faith claim is duplicative of the claim for breach of contract. Finally, GNIC argues that the New York General Business Law § 349 claim fails as a matter of law because GNIC did not engage in a deceptive business practice.
The Court held that the plaintiffs did not comply with the Policy's unambiguous requirement that they submit a sworn proof of loss, which is an absolute bar to recovery. In addition, their bad faith claim is duplicative and must be dismissed. Finally, to the extent that the plaintiffs mean to bring a claim under New York General Business Law § 349, it is dismissed.
The Policy is explicit that the party claiming a loss must file a proof of loss. The plaintiffs do not deny that the policy required them to submit a signed and sworn proof of loss, and they concede that they never submitted one. Rather, they claim that they fulfilled the proof of loss requirement by complying with a different requirement—that they be examined under oath. The plaintiffs say that their agreement to be examined the under oath fulfills the "conditions precedent to the lawsuit" because "[t]here is absolutely no indication in the policy that an examination' under oath" or "a signed description of the circumstances" are "different from a `signed, sworn proof of loss', or that these are two different and separate requirements within the policy." The plain language of the Policy unequivocally refutes this claim.
A review of the Policy demonstrates that the examination under oath provision and the proof of loss provision are "different and separate requirements." Aside from the clear language of the policy, the provisions are separated in the Policy document; each has its own heading, in bold font. Any conceivable doubt the plaintiffs could have harbored about these requirements was cleared up at their examinations under oath, when GNIC showed each plaintiff the letter that directed them to submit proof of loss statements. At no time, however, did the plaintiffs—one of whom is a lawyer—fulfill their contractual obligation to submit a sworn proof of loss statement.
There is, moreover, nothing unusual or unique about requiring an insured to submit a signed and sworn proof of loss. On the contrary, the proof of loss requirement is a routine provision in insurance contracts. The Court of Appeals of New York has interpreted New York Insurance Law as requiring strict compliance by an insured with an insurer's request for proofs of loss. The plaintiffs' participation in examinations under oath thus does not fulfill the separate and additional requirement to provide a signed and sworn proof of loss.
The plaintiffs also argue that GNIC "cannot show" that it mailed the proof of loss form to the plaintiffs or that the plaintiffs received it, and that the "record raises triable questions of fact as to whether a proof of loss form was actually submitted or mailed to plaintiff." This, too, is meritless. "Proof of an office procedure followed in the regular course of business which establishes that a notice was properly addressed and mailed gives rise to a rebuttable presumption that the notice was actually received by the person to whom it was addressed." A party cannot rebut the presumption merely by claiming that he did not receive the mailing, as the plaintiffs do here. "There must be—in addition to denial of receipt—some proof that the regular office practice was not followed or was carelessly executed so the presumption that notice was mailed becomes unreasonable."
GNIC sent the letter demanding a sworn proof of loss to the plaintiffs' address by certified mail, and a postal worker recorded that the letter was received on June 30, 2021. The attorney who drafted and sent the letter affirmed in an affidavit that he followed his regular office procedures and mailed the request for the Proof of Loss statement, blank Proof of Loss forms for the statement, as well as the certified mail label. Of course, the plaintiffs were aware from the examinations under oath that they needed to complete and submit the sworn proof of loss forms.
In short, the plaintiffs did not comply with the Policy's unequivocal proof of loss requirement, a material fact about which there is no dispute. The evidence establishes that GNIC sent the forms to the plaintiffs by certified mail, that the forms were received, that GNIC repeatedly advised the plaintiffs of the requirement, and that the plaintiffs never submitted the sworn proof of loss forms.
The plaintiff's claim for breach of the implied covenant of good faith and fair dealing is also dismissed, as it is redundant as the conduct allegedly violating the implied covenant is also the predicate for breach of covenant of an express provision of the underlying contract. Here, the plaintiffs make the same allegations in the breach of the implied covenant of good faith claim and the contract claim.
GNIC is also entitled to summary judgment on the New York General Business Law § 349 claim. A plaintiff claiming a violation of GBL § 349 must prove (1) that the defendant's acts were "consumer oriented," (2) that the acts or practices were "misleading in a material way," and (3) that the plaintiff "suffered an injury as a result." The plaintiffs make no such showing. They have alleged generally that the defendants acted "knowingly and as part of a general business practice" when it denied their insurance claim, but their response to the defendant's motion does not cite anything in the record to support this claim. GNIC is therefore also entitled to summary judgment on this claim.
12/11/24 Long v. Progressive Advanced Ins. Co.
United States District Court, E.D. Pennsylvania
Insurer Did Not Meet its Burden to Show that it Prepared Redacted Portions of the Claim Notes in Anticipation of Litigation Rather Than in the Ordinary Course of Business. Therefore, the Work Product Doctrine Did Not Apply
[Abridged] Insurance companies evaluate claims as part of their business, and their claims evaluations often result in demands from policyholders and then litigation. In discovery, that reality poses a challenge: litigants (and then judges) must decide when an insurance company created a claim evaluation document in the course of its business and when it did so in anticipation of litigation. The first category of documents is discoverable, but the latter is work product that Federal Rule of Civil Procedure 26(b) protects.
In this case, Progressive Advanced Insurance Company asserts work product protection for claims documents that it created after receiving a demand letter from a lawyer representing Long. After reviewing the record and the documents at issue in camera, the court concludes that Progressive has not demonstrated that work product protection applies because the documents reflect claims handling, not litigation analysis.
Ms. Long was in a car accident. She made a claim for UIM benefits from Progressive. On December 1, 2023, Ms. Long's lawyer sent a demand package to Progressive, demanding that Progressive tender its policy limits if it wanted to avoid litigation. As of then, Progressive had not yet evaluated Ms. Long's claim. It did so on December 4, 2023, but it redacted information from its claims notes on work product grounds. Its redactions cover both the overall valuation that it attached to Ms. Long's claim and its analysis of specific elements of her claim.
Ms. Long made multiple efforts to obtain that information. In response to this latest motion, the court ordered Progressive to submit unredacted versions of the claims notes for in camera review.
The work product doctrine, which Federal Rule of Civil Procedure 26(b)(3) codifies, shields materials prepared in anticipation of litigation from discovery, unless certain exceptions apply. Work product immunity shelters an attorney's mental processes, providing a privileged area to analyze and prepare his client's case. The party claiming work product protection "bears the burden of showing that the materials in question were prepared in the course of preparation for possible litigation." Because insurance companies evaluate claims made by their insureds in the ordinary course of their business, "discovery disputes involving an insurance company's claims file often present problems for the parties."
Progressive has not carried its burden to show that it created the redacted claims entries in anticipation of litigation. Insurers have a duty to investigate, evaluate, and decide on claims that insureds make. Progressive had not fulfilled that duty when it created the redacted claims notes. Thus, while the litigation demand that Ms. Long's counsel sent Progressive might have prompted it to conduct the evaluation (or conduct it faster), it had a separate, business-related obligation to conduct that evaluation.
Progressive also has not identified any other facts that might swing its evaluation into the "anticipation of litigation" category. The demand letter did not demand more than Progressive had offered, it did not demand more than the policy limits or threaten a bad faith claim, and Progressive had not yet hired outside counsel. Without any other fact to suggest that the evaluation was done in anticipation of litigation, Progressive has not carried its burden.
The fact that Progressive had not yet evaluated Ms. Long's claim sets this case apart from many of the cases that Progressive cites. In Barnard, Cicon, and Parisi, the insurers had already evaluated the claims and communicated their positions to the insureds before any demand letters arrived. In that circumstance, the insurer has fulfilled its obligation, and any revisitation of the claim analysis ties more to the litigation demand than a business need.
Progressive's argument to the contrary boils down to the fact that it received a demand letter from Ms. Long's counsel before it created the documents at issue. But there's no per se rule that every document that an insurance company creates after receiving a demand letter constitutes work product. A demand letter, even one with a high settlement demand, does not absolve an insurance company of the duty to evaluate a claim. Thus, when an insurance company continues its evaluation of a claim after receiving a demand letter, work product protection does not attach to the documents reflecting that evaluation. Progressive has not suggested that the evaluation that it conducted differed in scope or character from the evaluation that it would have conducted if it received a claim from Ms. Long but no demand letter.
11/15/24 Mountain Valley Indemnity v. Coen
Supreme Court, New York County
Declaratory Judgment Granted to Liability Insurer as the Property Did Not Constitute a “Residence Premises”. Sworn Deposition Testimony Trumps a Later Inconsistent Affidavit. The Insured Signed the Application and One Who Signs a Document is Presumed to Have Read and Understood its Contents Despite an Alleged Language Barrier
[Abridged] Plaintiff's motion for summary judgment is granted and defendant Moira’s cross motion denied.
Plaintiff seeks a declaration of no coverage for its policy holder, defendant Coen, for injuries claimed by defendant Moreira in an action captioned Moreira v. Coen (the "underlying action"). The policy provides coverage for bodily injury, except where such injury, among other things, arises out of a business engaged in by the insured, the rental of any premises owned by the insured, rented to an insured, or rented to others by an insured, other than the "insured location". As relevant herein, "insured location" is defined as the "residence premises," which in turn is defined as the premises where the insured resides and is identified in the declarations, including a two-family dwelling where the insured resides in one of the units. The residence premises defined in the policy is located at 64 West 13th Street, Huntington Station, New York 11750 (the "underlying premises").
Moreira commenced the underlying action against Coen after slipping and falling at the underlying premises. During its investigation of the claim, plaintiff interviewed Coen, who stated that at the time of the accident she was not living at the underlying premises but had moved. Plaintiff then disclaimed coverage on the grounds that the underlying premises was no longer the residence premises and was not otherwise an insured location under the policy. Coen later testified in the underlying action in 2023 that she had moved away from the underlying premises at least five years previously and had not moved back in. An interpreter was present at the deposition. Plaintiff now seeks summary judgment declaring that it is not obligated to defend or indemnify plaintiff in the underlying action.
Here, plaintiff has established prima facie entitlement to summary judgment by submission of the policy and Coen's statement regarding her residence. Plaintiff is entitled to a default judgment against Moreira on the same grounds, as Moreira appeared by counsel but never filed an answer to the complaint or sought an extension of her time to do so.
Coen asserts that she speaks little English and did not understand the questions being put to her. Assuming this is true, Coen later testified that she no longer resided at the underlying premises under oath, at a deposition where an interpreter was present, the transcript of which she reviewed and signed. To the extent her affidavit conflicts with her testimony, a later filed affidavit cannot be used to contradict sworn testimony given at a deposition.
Coen also testifies that she has never understood or had explained to her the provisions of the policy. Coen's papers are not clear as what import this should have, but the court assumes that perhaps she means to argue that she did not know that if she moved away from the underlying premises, she would lose coverage. Nevertheless, she does not deny that she is the insured, and therefore when obtaining the policy signed an application. Indeed, she also renewed the policy more than once, as evidenced by the renewal certificate included with the policy documents.
It is an axiom of the law that one who signs a document is presumed to have read and understood its contents. As the Court of Appeals has explained:
Ordinarily, the signer of a deed or other instrument, expressive of a jural act, is conclusively bound thereby. That his mind never gave assent to the terms expressed is not material. If the signer could read the instrument, not to have read it was gross negligence; if he could not read it, not to procure it to be read was equally negligent; in either case the writing binds him.
Coen cannot now claim ignorance of the policy when she has not sought to have it provided to her in a language that she can read fluently. Coen also does not provide any authority for the position that it was plaintiff's responsibility to discover her need for translation and provide translated copies of the policy and related documents.
Coen's argument that discovery is necessary to defend the motion is unavailing; she does not establish that facts "essential to justify opposition may exist but cannot [now] be stated."
Moreira's cross-motion to dismiss the complaint against her is denied. Moreira argues that she is not a proper party. Cases she relies on do not bar an insurer from seeking to determine its coverage obligations while the underlying action proceeds. As Moreira makes no other arguments, the cross-motion must be denied.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
12/10/24 Sherwin-Williams Co. v. Certain Underwriters at Lloyd’s London
Ohio Supreme Court
Insurers of Paint Company That Marketed and Sold Lead Paint Not Obligated to Indemnify Paint Company for Payments Made into Abatement Fund to Mitigate Hazards of Lead Paint
Santa Clara County, California sued Sherwin-Williams and other paint companies for strict liability, negligence, fraud and concealment, unjust enrichment, indemnity, and unfair business practices related to the companies’ role in selling and promoting the use of lead-based paint. Other California governmental entities joined in the suit, and the lawsuit ultimately moved forward on only a public nuisance claim on behalf of the People of the State of California. The complaint alleged that as a direct and proximate result of the paint companies’ conduct, large numbers of people, and particularly children, have been exposed, are being exposed, and/or will be exposed to lead, affecting their health, safety, and welfare. The California trial court held that Sherwin-Williams and two other paint companies had created a public nuisance, and it ordered the companies to pay jointly and severally $1.15 billion into an abatement fund to be administered by the State of California. According to the court’s order, the plan would last for four years, and any remaining funds would be returned to the paint companies.
The paint companies appealed to the California Sixth District Court of Appeal. That court affirmed the lower court’s conclusion that the paint companies had created a public nuisance by their promotion of lead-based paint. But the appellate court held that causation had not been established with respect to houses built after 1950, so it remanded the case to recalculate the amount of the abatement fund to limit it to the amount necessary to cover the cost of remediating pre-1951 homes. The California Supreme Court denied the paint companies’ petitions for review of the court of appeal’s decision. On remand, the Santa Clara County Superior Court reduced the amount to be paid into the abatement fund to $409 million. Ultimately, in 2019, the parties to the California lawsuit came to a settlement by which each of the paint companies would pay $101,666,667 into the abatement fund.
In Ohio, Sherwin-Williams filed a lawsuit in the Cuyahoga County Court of Common Pleas seeking, among other things, a declaration of the coverage obligations of its insurers with respect to a similar public-nuisance lawsuit pending in Rhode Island. The Rhode Island Supreme Court entered judgment in favor of Sherwin-Williams in that lawsuit, and Sherwin-Williams and all of the defendants jointly moved to stay the Cuyahoga County lawsuit. The trial court ordered a stay. After the California Supreme Court and United States Supreme Court refused to hear Sherwin-Williams’s appeal in the California lawsuit and after the Santa Clara County Superior Court entered its order reducing the total amount to be paid to the abatement fund to $409 million, Sherwin-Williams moved to lift the stay in January 2019.
Sherwin-Williams then filed an amended complaint against “Certain Underwriters at Lloyd’s, London, Certain London Market Companies, and Certain Domestic Insurers”, seeking indemnification for the California lawsuit and any other similar lead-paint claims. Nearly all of the insurers joined a motion for summary judgment arguing that they were not required to indemnify Sherwin-Williams under the terms of their various insurance policies. the insurers argued the polices did not provide coverage for harm that was expected or intended (Sherwin-Williams intentionally promoted its paint), the policies only provided coverage for damages and expenses, and the policies only covered damages “for,” “because of,” or “on account of” “property damage” or “bodily injury.” The common pleas court granted summary judgment to the insurers based on the language used by the California appellate court that an abatement order is an equitable remedy to eliminate the hazard causing prospective harm as opposed to the legal remedy of damages to compensate for prior harm. As a result, the common pleas court concluded there were no damages for reimbursement under the policies.
Sherwin-Williams appealed to the Eighth District Court of Appeals, which reversed the trial court’s judgment. The Eighth District reasoned that the abatement fund was monies to be paid to the government to compensate for money depleted by efforts to remediate the contamination of houses and buildings. The Eighth District also concluded that the trial court had correctly determined that coverage was not excluded because of any “intentional and expected acts” of Sherwin-Williams or because the liability was not imposed “because of” bodily injury or property damage.
The insurers filed a motion for reconsideration and reconsideration. The Eighth District denied the motion. The insurers’ appealed, and the Ohio Supreme Court accepted jurisdiction over three propositions of law. Since the ultimate question was resolved by one of the propositions, the court focused on whether the payment to the abatement fund constituted damages under the policies. The policies did not define damages. The insurers argued that the abatement fund was not to compensate for loss or injury but rather, to provide prospective relief. In Sherwin-Williams’s view, the abatement fund was established to compensate for a past harm—the presence of lead paint in residences built before 1951. The Ohio Supreme Court agreed with the insurers, concluding that because the abatement-fund payment was ordered to prevent future harm to children’s health from lead paint, the payment to the fund did not constitute “damages” under the insurance contracts.
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
12/12/24 Rodriguez v. Shelbourne Spring, LLC
Supreme Court of New Jersey
Supreme Court Holds Employee’s Injury is Covered Under Neither Worker’s Compensation Policy Nor Employer’s Liability Policy
SIR was hired as the electrical contractor for a project. Rodriguez, an employee of SIR, was injured on the job when he opened an electrical panel on a breaker. Rodriguez initially brought only a worker’s compensation claim. After the worker’s compensation claim was accepted by SIR, Rodriguez, apparently unsatisfied with his benefits level, filed a bodily injury claim against SIR. The bodily injury suit alleges negligence, gross negligence, reckless, and intentional conduct on the part of SIR.
The Supreme Court began its analysis by noting the significance of the variety of allegations at play, explaining that, as a general matter, an employee cannot sustain a claim against his or her own employer; instead, such claims are paid by the employer’s worker’s compensation policy. This rule is known as the “exclusivity rule.” However, where the employer intentionally causes the employee’s injuries, the employee may sustain a claim against the employer irrespective of this rule. This is known as the “Laidlow exception.” As the Court noted, to be said to have caused the employee’s injuries “intentionally,” the employer must have: (1) been substantially certain that the injury would occur; and (2) have deviated significantly from standard industry practice.
SIR was insured by Hartford Underwriters under a policy providing both worker’s compensation insurance and employer’s liability coverage. The Supreme Court noted the fundamental distinction between these two distinct types of coverage: worker’s compensation answers to claims of negligence, gross negligence, and even recklessness, whereas employer’s liability insurance answers to claims eligible to be brought directly against the employer despite the provisions of the worker’s compensation law. Stated differently, worker’s compensation insurance responds to claims that cannot be brought directly against the employer, while employer’s liability insurance responds to claims that are subject to the Laidlow exception.
The question certified to the Supreme Court was whether Hartford had a duty to defend SIR under either the worker’s compensation or the employer’s liability portions of its policy. The insuring agreement of the worker’s compensation part provided that Harford would pay “benefits required of [SIR] by the worker’s compensation law.” The Court noted that monetary damages for negligence, gross negligence, and recklessness do not fall within the purview of damages required under the worker’s compensation law, which only requires payment of medical benefits, death benefits, temporary disability benefits, and permanent total or partial benefits, without regard to fault. Any damages that could be awarded in response to a negligence claim, the Court reasoned, are not “benefits” within the context of the worker’s compensation law, and thus are not covered in the first instance under the worker’s compensation part of the policy.
The Court then turned to the employer’s liability part of the policy, whose insuring agreement provided that Hartford would pay for “bodily injury by accident” or “bodily injury by disease.” This part of the policy contained an exclusion, however, for any obligation imposed on SIR by the worker’s compensation law (i.e., the employer’s liability policy does not cover SIR’s obligation to pay the above-described benefits). Also excluded from employer’s liability coverage was “bodily injury intentionally caused or aggravated by [SIR].” An endorsement to the policy further provided that Hartford does not cover any and all intentional wrongs, including but not limited to bodily injury caused or aggravated by an intentional wrong committed by SIR or its employees, or bodily injury resulting from an act or omission by SIR or its employees which is substantially certain to result in injury.
The Court held that Rodriguez’s claims sounding in negligence, gross negligence, recklessness theories were excluded by the exclusion for benefits payable under the worker’s compensation law. The Court further held that the intentional conduct was excluded under the intentional acts exclusion and supplementary endorsement. In other words, the intentional acts exclusion barred coverage for the Laidlow claims, while the worker’s compensation exclusion barred coverage for the non-Laidlow claims.
Editor’s Note: The Court cited a few cases involving broader policies, in which the insurer’s duty to defend under the employer’s liability policy was not necessarily excluded vis-à-vis the intentional acts exclusion.
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
12/13/24 Bertels v. Farm Bureau Prop. & Cas. Ins. Co.
United States Court of Appeals, Tenth Circuit
Lack of Consideration Invalidates Assignment of Policy Rights, Thus Barring Standing to Recover Multi-Million Dollar “Judgment”
Autumn Bertles sustained severe injuries when a car driven by her grandmother, Elizabeth Bertles, collided with Denver Barr. Elizabeth and Mr. Barr were killed in the accident. Several years passed and Autumn eventually filed suit against her grandmother’s Estate. The Estate and Autumn entered an agreement.
The agreement provided: (i) Autumn’s claims would be brought before a judge in a “trial” that would consist of reports and affidavits submitted by Autumn without cross-examination or counter-evidence from the Estate; (ii) the Estate would assign any claims it possessed with Elizabeth’s auto insurer to Autumn; (iii) Autumn would not attempt to collect from the Estate’s assets if judgment was entered in her favor; and (iv) Autumn would pay the Estate’s litigation expenses.
Autumn received a $15.75 million judgment at “trial.” She then pursued Farm Bureau, Elizabeth’s insurer, to collect the judgment. Autumn’s case was dismissed by the district court for lack of standing because she provided no consideration for the assignment. The Tenth Circuit affirmed the dismissal.
The sole issue being standing, the Court of Appeals looked to whether the assignment was valid. Since the assignment was through contract, the court applied Kansas law, which requires consideration to be enforceable. In Kansas, non-prosecution of or non-defense of an action, or to abstain from an act to which one is not legally bound to perform can be sufficient consideration. Except if the claim or defense is obviously invalid, worthless, or frivolous.
Farm Bureau argued the agreement lacked consideration because Autumn promised not to do something she was already legally bound not to do, executing judgment against the Estate and payment of the Estate’s legal expenses. The court looked at Kansas’s nonclaim statute. Nonclaim statutes are laws that allow estates to be settled promptly by barring untimely and tardy claims.
Found in K.S.A §59-2239, the Kansas nonclaim statute contained two statute of limitations. The first states that all demands against an estate must be filed within four months after publication of the notice to creditors of probate proceedings ( or 30 days after notice to a known or reasonably ascertainable creditor). The second limits actions for all unsecured claims to within six months of the decedent’s death. §59-2239(1).
The accident occurred in 2010. Autumn filed an action in 2011 against Mr. Barr’s estate, Ford Motor Company, and Elizabeth. Autumn settled with Ford and Mr. Barr for the 2012 action, but not Elizabeth. In August 2014, a petition was filed to open a probate estate for Elizabeth, a month later Autumn filed a state action against the Estate.
So, Autumn failed to timely file a claim under §59-2239(1) because the Estate did not open until August 2014, much after Elizabeth’s death in 2010 and Autumn filed her claim in September 2014.
K.S.A. §59-2239(2) provides a limited exception to the timeliness requirements. A tort claim is considered timely if filed within the state’s statute of limitations. However, this exception contains two strings. First, recovery cannot affect the distribution of the Estate’s assets; and second, all court costs are to be paid for by the claimant/petitioner. Thus, subsection 2 excepts timely tort claims to recover insurance proceeds only, without cost to the Estate.
Autumn agreed to not recover the judgment form the Estate’s assets and to pay for the Estate’s legal expenses. Thus, she agreed to refrain from doing an already prohibited act, as well as complying with the legal obligation of paying the Estate’s litigation costs. Therefore, the assignment was invalid because she provided no consideration under Kansas law.
The court rejected Autumn’s tolling argument, finding the Kansas Supreme Court would not toll Autumn’s claim due to the strict protections for estates; waived a plain-error review regarding interpretation of the Consitution’s due process and equal protection arms; and the illusory promise doctrine amongst other arguments.
One notable argument was estoppel, which asserted that since Farm Bureau assigned Elizabeth defense counsel for the “trial”, and negotiated the agreement, Farm Bureau was estopped from invalidating the contract. Kansas noted that the mere fact an insurance company assigns defense counsel does not make that attorney the insurer’s agent. Instead, that attorney’s duty is to protect the interests of the insured and thus, may act against the insurer’s interest in protecting the rights of the insured.
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
12/17/24 Sabine v. State of New York
Court of Appeals
Majority for the Court of Appeals Refuses to Answer the Certified Question of Whether Prejudgment Interest Accrues When There is a Finding of Liability or When There is a Finding of Serious Injury as Defined by Insurance Law § 5102(d) After Determining This Question Was Not Properly Preserved Before the Trial Court
This case stems from a personal injury action where the Claimant, Michael Sabine, sued Defendant, State of New York, in the Court of Claims, after he was involved in a motor vehicle collision with a State employee. At the trial level, the case was bifurcated. On September 26, 2018, the Court of Claims granted partial summary judgment on “liability” to the Claimant. Then on October 27, 2021, following a bench trial, it was found that Claimant did have a “serious injury” as defined by Insurance Law § 5102(d) and awarded $550,000 in damages. Judgment was entered awarding these damages, along with prejudgment interest calculated from the date of the October 27, 2021, decision.
Claimant appealed the portion of the Judgment as it pertained to when the prejudgment interest was to be calculated. Specifically, Claimant argued that the interest should have begun to run from the date the Court of Claims held Defendant “liable” rather than the subsequent finding of “serious injury”.
At the Appellate Division level, the Fourth Department unanimously affirmed, citing that it was bound to follow existing case law in the Fourth Department which holds that a finding of “liability” requires a finding of “serious injury”. However, the Fourth Department divided on the issue of preservation – with two justices concluding that the issue being appealed was unpreserved at the trial court level. The three-justice majority concluded that the issue was preserved, and even assuming, arguendo, that it was not, a rare exception applies that allows the court to review the question regardless. Stemming from a prior Court of Appeals case [Telaro v. Telaro, 25 NY2d 433 (1969)], this rare exception applies only where an unpreserved argument could not have been avoided through “factual showings or legal countersteps” in the trial court.
Upon further appeal, the Court of Appeals, in a 4-3 split decision, affirmed, without costs, the Appellate Division’s Order – and notably did not answer the certified question as unnecessary. At the onset, the Court highlighted that, unlike the Appellate Division, it lacks the jurisdiction to review unpreserved issues in the interest of justice. Accordingly, the Court maintains a duty to determine whether an issue has been properly preserved below, regardless of whether a party has even raised a preservation argument (notably, the Defendant did not here).
This preservation argument analysis led the Court to determine that Claimant failed to properly preserve the issue at which point should prejudgment interest begin to accrue at the Court of Claims level. Interestingly, the Court stated that the Claimant was free to engage motion practice under CPLR § 5015 [seek to vacate an order] or § 5019 [seek to correct or amend an order] at the trial level, which would have allowed for proper preservation of this issue but failed to do so. Lastly, the majority explicitly disagreed that the exception to the Court’s preservation rule under Telaro applies here. Specifically, that such exception, which has not been used by the Court in the past 40 years, is inapplicable here in light of the aforementioned legal “countersteps” which were available to the Claimant.
Accordingly, the four-justice majority affirmed the lower Order, explicitly without providing an answer to the certified question.
In contrast, Judge Rivera penned a lengthy dissent wherein he concluded that he would reverse and remit to the Court of Appeals so that interest may be calculated from the date the Court of Claims determined Defendant was “liable”. Chief Judge Wilson concurred in full with this dissent, and Judge Troutman concurred with the dissent in all but one particular point (wherein Judge Rivera discussed the majority’s ruling on preservation).
Specifically, Judge Rivera began his dissent by engaging in a summary of the procedural history of the underlying case and a detailed analysis of New York’s No Fault Law, codified as Article 51 of the Insurance Law. In doing so, Judge Rivera highlighted the clear split in the Appellate Division on the definition of “liability” as it pertains to the No Fault Law.
In the Second and Third Department of the Appellate Division, case law has expressly concluded that a finding of “serious injury” under Article 51 is a question of damages, not “liability” for the purposes of calculating prejudgment interest. In contrast, the Fourth Department has held that a defendant is not liable for noneconomic loss under Insurance Law § 5104(a) unless the claimant proves that he sustained a serious injury – thus the term “liability” in motor vehicle cases in the Fourt Department encompasses both a finding of negligence and serious injury. Judge Rivera’s dissenting opinion states that this outlier view of the Fourth Department is contrary to the framework of Article 51.
He next engaged in an analysis of CPLR § 5002, which codifies the process for a plaintiff to recover pre-final judgment interest – expressing that the process becomes convoluted in matters such as personal injury actions where a bifurcation process is encouraged. This analysis led to the dissent’s conclusion that in an automobile accident where a claimant establishes, through a bifurcated process, that first a defendant was liable for the underlying tort and thereafter establishes they have sustained a serious injury under Insurance Law § 5102(d), that claimant is entitled to prejudgment interest under § 5002 from the date “liability” is determined.
The remaining portion of Judge Rivera’s dissenting opinion focused upon the preservation issues. First, he concluded that there is no preservation bar to resolving the certified question. He detailed how the Claimant timely appealed the final judgment from the Court of Claims wherein prejudgment interest was awarded. In that final judgment, the Court of Claims was bound by the aforementioned established case law precedent in the Fourth Department in its calculations. Accordingly, the Claimant’s first opportunity to present his argument for modification of the judgment would be on his appeal to the Fourth Department, which is the court that established the binding precedent.
Judge Rivera next disagreed with the majority’s decision to not answer the certified question based on the preservation determination, arguing that such a holding fails to further the goals of the Court’s preservation doctrine – which is a doctrine of the Court’s own making which can be drawn as narrowly as it wishes. Notably, this is the only part of Judge Rivera’s dissenting opinion which Judge Troutman did not concur.
The remaining portions of the dissent (1) states that the proffered remedy by the Court’s majority – namely instructing Claimant to have filed motions at the trial level under §§ 5015 or 5019 – was incorrect, and (2) that the rare exception to the Court’s preservation rules was applicable here, as the Appellate Division held.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
11/22/24 120 Main Hotel LLC v. Sompo Am. Ins. Co.
New York State Supreme Court, County of New York
Motion to Dismiss Denied, as Court Held that Policy Terms did Not Establish Entitlement to Relief under CPLR §3211(a)(1) or (7)
Plaintiff 120 Main Hotel LLC (“120 Main”) owned a property at 120 East Main Street, Rochester, New York (the “Property”). 120 Main purchased a property insurance policy from Sompo America Insurance Company (“Sompo”) providing coverage for the Property. In November 2022, a fire broke out at the Property, resulting in substantial damage to real and personal property. 120 Main submitted a claim, which was denied based on 120 Main’s failure to comply with certain conditions to coverage. Sompo stated that at the time of the fire, the Property was “vacant,” “unoccupied,” and caused by “vandalism and malicious mischief.”
After the denial of coverage, Plaintiff filed a lawsuit against Sompo, asserting causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing. After receiving notice of the suit, Sompo filed a motion to dismiss pursuant to CPLR § 3211(a)(1) and (7). In support of the motion, Sompo argues that the terms of the insurance policy conclusively establish that the denial of coverage was appropriate, as a matter of law.
The court first addresses that under New York law, when considering a motion to dismiss, pleadings are liberally construed, and all allegations contained in the pleading are accepted as true. Under CPLR §3211(a)(1), a complaint will be dismissed if the moving party asserts a defense founded upon documentary evidence, which conclusively establishes a defense to the claims asserted as a matter of law. Under CPLR § 3211(a)(7) the sole criterion is whether the pleading states a cause of action within the four corners of the complaint.
First, the Court looks to the Sompo policy to determine whether the Property was considered “vacant” or “unoccupied” at the time of the fire. The Sompo policy provides that a property is considered “vacant or unoccupied” when it “does not contain adequate covered property to conduct customary business operations.”
Sompo argues that the presence of adequate covered property is necessary, but not by itself sufficient for the purposes of determining occupancy and non-vacancy. Sompo alleges that “vacant or unoccupied” should be interpreted to be defined under a colloquial understanding of the terms.
However, the Court reasoned that the terms “vacant” or “unoccupied” were defined nowhere in the policy, besides the aforementioned phrase. As such, because the Plaintiff is entitled to a favorable inference that, the Court found that under the Sompo policy, for the purposes of the motion to dismiss, a property was vacant or unoccupied, when it “does not contain adequate covered property to conduct customary business operations.”
With the defined phrase in mind, the court looks at the evidence submitted to determine whether there was adequate covered property present at the time of the fire to prevent the building from being deemed “vacant or unoccupied,” as defined under the Sompo policy. Plaintiff submitted sworn affidavits stating that there was adequate covered property at the time of the fire to conduct customary business operations. The court identified that Sompo’s evidence submitted in support does not utterly refute the contention that the Property was not vacant at the time of the fire.
As such, the court held that there are disputed issues of fact surrounding the state of the building at the time of the fire, the presence of covered property, and whether Plaintiff had engaged in customary business operations prior to the fire.
Based on the dispute, the court denied Sompo’s motion to dismiss.
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
07/29/24 New York Bills S6635/A5745
Legislation to Allow New Yorkers to Apply for Workers’ Compensation for Extraordinary Work-Related Stress
On December 6, 2024, Governor Kathy Hochul signed Legislation S6635/A5745 to support individuals who face job-related mental health crises. This allows workers to file workers’ compensation for specific types of mental injury when faced with extraordinary work-related stress. This will include investing $1 billion to transform the continuum of care.
Governor Hochul said “The mental health crisis our country has experienced since the COVID-19 pandemic is unprecedented, and we need to do everything in our power to lend a hand to those in need. I'll never stop fighting for the working people of New York.” (NYS Press Release)
Workers Compensation law previously limited mental injury claims to certain emergency service workers (police, firefighters, etc.) A5745 will amend workers compensation law to allow claims for mental injury by any worker in New York State who has experienced extraordinary work-related stress.
S6635 provides that a workers compensation board may not disallow a claim based upon a factual finding that the stress was not greater than that which usually occurs in the normal work environment.
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
11/05/24 Fares Construction Limited v. Lead Structural Formwork Limited
Nova Scotia Supreme Court
Absent Exceptional Circumstances, the Duty of a Liability Insurer to Defend is to be Determined in Proceedings Separate and Apart from the Underlying Action
As six Atlantic hurricanes having made landfall since Hurricane Dorian in September 2019, including Fiona in 2022, it seems hard to remember the impact that Dorian had on the Bahamas, the Eastern of Seaboard of the United States and Atlantic Canada. However, few who were living in Atlantic Canada that September will forget Dorian as it was the most destructive storm to hit the region to that point since Hurricane Juan 16 years earlier.
Dorian brought widespread heavy rain, pounding surf, damaging storm surge and severe winds to Nova Scotia, Prince Edward Island, Newfoundland and parts of New Brunswick.
452 Brenton Street ("Brenton Suites"), a 170-unit condo complex in downtown Halifax was under construction on September 7, 2019, when Hurricane Dorian hit. The tower crane used on the project collapsed in spectacular fashion. A news video of the collapse went viral. Unbelievably, there were no deaths and no injuries. However, the property damage was significant.
It took many weeks to remove the fallen crane which damaged the project under construction amongst other properties. The removal effort shut down the project, for several weeks, displaced residents in the area and resulted in the intermittent partial and full closure of several surrounding streets impacting businesses in the area.
Four separate actions were commenced in the Nova Scotia Supreme Court. The principal defendants were the project owner, W. M. Fares Family Incorporated (“Fares”); the general contractor Lead Structural Formwork Ltd. (“Lead”); Lead’s sub-contractor/consultant Forgeron Engineering Limited (“Forgeron”) who Lead says was tasked with inspecting and certifying the crane installation; and APA Inc. Experts Conseils/Consultants a consulting engineering firm retained by Lead to assist in designing a concrete base upon which the tower crane was installed.
Fares was the named insured under a builders risk / course of construction policy issued by Sovereign General Insurance Company. APA and Forgeron did not know this policy existed until Fares produced it in March of 2023.
APA Inc. Experts Conseils/Consultants ("APA") and Forgeron Engineering Limited ("Forgeron") brought motions (called applications in other provinces) to amend existing third-party proceedings to add Sovereign as a third party. Forgeron and APA alleged that each of them are unnamed insureds under the policy and that Sovereign is obligated to defend and indemnify both of them. Both argued that Sovereign is a necessary party to the proceedings.
Sovereign opposed the applications stating:
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There is no coverage for APA nor Forgeron as they are not insured under the Policy.
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If they are insured, Sovereign says that the APA and Forgeron claims against it for indemnity are premature and should only be brought and determined after an agreed settlement or judgment is obtained in the proceedings.
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The issue of the duty to defend should be heard and determined in a separate proceeding;
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The policy prevented any such joinder in the following ‘no-action clause:
The issue in this particular set of applications was whether Sovereign can be joined as a party to the tort and contract claims. In reasons released November 5, 2024, the Nova Scotia Supreme Court application judge refused the application to join Sovereign as a party to one or more of the legal proceedings.
Given how the arguments were structured, it is fair to infer that the policy under discussion in this case offered comprehensive protection against the risks associated with the construction project. It seems that this policy included two important but separate coverages: builder’s risk coverage that provided property insurance for the building under construction and wrap-up liability. Both coverages are non-standard meaning that their content is not regulated by the Provincial Superintendents of Insurance. Usually, the wrap-up coverage provides comprehensive liability coverage for all parties involved in a construction project, including owners, general contractors, subcontractors, and sometimes architects and engineers. It covers third-party bodily injury and property damage claims arising from the construction.
The application judge in this case held that as there is no settlement or judgment in the proceedings, Sovereign has no obligation to indemnify its putative insureds and therefore the allegation that Sovereign has that obligation is premature.
As for the alleged obligation to defend, the application judge held that APA and Forgeron were free to bring a separate proceeding to determine if Sovereign was obligated to defend them in the actions arising from the crane collapse as that is “proper procedure to determine the obligation to defend”. A duty to defend proceeding is, according to this judgment, independent of the tort and contract actions underway in this case. Such an application involves an entirely separate contractual dispute claiming that, pursuant to the Policy, Sovereign owes APA and Forgeron the costs of defence and has breached the Policy by not paying those costs.
Nonetheless, the judge pointed out that the Court has the discretion or authority to add Sovereign as a third party, but that authority ought not to be exercised in this case as there is no evidence or likelihood that costs and time would be saved through such a joinder.
The application judge’s reasoning seems to be the correct decision in this case. However, in other situations, an insurer relying on a coverage issue, such as a breach of condition, may wish to be involved in the underlying contract and tort claim in its own name in order to prove the breach and the degree of prejudice that arises from the breach. This decision suggests that in the right case, which might be possible, but this is not ‘the right’ case.
The application judge then moved on to consider whether APA and Forgeron could amend their pleadings to allege that the general contractor, Lead, is barred from bringing an action against them in view of the immunity cast upon those insured under a builders risk policy. This part of the judgment is confusing to those who are not party to the litigation. There is no discussion as to whether the contracts between Lead, APA and Forgeron required Lead to insure for the benefit of APA and Forgeron setting up tort immunity claims. Further there is no indication that the project owner, Fares, claimed on the builders risk policy. Despite these omissions the application judge held that the terms of the policy “… do not provide a sustainable defence to the legal claims alleged against APA and Forgeron.”
With that, the applications brought by Forgeron and APA were dismissed with costs to be assessed, payable by each of them to the opposing parties, including Sovereign.
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