Volume XXVI, No. 18 (No. 691)
Friday, February 14, 2025
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.
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Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations.
Happy Valentine’s Day
This publication has been around for a long time. This story is from our February 7, 2008, Valentine’s edition, Volume IX, No. 16, and a tale that Steve Peiper has always appreciated:
Happy Valentine’s Day:
How do you celebrate Valentine's Day? Do you do it the modern way and send cards, candy, flowers, and gifts? I hope not. I thought a little history of the holiday would help you recreate a more traditional approach, steeped in history.
During the third century in Rome, Emperor Claudius II who was only emperor for two short years, by the way (August 268 to January 270) was preparing to fight the Goths. [Editor's note: who wouldn't fight the Goths, given the opportunity?]
Anyway, he decided that single men would be better soldiers than married ones, so he outlawed marriage for young men. However, one young priest, Valentine, believing that the Emperor's decree was unjust, continued to perform weddings. Rumor had it that he had a financial interest in a chapel and later moved to Vegas. Claudius learned of Valentine's defiance and had him imprisoned. While in jail, he fell in love with the jailer's daughter and it is said that before his death, he wrote her a love letter, which he signed "From your Valentine."
Valentine's feast day was set to commemorate his death in February 270, and that was also used to make it into a Christian holiday, the pagan Lupercalia Festival, which also celebrated the beginning of spring. That Festival involved the sacrifice of a goat for fertility and a dog for purification. The goat hide would be sliced into strips, dipped in sacrificial blood, and taken to the streets by young men who would slap women with the strips, apparently making the women more fertile. Pope Gelasius, seeking to end the pagan holiday but continue the tradition, declared February 14 as St. Valentine's Day around 496 A.D. So, there you go. Forget the card, forget the candy, and forget the flowers. Chase your sweetheart around the room and slap him or her with dried goat strips dipped in blood, and you'll be celebrating the holiday the right way.
Just don't tell the PETA people.
Artificial Intelligence v. Human Intelligence – A Word to the Wise
Many of you are familiar with the case of the New York lawyers who were sanctioned because they submitted citations for non-existing cases, which were created by artificial intelligence. One would think that the message would be clear – don’t submit cases to a court, generated by artificial intelligence (or otherwise), without reading them.
But it happened again, this time in Wyoming federal court. The judge was not happy and ordered Morgan & Morgan to show cause why they should not be sanctioned. If you want to read the law firm’s first response to the court order, it’s here. . Both Mr. Morgan and the local attorney who was hired to work on the case, filed declarations indicating that they had nothing to do with the filing, leaving the responsibility to the lawyer who actually filed the legal memorandum. The lawyer who did the actual submission just filed his explanation on Thursday, and you can find that here.
We can expect the court to file its decision on sanctions very shortly.
The message is clear. Do not think, for a moment, that artificial intelligence will always trump real intelligence. It is a compelling lesson, as my partner Larry Ross just said to me, for those who use these tools.
When an Employer Liability Carrier is Sued for Coverage, is the Lack of Grave Injury a Coverage Defense? This one will be of interest only to real coverage nerds.
There’s an interesting case in my column this week, involving, in part, a claim made for coverage under a New York Employer’s Liability policy. In most cases, unless the plaintiff has sustained a “grave injury”, a third-party action for contribution against an employer that provided Workers Compensation cannot be maintains (a small number of exceptions, notwithstanding). In this case, the employers liability carrier was able to get the declaratory judgment action dismissed on the ground that the plaintiff did not sustain a grave injury and therefore the EL coverage would never trigger. Normally, the issue the underlying tort action, not a coverage action.
First 45 Years Completed
Forty-five years ago, on February 12, Ann Evanko and I were sworn in as lawyers at the Appellate Division, Fourth Department. Our classmate and my law partner, Larry Ross, were admitted around the same time, downstate. That’s a long time to do anything. It’s been a fun ride and I’m still up on the horse.
Need a mediator for an insurance dispute? Coverage mediation is a thing! Subject matter expertise may be useful.
Hey coverage lawyers. Hey professionals. Have you and a friend, adversary, or lawyer for whom have respect reached a stalemate on a coverage dispute? Look, we know each other. We know that. We don’t want to litigate every coverage disagreement. Why? Because the position we oppose today may be the one we advocate tomorrow.
I’ve been doing a considerable amount of mediation all over the state (and country). Reach out.
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.
Valentine’s Cards for those Behind Bars – 100 Years Ago:
The Buffalo News
Buffalo, New York
14 Feb 1925
SEVERAL PRISONERS AT
JAIL RECEIVE VALENTINES
“Two Gun” Cotter Gets Tender
Sentiments – Jailer Expectant.
Valentine’s day was observed at the jail Saturday. George W. Bittle, who is awaiting a second trial on a charge of murder in connection with the killing of Rufus Eller, clerk in a Genesee street jewelry store, was the recipient of a Valentine from his wife and one from an unknown sender. Stella Mackowska, who was also implicated in the Eller murder and who is also awaiting a second trial, was not remembered.
A federal prisoner, who is charged with alien smuggling, received a handsome lace paper token of affection, and one with the forbidding title of “Two Gun” Cotter was sent some tender sentiments.
Up to noon, Jailer Charlie Leib had not received the annual comic that always comes to him. Mr. Leib is of simple proportions and always receives a Valentine which “spoofs” at his size. Somehow, he felt confident that it would arrive before the day was over.
Peiper on Property (and Potpourri):
Just returning from a wonderful IADC conference in California and heading from the sun to the frigid east. See you in two.
Steve
Steven E. Peiper
[email protected]
Young Love – 100 Years Ago:
The Buffalo News
Buffalo, New York
14 Feb 1925
MISSING SCHOOL GIRL
RETURNS AS BRIDE
SYRACUSE, N.Y., Feb. 13. – Police search for Eileen Page, 14, pretty 7th grade grammar school student who had been missing from her home two days, ended at noon today when she returned home, the bride of William “Wild Bill” Rook, motorcycle driver, with whom she eloped to Rochester.
The girl had been destined to go to a convent in Ohio, Thursday, sent there by her parents, who were opposed to her romance. She stole away from her home at midnight Wednesday, met Rook for what was to have been their last meeting, and they decided upon the elopement.
Lee’s Connecticut Chronicles:
Dear Nutmeggers:
The final mile is the longest mile—at least when it comes to home renovations. The saga of our kitchenless-life continues. There is, however, progress to report. We now have a sink with running water, countertops, and a backsplash. You have no idea what not having a kitchen sink has been like for the last four months. We’ve been washing our handful of kitchen tools in the powder room sink; a vessel not designed for washing things like a coffee pot. So, now it looks like a kitchen but it’s nothing more than a tease, because we still can’t use it like a kitchen. But the finish line is in sight, with electricians and carpenters set to return next week. Soon we should be in the punch list phase. I don’t dare ask how long that will take.
Not much in the case reporting department this week but read on for details on a broker’s post-procurement responsibility to the insured and what satisfies the obligation to exhaust the tortfeasor’s coverage before bringing a UIM claim. It’s not as simple as it sounds.
By the way, COVID is on the upswing (it got me—again), the norovirus is making the rounds, and there’s a measles outbreak in Texas. So, keep keeping safe.
Lee
Lee S. Siegel
[email protected]
Not A Lucky Day – 100 Years Ago:
The Buffalo News
Buffalo, New York
14 Feb 1925
13 PRISONERS ON WAY
TO JAIL ON FRIDAY, 13
DETROIT, Feb. 13. – Richard Labelle, federal deputy marshal, left Detroit today in charge of thirteen prisoners destined to Fort Leavenworth. Transportation arrangements were made before authorities noticed the date or Mr. Labelle declared he would not tempt fate to start with thirteen on Friday the thirteenth.
Ten of the prisoners violated the narcotic law, two robbed post offices, and the thirteenth, John Singstook, violated the prohibition enactment, for which the judge sentenced him to thirteen months.
Ruffner’s Road Review:
Dear readers,
Hope everyone enjoyed the Superbowl... while it is sad to see football season come to a close (and to have the Bills fall just short of the big game) it was a small consolation to see Kansas City lose in blowout fashion.
I have two no-fault cases to discuss this week. In the first, the insurer moved for summary judgment asserting it properly denied the subject claims pursuant to material misrepresentation in the insured’s application for insurance. However, while the court determined the misrepresentations were “material” the insurer did not submit documentary proof of its underwriting practices and procedures to meet its burden for summary judgment. In the next case, the court determined the insurer was entitled to summary judgment on the basis that the defendant did not comply with proper post-EUO verification requests.
Until next time,
Kyle
Kyle A. Ruffner
[email protected]
Could Have Been a Nice Swim – 100 Years Ago:
The Daily News
Lebanon, Pennsylvania
14 Feb 1925
5,000 Gals. Moonshine
Emptied Into River
Wilkes-Barre, Pa., Today – The receding Susquehanna river which reached a flood stage here two days ago, had something more than ice and water in it today. Federal prohibition agents emptied 5,000 gallons of moonshine and 250 barrels of beer in the stream. The stuff had been confiscated in raids. Besides destroying the liquor, the authorities also burned and demolished five truckloads of stills.
Ryan’s Federal Reporter:
Hello Loyal Coverage Pointers Subscribers:
Tough day at the Maxwell residence. Water in the basement. Nothing like spending money on fixing things.
This edition, I have a Second Circuit decision involving standing as a mortgage lender—or former mortgage lender.
Until next time…
Ryan
Ryan P. Maxwell
[email protected]
Axe Murderer Executed – 100 Years Ago:
Buffalo Courier
Buffalo, New York
14 Feb 1925
Slayer Walks to Death
Cheerfully Hands Over
Confession of Crimes
Wheaton, Ill., Feb. 13. – With a cheerfulness, in contrast with the surliness that marked his imprisonment, John Kammerer, walked to his death on the gallows today. With his own life he paid for the lives of five members of the family of Otto Eder, his “only friend.”
Before stepping on the trap, Kammerer handed a detailed confession of how he wiped out the Eder family, one by one, with an axe.
“There is nobody I’d change places with,” Kammerer said, “and I want to get it over with. I’ve made my peace with God.”
Storm’s SIU:
Hi Team:
Happy Valentine’s Day!
Three interesting cases in this edition:
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Court Grants Insurer’s Motion to Amend its Answer to Include a Fraud Affirmative Defense Based on Evidence of the Insured Claiming Damage Not Actually Damaged, Concealing Pre-existing Damage Reports, and Instructing Engineers to Alter Reports to Remove References to Uncovered Damage.
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Property Policy Void Ab Initio Due to Material Misrepresentations in the Application as the Insured Failed to Disclose the Existence of an Illegal Basement Apartment.
- Because the Forged Documents Were Not Financial Instruments, the Insured's Losses Were Not Covered Under the Forgery Provision of the Policy.
“Oh, here’s an idea let’s make pictures of our internal organs and give them to other people we love on Valentine’s Day. That’s not weird at all.” ~ Jimmy Fallon
“Love is being stupid together”. ~ Paul Valery
“Valentine’s Day is a love-note to the rest of the year. Graciously, it comes at a perfect time to be savored – that period of calm between winter holiday commotion and spring enticements” ~ Jo Lighfoot
“To be brave is to love someone unconditionally, without expecting anything in return. To just give.” ~ Madonna
Let’s talk again in two weeks!
Scott
Scott D. Storm
[email protected]
Warming Up to Marriage – 100 Years Ago:
Buffalo Courier
Buffalo, New York
14 Feb 1925
Weather Affects Love, Damsels
In Sunny Climes, Marry Young
Sacramento, Cal., Feb. 13. – Weather affects love. Sunshine and moonlight evenings make California girls easy prey for romance and takes them to the altar at an earlier age than maidens in other states of the union.
L. E. Ross, director of the state bureau of vital statistics, holds this a reasonable theory based on marriage statistics for three years. They show that the average California daughter marries between the ages if fifteen and twenty, while the American marrying age generally is between twenty and twenty-four years.
The figures show that over thirty-nine per cent of all the 1924 brides in California were under twenty years. Girls under the age of twenty-five made up fifty-four per cent of the marriage total for the last twelve months.
Fleming’s Finest:
Hi Coverage Pointers Subscribers:
This edition’s case comes from the Massachusetts Supreme Judicial Court. The SJC considered whether part 4 of the 2016 edition of the standard Massachusetts automobile insurance policy excludes coverage for “inherent diminished value” (IDV) of a third-party claimant's vehicle after an accident. The SJC also addressed whether the third-party claimants had standing to bring a direct action against the insurer without first obtaining a final judgment against the insured tortfeasors (very important).
Go Birds and Happy Valentine’s Day. Catch you later.
Kate
Katherine A. Fleming
[email protected]
Drunken Son – 100 Years Ago:
Buffalo Courier
Buffalo, New York
14 Feb 1925
MOTHER HAS SON JAILED
THIRTY DAYS FOR “SPREE”
“Make it as long as possible,” requested the mother of Michael Sieperski, thirty-two years old, No. 94 Gatchell street, when asked by Judge Hartzell in city court yesterday to name the punishment she wanted imposed upon her son charged with drunkenness.
The court decided that thirty days in the penitentiary would be sufficient to make Siepierski mend his ways. He was arrested on the complaint of his mother.
Gestwick’s Garden State Gazette:
Dear Readers:
Nice to see the Chiefs lose in blow-out fashion. The Bills would have done it better, but hey, a Chiefs loss is the next best thing to a Bills win.
I am preparing to take my fiancé to the Big Apple next week. I have been tens of times, due to our office’s heavy presence in the boroughs. My fiancé, however, has never had the pleasure. We’re going to see the High Line, World Trade Center memorial and observatory, Times Square, and all the other tourist attractions. Maybe we’ll even have the fortune of brushing shoulders with a Coverage Pointers subscriber!
The case I have for you this week is about a follow-form personal auto excess policy. The primary carrier tendered its $500,000 liability limit, which was insufficient to cover the full extent of the damage. The primary carrier’s UIM coverage endorsement excluded coverage for family members of the named insured. Does this exclusion apply to the UIM endorsement in the excess policy? Read on to find out!
See you in two weeks.
Evan
Evan D. Gestwick
[email protected]
The History of Valentine’s Day – 100 Years Ago:
Elmira Star-Gazette
Elmira, New York
14 Feb 1925
THE WHY OF VALENTINE’S DAY
Two Valentine’s Days are really crowded into one – the lovers’ festival and the religious side. The ancients believed that the birds selected their mates on February 14. Hence this date was observed as lovers’ day among the Romans, some 2000 years ago.
As a lovers’ festival, Valentine’s Day reached its greatest popularity in England five centuries ago. The custom of sending valentines likely started with the ancient practice of putting names of unmarried young men and women in a box.
Then there was a “Love’s Lottery,” in which the names were drawn out in pairs on Valentine’s Day. Thus, affinities were discovered and became each other’s valentines for a year – until the next lottery.
Early in the history of the Christian church, February 14 acquired the religious significance. There were eight saints and martyrs named Valentine, in various parts of the world. The greatest of the Valentine’s were a priest in Rome and a bishop in Umbria, who lived about 1700 years ago.
The first valentine sold in America was patterned after one received from England in 1519 by Easther Howland, daughter of a Worcester (Mass.) stationer.
O’Shea Rides the Circuits:
Hey Readers,
The Ottawa Senators are maintaining a playoff spot as the February break sets in. At this point, the Four Nations Cup is being played, and fingers crossed our players come out unscathed.
This week I have a couple of duty to defend cases. One involves corporate espionage and the other involves the intentional concealment of a murder weapon.
Until next time,
Ryan
Ryan P. O’Shea
[email protected]
Retribution – 100 Years Ago:
Press and Sun-Bulletin
Binghamton, New York
14 Feb 1925
MOTHER’A DEATH
CAUSES GIRL TO
LEAD RUM RAID
15-Year-Old Child Informs
Philadelphia Police Her
Parent Obtained Pint of
Liquor from Saloon Before
She Died
VENDOR IS HELD
Philadelphia, Feb. 14 – Finding her mother dead in bed, a 15-year-old girl early today led a police raid on a saloon, where, she said, her mother had obtained a pint of liquor last night.
The bartender was arrested and held pending analysis of the liquor. Police said the proprietor of the saloon is serving a 30-day sentence for illegal sale of liquor.
Coroner Patton, who ordered an inquest, declared that should death be found due to alcoholism, the vendor of the liquor would be held for murder.
Rob Reaches the Threshold:
Dear Readers,
So . . . Watching the Eagles beat down Mahomes and the Chiefs was kind of fun? However, overall, it was a pretty boring Superbowl given the dominate performance from Philly. Once the parade ends and my (insufferable) friends who are Eagles fans simmer down, we begin the long drought of football-less days. Coincidentally, this is the same time my own (probably also insufferable) Yankee fandom kicks into gear as Spring Training is right around the corner. But I just remembered that the DODGERS LITERALLY SIGNED EVERYONE BECAUSE MONEY IS FAKE IN BASEBALL. I am ready to hurt again come October.
For this installment, we have a rare appearance from the Fourth Department, who issued a decision in related accident cases which highlights the importance of defendant IME submissions in support of summary judgment motion practice seeking to dismiss a complaint on the ground that a plaintiff did not sustain a serious injury under Insurance Law § 5102(d).
Hope you all enjoy the read.
Rob
Robert J. Caggiano
[email protected]
Woman Business Leader has Little Confident about Women in Business – 100 Years Ago:
Democrat and Chronicle
Rochester, New York
14 Feb 1925
Women Cannot Supplant Men in
Business, Says Society Matron
Qualified as Financial Advisor
New York. Feb. 13. – Women cannot take the places of men in the business world, Mrs. William Laimbeer, society matron who is to become head of a woman’s department of the National City Bank after 12 years’ experience, said to-day.
“Men are all right.” She added. “I worry little about women’s rights, never vote and am not interested in politics. Women get what they are worth in business.”
She was reminded that men have been saying woman’s place was in the home.
“For most women, it probably is,” she answered. “But there are places for those who are compelled to make their own way and for those with an aptitude for special work. Besides, no girl’s future is secure, and every girl should be trained to care for herself if necessary.
“I think it gives women self-respect to earn their own living. It makes better waives, happier mothers.”
Mrs. Laimbeet entered business after her husband’s death. At her desk she still appears more as the hostess than the business executive. She wears a string of pearls, parts her auburn hair in the middle and knots behind it. Her new job will be advising women about their financial problems.
LaBarbera’s Lower Court Library:
Dear Readers:
It’s unhappy to report that after nearly six years of going uninjured, I am limping around in a boot. I was too ambitious at rec-league soccer and now must pay the price. Thankfully, we got a little bit of warm(ish) weather this week, and some of the ice on the road has melted away.
This week I am reporting on a New York County decision, granting the insurer’s motion for summary judgment and default in its entirety. The court discusses the reasonable, ongoing investigation taken by the insurer to investigate the facts and circumstances of the loss, and the applicability of the exclusion. There is also discussion regarding a privity-based additional insured endorsement. Hope you enjoy reading, I certainly did!
Until next time…
Isabelle
Isabelle H. LaBarbera
[email protected]
A Little Assault and Battery in School is Ok– 100 Years Ago:
Poughkeepsie Eagle-News
Poughkeepsie, New York
14 Feb 1925
Exonerate Teacher
Of Hurting Pupil
New York, Feb. 13. – The conviction of Miss Genevieve Collier, principal of the Central School at Port Chester, N.Y., of assault in the third degree for striking Frank Fugilisi, a 12-year-old pupil, with a rubber hose was reversed today by the appellate division in Brooklyn. A fine of $20 imposed on Miss Collier was remitted and the complaint against her dismissed.
“The prosecution,” the appellate court read, “failed to establish a reasonable doubt that the force used by the defendant in correcting the pupil was unreasonable in manner and immoderate in degree.”
Lexi’s Legislative Lowdown:
Dear Readers,
I am looking forward to a weekend full of skiing. I haven’t been in a couple of years so hopefully my muscle memory kicks in.
This week we discuss the reintroduction of the wrongful death bill, Senate Bill S4433. We will continue to follow this Bill through the 2025-2026 Legislative Session.
Thanks for reading,
Lexi
Lexi R. Horton
[email protected]
Two Wives OK in Singapore – 100 Years Ago:
Press and Sun-Bulletin
Binghamton, New York
14 Feb 1925
CHINESE GIRL WINS
HEART BALM SUIT
Singapore, Feb. 14 – The first Chinese breach of promise action ever known here was brought when Miss Wee Ohkiah sued a wealthy married businessman, Oel Teowbeng, who refused to take her as his secondary wife.
The defense was that breach of marriage was impossible in view of the fact that the man was already married, or, alternatively, that the second wife must be approved by the first.
The chief justice ruled that, although the obedience of the second to the first wife was the custom, the approval of the first was unnecessary for the marriage of the second. In support of the Chinese recognition of polygamy, he quoted the precedent of a Chinese who left six widows. Damages of £650 were awarded to Miss Wee.
Domenica’s Diary on Bad Faith:
I may be scorned for this opinion, but I am happy football season is over. NJ is Giant and Jet country, and my boyfriend is a die-hard Dallas Cowboy fan, so as you can imagine, it can get “loud” on Sundays in my corner on NJ. I will enjoy the next several months of peace and quiet.
This week I report on a Southern District case involving a carrier’s denial of a class action suit involving claims of failing to pay wages on public works contracts. The carrier denied coverage to its insured 3 times and a coverage action by the insured followed. The Court’s findings on the lack of bad faith are not new, but it reminds us that healthy disagreements on coverage should not be avoided based on a fear of Bad Faith.
Domenica
Domenica D. Hart
[email protected]
Two Wives, One Too Many, in Michigan– 100 Years Ago:
Press and Sun-Bulletin
Binghamton, New York
14 Feb 1925
WED WHILE DRUNK,
HE GETS TWO YEARS
Paw Paw, Mich., Feb. 14 – Being drunk while getting married is a more serious offense than drunk driving, John Lebeau of Detroit learned in circuit Court here when he was sentenced to serve from one to 14 years in the State Prison at Jackson on a bigamy charge.
Lebeau, a magazine solicitor, of Detroit, pleaded guilty to a charge made by Margaret Mildred Linge DeMonthe of Paw Paw, to whom he was married the day after he met her at an Armistice Day ball here. Later it was learned here that he had a wife and three children in Detroit.
Lebeau explained to the court that he was drunk at the Armistice ball when he proposed to his dancing partner and had not sobered up by the time the ceremony was performed the next day.
North of the Border:
Dear Readers:
It has been cold. Very cold. With some breaks (not lasting long enough) and with windchill, it has been hovering around -35C /-31F when I take the dogs to the dog park in the morning. I have to say though that there is a beauty to the world when it gets that cold. There are sometimes ice crystals in the air that refract the light when the sun shines through them. The sky is a beautiful blue and snow cover dazzles. But its still cold. Very cold. And the groundhog did not see his shadow. There will be more of it. I know.
My column this week discusses a case that held that undefined words in an insurance policy will be given their ordinary meanings. Something like the meaning to be given to “international border,” being the demarcation between two sovereign nations, such as the United States and Canada, the opposite of an imaginary line. An interesting historical factoid about that border: There are six airports, and eleven seaplane bases whose runways straddle the Canada/United States border. Such airports were built before the U.S. entry into World War II to legally transfer American built aircraft, such as the Lockheed Hudson, to Canada under the provisions of the Lend-Lease Act. Before the attack on Pearl Harbour in December 1941 and in the interest of maintaining neutrality, U.S. military pilots were forbidden to deliver combat aircraft to Canada. As a result, the aircraft were flown to the border, where they landed, and then, overnight, they were towed on their wheels over the border by tractors or horses. The next day, the planes were crewed by Royal Canadian Air Force pilots and flown to other locations, typically airbases in Eastern Canada and Newfoundland, from where they were flown to the United Kingdom and deployed in the Battle of Britain. That’s how sovereign nations cooperate.
See you in two weeks.
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]
- Interesting Decision, This One. Employers Liability Exclusion Applied to Eliminate CGL Coverage. That Was the Easy One. Court Finds That Employers Liability Coverage Not Available Because No Grave Injury. As a Purist, Court Should Have Dismissed Third-Party Action Rather Than Rule on Coverage on EL Policy
- Tenant’s Carrier Had No Obligation to Provide Additional Insurance Coverage to Landlord for Fall on Sidewalk, in Area Outside of Tenant’s Maintenance Obligations
- Named Insured Is Not Aggrieved by Order Requiring Its Insurer to Defend an Additional Insured. Query: Is That a Surprise?
- Lots of Good Stuff in This One. Where Alleged Child Molester Was an Employee of a Religious institution, He Was Not an Insured Because His Acts Were Not in Furtherance of His Employer’s Business, Nor Was His Conduct Accidental. Since the Claims Are Outside of the Grant of Coverage, No Need to Timely Disclaim. However, the Institutional Claims Are Accidental and Timely but Insufficiently Specific Disclaimer Letter Is Worthless and a Follow Up Disclaimer, Even Though Specific Enough, Was Sent 56 Days Later and Thus Untimely and Ineffective
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Nothing from me this time; see you in two weeks
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- Insured’s Broker Owes No Duty Post-Procurement
- Disputed Existence of Other Auto Policy Defeats UIM Carrier’s Motion
RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]
- Insurer’s Summary Judgment Motion Denied, as Documentary Evidence of Underwriting Practices Were Not Submitted to Establish Material Misrepresentation
- Insurer’s Summary Judgment Motion Is Granted on the Basis That Defendants Failed to Comply with Post-EUO Requests
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
- Former Mortgage Lender Lacks Standing Under Insurance Policy
STORM’S SIU
Scott D. Storm
[email protected]
- Court Grants Insurer’s Motion to Amend Its Answer to Include a Fraud Affirmative Defense Based on Evidence of the Insured Claiming Damage Not Actually Damaged, Concealing Pre-existing Damage Reports, and Instructing Engineers to Alter Reports to Remove References to Uncovered Damage
- Property Policy Void Ab Initio Due to Material Misrepresentations in the Application as the Insured Failed to Disclose the Existence of an Illegal Basement Apartment
- Because the Forged Documents Were Not Financial Instruments, the Insured's Losses Were Not Covered Under the Forgery Provision of the Policy
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- Third Party Claimants Lacked Standing In Direct Action Against Insurer and Were Not Entitled to IDV Damages to Their Vehicles
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
- Exclusions and Definitions in Primary Auto Policy Are Deemed Included in Follow-Form Excess Policy
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
- Extrinsic Evidence Establishes Exclusion but Not Duty to Defend
- Intentional Infliction of Emotional Distress Is Not an “Occurrence” and Pennsylvania Law Bars Insuring Criminal Acts
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
- Fourth Department Modifies Orders in Related Cases Which Granted Defendants’ Summary Judgment Motions Dismissing Plaintiff’s Complaints on the Basis That She Did Not Sustain Serious Injury Within the Meaning of Insurance Law § 5102(d) Where the Evidence Presented by the Defendants Did Not Meet the Initial Prima Facie Burden
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
- Court Held Insurer Was Not Obligated to Provide Coverage Based on Privity-Based Endorsement and Upheld Disclaimer of Coverage Based on Employee Exclusion Issued 62 Days After Tender
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
- The Grieving Families Act has been reintroduced as Bill S4433
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
- Plain, Undefined Words in an Insurance Policy Will Be Given Their Ordinary Meaning
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
Victoria S. Heist
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]
02/13/25 TCS Construction Corp. v. AmTrust North America, Inc.,
Appellate Division, First Department
Interesting Decision, This One. Employers Liability Exclusion Applied to Eliminate CGL Coverage. That Was the Easy One. Court Finds That Employers Liability Coverage Not Available Because No Grave Injury. As a Purist, Court Should Have Dismissed Third-Party Action Rather Than Rule on Coverage on EL Policy
Wesco issued a commercial general liability (CGL) policy to TCS and its principal, Matsui, and an employers' liability (EL) policy to TCS. TCS, a contractor, was hired to renovate certain real property owned by nonparty Balila Realty, LLC. Before commencing its work on those premises, TCS bought both of the aforementioned policies from Wesco through Wesco's managing general agent, AmTrust.
The CGL policy contains an employer's liability exclusion that applies to bodily injury to an "'employee' of the 'insured' arising out of and during . . . [e]mployment by the 'insured'," including "any obligation to share damages with or repay someone else who must pay damages because of the injury." The CGL policy also contains an independent contractors exclusion that applies to bodily injury "arising out of operations performed for any insured by independent contractors or acts or omissions of any insured in connection with his supervision of such operations."
The EL policy covers "bodily injury by accident" if the injury "arise[s] out of and in the course of the injured employee's employment by you [TCS]." If those conditions are satisfied, the EL policy obligated Wesco to "pay all sums you [TCS] legally must pay as damages because of bodily injury to your employees," including, "where recovery is permitted by law," damages "for which you are liable to a third party by reason of a claim or suit against you by that third party to recover the damages claimed against such third party as a result of injury to your employee."
In September 2016, Pacheco, an employee of TCS, sued Balila to recover damages for injuries he allegedly sustained while performing construction work at its premises. Balila later filed a third-party complaint against TCS and Matsui; according to the allegations in the third-party complaint,
Pacheco was employed by his brother rather than by TCS. TCS and Matsui commenced this action against AmTrust and Wesco, and, as relevant here, against Morstan, alleging that Morstan, a broker, sold TCS insurance for additional insured protection covering claims for bodily injury arising out of, or in the ]course of, TCS's performance.
Wesco established its entitlement to summary judgment. About the claim under the CGL policy, Wesco made an unrebutted prima facie showing of noncoverage by submitting evidence that Pacheco was injured in the course of his employment with TCS and therefore, that the employer's liability and independent contractor exclusions in the CGL policy apply to bar coverage of the contribution and indemnification claims against TCS and Matsui.
With regard to the claim under the EL policy, Wesco made an unrebutted prima facie showing of noncoverage by submitting Pacheco's bill of particulars, which demonstrated that his injuries did not qualify as "grave injuries" within the meaning of Workers' Compensation Law § 11 . Pacheco's claimed injuries were attributed to a wrist fracture and back and neck injuries, not an "acquired injury to the brain, the only potentially applicable category of grave injury under Workers Compensation Law § 11" Because Pacheco's injures were not "grave injuries" within the meaning of Workers' Compensation Law § 11, "recovery [from TCS] is [not] permitted by law" upon a third party's claim for contribution or indemnification with respect to damages based on those injuries. Accordingly, such third-party claims against TCS are not covered by the EL policy as to either defense or indemnity.
Editor’s Note: Attaboy Max. Technically, what the court should have done is dismiss the third party action on lack of grave injury rather than declare that the coverage is not available under the policy.
02/07/25 Wesco Ins. Company v. Jewelers Mutual Insurance Company
Appellate Division, First Department
Tenant’s Carrier Had No Obligation to Provide Additional Insurance Coverage to Landlord for Fall on Sidewalk, in Area Outside of Tenant’s Maintenance Obligations
Rio De Oro Jewelry Corp. (“tenant”) leased and operated a store on the ground floor of the premises owned by AKJR. The store was situated on the corner of Liberty Avenue and Eldert Lane in Brooklyn. The record shows that the store's sole entrance and storefront was located on the Liberty Avenue side of the building, while the Eldert Lane side of the store was a windowless, doorless wall.
On the sidewalk abutting the Eldert Lane side of the store were cellar doors opening to a staircase leading to the building's basement. It is undisputed that at all relevant times the leased premises did not include, and the tenant otherwise had no access to or an obligation to maintain, the basement or the cellar doors.
While the basement was situated below the store, there was no internal access to the basement through the Rio jewelry store. Further, the record clearly establishes that another AKJR tenant had exclusive use and control over the basement and cellar doors.
Additionally, while the lease obligated Rio to keep the sidewalk "in front of" the store (which the court found to mean the Liberty Avenue storefront) free from obstructions, it was silent as to any similar duty regarding the Eldert Lane sidewalk with the cellar doors, and fails to impose upon Rio any broader duty regarding the sidewalks abutting the store.
The tenant, in accordance with its lease, named AKJR as an additional insured in an insurance policy issued to it by defendant Jewelers Mutual. The policy covered AKJR "only with respect to liability arising out of the ownership, maintenance, or use of that part of the premises leased to [Rio]." The plaintiff in the underlying action alleged that he tripped and fell over a raised concrete panel surrounding and containing the cellar doors.
Jewelers is not obligated to cover AKJR as an additional insured because the injury did not arise out of AKJR's ownership of "that part of the premises leased to Rio". The raised concrete panel which allegedly caused the underlying injury was part and parcel of the cellar doors, which was not part of Rio's demised premises, property which tenant had no obligation to maintain. As such, any liability resulting from the trip and fall did not arise out of AKJR's ownership of that part of the building leased to the tenant.
Editor’s Note: Dennis Wade, of Wade, Clark, Mulcahy, LLP, gets the “atta lawyer” on this one.
02/07/25 O’Connor v. S&S Construction
Appellate Division, Fourth Department
Named Insured Is Not Aggrieved by Order Requiring Its Insurer to Defend an Additional Insured. Query: Is That a Surprise?
This was a Labor Law case. H.K. Frey & Sons, Inc. (Frey) appealed from an order determining that Frey's insurance carrier (insurer) had a duty to defend S & S in the main action. While this appeal was being perfected, the third-party action proceeded to trial, and the jury returned a verdict in Frey's favor, dismissing claim against it.
Whether the insurer had a duty to defend S & S against plaintiffs' claims in the main action is not properly before the court. Frey had no direct interest in the controversy between the insurer and S & S. Therefore, Frey is not aggrieved by that part of the order.
01/31/25 The Chapel v Guide One Insurance Company
Appellate Division, Fourth Department
Lots of Good Stuff in This One. Where Alleged Child Molester Was an Employee of a Religious institution, He Was Not an Insured Because His Acts Were Not in Furtherance of His Employer’s Business, Nor Was His Conduct Accidental. Since the Claims Are Outside of the Grant of Coverage, No Need to Timely Disclaim. However, the Institutional Claims Are Accidental and Timely but Insufficiently Specific Disclaimer Letter Is Worthless and a Follow Up Disclaimer, Even Though Specific Enough, Was Sent 56 Days Later and Thus Untimely and Ineffective.
The Chapel commenced a declaratory judgment action seeking a determination that GuideOne Mutual (“GuideOne”) has an obligation to defend it in an action alleging that Edward Batt (“Batt”), who was a youth group leader in The Chapel’s employ, committed acts of sexual abuse against the tort plaintiff (“victim”) in the underlying action. Batt also sought coverage under the same policy.
The lower court determined that GuideOne must defend Batt. The Fourth Department disagreed.
In support of his motion, Batt contended that the notice of disclaimer issued by GuideOne was untimely as a matter of law. The court noted that that an insurer is not required to issue a disclaimer of coverage under Insurance Law § 3420 (d) (2) when a claim falls outside the scope of the policy's coverage portion/. In addition, an insurer is not required to issue a disclaimer under section 3420 (d) (2) if the underlying claim does not arise out of an "accident" involving bodily injury.
Here, the commercial policies issued to plaintiff defined an insured to include plaintiff's employees, other than its executive officers, "but only for acts within the scope of their employment by you." Assuming that the allegations of sexual abuse in the underlying complaint are true, the court concluded we conclude that Batt departed from his duties for solely personal motives unrelated to the furtherance of [plaintiff's] business". Since Batt was not an insured, no disclaimer was necessary and certainly no timely one.
In addition, even if Batt was an insured under the policies, the court concluded that the underlying claim did not arise out of an accident. Here, the alleged sexual abuse of the tort plaintiff was intended from decedent's point of view and was not an accident .
However, coverage with respect to The Chapel requires a different analysis.
The Chapel was an insured and from the Chapel’s standpoint, this was an accident. It did not expect or intend the injuries.
GuideOne contends, however, that it issued a disclaimer pursuant to Insurance Law § 3420 (d) (2) as soon as reasonably possible. An insurer who delays in giving written notice of disclaimer bears the burden of justifying the delay. The time from which an insurer's obligation to disclaim is measured begins when the insurer first becomes aware of the ground for its disclaimer
Here, the victim notified the Chapel in July 2020 that he was sexually abused by decedent in 1989 and requested information regarding plaintiff's insurance policy. GuideOne was notified of this request on August 3, 2020. GuideOne obtained the relevant policies on September 29, 2020, and notified plaintiff that it was in possession of those policies. The Chapel asserts, and the court agreed, that September 29, 2020, represents the starting date from which GuideOne's time to disclaim should be measured.
GuideOne sent out an email to the Chapel on October. A notice of disclaimer "must promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated"
The October 7 email stated that "it does not appear there was any misconduct coverage added to the policies" and that the policies "includ[ed] a specific exclusion for any misconduct or any type of allegation relating to misconduct."
Even assuming, arguendo, that the email constituted a disclaimer of coverage, the court conclude that it lacks the required specificity and was thus insufficient to satisfy GuideOne's obligation under Insurance Law § 3420 (d) (2) (
GuideOne sent another email dated November 24, 2020, email to plaintiff was a sufficiently specific disclaimer, contrary to the court's determination. The court properly determined, however, that the 56-day delay rendered the disclaimer untimely as a matter of law.
GuideOne contended that the delay was reasonable since the letter that GuideOne received on August 3, 2020, describing the claim as generic and the tort plaintiff did not file his complaint until October 14, 2020. The letter GuideOne received on August 3 described the 1989 claim as "allegations of child sexual abuse that [the tort plaintiff] sustained at the hands of [decedent], whom [the tort plaintiff] came into contact with while [decedent] was a youth group leader for [plaintiff]."
Thus, the nature of the claim was clear from the letter GuideOne received on August 3, and when GuideOne obtained the policies on September 29, it had at that time " 'all relevant facts supporting . . . a disclaimer' ". GuideOne further contends that the delay was reasonable since The Chapel believed that the dates listed in the underlying complaint might be wrong and requested additional investigation from GuideOne into other policies. The court rejected that contention and concluded that plaintiff's request for an additional investigation did not justify the lengthy delay by GuideOne or raise a triable issue on timeliness.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Nothing from me this time; see you in two weeks.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
01/30/25 Case v. Hanover Ins. Co.
Superior Court of Connecticut, New Haven
Insured’s Broker Owes No Duty Post-Procurement
Case won a verdict in excess of $13 million against a group home, Oak Hill. She sued Oak Hill’s insurance broker under the Connecticut direct action statute, alleging that it negligently handled the insurance claim.
The broker successfully moved to strike the count against it (two counts against Hanover remain). The broker argued that the direct-action statute, CGS § 38a-321, applies only to an insurance company that issues an insurance policy against which the plaintiff seeks to collect the unsatisfied judgment. The broker was not the insurer that issued the alleged policies, it was only the broker that procured policies from Hanover. Additionally, the broker asserted that it owed no duty to Oak Hill regarding the insurance claim, nor was it acting as an agent of Hanover. Finally, the broker argued that since the underlying verdict is on appeal, there is no final judgment provided standing under the direct-action statute. In opposition, Case argued that since she alleged that the broker was an agent of Hanover, and owed a fiduciary duty to Oak Hill, the court must accept those plead facts as true.
Nevertheless, the court found that a broker owes no duty to an insured post-procurement, relying on the Appellate Court’s 2024 ruling in Deer v. National General.
Ed Note: The parties and court failed to note that the Supreme Court accepted certiorari on the very issue of what continuing duty a broker may owe an insured post-procurement. Further, the decision, while reported on Lexis, does not appear on the court’s docket. On February 3, 2025, the plaintiff withdrew its cause of action against the broker.
02/06/25 Latney v. Fernandez
Superior Court of Connecticut, Hartford
Disputed Existence of Other Auto Policy Defeats UIM Carrier’s Motion
Latney brought an underinsurance claim against his insurer, Amica. Amica moved for summary judgment, arguing that there is evidence of an uncollected insurance policy on behalf of the tortfeasor thus precluding UIM coverage. While the court acknowledged that exhaustion of all available coverage is a prerequisite for a UIM claim, it found that there was a question of fact precluding summary judgment for Amica. The court determined that it is for the trier of fact to determine whether plaintiff exhausted all reasonable efforts to pursue the disputed coverage before releasing the tortfeasor.
RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]
01/28/25 Liberty Mutual v. Desmond Roy Newman et al.
Supreme Court, New York County
Insurer’s Summary Judgment Motion Denied, as Documentary Evidence of Underwriting Practices Were Not Submitted to Establish Material Misrepresentation
Liberty Mutual issued a car insurance policy to Desmond Roy covering the insured vehicle involved in the subject accident. The defendant sought treatment with the Medical Provider Defendants, who submitted no-fault bills to the insurer. However, Liberty Mutual filed this action seeking a declaration that it was not obligated to cover the no-fault claims because there were material misrepresentations regarding the garaging location and ownership of the insured vehicle and noncooperation with the claim investigation and moved for summary judgment.
Liberty Mutual argued that alleged material misrepresentations by the Individual Defendants constituted grounds for voiding the policy and therefore Plaintiffs had no requirement to provide coverage. In support of their motion, Plaintiffs submitted documentation including affidavits from the claim investigator, an underwriter, and the claims department's Team Manager, as well as the EUO transcripts for the Individual Defendants.
A misrepresentation must be “material” in order to void a policy, meaning that knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to enter the insurance contract. It was not disputed that there were likely misrepresentations made regarding the ownership and garaging location of the vehicle in question. The issue was whether it was required that such misrepresentations would have resulted in the insurer’s full denial of a policy or if it was sufficient for a misrepresentation to be material if a correct statement would have led to issuance of a policy for a higher premium rate. The Provider Defendants cited to Second Department cases for the proposition that to be material, a misrepresentation must have meant that otherwise, the policy would not have been issued at all. However, in the First Department, a misrepresentation that would have otherwise resulted in a policy with a higher premium rate is sufficient to establish legal materiality. Therefore, the court determined that it was sufficient that the policy would have been issued at a higher premium rate if the misrepresentation was discovered.
The Provider Defendants also argued that the failure to submit underwriting materials would bar Plaintiffs from establishing prima facie entitlement to their claims. The insurer responded that the sworn affidavit from their underwriter was sufficient and claimed that the Provider Defendants never demanded discovery on underwriting practices. However, the court held that regardless of whether or not a defendant requested discovery regarding underwriting practices, in the First Department a plaintiff must submit documentation of underwriting practices such as "manuals, rules, or bulletins" even with an underwriter's affidavit. Therefore, because the insurer did not submit documentary evidence of its underwriting practices, it did not meet its burden on a motion for summary judgment and the motion was denied.
01/31/25 Nationwide Aff. Ins. Co. of Am. et al v. Karin Gepp, Ph.D. et al.
Appellate Division, Fourth Department
Insurer’s Summary Judgment Motion Is Granted on the Basis That Defendants Failed to Comply with Post-EUO Requests
The insurer in this matter requested examinations under oath of the defendants in relation to medical treatment provided to the insured, after which the insurer submitted additional verification requests. Just before the expiration of the 120 period to respond to these requests, defendants submitted a letter with blanket objections. Plaintiffs thus commenced this declaratory judgment action alleging, inter alia, that defendants were not entitled to receive no-fault reimbursement for the claims in question because defendants failed to comply with 11 NYCRR 65-3.8(b) with respect to their obligations to respond to written requests for information under their control within 120 days or submit written proof providing reasonable justification for failing to comply.
Under the No-Fault Law, an insurer is required either to pay or deny a claim for benefits within 30 days of receipt of the claim. However, such times may be tolled when additional verification is timely sought, to permit the carrier time to obtain information regarding the claim and determine whether it should be paid or denied. "The insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested" (11 NYCRR 65-3.5[c]). If the insurer requests an EUO, the verification is deemed to have been received by the insurer on the day the examination was performed (see 11 NYCRR 65-3.8[a][1]). Further, if the insurer is unable to garner the information it needs from the EUO of a person submitted by the assignee corporation or partnership, the insurer may request additional examinations of the assignee until a person is submitted for examination by the assignee who can provide the items necessary to verify the claim.
Here, the court concluded that plaintiff established their post-EUO requests were proper. Though post-EUO verification requests are not a specifically enumerated disclosure device in the no-fault regulations, plaintiffs were entitled to receive all items necessary to verify the claims and were entitled to continue to request additional EUOs until defendants produced a representative who could provide the items necessary to verify the claim. Defendants, having agreed to provide the additional disclosure—thereby inducing plaintiffs to forgo the additional EUOs to which they were entitled—cannot now claim that post-EUO discovery is impermissible as a matter of course. The court also agreed that the insurer established that defendants failed to comply with their obligation to submit verification within 120 days and that the defendants failed to raise a triable issue of fact as to whether they had a reasonable justification for the failure to comply with the demands. This included basic information including the licenses of the providers rendering care on defendants' behalf, information identifying which provider rendered the care, and data to determine whether the visits were properly billed and coded. Defendants agreed to provide such information during two EUOs, however, they failed to explain why they did not provide such documentation within the requisite time period following plaintiffs' demand. Having failed to do so, defendants failed to raise any triable issue of fact in opposition to plaintiffs' motion.
Accordingly, the Appellate Division reversed the Supreme Court's decision, holding the insurer established their prima facie entitlement to judgment as a matter of law.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
02/05/25 Crosby Capital USA LLC v. AmGuard Insurance Company
United States Court of Appeals, Second Circuit
Former Mortgage Lender Lacks Standing Under Insurance Policy
Crosby Capital USA, LLC (“Crosby”) alleged in its complaint that it had provided a mortgage loan for a property insured by AmGuard Insurance Company (“AmGuard”) and that AmGuard breached the policy by declining payment to Crosby. Crosby represented that it was the holder of both the promissory note and the mortgage on the property, entitling it to payment. The district court disagreed, finding instead that Crosby had previously transferred the note to another party and therefore lacked standing under the policy. The Second Circuit affirmed.
Under New York law, “the [promissory] note . . . is the dispositive instrument that conveys standing,” and here, it was undisputed that “Crosby transferred its promissory note for the property covered by the insurance policy to a person named Simon Leger via an allonge dated July 7, 2020, before the commencement of this lawsuit.” While Crosby argued that as the “holder” of the note or its “servicer,” it has “every right to enforce all rights under the note” including the right to “act on behalf of Leger,” the Second Circuit was unconvinced.
It did not help Crosby’s case that its representative conceded at a deposition that “Leger was the holder of the note,” which was the only evidence in the record. There was equally no evidence submitted supporting that Crosby had filed the action to protect Leger’s interests.
While Crosby additional asserted that AmGuard waived any standing defense by failing to plead that defense, the Second Circuit noted that AmGuard did not, intentionally relinquish that right and Crosby’s failure to plead the correct scenario resulted in AmGuard’s delay in raising the issue when pleading.
STORM’S SIU
Scott D. Storm
[email protected]
01/27/25 Esplanade 2018 Partners, LLC v. Mt. Hawley Ins. Co.
United States District Court, Southern District of New York.
Court Grants Insurer’s Motion to Amend Its Answer to Include a Fraud Affirmative Defense Based on Evidence of the Insured Claiming Damage Not Actually Damaged, Concealing Pre-existing Damage Reports, and Instructing Engineers to Alter Reports to Remove References to Uncovered Damage
The plaintiff filed a claim for hurricane damage to its building. Plaintiff seeks to recover at least $4,681,844.15 to cover the alleged damages, as well as statutory penalties and attorney's fees.
Mt. Hawley alleges it uncovered evidence during discovery that plaintiff knowingly inflated and misrepresented the claim, including claiming damage to a roof that was not actually storm-damaged, concealing pre-existing damage reports, and instructing engineers to alter reports to remove references to uncovered damage.
Mt. Hawley argues that the plaintiff "scheme[d] to artificially inflate their claim" in order to exceed the relevant policy deductible. Plaintiff alleged that replacement of the building's main roof was necessary at a cost of over $550,000, but its internal emails revealed that it had a report from its contractor stating that the main roof was not damaged by the storm. Further reports show that the building's roofs were already in poor condition and plaintiff had planned on replacing them prior to the storm. Mt. Hawley also alleges that plaintiff's internal emails show that it knowingly retained consultants and urged them to "add additional items to the claim" without evidence showing the additional damage resulting from the storm. Mt. Hawley points specifically to a claim for resealing every window in the building at a cost of $981,986.00, while concealing 2017 and 2018 inspection reports showing the window damage pre-existed the hurricane. Finally, Mt. Hawley alleges that plaintiff's public adjusters "literally instructed" Plaintiff's engineers "to alter its report to remove all references to 'wind-driven rain' because wind-driven rain is not covered under the Mt. Hawley Policy." Mt. Hawley contends that an employee of the adjuster issued these instructions "to better reflect the insurance policy language"; that the report was then, in fact, altered by the engineers; and that Plaintiffs submitted the altered report without disclosing the previous draft.
The subject policy condition states that the coverage is void in the event that the insured party "intentionally conceal[s] or misrepresent[s] a material fact concerning" the coverage, the property, the party's interest in the property, or a claim under the insurance coverage”.
The Court held that the insurer demonstrated good cause for leave to amend its answer to add an affirmative defense of fraud after the amendment deadline. The Court said that Mt. Hawley showed good cause to amend after the deadline because it did not have a basis to assert fraud prior to discovery disclosures. In addition, the proposed fraud allegations were sufficiently specific under Fed. R. Civ. P. Rule 9(b), stating the who, what, when, where and how of the alleged fraud.
01/22/25 Khair v. Hyundai Mar. & Fire Ins. Co.
Supreme Court, Kings County
Property Policy Void Ab Initio Due to Material Misrepresentations in the Application as the Insured Failed to Disclose the Existence of an Illegal Basement Apartment
The Court granted Hyundai’s motion to dismiss. A fire damaged the plaintiffs’ property in Brooklyn and Hyundai denied coverage for the claim and rescinded the policy returning all premium.
In the application for homeowners insurance the plaintiff described the property as a three-family house which did not have "illegal rental units, including basement unit" and was not a "boarding or rooming house." Hyundai’s underwriter testified the investigation revealed "that the house was configured with 7 dwelling units, resulting in a house with illegal basement units, a boarding house situation, and a house with greater than four total dwelling units." The Underwriter states that Hyundai "been truthfully advised that the house had these problems, [it] would not have issued this [subject] policy."
Hyundai submitted underwriting guidelines in support and the Underwriter stated that, "[i]llegal dwelling units are prohibited in part because without proper building permits and inspections, illegal units can have egress problems, can contain hazardous conditions that overtax the building's infrastructure, particularly electrical, and lack proper smoke detectors, thus greatly increasing the possibility of a loss."
A misrepresentation is defined as a false statement as to past or present facts made to the insurer by the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof under N.Y. Ins. Law § 3105 [a].
A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application.
Under New York law, the number of dwelling units contained in a building is determined by its structural configuration and the number of self-contained dwelling units.
The failure to disclose the illegal basement apartment constituted a material misrepresentation. The court determined that no reasonable insurer would provide coverage for a property with undisclosed illegal units due to increased risks. Plaintiffs made material misrepresentations concerning the existence of illegal rental units or basement unit within the Premises. Thus, the insurance policy was void ab initio.
02/03/25 KMS Dev. Partners LP v. Fed. Ins. Co.
United States District Court, Eastern District of Pennsylvania
Because the Forged Documents Were Not Financial Instruments, the Insured's Losses Were Not Covered Under the Forgery Provision of the Policy
The court granted summary judgment to the insurer.
KMS was defrauded by an individual impersonating a wealthy investor. The impersonator signed fraudulent documents including a Term Sheet and Equity Letter. KMS paid $300,000 and $500,000 to the fraudster based on these documents. KMS had an insurance policy with Federal that included a Forgery provision.
The Forgery provision covered losses from "Forgery or alteration of a Financial Instrument committed by a Third Party", not forgery of other documents. Financial instruments are defined as checks, drafts or similar written promises, orders or directions to pay a sum certain in money, that are made, drawn by or drawn upon an Organization or by anyone acting as an Organization's agent, or that are purported to have been so made or drawn.
The Court held that the fraudulent documents signed were not financial instruments as defined in the policy. A plain reading of the policy language requires that a forgery be of a financial instrument to trigger coverage. Because the forged documents were not financial instruments, the insured's losses are not covered under the Forgery provision of the policy.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
01/30/25 Cubberley v. The Commerce Insurance Company
Massachusetts Supreme Judicial Court
Third Party Claimants Lacked Standing In Direct Action Against Insurer and Were Not Entitled to IDV Damages to Their Vehicles
The plaintiffs, Cubberley and Seaver, each had a vehicle damaged in a collision caused by another driver insured under a policy issued by The Commerce Insurance Company. Each plaintiff, as a third-party claimant, sought compensation from Commerce for damage to their vehicles. Commerce acknowledged liability for the damage caused by its insureds and processed the claims. While Commerce covered the cost of repairs to restore the vehicles to their condition prior to the collision, it refused to compensate the plaintiffs for any alleged IDV (inherent diminished value). As a result, each plaintiff’s vehicle was worth less in the resale market than a comparable vehicle that had not suffered damage in a collision.
The plaintiffs commenced a lawsuit in the Superior Court, on behalf of themselves and similarly situated individuals, against Commerce for a declaration that Commerce was obligated to cover IDV damages and for compensation for Commerce's alleged breach of contract for failing to pay these damages. The plaintiffs asserted that Commerce failed to pay for IDV damages under part 4 of the 2016 standard Massachusetts automobile policy. The plaintiffs also sought a judgment declaring that all IDV damages must be paid and/or tendered to third party claimants where the insured tortfeasor has been determined to be liable for the associated third-party property damage. Commerce moved to dismiss, and the court concluded that part 4 of the 2016 standard policy excludes coverage for IDV damages to third-party vehicles and, therefore, Commerce had no obligation to pay the plaintiffs. The court did not address whether the plaintiffs had standing due to their failure to secure a final judgment against the insureds before suing Commerce. The plaintiffs appealed, and the SJC granted their request for direct appellate review.
As a threshold issue, the plaintiffs lacked standing to pursue their breach of contract claims because they failed to obtain final judgments against Commerce’s insureds. Under Massachusetts law, a third-party claimant must first secure a final judgment against the insured party before suing the insurer for an alleged failure to pay damages under the policy. Instead of obtaining final judgments against the insureds as required, the plaintiffs asserted that they were third party beneficiaries of the 2016 standard policy and sued Commerce directly. As a result, the SJC did not need to address the merits of the breach of contract claim.
However, at the court’s discretion, the SJC looked at the substantive question regarding whether part 4 of the 2016 standard policy provides coverage for IDV damages to a third-party claimant's vehicle. Contrary to the plaintiffs' claims, part 4 of the 2016 standard policy excludes coverage for IDV damages a third party claimant's vehicle. It states: “The amount we will pay does not include compensation for . . . any decreased value or intangible loss claimed to result from the property damage unless otherwise required by law.” Additionally, part 4 limits third-party coverage to “damage or destruction of . . . tangible property,” and damage to tangible property does not include IDV. The SJC also did not find that any other law would require coverage for IDV damages under part 4 of the 2016 standard policy, and the Commissioner of Insurance’s approval of the exclusion was reasonable and consistent with statutory authority.
Accordingly, the SJC affirmed the dismissal of the plaintiffs’ complaint.
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
02/11/25 Est. of Brackin et al. v. Privileged Underwriters Ins. Recip. et al.
Superior Court of New Jersey, Appellate Division
Exclusions and Definitions in Primary Auto Policy Are Deemed Included in Follow-Form Excess Policy
Dr. Butzbach’s two adult children, Phillip and Miles Brackin, were driving Butzbach’s vehicle (Phillip was driving, with Miles in the passenger seat). They were involved in a one-car accident, resulting in Miles’ death.
The vehicle was insured under a primary auto policy issued by USAA, and an excess personal auto policy issued by Privileged Underwriters Insurance Reciprocal (“PURE”). The PURE policy followed form to the terms and conditions of the USAA policy.
The liability part of the USAA policy provided that USAA would pay compensatory damages for bodily injury for which any “covered person” becomes legally liable to pay because of an auto accident. The USAA policy defined a “covered person” as any “family member,” which in turn was defined as a person related to the named insured by blood, marriage, or adoption, who resides primarily in the named insured’s household. The USAA policy provided liability limits of $500,000 per person and $1,000,000 per accident.
The USAA policy also had an uninsured/underinsured motorist coverage part (“UIM”), which provided that USAA would pay compensatory damages which a “covered person” was legally entitled to recover from the owner or operator of an “uninsured motor vehicle” or “underinsured motor vehicle” because of bodily injury sustained by a “covered person” and caused by an auto accident. The UIM part deemed a vehicle as “underinsured,” for purposes of the policy’s definition of an “underinsured motor vehicle,” where the sum of all bodily injury limits of all applicable liability policies was less than the UIM limit under the USAA policy and any other applicable UIM policies. The UIM part of the USAA policy also excluded from UIM coverage any vehicle owned by or available for the regular use of the named insured or any “family member.”
Meanwhile, the PURE policy’s excess liability coverage part provided that PURE would pay for damages that an insured is legally obligated to pay because of personal injury caused by an occurrence, in excess of the limits of the USAA policy. The PURE policy’s liability part excluded from coverage any damages for personal injury to any insured under the policy. Like the USAA policy, the PURE policy defined an “insured” as a “family member,” defined as someone who lived in the named insured’s household, and was related to the named insured by blood, marriage, or adoption.
The PURE policy also contained an excess UIM coverage part, which provided up to $1,000,000 in damages for bodily injury that an insured was legally entitled to receive from the owner or operator of an uninsured/underinsured auto. The UIM part expressly if it followed form to the USAA policy’s UIM coverage part, unless it was excluded by the terms of PURE’s UIM endorsement.
Following the accident, USAA paid its liability limit ($500,000) to Miles’ estate. PURE denied coverage entirely, on the ground that its liability coverage part excluded coverage for personal injury to any insured under the policy, including any resident family members of the named insured. PURE also denied UIM coverage on the ground that its UIM endorsement followed form to the USAA UIM endorsement, which contained a similar intrafamily exclusion.
Phillips’ estate sued PURE, claiming that its reliance on the intrafamily exclusion was against public policy, and that its follow-form provision was ambiguous. PURE moved to dismiss the Plaintiff’s claims on the grounds that the public policy argument had been heard and addressed (in PURE’s favor), and that its follow-form provision was clear and unambiguous. The lower court agreed, and this appeal followed.
The Appellate Division affirmed the findings of the lower court. First, the Court determined that both Miles (the driver) and Phillip (the decedent) were family members of Butzbach (the registered owner of the vehicle) and lived with her. Therefore, both Miles and Phillip were “insureds” under the policy. Since the excess liability part excluded coverage for personal injury to the policyholder or any other insured, the Court determined no coverage was available under the excess liability part of the PURE policy.
The Appellate Division also confirmed no coverage was available under the UIM endorsement. The plaintiff argued that the PURE policy’s follow-form provision was ambiguous because it was contained in the policy’s definitions section instead of the policy’s declarations. The Court disagreed, on the ground that the follow-form provision was not overly-technical, contained no hidden “pitfalls,” and that an insurance policy is not ambiguous simply because its declarations sheet, definitions section, and exclusionary provisions are presented on different pages. The Court cited well-established New Jersey law standing for the proposition that a rule requiring insurers to write every definition and exclusion on the declaration sheet would result in “even more fine print,” would “run the risk of making insurance policies more difficult to understand,” and would “eviscerate the rule that a clause should be read in the context of the entire policy.”
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
02/12/25 Aram Logistics v. United States Liab. Ins. Co.
United States Court of Appeals, Ninth Circuit
Extrinsic Evidence Establishes Exclusion but Not Duty to Defend
Diakon Logistics sued Aram, a rival furniture delivery company, in state court action alleging Aram misappropriated Diakon’s proprietary information. Aram possessed liability insurance through USLI. Within the USLI policy was personal and advertising injury coverage. Aram felt USLI owed a defense in the underlying state court action.
Aram asserted that even if none of Diakon’s claims allege advertising-based damages, extrinsic evidence still required USLI to provide a defense. USLI countered asserting Diakon’s claims were beyond the scope of coverage and if not, then are subject to the policy’s exclusions.
The only extrinsic evidence Aram pointed to was the deposition testimony of Diakon’s CEO. That person stated that one of Aram’s officers is an ex-Diakon employee who copied Diakon’s advertising materials, thus giving rise to a potential covered advertising claim. However, the Appellate Court found that the Knowing Violation Exclusion would apply even a defense duty triggered. The exclusion applies when an injury is:
“caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury’.”
So, the testimony of Diakon’s CEO provided evidence not of a duty to defend but the lack of coverage. The court reasoned the testimony indicates that Aram must have knowingly copied Diakon’s advertising materials because Aram’s officer was previous Diakon employee familiar with the materials. Thus, there exclusion applied and USLI’s summary judgment affirmed.
02/11/25 Rosenberg v. Hudson Ins. Co.
United States Court of Appeals, Third Circuit
Intentional Infliction of Emotional Distress Is Not an “Occurrence” and Pennsylvania Law Bars Insuring Criminal Acts
In this tragic matter the Rosenbergs’ son shot and killed a person he befriended at a local community college. The murder occurred at the Rosenbergs’ home. After the murder, the Rosenbergs’ son dragged the victim’s body to a park across the street from the home. It took the police over two months to find the body. However, the Rosenbergs’ marriage counselor found the weapon while hiking on a trail in another park a month prior to the detectives’ discovery of the body.
Due to the delay in discovery of the body, the victim’s mother brought an action against the Rosenbergs’ for intentional infliction of emotional distress. The Rosenbergs possessed two relevant policies. A homeowner’s policy through Chubb and an umbrella policy through Hudson. Under both policies, the Rosenbergs sought a defense. Both policies contain defense obligations for an “occurrence” which each policy defined differently.
The Chubb policy defined “occurrence” as "an accident which begins within the policy period resulting in bodily injury, shock, mental anguish, mental injury, or property damage." The Hudson umbrella defined the term as “an accident or accidental event, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”
Both Chubb and Hudson denied the Rosenbergs’ defense requests. So, they brought a declaratory judgment against the insurers. The district court found the allegations in the complaint were not fortuitous or accidental and thus, not an occurrence. And even if a defense were owed, Pennsylvania law bars coverage for criminal acts. The complaint contained an allegation of concealing evidence of the crime which is a criminal offence.
On appeal, the Third Circuit affirmed. The complaint alleged the Rosenbergs intentionally concealed the handgun that would have implicated their son and led to the earlier discovery of the victim’s body. Thus, the claim did not involve an accident and failed to qualify as an “occurrence” under the Chubb policy.
While the court noted the subjective component of the Hudson policy’s definition of “occurrence”, it was of no matter. That is because Pennsylvania law forbids insuring criminal acts. Since the Rosenbergs failed to challenge the district court’s independent finding on the Pennsylvania law issue, they cannot prevail on their appeal. Indeed, the Rosenbergs did not develop any argument to contest this issue on appeal.
Editor’s Note: The district court also found the Intentional Act Exclusion and Molestation, Misconduct or Abuse Exclusion applied to preclude coverage under the Chubb policy. But the appellate court does not delve into the application of those exclusions.
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
01/31/25 Rook v. Dibble & Rook v. Wood
Appellate Division, Fourth Department
Fourth Department Modifies Orders in Related Cases Which Granted Defendants’ Summary Judgment Motions Dismissing Plaintiff’s Complaints on the Basis That She Did Not Sustain Serious Injury Within the Meaning of Insurance Law § 5102(d) Where the Evidence Presented by the Defendants Did Not Meet the Initial Prima Facie Burden
These cases stem from two separate motor vehicle accidents which occurred in Erwin, New York, involving the same Plaintiff, Sheryl L. Rook. The first accident occurred on November 22, 2018, when Plaintiff’s vehicle was allegedly rear-ended by a vehicle operated by Defendant Kaitlin Onalee-Irene Wood and owned by Defendant C Terreri-Wood. Shortly after, on December 7, 2018, Plaintiff’s vehicle was involved in another collision with a vehicle operated by Defendant Kevin S. Dibble and owned by Defendant Horseheads Automotive Recycling, Inc.
As a result of these accidents, Plaintiff alleged injuries to her cervical spine, thoracic spine, bilateral median nerve/carpal tunnel syndrome which required surgical release on the right, left shoulder pain, headaches, and depression. She claimed that these injuries met the Serious Injury Threshold under the following categories of Insurance Law § 5102(d): permanent consequential limitation of use, significant limitation of use, and 90/180 day. During the discovery phase, these matters were consolidated. Following discovery, Defendants made motions for summary judgment seeking to dismiss the respective complaints on the ground that Plaintiff did not sustain a serious injury. By Order of Supreme Court, Steuben County, these motions were granted and the complaints dismissed. Plaintiff sought appeal in both cases.
On review, the Fourth Department found that Defendants’ submissions in support of their respective motions failed to meet their initial burden of establishing as a matter of law that Plaintiff did not sustain a serious injury, thus the burden never shifted to Plaintiff to raise a triable issue of fact in opposition. Specifically, the Fourth Department reviewed Defendants’ IME physician’s report which was produced in support of the motions. This physician, who examined the Plaintiff and reviewed all relevant medicals both prior to and after these accidents, opined that Plaintiff suffered causally related strains to her left trapezius and cervical spine, which were exacerbated from the latter of the subject accidents. Further, this IME physician’s report contained a quantitative assessment showing Plaintiff had related range of motion loss.
Since Defendants’ own submissions contained objective proof of a causally related injury and documented range of motion loss sufficient to constitute a serious injury, Defendants failed to meet their prima facie burden on motion practice. Accordingly, the Orders of the Supreme Court, Steuben County, were unanimously modified on the law by denying the motions in part and reinstating the complaints with respect to the claims of serious injury under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d).
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
02/04/25 Scottsdale Ins. Co. v. Sisco Architectural Metals Co.
Supreme Court of the State of New York, New York County
Court Held Insurer Was Not Obligated to Provide Coverage Based on Privity-Based Endorsement and Upheld Disclaimer of Coverage Based on Employee Exclusion Issued 62 Days After Tender
Scottsdale Insurance Company (“Scottsdale”) filed an action against Sisco Architectural Metals Co. (“Sisco”), Emmanuelle Castillo, Shannon Contracting LLC (“SC LLC”), and 14 MP Street Property LLC (“14 MP”). Scottsdale sought a declaration that it was not required to defend and/or indemnify Sisco, 14 MP, or SC LLC in an underlying labor law action. Scottsdale had issued a general liability policy to Sisco, which was in effect at the time of the injuries alleged in the underlying labor law action.
Scottsdale moved for default judgment against Sisco, and summary judgment against the appearing defendants. MP 14 and SC LLC cross-moved for summary judgment, arguing that Scottsdale has a duty to defend and indemnify Sisco as a named insured, and MP 14 and Shannon Contracting as additional insureds. Additionally, the cross-motion asserted that Scottsdale cannot move for default judgment, because they failed to move for the relief within one year of service.
Scottsdale argues that there is no written contract or agreement between MP 14 and Sisco, identifying that MP 14 is to be named as an additional insured which is a requirement for additional insured status in the Scottsdale policy. In opposition, MP 14 identifies that there was a contract between SC LLC and Sisco, which identified that Sisco would name both Shannon Contracting and MP 14 as additional insureds.
Notably, the Scottsdale policy contained a privity-based additional insured requirement, which stated an additional insured was, “any person or organization for whom you are performing operations 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.”
Since it was undisputed that there was no written agreement between Sisco and MP 14, the Court held that MP 14 is not entitled to coverage under the Scottsdale policy, because it does not qualify as an additional insured.
In relation to obligations to defend and indemnify SC LLC, Scottsdale asserts that coverage was based by an Absolute Employee and Worker Injury Exclusion, excluding coverage for bodily injuries to an employee of any insured. In opposition, SC LLC asserts that reliance on the exclusion is barred, because Scottsdale failed to timely assert it.
Under Insurance Law 3420(d), an insurer must give written notice of a disclaimer as soon as reasonably possible after it learns of the grounds for disclaiming liability. However, a delay in disclaiming coverage may be excused if an insurer conducts an investigation into issues affecting an insurer’s decision whether to disclaim coverage.
Here, the claim was tendered to Scottsdale on September 24, 2020. Scottsdale disclaimed coverage, asserting the Absolute Employee and Worker Injury Exclusion on November 25, 2020.
The court disagreed with SC LLC that Scottsdale untimely disclaimed coverage. Although the tender stated that Sisco was the employer of the plaintiff in the labor law action, the complaint failed to identify Sisco as the employer. As such, Scottsdale contacted Sisco on October 6, 2020, only one week after receiving the tender. Sisco identified, on October 6, 2020, that the underlying plaintiff was not his employee. Scottsdale additionally acquired a copy of the Worker’s Compensation Board decision, dated October 16, 2020, where Sisco disputed the employee status of the underlying plaintiff.
However, on November 2, 2020, MP 14 filed a third-party complaint in the underlying labor law case, asserting that Sisco was the employer of the injured plaintiff.
Based on the inconsistent information given to Scottsdale, and its continuing investigation, the court found that the two-month delay in disclaiming coverage was reasonable and timely.
As to the default judgment against Sisco, the court found that Scottsdale never abandoned the action. Here, Sisco was served on May 5, 2022, while Scottsdale moved for default judgment on September 5, 2023. Despite the fact that this was a fifteen month delay, the court identified that Scottsdale filed an RJI, contacted Sisco regarding the default, and engaged in discovery with the appearing defendants. MP 14 and SC LLC failed to make a showing of prejudice from the three month delay in Scottsdale moving for summary judgment.
Based on the foregoing, the court ordered that Scottsdale’s motion for summary judgment and default judgment were granted. The court declared that Scottsdale has no obligation to defend or indemnify Sisco, MP 14, or SC LLC in the underlying labor law action.
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
02/14/2025 New York Senate Bill S4433
New York State Senate
The Grieving Families Act has been reintroduced as Bill S4433
On February 4, 2025, the Grieving Families Act was reintroduced as Bill S4423. The Bill again seeks to provide for the types of damages that may be awarded to the persons for whose benefit an action for wrongful death is brought.
This legislation attempts to amend the estates, powers and trusts law, in relation to payment and distribution of damages in wrongful death actions. The bill seeks to expand the available economic or pecuniary losses, including damages for grief and anguish, available to “surviving close family members.”
On December 21, 2024, Governor Kathy Hochul vetoed the 2024 version of this bill, Assembly Bill A9232-B.
Governor Hochul wrote, “[f]or the third year in a row, the Legislature has passed a bill that continues to pose significant risks to consumers, without many of the changes I expressed openness to in (the) previous round of negotiations.”
As it was introduced Bill S4433 is substantively the same as Bill A9232-B which was vetoed by the Governor in 2024.
DOMENICA’S DIARY on BAD FAITH
Domenica D. Hart
[email protected]
01/10/25 A&M Warshaw Plumbing & Heating, Inc. v. Mount Vernon Fire Ins. Co.
United States District Court, Southern District of New York
Arguable Difference of Opinion Precludes Bad Faith: New York Reminds Us That Allegations of Simple Error or Disagreements on a Denial of Coverage Are Not Sufficient to Prove Bad Faith
This matter arises from a class action complaint filed by two laborers against A&M Plumbing and A&M Fire in New York State Court, alleging that they had failed to pay their full wages in breach of a public works contract on a building restoration project in Brooklyn. A&M Fire and A&M Plumbing took out separate insurance policies with Mount Vernon Fire Insurance Company to insure against lawsuits brought under the Fair Labor Standards Act ("FLSA") and similar wage laws. The Complaint was later amended to include allegations pursuant to New York Labor Law § 220(3)(a). NYLL § 220(3)(a) requires that laborers on public works contracts be paid "not less than the prevailing rate of wages," and mandates that these contracts "shall contain a provision" requiring payment of those wages. Both parties sought defense and indemnity from Mount Vernon. Mount Vernon denied coverage 3 times on the premise that the policy language covered only claims for alleged violations of the FLSA and similar laws, and the Lawsuit alleged breach of contract claims.
A&M Warshaw (‘A&M”) filed an insurance coverage action against Mount Vernon seeking a declaration that Mount Vernon owed it defense and indemnity, and seeking punitive damages and attorney fees. The Court found that AM Warshaw’s breach of implied covenant of good faith and fair dealing claim was duplicative of the breach of contract claims. As New York law does not recognize a separate cause of action for breach of the implied covenant claim when there is a breach of contract claim based on the same facts, the implied covenant claim was barred. The Court dismissed the punitive damage claim as A&M did not allege intentional tort against Mount Vernon which was egregious conduct directed at the public. Allegations of intentional tort, egregiousness and direction toward the public at large are required elements of a punitive damage claim in New York. The Court finally dismissed A&M’s claim for attorney’s fees. The two exceptions to the New York Law, which does not permit an insured to recover fees and expenses when it sues their insurer to enforce the policy, were not met. Firstly, Mount Vernon had not put A&M in a “defensive posture by legal steps.” The action was an affirmative action by A&M, and denial of coverage, even 3 times, is not a “legal step.”
Secondly, the Court also found A&M was not entitled to attorney’s fees based on Bad Faith. The well-settled New York law prevailed here. There is a strong presumption against a finding of bad faith liability by an insurer. The burden of proving bad faith requires that an insured show that the denial of coverage was so entirely without basis that no reasonable insurer would assert or be expected to assert the denial, given the same facts. Simple error or disagreement/difference of opinion, even if the position is ultimately wrong about coverage obligations, is not enough. Although there was a disagreement between A&M and Mount Vernon regarding claims for any actual or alleged violation of wage-and-hour laws versus breach of contract claims, the court found that the ambiguity created an "arguable difference of opinion" that precludes the finding of bad faith.
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
02/03/2025 904950 Ontario Limited v. Dominion of Can. Gen. Ins. Co. et al.
Ontario Court of Appeal
Plain, Undefined Words in an Insurance Policy Will Be Given Their Ordinary Meaning
If water enters a basement through a pipe that goes through a wall, did the water enter through the wall or the pipe? If it entered through the wall, then there would be no coverage for water damage. If the water entered through the pipe, there is coverage. Two levels of courts in Ontario said there is coverage. This is the stuff that makes coverage lawyers smile in pure happiness. This gives us meaning and purpose ….
This very brief decision is short on detail and gets right to the point. It seems that the Dominion of Canada General Insurance Company (Travelers Canada), issued a property insurance policy to an Ontario numbered company covering property somewhere in Ontario. Like most property policies, property damage caused by water discharging from watermain was covered UNLESS the water entered the insured property through a basement wall.
In this case, a watermain burst. Water from the watermain flooded the basement of the insured property. The water entered the basement through a pipe that transected one of the walls of the basement. We assume that means that the pipe penetrated through the wall, extending from one side of the wall to the other, creating a pathway for the water. Apparently, the pipe was no longer used for any purpose, but it had not been sealed.
Counsel for the insurer argued that the exclusion clause unambiguously applied.
The motion judge disagreed stating “walls and pipes serve conflicting functions. Walls “enclos[e]” and “protect[]” a property against the outside world: Canadian Oxford Dictionary, 2nd ed. (Don Mills: Oxford University Press, 2004), definition of “wall”. Pipes do the opposite. As “tube[s] . . . used to convey water” from place to place, they enable water to flow into or out of a property: Canadian Oxford Dictionary, definition of “pipe”. The same judge held that as the pipe was not sealed, the pipe was still ‘a pipe’. The Court of Appeal stated that the pipe has a different function than a wall.
The Court of Appeal rejected the insurer’s secondary argument that the parties could not have expected that a pipe would transect the wall:
We reject its argument that the parties could not have reasonably expected that a pipe might transect the wall or that extending coverage produces an unrealistic result. Pipes sometimes do transect walls. It is reasonable and realistic to expect insurers to turn their minds to this possibility when drafting policies. Indeed, as the …[insured]… submits, some insurers expressly exclude coverage for damage caused by water that enters through openings in walls….
The Court of Appeal held that the exclusionary language was not ambiguous. Nonetheless, that court went on to say that if it was ambiguous, the ambiguity would be resolved by applying the rule of contra proferentum and reading the exclusion narrowly in favour of coverage. In that case:
“As the insurer who drafted the policy, it could have specifically addressed the entry of water through pipes. It must live with the consequences of an ambiguity that its failure to do so created.”
The insurer was ordered to cover the damage and to pay $8,000 in court costs to the insured.
The moral story is that none of the pipes in the images below are walls:
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