Volume XXVI, No. 20 (No. 693)
Friday, March 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.
In some jurisdictions, newsletters such as this may be considered Attorney Advertising.
If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.
You will find back issues of Coverage Pointers on the firm website listed above.
Dear Coverage Pointers Subscribers:
Do you have a situation? We love situations.
DRI Insurance Roundtable
I am back from Chicago where I was fortunate enough to be asked to participate in one of the nation’s most impressive insurance programs, the DRI Insurance Roundtable. Along with my colleague and friend Matt Foy from the Gordon Rees firm, in place of my great pal John Trimble, who was unable to attend, we discussed how the insurance industry and the defense/coverage attorney community, can work together to transition the business and practices into the future. Both the industry and the legal profession face challenges, financial and otherwise, and we each want the other to expand and thrive. These are challenging times and it’s great that we can break bread and have frank and honest discussions on these very compelling topics/
New York Car Rental Coverage – Important First Department Decision
This one is, in my opinion, one of the most significant judicial decisions involving rental car coverage in many years. On Thursday, March 13th, the First Department handed down a decision which is reported in column, in a matter called Second Child v. Edge Auto. You will find a lengthy discussion of the case and a link to the decision in in the attached issue of Coverage Pointers.
The Court overturned, in part, based on the Graves Amendment, a section of the Vehicle & Traffic Law (Section 370) and distanced itself from an earlier decision from our high court in ELRAC v. Ward, by holding that the federal statute preempts the requirement that rental car companies need to provide at least the minimum New York limits of liability insurance. $25,000/$50,000/$10,000, to those who rent cars in New York.
This is a perfect case for high court review, but it will have to be done on motion for leave to appeal.
Primary carriers beware – you may have believed that when your insureds rented cars and had accidents, your policies would provide excess, non-owned coverage. If this case becomes the law of the land, you will now have primary responsibility to defend and indemnify your insureds. And for those renters who don’t have their own auto coverage, we can expect a rise in uninsured motorists claims and claims under MVAIC.
Wyoming Sanctions Case Settles
For those who have followed the Morgan and Morgan case which included sanctions to lawyers in that firm for submitting hallucinated cases in support of a motion in liminie, that case was sent to the jury for final consideration on Wednesday, March 13. The parties settled the case during deliberations.
I have no additional information.
The case involved an allegedly defective hoverboard which was said, by the plaintiffs, to have started a fire, leading to injuries to children in the home. The defense blamed the fire on cigarettes in a smoking shed. And so, it goes.
For those who need to keep up to date on insurance coverage between issues of Coverage Pointers, we’re happy to help. Just follow me on LinkedIn and we’ll keep you up-to-date. I’m easy to find – my linked in name is (ready for this unusual and unexpected name): Kohane (now there’s a shock) and you can find me here: https://www.linkedin.com/in/kohane/
Need a Mediator or Arbitrator, Give a Call
A growing percentage of my practice has been a mediator (and sometimes as an arbitrator) in insurance coverage, commercial, personal injury, and other disputes. With a robust national client base, I am regularly called on by friends and colleagues from around the country, folks who know me and trust me, to help resolve disputes. Often, particularly in mediated matters, I know the insurers and lawyers on both (or several) sides of the dispute. Since they all trust me as a fair dealer, they feel comfortable in having me try to help close the file (and avoid precedent). Just pick up the phone, 716.849.8942 or send an email to [email protected] and I’ll try to help.
First Department Rules on Interrelated Wrongful Acts in Sexual Assault Arena
There’s another interesting case in my column on the question of interrelated wrongful acts in a claims made, Errors and Omissions policy. If you work in that space, it’s surely worth a read.
Maxwell Gets a Pass
Kudo to Lorraine and Ryan Maxwell on the birth and safe arrival at home of their beautiful daughter, Eliza Sofia. She joins big brothers Phillip and Logan, and the dogs, in a wider family menagerie. Eliza showed up a few weeks earlier than expected after TLC at the hospital, has finally made it home. Ryan gets a pass on this week’s CP, as a result. But ONLY this week!
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.
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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.
The Gold Revolver – 100 Years Ago:
Times Union
Brooklyn, New York
14 Mar 1925One Manhattan Gun-Toter
Pleads Guilty in Court
After Pal Is ConvictedIn the County Court today before Judge Reuben L. Haskell two more young Manhattan gunmen learned that, for their kind, Brooklyn is not an attractive place in which to tarry.
The two prisoners from the other side of the Bridge were David Reiner, 20 years old, of 241 East Houston street, and Morris Gold; 20 of 207 Stanton Street. They are old offenders, and they were brought before Judge Haskell on charges of possessing a loaded revolver as a felony, Reiner went to trial before Judge Haskell and a jury, with Assistant District Attorney Bernard Becker in charge of the prosecution. He was found guilty. With the verdict returned against his pal, Gold concluded he had no chance of escape, so he entered a plea of guilty. Judge Haskell remanded the pair to Raymond street jail until Tuesday when he will sentence them.
Reiner and Gold were arrested by Detectives Harry Beck, William Donelly and Henry Reif. On the morning of Jan. 28 last, as they walked along Thatford Avenue, the three detectives saw Gold, Reiner and three pals of their own age come from a Turkish bathhouse on Thatford Avenue, between Belmont and Sutter avenues. Recalling Gold and Reiner as two old offenders and suspicious of their presence in the neighborhood at that hour, the detectives crossed the street, walking toward the men. On the approach of the detectives. Reiner, with a sweeping motion of his arm behind his back, threw away a loaded revolver. On Gold, concealed behind the waistline of his trousers, was found a loaded revolver, The revolver thrown away by Reiner was recovered.
Peiper on Property (and Potpourri):
Returning from Chicago where I attended the DRI Insurance Coverage and Claims Institute. All is well and I’ll see you in a couple of weeks. He offered you this vista:
Steve
Steven E. Peiper
[email protected]
Full of Bologna – 100 Years Ago:
Times Union
Brooklyn, New York
14 Mar 1925
DETECTIVES GUARD GOBEL HOME; CHILDREN OUT
The beautiful residence of the late Adolph Gobel, Bologna manufacturer, at 279 Highland Boulevard, is being guarded today by private detectives while the widow, who is now Mrs. Sigwar John Reid, the wife of an artist, is living at the Pennsylvania Hotel. The guards at the house, according to reports, are to keep out the eldest daughter Ottillie, Mrs. Claude Earl Moore, who is reported to have had a disagreement with her mother, when she returned from her honeymoon to find that her mother had married again.
According to neighbors, Adolph, Jr., joined in the quarrel, with the result that he is living now at the Gobel country estate at Annabelle, N.J.
Lee’s Connecticut Chronicles:
Dear Nutmeggers:
Spring is in the air. How do I know this, you ask? Well, it’s not from the still bone-chilling cold temperatures and howling winds blowing off Long Island Sound. Nope, instead it’s the annoying itching feeling in my ears telling me that it’s time to start up the allergy meds again. There’s no surer sign of spring than that. So, forget about Punxsutawney Phil and just ask me if my ears are itchy—then you’ll know spring is around the corner.
Also, it seems that policyholders in Connecticut are itching for some CUTPA/CUIPA action but keep under-pleading their claims. This edition we present another couple of cases in which the courts again dismiss CUTPA/CUIPA causes of action for the policyholders’ failure to adequately plead a general business practice (or lack of standing). It’s become clear that mechanically pleading generic allegations, or even specific case-related allegations, are not enough to meet the pleading standards.
Until next time, keep keeping safe.
Lee
Lee S. Siegel
[email protected]
Sleeping Man Confesses Infidelity – 100 Years Ago:
Times Union
Brooklyn, New York
14 Mar 1925
To Argue Legality
Of Sleep Talk Evidence
In Suit for Divorce
Interesting argument is expected in the Chancery Court in Jersey City next Friday in the action for divorce brought by Dr. Emil Posner, formerly of Butler, N.J., against his wife, Eleanor, of Jersey City, before Vice Chancellor Griffin.
The interest centers on whether or not the court will permit in evidence statements alleged to have been made by Posner during his sleep in which the other girl was mentioned. The papers filed by the wife made this allegation.
Mrs. Posner, opposing the suit, is represented by V, McDonald an attorney of Essex County, and the husband has engaged Julius Lichtenstein, of Hoboken.
Ruffner’s Road Review:
Dear Readers,
I celebrated my (29th) birthday last week ... hard to believe 30 is less than a year away! Went to another Sabres game earlier in the week, lost any hope of a miraculous playoff run as they got blown out by the worst team in the NHL, enjoyed a good Hibachi birthday dinner and time with family and friends.
In this week’s case, the respondent moved to vacate an arbitration award pursuant to CPLR §7511(b)(1)(iii), as well as a default judgment, arguing that as a foreign corporation not authorized to do business in New York it could not be subject to any arbitration in New York. The court denied the motion, because while personal jurisdiction is required for the exercise of the state's judicial power over a party, arbitration is a form of dispute resolution almost wholly independent of the court systems. Further, the insurer did not produce its policy to examination for a determination of whether it permitted or possibly required arbitration.
Kyle
Kyle A. Ruffner
[email protected]
Guilty Conscience – 100 Years Ago:
Buffalo Courier
Buffalo, New York
14 Mar 1925
Holds Up Grocery Store.
Refused to Take Loot;
Gives Self Up to Cops
New York, March 13. – Saying that his conscience bothered him because he had held up a grocery store last night, Arther Prohaska of Dedham, Mass., surrendered to the police today, although the holding up yielded him only $1, which he had turned back to the astonished grocer.
He was held in $3,500 bail to await grand jury action on charges of attempted robbery and carrying concealed weapons.
Prohaska said he left a bride of eight months in Dedham when he came to New York last week. Last night he walked into the grocery store of Michael Hackadorian on West Sixty-first street, drew a pistol and ordered the grocer to open the cash register. The grocer complied, said Prohaska, but there was only $1 in the register and this the would-be bandit declined to take.
Ryan’s Federal Reporter:
Nothing from me this time (but next time I'll have some extra hands).
Ryan
Ryan P. Maxwell
[email protected]
My Kingdom for a Stamp – 100 Years Ago:
Buffalo Courier
Buffalo, New York
14 Mar 1925
ORDER BILLION OF NEW STAMPS
Washington, March 13. – Requests for 1,400,000,000 of the new one and a half cent postage stamps bearing President Harding’s picture already have been received from postmasters for use on third class mail when the new rates go into effect April 15.
Storm’s SIU:
Hi Team:
Next time we speak, it will be Spring! Can’t come soon enough.
A couple interesting cases this edition:
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“For Hire” Exclusion not Effective to UM/SUM Coverage; Not Enough Proof That the TNC Exclusion Applied.
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Where Insured’s Expert Identifies Six Possible Causes of Loss, it is Not Enough for Summary Judgment for the Insurer to Argue One Cause is Excluded from Coverage Based on the Anti-Concurrent Causation Language Without Evidence the Excluded Peril Accounted for Some of the Damage.
Have a great two weeks until we talk again!
Scott
Scott D. Storm
[email protected]
Hope My Wife Doesn’t Turn Me In For Annoying Her – 100 Years Ago:
Buffalo Courier
Buffalo, New York
14 Mar 1925
ANNOYS WOMAN. GETS 4 MONTHS.
Maryan Kaczmarek, No. 1396 Broadway, was sent to the penitentiary for four months by Judge Woltz in city court yesterday for annoying Mrs. Mary Krudziel of the same address.
Fleming’s Finest:
Hi Coverage Pointers Subscribers:
This week’s case from the Iowa Supreme Court considers whether a policy provided coverage for damage from a partial roof collapse but also the restoration of load-bearing walls for the entire building based on the policy’s ordinance or law provision. The Iowa Supreme Court held that the insurer only had to pay for the partial roof collapse due to an exception for pre-existing code violations.
Looking forward to enjoying the warmer weather this weekend!
Catch you later,
Kate
Katherine A. Fleming
[email protected]
Sound Like the Right Conference to Attend – 100 Years Ago:
Buffalo Courier Express
Buffalo, New York
14 Mar 1925
DRUGGISTS WILL ATTEND NARCOTIC CONFERENCE
At the invitation of Richard H. Templeton, federal district attorney, the Erie County Pharmaceutical association will be represented at the first narcotic conference on Monday afternoon by three delegates. The men named by the druggists’ society are George P. Bigham, T. F, Williams, and Sidney James.
Members of the Erie County Medical society, Health Commissioner Fronczak and Bishop Brent will also attend.
Gestwick’s Garden State Gazette:
Dear Readers:
I tried making corned beef jerky for the first time this past weekend, using my food dehydrator. Apparently, corned beef needs to be sliced thicker than one would slice regular top round for jerky-making purposes (either that, or it takes less time to dehydrate than regular beef). Either way, may I interest you in a corned beef chip? Because that is what I ended up with. Good thing this was only my “test run,” as I signed up to make the same for our firm’s St. Patrick’s Day potluck lunch on Monday. Perhaps this weekend will yield better results.
I have two cases for you this week. The first involves a rescission of a policy where the insured misrepresented its use of subcontractors on construction sites. The insured said it did not use any, and yet, went right ahead and hired (at least) one. The Court, having been duly satisfied that the carrier would not have issued the policy as it did have it known that its insured does, in fact, use subcontractors (at least sometimes), upheld the rescission.
The second case is far more interesting, in my opinion. A man was incarcerated after intentionally burning down his home. While incarcerated, he received a notice of arbitration from the subrogee which had previously compensated the law enforcement officers injured in dealing with the aftermath of his misdeed. Miscues during the arbitration proceeding, and more miscues in the mail room, led to a very interesting decision.
That’s all, folks! See you in two weeks.
Evan
Evan D. Gestwick
[email protected]
A Kiss is But a Kiss – 100 Years Ago:
Anderson Daily Bulletin
Anderson, Indiana
14 Mar 1925
KISSING BURGLAR.
London, March 14. – A “kissing burglar” has been busy in one section of London recently. After robbing the house, he kisses any girls he finds in bed and makes his escape.
O’Shea Rides the Circuits:
Hey Readers,
I was unprepared for the posting of a dogs photo in this week’s edition. Looks like I will have to follow up in the next edition. Since the last edition, Josh Norris left the pristine rivers and waters of Ottawa for the Metropolis of Buffalo. In exchange, Dylan Cozens and local product, Dennis Gilbert, traveled to Ottawa. Time will tell how this trade plays out. While I wish Norris well, I hope he does not cause resent and regret within the years to come among us Sens fans.
This week I have another circuit case from the Eleventh Circuit. This time the court looks to whether an insured has standing to reform a policy before the submission of a claim and the breadth of a construction exclusion.
On another note, I disagree with the First Department’s decision in Second Child. The Graves Amendment was enacted to prevent limitless liability against automobile manufactures and rental car companies. What the statute also contains is a carve out for a State’s Financial Responsibility Laws imposing minimum insurance limits. New York VTL Sec. 370 imposes a minimum limit for property damage and bodily injury coverage.
The Appellate Term Decision , 37 S. Fifth Ave. Corp. v Dimensional Stone & Tile, 58 Misc 3d 56, 59 (App Term 2017), similarly identified the carve out in Graves. And found VTL Sec. 370 does not operate to impose vicarious liability. So VTL Sec. 370 imposes mandatory minimums of insurance coverage with no vicarious liability. Sure, seems like a financial responsibility law to me that falls within Graves’s carve out.
Until Next Time,
Ryan
Ryan P. O’Shea
[email protected]
It Was a Simpler Time – 100 Years Ago:
The Miami Herald
Miami, Florida
14 Mar 1925
KISSING WOMEN COSTS PRISONER SIX MONTHS
TAMPA, Fla., March 13. – Kissing his women passengers, who were being smuggled into the United States, cost Emilio Leara an extra six months in the Federal prison at Atlanta, government officials in Federal Court here intimated. Leara, as far as the court’s sentence of 18 months is concerned, was not informed that his reported amorous attentions toward the women in question had anything to do with the difference between one year and 18 months in prison.
Several of the women, all aliens testified through an interpreter, that Leara brought a boat load of the aliens from the schooner Almendares last year, into shallow water near shore but refused to land the women until they kissed him. One, Maria Lisjak, admitted she paid the extra charge, being anxious to be put ashore.
Rob Reaches the Threshold:
Dear Readers,
We are now in March - one of my favorite months of the year for many reasons. As I write this, the Players Championship is underway down in Florida. Next week, the March Madness tournament begins. Conveniently, that madness will take us right into Opening Day for MLB and my beloved Yankees (who are dropping like flies in Spring Training, and I am NOT OKAY about it). In better news, I just celebrated my birthday earlier in the week, and it will be near 70 degrees in Buffalo this weekend with some golf courses opening. March is great.
For this installment, we review a First Department decision that analyzes pre-trial rulings on motions in limine regarding testimony from respective experts. Since the jury ultimately found that the plaintiff did not sustain a serious injury pursuant to Insurance Law Section 5102(d), the lower Court's rulings on these motions were crucial.
Hope you all enjoy the read.
Rob
Robert J. Caggiano
[email protected]
Can’t Talk About it – 100 Years Ago:
Buffalo Courier Express
Buffalo, New York
14 Mar 1925
JUROR SAID TO HAVE DISCUSSED VERDICT EXCUSED
Trial of issue in suit will be completed with eleven men in box.
Conrad J. Moschel, whose name is caried on the jury list as a livestock dealer, No. 165 Jewett Parkway, was excused from service as a juror in the suit of David Paul of No. 332 North Ogden street against Harry Lieberman of No. 63 Traymore Street, after all the testimony had been heard and the opposing attorneys were about to sum up yesterday afternoon. County Judge Conable directed that the case be decided by the remaining eleven jurors.
During a recess one of the eleven jurors claimed that he heard Moschel make a remark indicating that he was in favor of awarding a verdict to the plaintiff. The court and the attorneys decided it would be best to excuse Moschel so as to remove any suspicion that he had prejudged the case.
Paul sought to recover $1,900 that he claimed as his portion of the profits of a farm owned by Liberman that Paul agreed to work on a share basis.
LaBarbera’s Lower Court Library:
Dear Readers:
My puppy has a habit of bringing things outside with her into the backyard. Toys, socks, garbage, you name it. If she can carry it, she must take it with her. Unfortunately, she does not have the same desire to bring things back in. After a few days of warmth, the snow at my house melted away. I finally found out where her favorite toys, my favorite socks, and all of her bones went.
This week I found an interesting case discussing an insured’s motion for class certification. The court denied the motion as premature and ordered the parties to conduct limited discovery regarding the class certification requirements.
Until next time…
Isabelle
Isabelle H. LaBarbera
[email protected]
Cancelled Taxes – 100 Years Ago:
The Buffalo News
Buffalo, New York
14 Mar 1925
CARGO TAXES CANCELLED BY CANTON GOVERNMENT
CANTON, China, March 14. – The provisional government, officially announcing the death of its head, Dr. Sun Yat-Sen, who died Wednesday in Peking, cancelled the recently imposed taxes on cargo boats, which caused a strike of cargo boat and cartage coolies and threatened to provoke a general strike throughout the city. There is much jubilation among the workers, who are resuming work.
There is, however, much uneasiness here, owing to military activities in the city and throughout the province of Kwang Tung as a result of the reported ambition of General Chen Chiung-Ming, as opponent of the government, to gain control.
As a sign of mourning for Dr. Sun, the government has ordered the closing for a week of all cinemas and theaters and the cessation of fireworks displayed and other amusements. All government officials and employees have been ordered to wear a band of crepe on the left sleeve.
Lexi’s Legislative Lowdown:
Dear Readers,
This week’s column talks about pet insurance. As a person who has two wild pups and is the holder of two pet insurance policies, I am always interested in reading about proposed legislation that would regulate the pet insurance industry.
Here is a picture of my dogs, May, and Knox, who keep me busy every single day!
Have a nice weekend.
Lexi
Lexi R. Horton
[email protected]
Fire Safety – 100 Years Ago:
Buffalo Courier
Buffalo, New York
14 Mar 1925
TOSSES CIGARETTE INTO POWDER KEG.
GATHER REMAINS
Jonquieres, Que., March 13. – James McLaughlin of Manchester, N.H., was killed instantly today when he tossed a lighted cigarette into a keg of powder beside a bow of dynamite on which he was seated. The dynamite also exploded.
Domenica’s Diary on Bad Faith:
Dear CP Readers,
Happy almost spring! The weather is getting warmer, which makes me happy. My morning walks with my Dachshund, Charlie, will now be livelier as the abundant neighborhood chipmucks and squirrels tempt Charlie almost as much as Reese’s Peanut Butter Cups tempt me. It’s a challenging time of year for us both!
Short on bad faith in New York this week, I bring you a Pennsylvania case that highlights the high burden on an insured to prove bad faith by an insurer. The high burden is seen in many jurisdictions around the country.
Domenica
Domenica D. Hart
[email protected]
Dear Ms. Fairfax – 100 Years Ago:
The Kansas City Post
Kansas City, Missouri
14 Mar 1925
ADVICE TO THE LOVELORN
By Beatrice Fairfax
Miss Fairfax – As you have helped me before with your advice, I come again asking your kind advice. I know I am dreadfully ignorant as to some of the ways of society but know you will help me.
What is the correct etiquette concerning the wearing of an engagement ring? I notice so many college girls wearing the ring on the right hand while other wear it on the left. Is it the custom for the bridegroom to furnish his with a completely new wardrobe after their marriage? Thanking you in advance for your advice. – L.H.
The custom has been for years and years to wear the engagement ring on the third finger of the left hand, but girls are changing the entire order of things now and I imagine one may do as one pleases about wearing engagement rings.
Brides usually have enough clothes to last a year, that is, enough of the principal garments. Of course, little things like hose and accessories must be purchased from time to time even during the first year.
North of the Border:
We just had our two grandsons over for the weekend. They are almost five and three and full of life. They played in the monstrous puddles outside our house; built Duplo creations and knocked them down; raced around the house on push vehicles and didn’t stop eating. When I suggested to the oldest that he needed to finish his main course before having a cookie, he said “that spoils my happiness,” forcing me to lamely say, “that’s the way it is.”
I recommend being a grandparent.
My column this week discusses the cross-border litigation regarding Vale Canada’s claims for coverage for pollution events arising from its worldwide nickel production facilities.
See you next time.
Heather
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
Headlines from this week’s issue:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- This One Is Big. First Department Holds That Graves Amendment Supersedes Vehicle & Traffic Law Section 370, insofar as It Requires Rental Car Companies to Provide Minimum Limits of Coverage for Its Drivers. Thousands Flee.
- Law Firm Loses Coverage Under Claims Made E&O Policy When It Had Prior Knowledge of Facts That Could Constitute Claims and Failed to Disclose Same in Policy Application. First Department Provide Primer on This Area of Law
- Later Acts of Sexual Harassment to a Different Victim Is Sufficiently Connected to Earlier Harassment to Be Considered an Interrelated Wrongful Act
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Settlement Against Potential Joint Tortfeasor in a Foreign Jurisdiction Does Not Support Res Judicata Dismissal of Second, Independent Lawsuit
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- Berkley Knocks Out CUTPA/CUIPA but Falls Short on Dismissing Bad Faith Claim
- CUTPA Claim Dismissed For Want of Standing
- Negligent Infliction of Emotional Distress Claim Survives Against Carrier
- Carrier Cannot Rely on Home Improvement Act as a Defense to Payment, Among Other Issues
RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]
- Motion to Vacate Default Is Denied, as Respondent Did Not Produce Its Policy to Establish Whether It Permitted or Required Arbitration
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
- Nothing from me this time (but next time I'll have some extra hands).
STORM’S SIU
Scott D. Storm
[email protected]
- “For Hire” Exclusion Not Effective to UM/SUM Coverage; Not Enough Proof That the TNC Exclusion Applied
- Where Insured’s Expert Identifies Six Possible Causes of Loss, It Is Not Enough for Summary Judgment for the Insurer to Argue One Cause is Excluded From Coverage Based on the Anti-Concurrent Causation Language Without Evidence the Excluded Peril Accounted for Some of the Damage
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- Insurer Must Only Pay to Repair the Damage from the Partial Roof Collapse but Not the Cost to Remedy the Longstanding Deterioration in Other Areas of the Building Unaffected by the Collapse
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
- Insurer Entitled to Rescind Policy Where Misrepresentations Were Made as to the Use of Subcontractors on Construction Projects
- Appellate Division Affirms Waiver of Incarcerated Individual’s Right to Contest Arbitration Award, and Finds the Thirty-Day Rule to Apply in Any Event
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
- Insured Possesses Article III Standing to Bring Reformation Claim on Undamaged Buildings and Broad Course Of Construction Exclusion Applies to Entire Construction Project
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
- First Department Unanimously Affirms Order Which Included Trial Rulings on Motion in Limine Where Plaintiff’s Application to Preclude Defendant’s Biomechanical Engineer Expert From Testifying Was Denied and Defendant’s Application to Limit Plaintiff’s Treating Physician’s Testimony Was Granted
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
- Court Denies Motion for Class Certification as Premature, and Orders the Parties to Conduct Limited Discovery
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
- Proposed Act to Provide Guidelines for the Issuance of Pet Insurance in New York State
DOMENICA’S DIARY ON BAD FAITH
Domenica D. Hart
[email protected]
- Long Periods of Time Between a Demand and a Settlement Does Not on Its Own Constitute Bad Faith; Delays Attributable to Necessary Investigation or Even Simple Negligence Will Not Satisfy the Burden
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
- Unless There is a Choice of Law Clause Specifying a Jurisdiction Other than Ontario, the Ontario Courts have Jurisdiction to Hear Coverage Disputes under Policies that were Brokered and Issued to Insureds at an Address Outside of Ontario, Where the Issuing Insurers are Registered and Licensed to Transact Business in Ontario; the Insured Does Business in Ontario; and, the Policies Relate Largely, but not Exclusively to the Insured’s Operations in Ontario
- The Sudden and Accidental Pollution Exception to the Pollution Exclusion Contains a Temporal Element that is Met by the Discharge, Abruptly or Within a Short Time Span, of a Significant Quantity of the Pollutant Sufficient to Have Some Potentially Damaging Environmental Effect
That all we have for this week. See you in two.
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
Kohane’s Coverage Corner
Peiper on Property and Potpourri
Lee’s Connecticut Chronicles
Ruffner’s Road Review
Ryan’s Federal Reporter
Storm’s SIU
Fleming’s Finest
Gestwick’s Garden State Gazette
O’Shea Rides the Circuits
Rob Reaches the Threshold
LaBarbera’s Lower Court Library
Lexi’s Legislative Lowdown
Domenica’s Diary on Bad Faith
North of the Border
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
03/13/25 Second Child v. Edge Auto, Inc.
Appellate Division, First Department
This One Is Big. First Department Holds That Graves Amendment Supersedes Vehicle & Traffic Law Section 370, insofar as It Requires Rental Car Companies to Provide Minimum Limits of Coverage for Its Drivers. Thousands Flee.
Plaintiffs, a company and its driver, (collectively referred to as “Second Child”) (by the way, Second Child is a corporation, not the second son or daughter of Mr., and Mrs., Child) rented a vehicle from its owner Edge Auto, Inc. A nonparty commenced an action against Second Child seeking damages arising out of a traffic accident involving their operation of the rented vehicle.
Second Child filed a third-party complaint against Edge Auto and its insurer seeking a judgment declaring, among other things, that Edge Auto was statutorily obligated to provide insurance to Second Child on a primary non-contributory basis pursuant to Vehicle and Traffic Law § 370; that Edge Auto or its insurance company were required to undertake the defense and indemnity obligations of plaintiffs in the underlying action; and that Edge Auto was prohibited from seeking indemnification from plaintiffs or their insurer for amounts up to the statutory minimums imposed by Vehicle and Traffic Law § 370.
Vehicle and Traffic Law § 370 provides that rental car companies "shall file with the commissioner of motor vehicles . . . evidence of . . . a corporate surety bond or policy of insurance. Any such bond or insurance policy shall inure to the benefit of any person legally operating the motor vehicle". The Court of Appeals has determined, in previous cases, that this section obliges rental car companies to provide coverage to their drivers, renters up to the minimum liability limits provided by the statute
The U.S. Congress enacted the Graves Amendment (49 USC § 30106) in 2005. The Graves Amendment's operative provision, the preemption clause, states:
"An owner of a motor vehicle that rents or leases the vehicle to a person . . . shall not be liable under the law of any State . . . , by reason of being the owner of the vehicle . . . , for harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of rental or lease, if — (1) the owner . . . is engaged in the trade or business of renting or leasing motor vehicles; and (2) there is no negligence or criminal wrongdoing on the part of the owner . . . ." (49 USC § 30106[a]).
The Amendment contains a savings clause, titled "Financial responsibility laws," which provides:
"Nothing in this section supersedes the law of any State . . . — (1) imposing financial responsibility or insurance standards on the owner of a motor vehicle for the privilege of registering and operating a motor vehicle; or (2) imposing liability on business entities engaged in the trade or business of renting or leasing motor vehicles for failure to meet the financial responsibility or liability insurance requirements under State law" (49 USC § 30106[b]).
Second Child argued that the Graves Amendment does not supersede Vehicle and Traffic Law § 370 and concedes that the plain language of the preemption clause bars liability against Edge Auto. Their argument instead rests on the savings clause, contending that Vehicle and Traffic Law § 370, as interpreted by Ward, is a financial responsibility law and thus not superseded (see 49 USC § 30106[b]).
The court holds that the Graves Amendment does not supersede Vehicle and Traffic Law § 370 insofar as it is a state law that requires car rental companies to carry a specified minimum amount of insurance for each of their vehicles.
However, the court finds that Vehicle and Traffic Law § 370 is superseded to the extent it requires a rental car company to "provide primary insurance to their renters up to the minimum liability limits provided by the statute". Requiring rental car companies to primarily insure and indemnify plaintiffs' damages is the precise result barred by the Graves Amendment.
Plaintiffs argue that the Graves Amendment only supersedes statutes imposing vicarious liability (see e.g. Vehicle and Traffic Law § 388; Hernandez v Sanchez, 40 AD3d 446, 447 [1st Dept 2007]), not statutes mandating primary coverage. This is a distinction without a difference. Rental car companies "shall not be liable" under New York State law for damages incurred by renters (49 USC § 30106[a]). The form in which state law attempts to impose vicarious liability, whether under vicarious liability statutes or under primacy of insurance coverage statutes, does not matter (see Brown, 446 F Supp 3d at 553). To hold otherwise would rescue every vicarious liability claim up to statutory minimum insurance amounts and render the Graves Amendment's preemption clause a nullity (see Dimensional, 58 Misc 3d at 59-60; see generally Garcia v Vanguard Car Rental USA, Inc., 540 F 3d 1242, 1248 [11th Cir 2008]).
Editor’s Note: Nah. Just wrong. The carve out in the Graves Amendment allows Section 370 to be operative.
03/13/25 Allied World Assurance Company v. Golenbock Eiseman, et al.
Appellate Division, First Department
Law Firm Loses Coverage Under Claims Made E&O Policy When It Had Prior Knowledge of Facts That Could Constitute Claims and Failed to Disclose Same in Policy Application. First Department Provide Primer on This Area of Law
The Golenbock law firm (“law firm”) represented nonparty Workspace, Inc. regarding certain real estate sales from 2015-2017. One of the properties, a unit in 106 Spring Street in Manhattan, sold in 2015, and by virtue of the sale the purchaser became a shareholder in Workspace.
In November 2017, the purchaser sued Workspace (the “Spring Street action”) alleging that Workspace, by concealing certain documents and facts both during the sale and thereafter, acted to deprive the purchaser of significant monetary benefits in the pending sale of another of Workspace's properties at 93 Mercer Street. The 93 Mercer Street transaction never closed due to, among other things, the pendency of the 106 Spring Street Action, resulting in an alleged loss to Workspace's shareholders of more than $18 million.
In 2018, Workspace and the law firm entered into a tolling agreement, which set forth that Workspace believes that it may hold claims against [defendant] . . . and wishes to preserve the Claims — if any — until the final adjudication of the [106 Spring Street Action]. The tolling agreement also provided that defendant "believes that it may hold claims against Workspace for unpaid legal fees," and that "[t]he parties desire to avoid litigation at this time." Finally, the parties entered into the agreement "to toll the statute of limitation on their claims against one another at this time."
Years later, Allied World (“AWAC”) issued a claims-made policy to the law firm for the period of August 1, 2021, to August 1, 2022. The policy expressly defined a "claim" to include "a request to toll or waive a statute of limitations made to or against any Insured seeking to hold such insured responsible for any Wrongful Act."
The policy defines a Legal Services Wrongful Act as "any actual or alleged act, error or omission committed by any Insured, solely in the performance of or failure to perform Legal Services." Finally, the "No Prior Knowledge" condition precedent to coverage required that "prior to August 1, 2019, no Insured had any basis (1) to believe that any Insured had breached a professional duty; or (2) to foresee that any fact, circumstance, situation, transaction, event, or Wrongful Act [*2]might reasonably be expected to be the basis of a Claim against any Insured." Defendant did not disclose the tolling agreement or the related 106 Spring Street Action to plaintiff prior to the policy's issuance.
On August 3, 2021, Workspace initiated an action against defendants for legal malpractice allegedly committed from 2015 through 2017 in connection with the 106 Spring Street sale and the ultimately aborted 93 Mercer Sale (the Workspace Action). The law firm requested coverage in the Workspace Action from plaintiff, and on August 27, 2021, plaintiff agreed to provide a defense while reserving its rights. During its investigation of the Workspace Action, plaintiff subsequently learned that defendant had entered, and failed to disclose, the tolling agreement in August 2018. On August 16, 2022, AWAC denied coverage to the law firm on the grounds that the claim pre-dated the policy, and that the policy's no prior knowledge condition was not satisfied.
It is undisputed that defendant and Workspace, its former client, entered into the tolling agreement prior to the policy period, and defendant's argument that the tolling agreement is ambiguous or otherwise insufficient to constitute a "claim" is unavailing. The policy specifies that a tolling agreement seeking to hold defendants responsible for "any Wrongful Act" (including acts constituting legal malpractice) establishes a claim.
AWAC also properly denied coverage due to defendant's failure to satisfy the policy's "No Prior Knowledge" requirement. When analyzing "prior knowledge" provisions in professional liability insurance cases, New York courts apply a two-step subjective/objective knowledge. The Court must first determine whether the insured has subjective knowledge of relevant facts or circumstances indicating a potential claim prior to the policy's effective date. Second, the Court must determine whether a reasonable attorney "might expect such facts to be the basis of a claim."
The tolling agreement establishes that defendant had both subjective and objective knowledge of a potential legal malpractice claim sufficient to trigger an obligation to disclose such fact to plaintiff under the policy.
03/11/25 Zurich American Insurance Co. v. Giorgio Armani Corporation
Appellate Division, First Department
Later Acts of Sexual Harassment to a Different Victim Is Sufficiently Connected to Earlier Harassment to Be Considered an Interrelated Wrongful Act
This appeal arises out of three lawsuits and two insurance policies. One of the insurance policies was issued by Hiscox Insurance Company. This is a rare, signed decision out of the First Department, from Justing Singh. The other was issued by plaintiff Zurich American Insurance Company (ZAI). Both were issued to defendant Giorgio Armani Corporation (GAC).
The lawsuits allege that GAC employee Javier Herrera used his position to sexually harass, and assault women and that GAC made no effort to deter or punish his misconduct. There were three lawsuits. Hiscox acknowledged coverage for two of them. Third, the Christin act, Hiscox denied claiming it as outside the policy period and within ZAI’s.
Hiscox acknowledged coverage of the Loreto-Hays and Oberloh actions. It denied coverage of the Christin action, which it asserted was filed outside the policy period. The parties eventually agreed to litigate their dispute in New York. Both ZAI and Hiscox moved for summary judgment, each asserting that the other's policy covered the Chrstin action.
The Hiscox policy covered the period in which the first two lawsuits were filed. The Loreto, Hays, and Oberloh actions were filed. It is not disputed that these actions and the Christin action constitute Claims under the Hiscox policy.
The Hiscox policy provides that once notice of a Claim is given, "any Claim which is subsequently made against the Insureds and reported to the Insurer . . . alleging any . . . Related Wrongful Act to that alleged in the Claim of which such notice has been given, shall be considered made at the time such notice was originally given." Related Wrongful Act(s) is defined as:
"Wrongful Act(s) as defined in the applicable Coverage Part which are the same, repeated or continuous to other Wrongful Act(s) as defined in the same applicable Coverage Part."
"Related Wrongful Act(s) shall also mean Wrongful Act(s) as defined in the applicable Coverage Part which arise from a common causal connection or cause the same or related damages, or a common nexus or nucleus of facts to other Wrongful Act(s) as defined in the same applicable Coverage Part."
"Claims can allege Related Wrongful Act(s) regardless of whether such Claims involve the same or different claimants, Insureds or legal causes of action."
The ZAI policy covered the later period in which the Christin action was filed. Again, it is undisputed that all three actions constitute Claims under this policy. The ZAI policy provides that "[a]ll Claims . . . which arise out of the same Wrongful Act and all Interrelated Wrongful Acts of Insureds shall be deemed one Claim," which "shall be deemed to be first made on the date the earliest of such Claims is first made against any Insured, regardless of whether such date is before or during the Policy Period." Interrelated Wrongful Acts are defined as "all Wrongful Acts that have as a common nexus any fact, circumstance, situation, event, transaction, cause or series of causally connected facts, circumstances, situations, events, transactions or causes."
The Actions
In these first of the two lawsuits, the plaintiff alleges that in 2015, while she was providing janitorial services to a GAC store, Herrera sexually assaulted her. She alleges that she reported the sexual assault to GAC, which took no action to protect her from Herrera. She further alleges that GAC knew or should have known that Herrera posed a danger to others.
In the second action. It is alleged that GAC and its employees, including Herrera, discriminated against her on the basis of her race and sex. As relevant here, she alleges that she learned Herrera had been sexually harassing three women and later learned that he had sexually assaulted a coworker. She alleges that she reported both to GAC, that it knew women felt uncomfortable in the workplace because of Herrera, and that it did nothing. Allegedly, the women eventually quit because of Herrera's behavior, and Oberloh herself was fired on March 27, 2018.
In the Christin action, five women allege a variety of harassment by Herrera from 2013 until 2018. One plaintiff alleges that she was sexually assaulted by Herrera many times over a period of almost two years. The complaint alleges that, in response to complaints against him, Herrera was transferred to another store. He then allegedly subjected the remaining plaintiffs, who worked at that store, to years of unwelcome and degrading sexual contact.
The Christin complaint also alleges that GAC knew of Herrera's wrongdoing against women other than the plaintiffs. Among the misconduct alleged is that against the two women in the first two actions.
The court finds that the Christin action shares "a common nexus or nucleus of facts" with the earlier actions, and whether it "[has] as a common nexus" with them "any fact, circumstance, situation, event, transaction [or] cause." This is a broad test, which should not be "read [] . . . narrowly at the expense of applying its plain language. Applying this test, the court finds that the Christin action should be treated as made no later than the filing date of the Oberloh action.
Nothing in the language of either policy restricts Related or Interrelated Wrongful Acts to those harming the same plaintiff. Rather, Herrera's actions and GAC's response — or lack of response — to them may present the common nexus or nucleus of fact.
The Oberloh and Christin complaints share allegations that Oberloh learned Herrera was sexually harassing three women employed by GAC, that Oberloh reported this harassment to GAC, that all three women eventually quit because of Herrera's misconduct, and that GAC took no action to punish Herrera or prevent repetition. Two of those women were plaintiffs in the Christin action. Furthermore, all three complaints allege that Herrera sexually assaulted the women from the first two lawsuit and GAC did nothing. The allegations "originate from" and have "some causal relationship" with the allegations in the earlier actions (id.).
The court finds that the Christin action is a Related Wrongful Act under the Hiscox policy and an Interrelated Wrongful Act under the ZAI policy. It is thus covered by the Hiscox policy.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
03/06/25 Kirby v. David Fabricators of NY, Inc.
Appellate Division, First Department
Settlement Against Potential Joint Tortfeasor in a Foreign Jurisdiction Does Not Support Res Judicata Dismissal of Second, Independent Lawsuit
Plaintiff commenced this action in New York seeking damages as a result of exposure to asbestos products while working in pizza kitchens from the 1960s through the 1980s. Plaintiff alleged that his exposure was caused by certain stone boards which were manufactured by defendant David and incorporated into ovens manufactured by Bakers Pride. An action was previously commenced in Illinois against Bakers Pride, and was ultimately discontinued, with prejudice, as part of a settlement agreement.
David moves to dismiss the subsequent action, filed in New York, under res judicata grounds. The Appellate Division rejected David’s argument because David was neither a party to the Illinois lawsuit, the Illinois settlement, nor was David in privity with Bakers Pride. The existence of a potential indemnity obligation running in favor of Bakers Pride also does not create a bar to plaintiff’s new action in New York.
Finally, David’s argument that Bakers Pride was a “necessary party” to the New York action was also dismissed by the Court. It is black letter law in New York that joint tortfeasors are “necessary parties.”
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
02/26/25 Natarajan v. Berkley Ins. Co.
Superior Court of Connecticut, Stamford
Berkley Knocks Out CUTPA/CUIPA but Falls Short on Dismissing Bad Faith Claim
The insured sued Berkley for breach of a homeowner’s policy, claiming that the carrier wrongly denied coverage for a sewer backup loss. The policyholder also alleged that Berkley’s denial was in bad faith, under common law and statutory theories.
Interestingly, the policy covered sewer backup damage, but only for drains “located within the fully enclosed perimeter of the foundation of the building.” The insured alleged that the loss was caused by a drain “located immediately outside the interior of the dwelling. Critically, the drain was located within the fully enclosed perimeter of the foundation of the building.”
Berkley moved to strike the bad faith causes of action but was only one for two. The insured alleged that the denial was in bad faith because Berkley, among other things, failed to properly apply the terms of the Policy; ignoring the terms of the Policy; disregarding the facts surrounding the Loss; disregarding documentation provided by Plaintiffs; disregarding Connecticut law; disregarding the law of policy interpretation; improperly attempting to, in effect, delete, nullify or neutralize terms contained in the Policy; failing to timely and promptly respond to communications from Plaintiffs; misrepresenting its intentions; misrepresenting when it would respond to communications; misrepresenting the terms of the Policy; misrepresenting the facts; and failing to conduct a thorough investigation into the facts, foundation and footing design, application of the Policy and applicable law.
The court, based on these allegations, refused to strike the cause of action. “The facts alleged about the coverage dispute, taken as true on this motion to strike, describe conduct calculated to deprive plaintiffs of the benefits of the insurance contract, which suffices to state a claim of bad faith conduct violative of the implied covenant of good faith and fair dealing.”
Berkley, however, fared better on the CUTPA/CUIPA claim. While the court was sympathetic to a more lenient pleading approach, the allegations did not meet the lessened standard. The court noted that the insured’s allegations did not assert a general business practice in violation of CUIPA. “The preceding paragraphs, however, just alleged acts experienced by plaintiff from which no inference of a general business practice may be derived. No facts are alleged to show that Berkeley's settlement practices experienced by plaintiff were part of its general business practices.”
02/25/25 Cummings v. Alexander
Superior Court of Connecticut, Tolland
CUTPA Claim Dismissed for Want of Standing
The court dismissed the plaintiff’s CUTPA action against GEICO. Because the plaintiff was not a party to the insurance contract or an intended beneficiary of the insurance contract, he lacked standing to bring a CUTPA claim.
Cummings alleges that he got into a motor vehicle accident with Alexander, who was insured by GEICO. Cummings claimed that GEICO had not acted promptly to settle the property damage claim, in violation of CUTPA. The plaintiff, however, did not assert a CUIPA claim. Connecticut precedent establishes that an insured must allege a CUIPA violation in order to sustain a CUTPA claim. The Connecticut Supreme Court has held "that individuals may bring an action under CUTPA for violations of CUIPA. In order to sustain a CUIPA cause of action under CUTPA, a plaintiff must allege conduct that is proscribed by CUIPA.”
Ultimately, the court dismissed the claim because of a lack of standing. Because the plaintiff is not the insured, not a third-party beneficiary, and not a subrogee of the insured, he lacked standing to bring a CUTPA claim against GEICO.
02/26/25 Cummings v. Liberty Mut. Fire Ins.
Superior Court of Connecticut, Tolland
Negligent Infliction of Emotional Distress Claim Survives Against Carrier
Mr. Cumming returns to us (see above), with claims against Liberty Mutual. For the same reasons, the court struck plaintiff’s CUTPA claim against Liberty for lack of standing. This time, however, Cummings fared better on his claim that Liberty negligently inflicted emotional suffering on him. The opinion is sparse in detail; however, the court denied the motion to strike on the carrier’s claim of a lack of standing.
There is no requirement that a plaintiff be in contractual privity to bring a tort claim against a party. “The court rejects the defendant's argument that the plaintiff's claim for negligent infliction of emotional distress is legally insufficient because the plaintiff fails to allege that he has subrogation rights under the insurance policy or that there has been a judicial determination of the insured's liability.”
A copy of this decision is available upon request.
02/27/25 Rising Star Roofing, LLC v. Gen. Ins. Co. of Am
Superior Court of Connecticut, Hartford
Carrier Cannot Rely on Home Improvement Act as a Defense to Payment, Among Other Issues
The Pazdas are homeowners who suffered insurable damage to their roof. They hired Rising Star to complete the repairs and assigned their rights against General for the cost of repairs to Rising Star. General paid the contractor over $28,000 for the damage, but Rising Star claimed it was due additional compensation.
The carrier moved for summary judgment claiming that the assignment was invalid, the contractor was paid in full under the terms of the insurance contract, and the contractor’s Xactimate estimates did not provide adequate support for its claim. General also argued that the repair contract was void for failure to comply with CGS § 38a-313a which requires that a contractor provide a written scope of work, estimated price, and that in at least 12-point type apprising the homeowner of the right to be a joint payee. And, of course, the parties fought over the right to appraisal.
First, the court held that there was a question of fact as to whether the homeowner had apparent authority to sign the assignment to the contractor on behalf of his wife. Second, the court held that the construction contract did not preclude a claim for additional compensation. The contract between Rising Star and the Pazdas provided that, "Final project cost will equal the carrier's final agreed scope and estimate of damages.” The court found that caselaw finding that additional compensation was prescribed by such language was inapplicable because it was in the context of mechanic’s lien. Third, while the court was skeptical that an Xactimate estimate was sufficient proof of the actual and necessary repair costs incurred, the evidence raises a triable issue of fact.
Fourth, and significantly, the court held that the insurer cannot assert the Home Improvement Act as a defense to payment. “The act is for the benefit of the consumer, and compliance with its terms may be waived by the consumer, either explicitly or by nonassertion. Thus, the . . . insurer, cannot interpose noncompliance with the act as a defense to its own insured's claim for replacement cost coverage.”
Lastly, the court indicated that a post-litigation appraisal is not precluded or waived. “although appraisal is an option available to either party, it is not mandatory. For this reason, the court further concludes that it would be inappropriate to determine, as a matter of law, that every failure to request appraisal prior to initiating suit ipso facto results in a waiver of appraisal rights. Instead, the court concludes that whether Rising Star waived its right to appraisal in this case presents a genuine issue of material fact.” However, the court refused to order appraisal because Rising Star did not allege a right to appraisal in its complaint or otherwise seek such relief.
RUFFNER’S ROAD REVIEW
Kyle A. Ruffner
[email protected]
03/03/25 In re St. Farm Mut. Auto. Ins. Co. a/s/o Soblevsky v. Prime Prop. & Cas. Ins., Inc.
Civil Court of the City of New York, Queens County
Motion to Vacate Default Is Denied, as Respondent Did Not Produce Its Policy to Establish Whether It Permitted or Required Arbitration
State Farm’s insured was involved in an accident with a vehicle operated by a driver for Prime Property’s insured, JLP Express Corp. State Farm commenced an arbitration proceeding seeking loss transfer reimbursement pursuant to Insurance Law §5105 and upon the default of the respondent was awarded $44,892.39. The petitioner then commenced this action seeking to confirm the arbitration award and another action, as subrogee of its insured seeking reimbursement of $49,800 in No-Fault payments paid by State Farm. The respondent moved to vacate the award pursuant to CPLR §7511(b)(1)(iii), as well as the default judgment, arguing that as a foreign corporation not authorized to do business in New York it could not be subject to any arbitration in New York.
To vacate a default the movant must present a reasonable excuse for the default and a potentially meritorious defense. There were no disputes between New York courts that lack jurisdiction over whether a party does not transact business in New York or is not licensed to transact business in New York (see, CPLR 302) or that a vehicle insured out of state that is involved in an accident within the state is insufficient, standing alone, to confer jurisdiction. However, the lack of jurisdiction that does not mean a party cannot be subject to an arbitration in New York. The court referenced the case of American Independent Insurance Company v. Art of Healing Medicine P.C., 104 AD3d 761, 961 NYS2d 240 [2d Dept., 2013] as instructive to this case, explaining that "while personal jurisdiction is required for the exercise of the state's judicial power over a party, arbitration is a form of dispute resolution almost wholly independent of the court system" and that other than a few basic guarantees "personal jurisdiction is not required for arbitration that is controlled by the parties' agreement". The issue is whether the arbitrator has authority under the insurance contract to award no-fault benefits to the applicant. The court held that the lack of personal jurisdiction over the respondent would not bar any arbitration proceedings over the same respondent. In prior cases, motions of out of state insurers to vacate a default on the grounds that the insurer did not conduct business in the state have been denied where the insurer failed to submit its policy to determine whether an arbitration clause existed.
In addition, the court pointed out that the existence of an out-of-state insurance clause within respondent's policy would subject respondents to the financial liability No-Fault laws of New York, where an insured becomes subject to those laws by driving in that state. Therefore, without the ability to review the insurance policy the respondent failed to present sufficient evidence warranting the vacatur of the arbitration award.
The respondent cited multiple cases to support its contention the court had no jurisdiction over it. For example, in GEICO Indemnity v. Prime Property & Casualty, Index Number 603953/2021 (Supreme Court Nassau County 2023) and New York State Insurance Fund v. Prime Casualty & Realty, Index Number 803471/2023 (Supreme Court Erie County 2024) the courts held that arbitrations could not proceed against the respondent in this action, Prime Property and Casualty Insurance Inc., because the respondent was not licensed to do business in New York and was thus not a covered person pursuant to Insurance Law §5102(j). However, neither decision discussed American Independent Insurance Company v. Art of Healing Medicine P.C. which held that whether a party must submit to arbitration is not in any way connected to the jurisdictional requirements of state courts and failed to consider whether the insurance policy of the respondent contained an `out-of-state insurance clause' which would subject the respondent to arbitration and any subsequent state court action to confirm any eventual award.
Therefore, the only factor in determining whether the respondent could be subject to arbitration is whether its policy contained procedures regarding arbitration. However, this would require an examination of the policy itself. The court determined an affidavit from an employee of respondent, the vice president of the claims department, establishing that the respondent was not authorized to do business in New York and did not conduct business in New York, did not address whether the respondent's policy permitted, and perhaps required, arbitration.
Therefore, the court held the respondent failed to submit its insurance policy for review and thus has failed to present a meritorious defense necessary to vacate the default judgement. As such, the motion seeking to vacate the arbitration award was denied.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
Nothing from me this time (but next time I'll have some extra hands).
STORM’S SIU
Scott D. Storm
[email protected]
02/10/25 Matter of State Farm Mut. Auto. Ins. Co. v. Rympel
Supreme Court, Kings County
“For Hire” Exclusion Not Effective to UM/SUM Coverage; Not Enough Proof That the TNC Exclusion Applied
State Farm commenced a special proceeding to permanently stay arbitration. State Farm's insured, Dalusma, had a policy that excludes coverage for "for hire" and TNC vehicles. Rympel hailed Dalusma's vehicle on the street, recognizing it as a taxicab, without pre-arranging the trip. Dalusma was allegedly working for "Mex Express Car Service" at the time of the accident.
The Court held that the "for hire" exclusion in the policy may be effective regarding the general liability aspects of the policy, but the exclusion does not apply to UM/SUM coverage as a matter of public policy to ensure innocent victims of motor vehicle accidents are compensated for their injuries and losses.
The Transportation Network Company exclusion does not apply in this case as the vehicle was not being used as a TNC vehicle at the time of the accident. The undisputed affidavit of Rympel said, "Prior to the accident, I was walking toward the bus stop when I saw Mr. Dalusma's vehicle. I hailed Mr. Dalusma's vehicle on the street as I recognized it to be a taxicab. Mr. Dalusma stopped and accepted me as a passenger. I did not otherwise contact anyone to pre-arrange this trip." The affidavit of Mr. Dalusma makes general statements that the driver was working for "Mex Express Car Service" at the time of the accident but the court said it does not tell us the circumstances as to Ms. Rympel's pick-up.
02/21/25 SC Austin Holdings LLC v. Mt. Hawley Ins. Co.
United States District Court, S.D. New York
Where Insured’s Expert Identifies Six Possible Causes of Loss, It Is Not Enough for Summary Judgment for the Insurer to Argue One Cause Is Excluded From Coverage Based on the Anti-Concurrent Causation Language Without Evidence the Excluded Peril Accounted for Some of the Damage
Mt. Hawley Ins. Co. insured SC Austin Holdings covering a hotel in Daytona Beach. Hurricane Ian flooded the hotel and damaged almost every room. The hotel was closed for months. Mt. Hawley denied coverage and sought summary judgment on SC Austin's claims as to 1) damage on the hotel's second through seventh floors based on an "anti-concurrent cause" exclusion in the policy, and 2) business-income losses caused by the hotel's closure.
The court held that as an "all-risk" policy, it is Mt. Hawley's burden to prove that the damage is excluded. Once the insured shows that a loss has occurred, the insurer has the burden of demonstrating that the loss claimed is excluded. The court says that Mt. Hawley fails to meet this burden. Mt. Hawley pointed to one of six possible explanations for water damage identified in SC Austin's expert’s report saying it was excluded under the policy and relying on the anti-concurrent causation language but failed to provide evidence that this theory definitively accounted for some or all of the damage.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
03/07/25 Waterloo Comm. Sch. Dist. v. Vermont Mut. Cas. Co.
Iowa Supreme Court
Insurer Must Only Pay to Repair the Damage From the Partial Roof Collapse but Not the Cost to Remedy the Longstanding Deterioration in Other Areas of the Building Unaffected by the Collapse
After a heavy snowstorm, part of the roof of an aged elementary school building collapsed into a second-floor classroom during a snow day. Several feet of snow had already fallen, and the heavy snow accumulated on the roof of the school. Investigations into the cause of the collapse determined that the roof failed under the weight of the snow and because of pre-existing, hidden deterioration of mortar in the load-bearing walls supporting the roof. The longstanding deterioration was found in the load-bearing walls throughout the school, and local authorities deemed the entire building unsafe for occupancy. The school district was unaware of the deterioration of the mortar within the concealed, load-bearing layer of the walls. Both the school district and the insurer hired experts to investigate the cause of the collapse, and both experts agreed that the deterioration of the load-bearing wall was a contributing factor for the partial collapse due to long-term water infiltration.
The school district demanded that the insurer pay to restore the load-bearing walls for the entire building to comply with the building code because it had purchased additional Ordinance or Law coverage. However, the insurer agreed to pay only for the area of the collapse based on the Ordinance or Law provision’s exception for failure to comply with the code before the collapse. The parties disagreed about whether the exception applied because the school district was unaware of the deteriorated mortar that made the building unsafe before the collapse. The school district sued for the cost to restore the deteriorated mortar throughout the entire building. The district court granted summary judgment for the insurer, concluding that the school district could only recover for the damage physically caused by the collapse. The district court applied the exception for pre-existing code violations and found that the policy’s exclusion for decay and deterioration barred coverage.
The school district applied for interlocutory review. The Iowa Supreme Court agreed with the insurer that the Ordinance or Law coverage’s exception applied to the pre-existing code violations and defeated the school district’s claim for the deteriorated mortar outside the area of the collapse. The court reasoned that the Ordinance or Law coverage was designed to pay for the costs of a code upgrade where the building code excused owners of older buildings from complying with current code requirements until an event necessitated major renovations. By contrast, the provision does not provide coverage for pre-existing code violations that the school district had been obligated to address. Accordingly, the Supreme Court held the district court correctly applied the Ordinance or Law exception, and there was no coverage for the cost to replace deteriorated walls outside the area of the partial roof collapse. A contrary holding would have turned the policy into a general maintenance contract.
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
03/03/25 Midvale Indem. Co. v. Plaster Pro Masonry Contractors et al.
United States District Court, District of New Jersey
Insurer Entitled to Rescind Policy Where Misrepresentations Were Made as to the Use of Subcontractors on Construction Projects
Midvale issued an insurance policy to Plaster Pro. On the application for that policy was a question that asked whether Plaster Pro used any subcontractors on any of its projects, to which Plaster Pro responded “no.” While the policy was in effect, an accident occurred at one of Plaster Pro’s job sites. Through investigation, Midvale learned that Plaster Pro had hired Cumbicos, a subcontractor, in connection with the project. Midvale agreed to defend Plaster Pro in the resulting tort action under a reservation of rights, and brought this declaratory judgment action seeking declarations that it is entitled to rescind the policy based on Plaster Pro’s material misrepresentation, and that it has no duty to defend or indemnify Plaster Pro in the tort action.
The Court noted that, under New Jersey law, an insurance carrier is entitled to rescind an insurance policy based on a material misrepresentation made by the insured. To prove its entitlement to do so, the insurer must establish that the misrepresentation existed at the time of the application for the policy, and that the insurer either would not have issued the policy at all or would have issued the policy on different terms (e.g., at a different premium) had it known of the misrepresentation at the time of the policy’s application.
The Court, having found that Midvale satisfied its burden of showing both the misrepresentation and that it would not have issued the same policy had it been aware of the misrepresentation at the time of Plaster Pro’s policy application, held that Midvale was entitled to rescind the subject insurance policies.
02/28/25 Burlington Cnty. Mun. Joint Ins. Fund a/s/o Ettinger v. Smith
Superior Court of New Jersey, Appellate Division
Appellate Division Affirms Waiver of Incarcerated Individual’s Right to Contest Arbitration Award, and Finds the Thirty-Day Rule to Apply in Any Event
Smith intentionally set fire to his home and was eventually incarcerated. Several members of the Pemberton Police Department entered the burning structure in an attempt to rescue elderly individuals and were injured in the process. The Burlington County Municipal Joint Insurance Fund (the “Fund”), a joint insurance fund established to insure the municipality against various risks, initially compensated the injured municipal workers for their injuries, and became subrogated to the rights of the workers, allowing the Fund to stand in their shoes to collect directly from Smith.
Under the New Jersey rules of court (New Jersey’s civil procedure rules), all actions for personal injury not arising out of the operation, ownership, maintenance, or use of an automobile are to be submitted to arbitration. If a party is unsatisfied with the arbitration award, it may file a notice of rejection of the award and demand a trial within 30 days of the award.
After the conclusion of discovery, the Court scheduled the parties for arbitration on May 4, 2023. Smith, having received his prison sentence almost a year and a half prior to the arbitration date, was incarcerated at the time of the arbitration hearing. Smith attended the arbitration hearing by phone but, according to him, had technical difficulties. The arbitrator entered an award in favor of the Fund and against Smith, providing that Smith “refused” to attend the hearing by phone, and “was advised that the court wanted the arbitration to go forward,” and that Smith “stated he wanted his attorney and hung up.”
On May 8, 2023, four days after the arbitration, the Fund mailed the arbitration award to Smith at the correctional facility (as required by the rules). On June 13, 2023, the Fund filed and served a notice of motion seeking to confirm the arbitration award with the Court. On July 10, 2023, the Court, noting that no opposition was filed in connection with the confirmation of the arbitration award, confirmed the award and entered judgment in favor of the Fund. The July 10, 2023, order was sent to Smith at the correctional facility. On July 24, 2023, Smith signed an acknowledgement of receipt of the judgment.
On August 16, 2023, Smith filed a motion rejecting the arbitration award and seeking a trial of all issues. Smith’s basis was that he never received notice of the arbitration award, and that although he tried to attend the hearing, the video and audio were inadequate.
The trial court denied Smith’s motion, finding that the June 13, 2023, mailing (the notice seeking to confirm the arbitration award) was sent to the same address that was listed as the return address on both items of correspondence received from Smith. As a result, the Court concluded that Smith was beyond the 30 days to reject the award and demand a trial. This appeal followed.
The Appellate Division affirmed the judgment of the trial court, finding that Smith had notice of the arbitration hearing, and indeed was given an opportunity to participate. No evidence suggested that the telephonic hearing was inadequate. The Appellate Division noted that, by voluntarily disconnecting from the proceeding, Smith waived his right to reject the arbitration award and seek a trial, notwithstanding the 30-day rule.
The Appellate Division continued that, even if Smith had not waived his right to reject the award by voluntarily disconnecting from the proceeding, his rejection of the award was untimely. The Court, like the trial court, was satisfied by the proof of service of the award, finding that it demonstrated that the award was sent to the same address as the return address listed on Smith’s various items of correspondence.
Editor’s Note: The opinion also says that Smith requested his lawyer before he disconnected from the arbitration proceeding. Indubitably, Smith is entitled to a lawyer at all criminal proceedings. Does that extend to civil proceedings while incarcerated? What about if the civil proceeding is connected to the crime for which he is incarcerated? Sounds like a question that could appear on a final exam in a constitutional law course.
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
03/05/25 Liberty Surplus Ins. Co. v. Kaufman Lynn Cons. Inc.
United States Court of Appeals, Eleventh Circuit
Insured Possesses Article III Standing to Bring Reformation Claim on Undamaged Buildings and Broad Course of Construction Exclusion Applies to Entire Construction Project
JM Family Enterprises hired Kaufman Lynn Construction to construct JM’s new corporate campus in South Florida. The campus buildings were to include three office buildings, a training and conference center, a sports and recreation building, a dining hall, an amphitheater, an energy plant, a parking garage, and various landscaping features. Kaufman procured a commercial general liability policy from Liberty Surplus.
Kaufman completed the energy plant, parking garage, office buildings, and dining hall by October 2020. At that time JM began to relocate staff to the new campus. On November 8, 2020, Tropical Storm Eta hit the campus and caused a water leak. Which amounted to about $3.3 million in damage. When this occurred, the remaining buildings were yet to be completed. JM claimed Kaufman was responsible for mitigating the damage. Kaufman then sued its various subcontractors and also filed a claim with Liberty.
Liberty denied coverage on the policy’s Course of Construction Exclusion, which barred coverage for “[a]ny ‘property damage’ at or to any project insured under this policy during the course of construction until the project is completed.” Liberty then filed a coverage action to enforce its coverage position. Among other defenses, Kaufman asserted a counterclaim for reformation of the policy.
Kaufman’s reformation claim was based upon a mutual mistake. According to Kaufman, the policy’s description of the project differed from what Kaufman provided Liberty at the time of binding, failed to include several buildings, and failed to identify the project was to proceed in two phases. Liberty eventually received a grant of summary judgment and dismissed Kaufman’s reformation claim for a lack of standing.
On appeal, we look at the reformation claim and the application of the exclusion itself. Standing in the sphere federal practices requires (i) a cognizable injury; (ii) a concrete and particular injury; and (iii) a ripe claim. The Appellate Court broke with the lower court and found Kaufman met each standing requirement.
The district court found a lack of standing for the following reasons (i) there was no cognizable injury because Kaufman was not pursuing claims for omitted buildings under the policy and even if reformed the exclusion would apply; (ii) Kaufman faced no injury from the incorrect premium; and (iii) the reformation claim was unripe because Kaufman might not face hardship if adjudication was withheld.
There is a cognizable injury since, if proven, Kaufman would have received a different policy than bargained for and paid a premium insufficient for the coverage sought. Kaufman’s injury was also concrete and particular because it was affected by the policy itself, and thus, sought reformation. The mere fact Kaufman did not seek damages did not lessen the injury. Finally, the reformation claim was ripe because it is not turn on a future event because a mistake occurred in the past formation of the policy. Thus, Kaufman possessed standing to bring a reformation claim regarding the unfinished portion of the project, as well as the finished building. Because the policy may not reflect the actual bargained for agreement.
As for the exclusion itself, the court looked at the distinction between a general liability policy and a builder’s risk policy. A builder’s risk policy provides protection for buildings in the process of construction. Whereas a general liability policy protects the insured from liability arising from property damage or bodily injury during the construction. Since the Liberty policy is a general liability policy, the court properly analyzed the exclusion within the sphere of a liability policy.
The dispositive language at issue was “until the project is completed.” Neither project nor completed were defined within the policy. But an undefined term itself does not create an ambiguity. In looking to the dictionary definition of both terms, the Eleventh Circuit agreed with the district court on this issue. The exclusion barred coverage until the entire project was completed. Even agreeing with Kaufman’s belief that there were two distinct phases, the entire project was still incomplete. To support its reasoning, the court identified that under Kaufman’s interpretation the entire project’s start and end date remained the same. Thus, while the project may have been split into two phases those two phases were apart from a single, overarching construction project.
Kaufman suggested the policy’s “products-completed operations hazard” could be used to define “complete” within the exclusion. But that argument was rejected. The court noted the “products-completed operations hazard” applied to the “your work” definition also found within the policy. However, “your work” was not included in the exclusion’s language. Since “your work” was not included in the exclusion’s language, the court reasoned the policy simply does not read with Kaufman’s interpretation. The Court cited Liberty’s argument to this point. It noted Kaufman’s interpretation conflicts with the exclusion itself. Because Kaufman would receive coverage for each building completed, when the exclusion broadly applies to the entire project and not single buildings.
An amicus brief was submitted by several contractors and builders who argued such an exclusion would insurance policies themselves unreliable. But the Liberty policy was procured through a contractor-controlled insurance program (“CCIP”). A program used by a general contractor to provide liability insurance to all participants in the project. And while JM procured a builder’s risk policy, it was never entered into the record to determine a potential gap in coverage. So, the exclusion applied to the claimed water damage.
Editor’s Note: There is another portion of the decision concerning attorneys’ fees. But I limited this review to the coverage aspects only.
ROB REACHES the THRESHOLD
Robert J. Caggiano
[email protected]
02/27/25 Drapper v. Horan, et al
Appellate Division, First Department
First Department Unanimously Affirms Order Which Included Trial Rulings on Motion in Limine Where Plaintiff’s Application to Preclude Defendant’s Biomechanical Engineer Expert From Testifying Was Denied and Defendant’s Application to Limit Plaintiff’s Treating Physician’s Testimony Was Granted
This case stems from a July 17, 2013, motor vehicle accident where a vehicle owned and operated by Plaintiff, Dwight Drapper, collided with a vehicle owned and operated by Defendant, Andrew John Horan, in Greenburgh, New York. As a result of this accident, Plaintiff alleged significant injuries to his left shoulder, cervical spine, lumbar spine, and a traumatic brain injury. He claimed that these injuries met the Serious Injury Threshold under numerous categories of Insurance Law § 5102(d).
By way of motion practice, liability was determined against Defendant as of August 12, 2014. Notably, unlike certain Appellate Divisions (i.e., Fourth Department), a finding of ‘liability’ in First Department venues does not include the finding that a plaintiff sustained serious injury under § 5102(d). Many years later, the matter moved to jury trial on the issue of damages only in July 2022. Prior to the trial, the Supreme Court, Bronx County, denied Plaintiff’s motion in limine seeking to preclude the Defendant’s biomechanical engineering expert from testifying. It further granted Defendant’s motion in limine which sought to limit Plaintiff’s treatment of physician from testifying about imaging records taken of Plaintiff after a prior motor vehicle accident. Following the trial, the jury found that Plaintiff did not sustain a serious injury under § 5102(d) and thus did not award non-economic damages – but did award economic damages for lost wages and medical expenses incurred. Plaintiff then sought appeal, which included review of the Court’s rulings on pre-trial motions in limine.
On review, the First Department agreed with the lower Court’s pre-trial rulings. Regarding granting of Defendant’s motion in limine, it was found that Plaintiff’s treating physician was properly limited in his testimony. Specifically, the Court permitted the physician to testify about his observations during surgery he performed on the Plaintiff’s shoulder and his treatment reports, but he was precluded from testifying about MRI imaging done of Plaintiff’s shoulder after a prior motor vehicle accident. The First Department found this limitation proper since the physician had not reviewed the prior MRI before the trial nor referenced it in any treatment report – therefore the Defendant had no prior notice that the physician would give such testimony at trial.
Further, the First Department agreed that the lower Court properly denied Plaintiff’s motion in limine and allowed the Defendant’s biomechanical engineering expert to testify. Specifically, expert was presented to offer an opinion as to whether the accident could have created the mechanisms required for Plaintiff’s claimed injuries. The expert had reviewed specifications and crash data from both involved vehicles and cited peer-reviewed documentation in support of his analysis. Plaintiff’s motion for preclusion was based upon the expert not having medical training – but the First Department cited prior case law that states that such lack of training does not render the expert unqualified to offer an opinion that the force of the accident could not have caused the alleged injuries.
Accordingly, the First Department unanimously affirmed the Order of Supreme Court, Bronx County, without costs.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
03/04/25 Hudson v. Allstate Veh. & Prop. Ins. Co.
New York State Supreme Court, New York County
Court Denies Motion for Class Certification as Premature, and Orders the Parties to Conduct Limited Discovery
Allstate Vehicle & Property Insurance Company (“Allstate”) issued a Condominium or Coop Owners Policy to Stephen Hudson (the “Plaintiff”), for the period from June 10, 2023, to June 10, 2024 (the “Policy”). Plaintiff submitted a claim to Allstate under the Policy, alleging that in June 2023, and January 2024, there were two discrete and sudden instances of smoke wafting from the apartment below. The Plaintiff stated that as a result of the smoke, Plaintiff’s apartment was declared to be temporarily uninhabitable, requiring significant cleaning.
Allstate denied coverage for the loss, stating that the Policy did not provide coverage for the Plaintiff’s claim for tobacco/nicotine smoke damage, because the loss was not a sudden and accidental direct physical loss. After the denial, the Plaintiff commenced a declaratory judgment action against Allstate, seeking coverage for the claim.
After Allstate appeared, the Plaintiff filed a motion for class certification, seeking to expand the class of plaintiffs to cooperative/condominium apartment residents who experienced second-hand smoke intrusion from a neighboring property over the last six years, while insured by Allstate or its subsidiaries under a homeowners’ or renters’ policy.
Pursuant to CPLR 901(a), a court may certify a proposed class only if (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common; (3) the claims or defense of the representative parties are typical of the claims and defenses of the class; (4) the representative parties will fairly and adequately protect the interest of the class; and (5) the class action is superior to other available methods for the fair and efficient adjudication of the controversy. After all requirements are met, the court must then assess the feasibility considerations listed in CPLR 902.
In deciding the motion, the Court found that the motion was premature. Plaintiff provided no evidence to support any of the requirements, outlined above. The only evidence attached to Plaintiff’s motion was (1) a screenshot of the US Census data and estimate of the number of condominium and cooperation housing unit owners in NYS; and (2) a screenshot of a pamphlet from the American Lung Association, titled, “Is Secondhand Smoke Infiltrating Your Apartment or Condominium.”
The Court wrote that the documents and general statistics are insufficient to establish any element of class certification.
However, the Court did exercise its discretion to require limited pre-certification discovery to develop the record of the elements required under CPLR 902(a). In doing so, the Court identified that based on the nature of the Plaintiff’s claims, there is potential for certification following limited pre-certification discovery. The Court reasoned that the Policy was a “form” insurance policy and has potential impact on many other Allstate customers.
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
03/14/25 New York Assembly Bill A1433
New York State Assembly
Proposed Act to Provide Guidelines for the Issuance of Pet Insurance in New York State
Assembly Bill A1433 proposed on January 9, 2025, seeks to amend insurance law by providing guidelines regarding the issuance of pet insurance in New York State.
The Bill seeks to amend Insurance Law to include Section 3463 to provide certain definitions for terms relevant to the pet insurance industry including veterinarian, veterinary expenses, waiting period, and wellness program. If an insurer uses the terms outlined in the proposed Subsection (A) of § 3463, then the insurer must use the definitions provided in that subsection.
The Bill would further require that an insurer transacting pet insurance shall disclose to the consumers among other things, the following:
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If the policy excludes coverage due to any of the following:
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A preexisting condition.
(ii) A hereditary disorder.
(iii) A congenital anomaly or disorder; or
(iv) A chronic condition
(b) If the policy includes any other exclusions, the following statement: "other exclusions may apply. Please refer to the exclusions section of the policy for more information."
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Any policy provision that limits coverage through a waiting or affiliation period, a deductible, coinsurance, or an annual or lifetime policy limit.
(d) Whether the insurer reduces coverage or increases premiums based on the insured's claim history, the age of the covered pet or a change in the geographic location of the insured.
DOMENICA’S DIARY on BAD FAITH
Domenica D. Hart
[email protected]
03/04/25 Pipik v. State Farm Mut. Auto. Ins. Co.
United States District Court, Western District of Pennsylvania
Long Periods of Time Between a Demand and a Settlement Does Not on Its Own Constitute Bad Faith; Delays Attributable to Necessary Investigation or Even Simple Negligence Will Not Satisfy the Burden
Pipik alleges that, on November 2, 2020, her vehicle was sideswiped by another motorist, and she sustained injuries. Pipik maintained automobile insurance with State Farm that provided for UIM coverage.
Pipik gave notice of her UIM claim to State Farm “shortly before January 5, 2022.” Between June 2023 and October 2004, investigation took place, including obtaining Pipik’s demand, medical records, Social Security Disability documentation, and State Farm’s request for proof of the offer of $15,000.00 from the tortfeasor. Plaintiff’s EUO and IME were also conducted. Pipik alleged that, since October 2024, State Farm had not yet extended an offer on her UIM claim. Prior to settlement, in December 2024, Pipik filed suit against State Farm for statutory bad faith under 42 Pa.C.S. § 8371 and breach of contract. State Farm moved to dismiss the Bad Faith count.
Pipik alleged State Farm’s motion should be denied because her Complaint’s timeline demonstrated an “inexcusable delay” which violated State Farm’s duty to fairly and promptly investigate the UIM claim. State Farm countered with allegations of Pipik’s delay in furnishing her Social Security Disability file and her attorney’s delay who withheld the proof of the tortfeasor’s settlement offer.
Like neighboring states, the Court recognized the high burden recognizedto prevail on a bad faith action. Pipik had to present clear and convincing evidence that State Farm did not have a reasonable basis for delaying benefits under the policy and State Farm knew of or recklessly disregarded its lack of a reasonable basis. The Court found that Pipik did not meet this burden. The Court highlighted an insurer’s right to investigate and evaluate UIM claims and emphasized that a long period of time between a demand and settlement does not on its own constitute bad faith. If the delay is attributed to the need to investigate further, or even simple negligence, there is no bad faith. The Court’s findings that Pipik delayed filing the UIM demand until several months after the accident and her counsel’s delay in obtaining proof of settlement from the tortfeasor were significant factors in its decision. It also highlighted the delays beyond the parties’ control, i.e., production of the Social Security Disability File. Given the totality of circumstances, the Court found State Farm conducted an ongoing investigation on par with the timing and substance of information it received. The Court granted State Farm’s motion to dismiss the Bad Faith count.
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
For the last 80 years, International Nickel Company of Canada Limited, later re-named Inco Limited, was the world’s leading producer of nickel. Throughout its existence, Inco has been headquartered in Toronto, Ontario, with satellite offices throughout the world. In a deal that took place in 2007, Inco was purchased by the Brazilian company, Vale S.A., resulting in a change of name to Vale Canada Limited.
Over the past 20-30 years, Inco/Vale Canada incurred environmental remediation costs for damage caused by its operations in relation at 26 sites around the world. Of those sites, 22 are in Canada with 19 of them in Ontario. It also incurred remediation costs at sites operated through subsidiaries in Japan, Indonesia, New Jersey, and Wales.
Over several decades, 24 separate primary and excess insurers issued a total of 92 policies to Inco/Vale to cover the worldwide environmental liabilities in issue. Inco/Vale initiated claims for coverage under all 92 policies for the remediation costs incurred at its worldwide sites.
The claims advanced by Inco/Vale and its subsidiaries under the insurance policies relate predominantly, but not exclusively, to environmental expenditures incurred in Ontario that were generated by its Ontario operations. All of Vale Canada’s information and documents about all the insurance claims for environmental expenditures is in Ontario. Witnesses about the expenditure claims are in Ontario (except for four people in Manitoba and one person in New Jersey).
Vale sought to negotiate its claim for insurance coverage. The negotiations broke down, and Travelers Casualty & Surety Company brought an action in the Supreme Court, New York County, New York, against Vale, and the many insurers with respect to whether it was obligated to indemnify Vale.
Vale has an office in New York. One or more policies were brokered and underwritten in New York and issued to Vale Canada at its New York address. Notice of claims on those policies was to be given in New York.[1]
The Ontario Action
12/09/22 Vale Canada Limited v. Royal & Sun Alliance Ins. Co. of CA
Ontario Court of Appeal
Unless There Is a Choice of Law Clause Specifying a Jurisdiction Other Than Ontario, the Ontario Courts Have Jurisdiction to Hear Coverage Disputes Under Policies That Were Brokered and Issued to Insureds at an Address Outside of Ontario, Where the Issuing Insurers Are Registered and Licensed to Transact Business in Ontario; The Insured Does Business in Ontario; and the Policies Relate Largely, but Not Exclusively to the Insured’s Operations in Ontario
Soon after, Inco/Vale and Royal & Sun Alliance Insurance Company of Canada (RSA), one of Inco/Vale’s primary insurers, issued an identical action in Ontario. Vale and RSA took the position that the action they commenced should continue in Ontario. Travelers and several other insurers took the position that the Ontario action either cannot, or should not, proceed. Each side accused the other of gamesmanship and forum shopping.
Inco/Vale and RSA brought an application within the Ontario action to have Ontario declared the appropriate forum to hear the coverage action. The motions court agreed with Inco/Vale and RSA that Ontario was the appropriate forum. In a decision released December 9, 2022, the Ontario Court of Appeal affirmed the decision of the Motions Court. The Court of Appeal stated:
A comprehensive general liability insurer, underwriting primary or excess insurance coverage for Ontario risks, connects itself to Ontario for jurisdictional purposes and thus commits itself to defending, in Ontario, claims arising out of those risks. No other outcome is commercially reasonable in the operation of the international insurance market and consistent with the principles of comity. There is no place that enjoys universal jurisdiction.
The common law principles of comity underpin the doctrines of jurisdiction simpliciter and forum non conveniens and stand against forum shopping and the notion that the race should go to the swiftest, for good reason, as we will explain. These principles ensure that Vale, an Ontario-based international miner, can sue its primary, comprehensive general liability insurer RSA, an Ontario-based insurer, in respect of environmental liabilities largely incurred by Vale for polluting Ontario properties, in Ontario’s Superior Court of Justice. These principles also entail the conclusion that Vale and RSA can sue the insurers who provided additional or excess insurance, largely follow-form, for the same type of risks, significantly but not exclusively tied to Ontario, in the same court.
The interesting finding in this case is that Ontario is the appropriate jurisdiction for the coverage disputes implicating the follow-form excess insurers. The follow-form policies did not contain a choice of law / jurisdiction clause meaning that the common law determines the issue of what is the appropriate jurisdiction to hear coverage disputes. The motion court and the Court of Appeal pointed out that the insurers were licensed and registered to undertake insurance in Ontario; the policies were issued to an insured doing business in Ontario; that was sufficient connection to Ontario for the Ontario courts to assume jurisdiction. One of the insurers, North River Insurance Company, argued that it was not licensed to undertake insurance in Ontario.
The Court held that the record before it did not contain that evidence but that even if it did, North River would have had a reasonable expectation at the time its excess policy was issued in a tower where RSA was the primary, that its liabilities would be acted upon in Ontario and therefore it was subject to the jurisdiction of the Ontario courts.
North River filed an application for leave to appeal to the Supreme Court of Canada. That application was dismissed December 9, 2022.
As the Ontario Court of Appeal judgment was not appealed, it is final and binding. Vale’s claims for coverage are continuing in Ontario.
The New York Action
02/26/25 Travelers Casualty & Surety Company v. Vale Canada Limited
Supreme Court, New York County
The Sudden and Accidental Pollution Exception of the Pollution Exclusion Contains a Temporal Element That Is Met by the Discharge, Abruptly or Within a Short Time Span, of a Significant Quantity of the Pollutant Sufficient to Have Some Potentially Damaging Environmental Effect
In the meantime, Vale and RSA applied in the New York Courts to have the New York action commenced by Travelers dismissed on the basis that the Ontario courts have jurisdiction to hear the coverage disputes. On May 10, 2022, their application was denied, and the New York action was allowed to continue.
On February 26, 2025, the New York Supreme Court, sitting in New York County, released its judgment on a motion filed by Travelers Casualty and Surety Company, North River Insurance Company, and United States Fire Insurance Company for summary judgment seeking a declaration that a Pollution Exclusion that was common to all policies issued by these insurers unambiguously bars recovery for any of Vale Canada's insurance claims.
Those claims arise from 27 sites. The parties agreed that four of those sites are representative of the 27 for purposes of discovery and for the Court’s review. Vale picked the Pipe Mine in Manitoba and the Chicago Mine site which is in Ontario. The insurers picked The Copper Cliff Smelter in Sudbury and the Thompson Complex in Manitoba.
The operative policies issued by these insurers contained the same pollution exclusion which excluded property damage caused by pollution, except where the damage arises from the "sudden and accidental" discharge (the ‘sudden and accidental exception’) of the pollution or other contamination, including any waste materials.
The insurers argued that the Pollution Exclusion contained in each of the Policies clearly and unambiguously bars recovery for any of Vale Canada's coverage claims for the Test Sites because it is undisputed that the pollutant damage for which Vale Canada claims coverage arise out of the gradual discharge, release, or dispersal of pollutants over the course of many decades such that it cannot be said that the pollution was "sudden" within the meaning of the sudden and accidental exception.
The controlling case in New York on the ‘sudden and accidental’ exception is Northville Industries Corp. v National Union Fire Insurance Co., 89 NY2d 621, According to that case, the sudden and accidental exception is based on the "initial release of the pollutant, not on the length of time the discharge remains undiscovered, nor the length of time that damage to the environment continued as a result of the discharge, nor on the timespan of the eventual dispersal of the discharged pollutant in the environment" As such, the exception "cannot be established merely by showing that the release of the pollutant had its onset at some particular point in time and, in that sense, the discharge could be said to have begun abruptly". "Rather, the temporal aspect of the sudden discharge element would only be met by the discharge, abruptly or within a short time span, of a significant quantity of the pollutant sufficient to have some potentially damaging environmental effect."
Based on this authority, the Insurers argued that they are entitled to summary judgment dismissing Vale Canada’s claims for coverage as there is no dispute as to the gradual nature of the pollution events for which coverage was demanded.
Vale Canada opposed this position stating that the law of Ontario applies to the policies. Under Ontario law, there is no temporal element to the application of the sudden and accidental exception.
The first order of business therefore was for the court to decide whether the policies are subject to the law of Ontario (which was Vale Canada’s position) or the law of New York State (which was the insurer’s position) However, under New York law, if there is no conflict between the applicable law of Ontario and New York on the subject, then there is no need to decide ‘the law of the policies’.
The onus was on Vale Canada to demonstrate the lack of a temporal element regarding this exception under Ontario law creating a conflict with New York law. Vale Canada retained Gordon Hilliker, K.C., a noted policyholder Canadian coverage lawyer and author based in Vancouver as their expert on Ontario law. The insurers retained Chris Paliare, a respected, general commercial litigator out of Toronto.
The New York Court found that Vale Canada’s expert, Mr. Hillicker, did not say that the law on the topic is settled in Ontario and further, he did not say that there is no temporal element to the application of the exception. The New York Court then delved further into Ontario law. The judgment discusses two inconsistent trial level decisions on the exception. Of those, the most recent case (B.P. Canada Inc. v. Comco Service Station Const. & Maintenance Ltd,) was found to be consistent with New York law. Canadian principles of horizontal stare decisis dictate that the New York court is bound to follow BP. However, even if that was not the case, the earlier Ontario case (Zatko v. Patterson Spring Service Ltd.) states that the exception does not apply to pollution damage that occurs after the insured becomes aware of the polluting event. Vale Canada seeks coverage for pollution damage at the Copper Cliff Smelter that is the consequence of a surface pollution event that occurred in 1974 and subsequently spread to the groundwater. Under Zatko, the earlier Ontario decision, this would not be covered.
As no conflict was found between the law of Ontario and the law of New York on this exception to the Pollution Exclusion, there was no need to engage in a conflict of law analysis. Even if it did, under both the law of Ontario and the law of New York, the insurers had established their case for summary judgment and accordingly, Vale Canada’s demands for coverage at the Test Sites were dismissed.
Time will tell if there is an argument as to the application of the decision regarding these test sites to the remaining claims.
[1] This information is mentioned in the Ontario proceedings and specifically referred to in Travelers Cas. & Sur. Co. v. Vale Can. Ltd., unpublished opinion, Borrok, J., May 10, 2022
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