Coverage Pointers - Volume XXVI No. 21

Volume XXVI, No. 21 (No. 694)
Friday, March 28, 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, New Jersey, 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.

My cover note will be a little different than most.  Let me reflect on a situation more important than an insurance coverage..

Protecting Lives through the Rule of Law

For the past 26+ years, I have written a column in this newsletter, where I speak of insurance coverage, family matters, promotions, CE and CLE programs, etc.  In all that time, I have steadfastly avoided political commentary and surely, partisan opinion.  However, I hope you will indulge or forgive me for my comments here.

I am a lawyer.  I am proud of what I do.  I am humbled to be part of a legal system that is designed to protect our citizens.  I am committed, as a lawyer, to honor our Constitution and to protect the rule of law.  I am very concerned about the broadside attacks on our judges, our constitution, and our legal system.  This is not a Democrat or Republican question. It is surely not a partisan issue; it is an American issue.
The ongoing assault on the judiciary—an undeniable and deeply concerning reality—has now reached a level so severe that it has compelled the Chief Justice to issue a public statement. This is not a development we can afford to overlook or dismiss lightly. Judicial independence is the bedrock of a functioning democracy, and any attempt to undermine it is, in effect, an attack on the fundamental principles that sustain the rule of law.

As lawyers, regardless of our political beliefs or partisan affiliations, we have a solemn duty to remind our fellow citizens that the judiciary is not a political instrument but a guardian of justice. To erode its independence is to erode the very framework that ensures fairness, accountability, and the protection of rights for all.

In 2020, I had the privilege of addressing 140 state appellate judges at the National Foundation for Judicial Excellence's annual symposium, where I spoke about the profound impact that the rule of law has had on my own family's journey from Nazi Germany. The lessons of history serve as stark reminders of what can happen when the rule of law is compromised or manipulated for political ends. I was honored to reprise this message at the ADTA annual meeting the following year, emphasizing the crucial role that judges and lawyers play in upholding and defending our legal system.

If you have any interest in reading my remarks, entitled Protecting Lives through the Rule of Law they are available.  I urge you to remember, Democrat or Republican or Independent, we are Americans first.

Today, I offer these reflections, once again, as a sobering reminder: the responsibility to protect judicial independence does not rest solely with the judiciary—it belongs to all of us who believe in justice, fairness, and democracy. Now more than ever, we must stand vigilant in defense of the rule of law.

 

New York Rental Car Companies Celebrate "BYOI": Bring Your Own Insurance!

On March 13^th, the First Department, in Second Child v. Edge Auto, Inc, 2025 NY Slip Opn 01432, has turned car rental insurance on its head, upending a quarter century of precedent.  I reported on that decision in the most recent issue of this newsletter.  However, I wanted to expand my thoughts on it.

Imagine you're a customer at the Happy Car Rental counter at JFK Airport, and the clerk asks, "Would you like liability insurance for $6.00 per day?" Knowing the law, you confidently decline, citing to the bewildered counter clerk, the 2001 Court of Appeals decision in ELRAC v. Ward, which mandates rental companies to provide at least the minimum liability coverage required under Vehicle & Traffic Law Section 370:

The language of section 370 [of the Vehicle & Traffic Law] is plain and precise. Common carriers, including rental car companies, are required to obtain insurance for their vehicles.  For passenger cars, such as the ones rented here, the insurance must provide minimum liability coverage of $ 25,000 for bodily injury and $ 50,000 for death. Furthermore, the policy must "inure to the benefit" of any permissive user of the vehicle … A renter is, of course, a permissive user. Thus, section 370 clearly requires the rental company to provide the renter with this minimum level of coverage.

ELRAC, Inc. v. Ward, 96 N.Y.2d 58, 73 (2001).

How much clearer can that be? The rental company is required to provide the renter with the minimum level of coverage.

The 2005 Graves Amendment changed the tort liability landscape by exempting rental and leasing companies from vicarious liability unless the accident resulted from vehicle defects or owner negligence. The federal statute was enacted in response to state statutes around the country – like New York Vehicle & Traffic Law Section 388 – that imposed vicarious liability on vehicle owner for the negligent acts of permissive users.  Those states – including Section 388 – applied not only to personal autos, but also to rental and leased vehicles.  Congress determined that those companies in the business of renting and leasing vehicles should not be subject to vicarious liability and would only be responsible for accidents if the vehicle proved defective and the defect, or some act of owner negligence, caused on contributed to the accident. The statute provided:

49 U.S. Code § 30106 - Rented or leased motor vehicle safety and responsibility

(a) In General.—An owner of a motor vehicle that rents or leases the vehicle to a person (or an affiliate of the owner) shall not be liable under the law of any State … by reason of being the owner of the vehicle .. harm to persons or property that results or arises out of the use, operation, or possession of the vehicle during the period of the 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 …

Since that statute was adopted, judicial decisions throughout the country have dismissed car rental and leasing companies from lawsuits, in the absence of negligence on the part of the vehicle owner.

That answered the question about tort liability. 

What about insurance obligations?  The Graves Amendment contained. what has been known as the “savings clause”:

(b) Financial Responsibility Laws.—Nothing in this section supersedes the law of any State or political subdivision thereof—

(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.

Simply stated, state statutes that imposed insurance requirements on vehicle owners would remain untouched by the Graves Amendment.  So, if a statute-imposed insurance requirements on the owner of a motor vehicle – a consideration separate and distinct from tort responsibility – those insurance obligations would remain.

As the Court of Appeals said in ELRAC v Ward, Section 370 does just that – it is a state statute that imposes insurance obligations on motor vehicle owners, including car rental agencies. It should be noted that ELRAC preceded the Graves Amendment.

Nevertheless, the First Department's recent decision in Second Child introduces a drastic shift. The court found that while Vehicle & Traffic Law § 370, requiring rental companies to carry minimum insurance coverage, remains valid, the law is preempted by the Graves Amendment when it attempts to make rental companies provide primary insurance coverage for renters. The court reasoned that any requirement forcing rental companies to provide primary insurance essentially reinstates vicarious liability, which the Graves Amendment expressly prohibits.

“[R]equiring rental car companies to primarily insure and indemnify plaintiffs' damages is the precise result barred by the Graves Amendment.”
The renters argued that the Graves Amendment only supersedes statutes imposing vicarious liability, not statutes mandating primary coverage. The court holds this to be "a distinction without a difference". Rental car companies "shall not be liable" under New York State law for damages incurred by renters. 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. The First Department opined that 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”.

This decision has introduced significant uncertainty. Historically, rental companies provided primary coverage, with personal auto policies offering excess coverage. Now, personal insurers like Risky Business Insurance Company may become primary, releasing rental agencies from initial (actually, any) responsibility.

So. imagine that customer at the JFK rental car counter has his personal auto policy with Risky Business Insurance Company and rents a car.  It had been the rule, practice, and understanding, under the 2001 ELRAC decision, that if she or he had an accident, the Happy Car Rental Company would through its insurer or by itself, if self-insured, provide the defense and first layer of liability insurance coverage.  Now, according to the First Department, that responsibility has been punted to Risky Business, the customer’s personal auto carrier.

This ruling raises serious concerns, especially for renters without personal auto insurance. Previously, rental agencies would cover minimum liability, but under this new interpretation, such coverage may vanish. Crash victims could be forced to rely on their own uninsured motorist (UM) coverage, or if uninsured, turn to the Motor Vehicle Accident Indemnification Corporation (MVAIC) for compensation.

The author believes the First Department misinterpreted the Graves Amendment's savings clause. Until further clarification from the Court of Appeals, confusion is likely to persist as rental companies and personal auto insurers navigate these uncharted and shark-infested waters.

This author suggests that the First Department’s decision misreads the “savings clause” in the Graves Amendment.  But, in the meantime, stay tuned for confusion, as rental car agencies and personal auto companies duel this one out.

 

Law Firm Sanctioned $1,000,000 for Failing to Disclose all Available Coverage – Lawyers, Pay Attention.

A Washington State judge sanctioned a well-respected law firm $1 million for its failure to timely disclose two excess policies.  A reminder to all who read this – the duty to inquire and disclose other primary, excess, umbrella, additional insured, or contingent coverage rests with the party and the law firm and the lawyer understand coverage well enough to know where to look and what questions to ask and be persistent enough to secure the information from the carrier that retained the firm and from their client (the insured).  Not all coverage for an accident is necessarily provided by the same carrier that has primary responsibilities.

For lawyers who are reading this, ask yourself: are we adequately training our trial lawyers to understand insurance coverage and effectively inquire about it?  Any lawyer reviewing this decision who does not promptly meet with their trial attorneys to discuss the obligation to disclose coverage, the necessity to inquire thoroughly, and the correct methods for identifying coverage, is risking potential sanctions.

Litigators, particularly those with less experience, often assume that the insurance carrier assigning a file will provide comprehensive information regarding primary and excess coverage. This assumption is frequently incorrect. Sometimes carriers fail to inform firms even about their own excess policies. Additionally, carriers might be unaware of other existing excess, umbrella, primary, or co-primary policies.

Consider a basic scenario: an ambulance accident involving another vehicle. The attorney representing the ambulance service might be dealing with multiple policies, including professional liability, owned auto, non-owned auto, additional insured, personal auto coverage for the driver, as well as excess and umbrella coverages.

Read what the court held the firm did and did not do and then read it to your lawyers.

 

Newsletters:      

We have other firm newsletters to which you can subscribe by simply letting the editor (or me) know, including a new publication, which was created to advise on business and employment law questions:

• Premises Pointers:  This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!).  Please drop a note to Jody Briandi at [email protected] to be added to the mailing list.
   

• Labor Law Pointers:  Hurwitz Fine P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at [email protected] to subscribe.
   

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

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

   

  Aging Waterfall – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
28 Mar 1925

 

Figures Age Of Niagara Falls As 40,000 Years

Chicago Professor Claims Falls originally were at Lewiston and Queenston, Retreating 7 ½ miles.

 

Chicago, Ill., Marcj 27.- Niagara Falls came into being in the year 26935 B.C., at Lewiston, according to professor J. Harlen Bertz, University of Chicago geologist, who has been probing into the birth record of the famous falls.

Based on careful study of the falls, the gorge and the Great lakes, it is estimated that the falls began 30,000 to 40,000 years ago and have been working steadily ever since.

“Nature left a record – if we can read it right -,” said professor Bretz “showing how long ago in years the Northern States were covered by a glacier. Niagara falls are wearing away the rock over which they tumble. They are undercutting this rock at the rate of about 4 ½ feet a year. The falls are maintained by undercutting, but they are moving upstream. And as they move they lengthen the gorge below the great cataract. That is how the gorge was formed – by the retreat of the falls. The gorge is about 7 ½ miles long. The falls were originally at Lewiston and Queenston. They took origin when the ice sheets retreated from the northern part of the Great Lakes country.

“For a long time only the waters of Lake Erie spilled over the falls, lakes superior, Michigan and Huron basins were discharging down the Ottawa river to Lake Ontario directly.”

 

Peiper on Property (and Potpourri):

Greetings, and welcome to baseball season.  If the games are really counting, Spring must be right around the corner.  Doesn’t it?

The road show loads up again this weekend, as we’re headed to Indianapolis for PLRB’s annual meeting and claims conference.  Indianapolis is close to everyone, it seems, yet not an easy trip for us from Buffalo.  We hope to see you there, where your author will be presenting on how to read the CGL policy in the context of a construction defect/products liability claim.  Our editor, by popular demand, will be presenting on risk transfer and tenders. 

Before we go this week, we’d be remiss if we didn’t point out the Appellate Division’s decision in Dersam as reported in the Property Column.  In our humble opinion, the Court appears to be conflating first and third-party bad faith standards.  This is part of a consistent trend which, intentionally or unintentionally, is eroding the long-established rules set forth by the Court of Appeals in NYU v. Continental Cas. Co.  

Be warned and be ready to explain why Pavia doesn’t mix with Romanova in your next motion.

That’s it for now.  See you in two weeks.  And go O’s.   

 

Steve
Steven E. Peiper
[email protected]

 

Don’t Spead It All In The Same Place – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
28 Mar 1925

 

Chicago Orchestra Members to Receive World’s Highest Pay

 

Chicago, Ill, March 27 (A.P.) – The 82 members of the Chicago Civic Opera company’s orchestra have become the highest paid musicians in the country, if not in the world, James Petrillo, president of the musicians’ union, said today with the signing of a new wage agreement.

The players were given a wage increase of $8 a week, bringing the minimum wage to $119 a week. In addition, the agreement provided for $5 for each practice, adding $35 or $40 a week. The average salary will be close to $155 a week during the 22 weeks of the opera season, Petrillo said.

 

Lee’s Connecticut Chronicles:

Dear Nutmeggers,

Busy couple of weeks, with three out of the four kids having overlapping spring breaks and, believe it or not, wanting to spend some time with dear old mom and dad. Moving to the beach was the best decision we ever made!

More Nutmeggers’ news for you next edition. Oh, and check out our cases this week – a $5,000 issue that’s gonna add up to a lot of money for the industry if carriers don’t change their UM/UIM set-off language.

Until next time, keep keeping safe.

 

Lee
Lee S. Siegel
[email protected]

 

Wife Just Ain’t Worth That Much – 100 Years Ago:

The Buffalo News
Buffalo, New York
28 Mar 1925

 

JUDGE SETS ASIDE $1000 AWARD MADE BY JURY

 

The verdict of a Supreme court jury in favor of Merle Austin, 333 Potomac avenue, was set aside Thursday by Justice Brown. The judge ruled that the $1000 compensation awarded Austin for loss of his wife’s services was excessive and declared that unless Austin accepted $500 he would give the D.J. Perry corporation and Gladys Ferrin, secretary to President Edward B. Germain of the Dunlop Tire & Rubber Co., co-defendants, a new trial.

The jury also awarded Austin’s wife, Hazel 20, $750 damages for injuries, suffered when the car in which she and Miss Ferrin were riding, was struck by a Perry corporation truck last April.

 

Ruffner’s Road Review:

Dear Readers,

Happy Spring, although it certainly doesn’t feel like it yet with 30-degree weather and snow falling. In sports news, March Madness is finally here, and for once my brackets are actually off to a pretty good start. We will check back in a few days to see if that is still the case!

I have a case of first impression from the Second Department this week, regarding whether distinct arbitration awards can be treated as a single arbitral award under Insurance Law and the No-Fault law for the purposes of determining whether the requisite $5,000 threshold has been met to allow for a de novo review of claims for no-fault insurance benefits. The court held that the plain language and intent of the statutes did not contemplate such interpretation (even though the insurance company, medical provider, and injured person were the same in each arbitration) and reversed the Supreme Court’s ruling. In the second case, the court determined that the insurer was not required to pay no-fault claims, as it properly established a founded belief that the claimed injuries were not caused by the subject accident.

Until next time,

 

Kyle
Kyle A. Ruffner
[email protected]

 

Nobody Invited Me! – 100 Years Ago:

The Kingston Whig-Standard
Kingston, Ontario, Canada
28 Mar 1925

 

Petting Parties

 

I am twenty and a member of a girl’s quartet. Last summer we played in small towns, and the girls treated me coolly because I refused to go to petting parties and bathing parties at night. Did I do right? – C.R.

You made no mistake in the stand you took. Petting parties alone with a man are always objectionable. Swimming at night with a comparative stranger is also objectionable.

 

Ryan’s Federal Reporter:

Hello Loyal Coverage Pointers Subscribers!

It’s a GIRL! My wife and I welcomed our beautiful baby daughter into the world on March 1 (six-weeks early), and she is the perfect complement to our two boys, who are now five and almost eight. While she does not yet crawl, talk, or play, she can certainly eat, sleep, and poop with the best of them. Our family is now five and it’s an amazing feeling.

This issue, I tackle a Second Circuit decision concerning coverage for Strikes, Riots, and Civil Commotion. The takeaway is a practical tip for your next grapple with off-beat language.

Until next time,

 

Ryan
Ryan P. Maxwell
[email protected]

 

He Wheeled His Wheelbarrow, Through Streets Broad And Narrow – 100 Years Ago:

Lebanon Daily News
Lebanon, Pennsylvania
28 Mar 1925

 

WHEELBARROW WAS RETURNED

 

Through the article in Thursday’s letter concerning the wheelbarrow that disappeared from the tool house on the Union cemetery, the return of the missing article was brought about. It turned out that it was not stolen but only borrowed by someone in need of it, who, knowing it would be inconvenient to ask Morris Batdorff, the caretaker of the cemetery about it, took the wheelbarrow without that formality, and had forgotten to return it until his attention was called to the matter by the article.

 

Storm’s SIU:

Hi Team:

Just getting back from some vacation time in sunny Florida.  Mickey says, “Hi Folks”!

Five cases this week:

• Coverage Denial for Untimely Sworn Statement in Proof of Loss Upheld on Presumption of Receipt of Mailing. 

• Denial of Assignee Medical Provider’s Claim Upheld Due to Insured’s Failure to Attend EUO.

• Case Survives Motion to Dismiss Whether Insurer Must Pay Sales Tax for Total Loss Leased Vehicles. 

• In Staged Accident case, Evidence from Third-Party Sources like Accurint Reports, CarFax Reports and Information from the Other Vehicle's Event Data Recorder Deemed Inadmissible Hearsay.

• Anti-Concurrent Causation Clause Applies if Any Excluded Cause Contributes to the Loss, Even if Other Covered Causes are also Involved.

Have a great two weeks until we talk again!

 

Scott
Scott D. Storm
[email protected]

 

What Is A “Baby Party,” Anyway? – 100 Years Ago:

The Kansas City Post
Kansas City, Missouri
28 Mar 1925

 

LID ON STUDENTS

Texas University Faculty Ready to Clamp ON Drastic Rules.

 

AUSTIN, TEX., Marcj 28. – While the socially elect of Texas university thronged to another formal dance at the Country club last night, the faculty administrative counsel met to consider stringent restrictions on students’ social affairs.

Prohibition of all dances off the campus, enactment of an 11 o’clock curfew for social nights and a curtailed social calendar, were among measures discussed, according to L. H. Hubbard, dean of students.

“The investigation of the alleged ‘baby’ party is progressing as fast as could be expected,” Hubbard declared. Taking of testimony has been slow and no disciplinary action will be announced for several days.

The dean denied reports that six students had been told privately to withdraw from the school to avert scandal.

 

Fleming’s Finest:

Hi Coverage Pointers Subscribers:

This week’s case from the Rhode Island Supreme Court considered whether or not to vacate an appraisal award based on the interest of the defendant’s appraiser. The court vacated the award because the defendant’s appraiser had been assigned the insured’s interest in the claim and was also the contractor performing the restoration work.

Happy Spring!

 

Kate
Katherine A. Fleming
[email protected]

 

Stop The Flow Of Immigrants Into The US – Then, It Was The Irish – 100 Years Ago:

The Tablet
Brooklyn, New York
28 Mar 1925

 

IRISH “HEART” CASE CAUSES INQUIRY

Letters Continue to Back Up N.C.W.C Bureau’s Charge of Injustice

 

Washinton, March 20. – Results in the N.C.W.C. Bureau of Immigration’s check-up on the flood of debarments of Irish immigrants, continue to bear out the Bureau’s contention that serious injustice is being done these immigrants, the Bureau declared this week.

Letters containing doctors’ certificates of stalwart health, and testifying to their employment at good wages, with full ability to work, are still coming in from Irishmen who were admitted only after providing bond that they would not become public charges, says the Bureau. The preponderance of debarments and ultimate deportations or demands for bond came after diagnoses of heart disease.

 

Gestwick’s Garden State Gazette:

Dear Readers:

Well, MLB opening day is upon us, and so is the Sweet Sixteen of March Madness. One of my favorite times of the year. With the Blue Jays’ off-season acquisitions (Anthony Santander and Max Scherzer, to name a few), I am excited to see if we can turn the corner. Kudos to my fiancé and CP’s own Kyle Ruffner, who are currently neck-and-neck for first place in the Hurwitz Fine March Madness bracket. I am a bit below those two.

I have a Coverage B case for you this week. For those who don’t know, Coverage B is part of many liability insurance policies. Unlike Coverage A, which covers for bodily injury and property damage liabilities, Coverage B protects against “personal and advertising injury,” a defined term that includes many things, including claims of disparagement, slander, and libel. However, a common Coverage B exclusion is one for personal and advertising injury that is caused intentionally (in my view, it is somewhat akin to the typical Coverage A exclusion for expected or intended injury). This week’s case focuses on whether the carrier has a duty to defend against a claim for tortious interference arising out of defamation-esque allegations, and all the allegations such a claim entails. Enjoy!

Until next time,

 

Evan
Evan D. Gestwick
[email protected]

 

Twins Born 24 Hours Apart – 100 Years Ago:

The Brooklyn Daily Times
Brooklyn, New York
28 Mar 1925

 

Twins in 4 Generations Makes Family Record. Born 24 Hours Apart

 

James Cain, a salesman, of 604 Humboldt street, is today acting as nurse to his wife, Frances, who presented him with twins Thursday. The babies were born twenty-four hours apart. According to Cain, mother and babies are doing nicely.

The most interesting feature of the case is that Mrs. Cain is one of twins, her mother, Mrs. Theresa Bruetsch, was also one of twins and her grandmother, who is dead, was also one of twins. Thus, the birth of a pair this week completes a series of twins for four generations.

Both of the present babies are girls. One was born at 9:30 P.M. Tuesday, and the other at 10 P.M. Wednesday. This length of interval between the arrival of twins is in itself very rare.

 

O’Shea Rides the Circuits:

Hey Readers,

This week I was ready to attend the Sabres – Senators game. However, a colleague determined my presence was unneeded. Perhaps it was my fanaticism for Jake Sanderson or not agreeing with his theoretical trades for Brady Tkachuk. One will never know. I jest, my ticket was usurped for an admirable reason, a game with his father.

In other news, I am bracing for the landscaping season. I am not the green thumb of the house, just the manual laborer. Once the ground is thawed, the spade will be ushered into my hand. I can’t wait.

For this issue I have a matter that involved some creative lawyering. Essentially, a party tried to extend the insuring agreement found within a base auto policy to the policy’s supplemental uninsured/underinsured endorsement.

See You in Two,

 

Ryan
Ryan P. O’Shea
[email protected]

 

Drill Baby Drill (Or Not) – 100 Years Ago:

Buffalo Courier
Buffalo, New York
28 Mar 1925

 

ATTORNEY GENERAL STARTS DRIVE ON QUACK DENTISTS

 

New York, March 27. – The state attorney general’s office here is conducting a drive against quack dentists, it became known today when William Gerny of Manhattan pleaded guilty to illegal practice and was fined $200 in general sessions.

Deputy Attorney General Ullman said he would hereafter seek severe sentences in all such cases.

 

Rob Reaches the Threshold: 

Dear Readers,

This edition of Coverage Pointers happens to come out on a beloved national holiday - Opening Day. Cheers to all you baseball fans out there who, like me, look forward to their team taking the diamond with aspirations of a brand-new season. Although I'm sure our diverse readers are fans of various different teams, we can all unify under one purpose - stopping the Dodgers. Happy Holiday to you all.

Unfortunately, there has been a lull in decisions from the Appellate Division on Serious Injury Threshold, so no case analysis from me this time. We will try again in two weeks.

In the meantime, please enjoy the articles from my colleagues.

 

Rob
Robert J. Caggiano
[email protected]

 

So Forward! – 100 Years Ago:

The Kingston Whig-Standard
Kingston, Ontario, Canada
28 Mar 1925

 

DEAR MISS FAIRFAX:

I have been going about with a young man for the past year. About four months ago he asked me whether he could see me twice a week, Wednesdays and Sundays. I consented because I love him dearly. He is always telling me how much he cares for me.

I would like to know whether it would be proper for me to ask his intentions. A.S.

Let him take the initiative. You will gain nothing by asking him the question you suggest, and you may lose his friendship. But don’t let him take up so much of your time and thoughts.

If I were you I would encourage other young men friends to call now and then, even on the nights you’ve formerly set aside for him. A little competition will do no harm.

Besides, you can’t in any way count on his proposing marriage to you and it’s therefore unwise to allow him to monopolize you.

 

LaBarbera’s Lower Court Library:

Dear Readers:

It was maple weekend recently in Western New York. I discovered, despite years of denial, that I do indeed love maple candies. Excited for some more weekend adventures as the weather continues to warm up.

Another New York County decision to report on this week. The Court held that Southwest Marine & General Insurance Company had a duty to defend an additional insured, based on the allegations in a Third-Party Complaint, which the Court acknowledged was “self-serving.”

Until next time…

 

Isabelle
Isabelle H. LaBarbera
[email protected]

 

What Kind Of Degree? – 100 Years Ago:

The Buffalo News
Buffalo, New York
28 Mar 1925

 

BURGLARY SCHOOL COMES TO GRIEF

PARIS, March 28. – Running a burglary school in the best style of Fagin brought disaster yesterday to Pere Mousset, because he allowed his pupils to begin practical application of their studies before they had mastered the course. The instructor and three young women and three young men students were jailed after a series of 40 burglaries with which they are charged.

Mousset gave careful lessons and distributed skeletons keys and jimmies, urging his pupils to do a little homework. This resulted in the turning over to the school of various objects valued at 30,000 francs.

The police tracked the pupils and their instructor. Since they have not mastered the jail-breaking lesson, all are behind the bars.

 

Lexi’s Legislative Lowdown:

Dear Readers,

Next weekend I am heading to Charleston, South Carolina, to run a 10k and visit a friend from college. It looks like it will be around 80 degrees the entire weekend, and I cannot wait for the warm weather!

This week we discuss a proposed bill that seeks to regulate the increases in policy premiums for homeowners’ policies.

Thanks for reading,

 

Lexi
Lexi R. Horton
[email protected]

 

Now There’s Something We Don’t See Every Day – 100 Years Ago:

The Buffalo News
Buffalo, New York
28 Mar 1925

 

GOVERNOR SIGNS BILL TO CUT INCOME TAX

 

ALBANY, March 28. – Governor Smith today signed the bill providing for a 25 per cent. Reduction in the state income tax. The governor was filmed in the act of affixing his signature.

Assemblyman Phelps of New York, introducer of the measure, was present and received the pen used by the governor.

 

Domenica’s Diary on Bad Faith:

Dear Readers,

This week’s column diverges from the typical Bad Faith to address Attorney-Client Privilege and the Work-Product Doctrine. As lawyers in the insurance arena, we rely heavily on these privileges and this case highlights the chance for unintended waiver of these privileges, guiding us to be prudent with sensitive documents and information.   Until next time!

 

Domenica
Domenica D. Hart
[email protected]

 

Monthly Floggings – 100 Years Ago:

Brooklyn Eagle
Brooklyn, New York
28 Mar 1925

MONTHLY FLOGGINGS FOR ALL CRIMINALS IN 2D TERM URGED

Revise Criminal Insanity Laws
Also, Dr. E. E. Hicks Tells
Flatbush Exchange Club.

 

Criminal and Criminal insanity and the most effective methods of dealing with these problems was the subject which Dr. Edward E. Hicks, Brooklyn alienist, discussed last night at the dinner of the Flatbush Exchange Club. The dinner was held at the Union League Club of Brooklyn, 122 Kenmore pl.

Dr. Hicks advocated three methods of handling criminal cases in which the question of sanity enters. He said that, in the first place, the laws should be changed so that every person charged with a capital crime will be tried for the particular crime without the question of sanity entering into the trial. After being tried, the mental condition of the prisoner should be considered.

“If found sane, the guilty person would be sent to jail,” he said, “and if insane, sent to a criminal asylum.”

He said that in this manner much of the usual scandal and injustice connected with the trial of wealthy criminals will be done away with.

Secondly, he advocated that all “repeaters” in penal institutions, or persons who have served a previous term, be given the lash once a month.

 

North of the Border:

In the early morning before sitting down at my desk, I take my 10-year-old arthritic golden retriever and our 10-month-old golden retriever puppy to the dog park for a romp. Lately, I have been bringing along our Chuckit! Ball Launcher and an orange ball.

Our puppy erupts with unbridled excitement the moment the Chuckit! ball launcher appears; his entire body quivering with anticipation. His dark amber eyes lock onto the bright orange rubber ball; nothing else matters. With each launch, he bounds across the field of emerging grass and melting snow, ears flying and paws barely touching the ground, tracking the ball with laser-focused intensity. He retrieves it with a triumphant leap and a proud trot back, eyes sparkling with the simple, profound pleasure of the game. Every throw is a celebration; every catch a moment of canine ecstasy that radiates from his very being—this is a puppy experiencing the most elemental and wonderful kind of happiness.

I marvel at his wholehearted commitment. When playing his entire being is dedicated to the moment, there are no half-measures, no distractions. Every muscle, every sense is focused on the ball, on the game. In our often-fragmented human experience, where our attention is constantly divided by screens, worries, and multiple responsibilities, he reminds me of the profound satisfaction that comes from being fully present, from engaging completely with the task or joy at hand.

A great way to start the day.

My column this week is on the important issue of whether counsel appointed to prosecute a subrogated claim has a traditional solicitor client relationship with the insured.

Until next time.

 

Heather
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]

 

Headlines from this week’s issue, attached:

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

• Fall in Parking Lot Triggers Tenant’s Carrier’s Duty to Defend, Even Though Lease was Only for the “Dentist Office”.  Late Notice Excused because of Lack of Prejudice.  Late Disclaimer Doom Disclaimer, in Any Event
• An Indemnity Agreement in a Construction Contract, Signed After an Accident Can be Effective if the Parties Intended it to be Effective Retroactively.  In this Case, a Question of Fact on that Issue
• Southern District Holds that an Insurer is Not Estopped from Withdrawing a Defense to an Additional Insured Where the Insurer Did Not Control Defense; Court also Rules that a Finding in a Trial Court of No Proof of a Written Contract for Contractual Indemnification Purposes Collaterally Estops Additional insured from Re-litigating the Existence of a Written Contract in Insurance Dispute [Guest Editor:  Sherri Pavloff]

 

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

• Two Year Suit Limitation Clause Enforceable Where Clearly Attaches Two Years After the Occurrence Giving Rise to the Claim
• Court Denies Motion of Late Proof of Loss Where there No Proof the Form was Attached to Email; Applies Pavia Standard to Companion First Party Bad Faith Claim 
• Entry of Final Order Terminates Appellate Rights Attached to Intermediated Orders

 

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

• Failure to Cooperate Nullifies Homeowner’s Coverage
• Medical Payments Coverage is Not a Set-off to UM

 

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

• In a Case of First Impression, Court Holds that Health Care Providers who   Treat No Fault Patients, May Charge at Rates Great Than Workers Compensation Schedule Once $50,000 Basic Economic Loss Ceiling has Been Reached
• Separate Arbitration Awards May Not Be Combined to Meet the Jurisdictional Threshold for De Novo Review of No-Fault Claims
• Insurer Had No Duty to Pay No-Fault Claims Due to Founded Belief the Claimant’s Injuries Did Not Arise Out of the Accident

 

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

• Remand Ordered to Permit Consideration of Extrinsic Evidence Submitted by Insurer in Support of its Interpretation of Policy Wording

 

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

• Coverage Denial for Untimely Sworn Statement in Proof of Loss Upheld on Presumption of Receipt of Mailing
• Denial of Assignee Medical Provider’s Claim Upheld Due to Insured’s Failure to Attend EUO
• Case Survives Motion to Dismiss Whether Insurer Must Pay Sales Tax for Total Loss Leased Vehicles
• In Staged Accident case, Evidence from Third-Party Sources like Accurint Reports, CarFax Reports and Information from the Other Vehicle's Event Data Recorder Deemed Inadmissible Hearsay
• Anti-Concurrent Causation Clause Applies if Any Excluded Cause Contributes to the Loss, Even if Other Covered Causes are also Involved

 

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

• Appraisal Process Could be Equated With Arbitration. Appraisal Award Vacated Due to Evident Partiality of Defendant’s Appraiser

 

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

• Appellate Division Rules Tortious Interference Claim Intrinsically Includes Allegations of Intent, Barring Coverage Under Policy’s Personal and Advertising Injury Exclusion

 

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

• Insured Cannot Extend Auto Policy’s Insuring Agreement in Liability Part Regarding an Insurer’s Right to Investigate a Claim to the Policy’s Uninsured/Underinsured Motorist Endorsement

 

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

• Nothing notable recently from the Appellate Division on Serious Injury Threshold. Check back in two weeks.

 

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

• Court Finds Third-Party Complaint Triggers Duty to Defend Additional Insured

 

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

• Act to Amend Insurance Law to Prohibit Increases in Rates of Homeowners’ Insurance in Excess of Twenty-Five Percent Per Year

 

DOMENICA’S DIARY ON BAD FAITH
Domenica D. Hart
[email protected]

• Attorney-Client Privilege and Work-Product Doctrine Can be Waived by Failure to Use Reasonable Steps to Rectify an Inadvertent Disclosure

 

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

• A Lawyer Prosecuting a Subrogated Claim for an Insurer Does Not have a Retainer with the Insured and Therefore is Not in Conflict Should that Same Lawyer Act Against the Insured in a Coverage Action on the Same Policy that Generated the Subrogated Claim.

 

That’s all there is and there is no more.

Stay safe and stay focused on what is important.

 

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]

 

03/19/25       523 BWAY, LLC v. Erie and Niagara Insurance Association
Appellate Division, Second Department
Fall in Parking Lot Triggers Tenant’s Carrier’s Duty to Defend, Even Though Lease was Only for the “Dentist Office”.  Late Notice Excused because of Lack of Prejudice.  Late Disclaimer Doom Disclaimer, in Any Event

Berson leased dental office space (“premises”) from the plaintiff, 523 BWAY.   Erie and Niagara Insurance Association (“ENIA”), issued a policy of insurance to Berson for premises for the period from June 15, 2016, to June 15, 2017. The policy listed 523 BWAY as an additional insured.

In November 2016, Pacheco, who was employed by Berson, slipped and fell in a parking lot at the subject property while walking to her car. Pacheco sought to recover damages in an underlying personal injury action entitled Pacheco v Kasey Realty, LLC (the “underlying action”).

523 BWAY's insurance carrier, Merchants Mutual, sought additional insured coverage from ENIA under Berson's policy. ENIA disclaimed coverage to 523 BWAY on the grounds, among others, that the parking lot at the subject property was not included in Berson's lease and, therefore, was not covered by ENIA's policy, that 523 BWAY failed to timely provide notice of the occurrence as soon as practicable, and that the additional insured endorsement of the policy excluded coverage for 523 BWAY's direct liability.

523 BWAY commenced this action for a judgment declaring that ENIA is obligated to defend and indemnify 523 BWAY as an additional insured in the underlying action.

An insurer's duty to defend its insured is 'exceedingly broad’ and additional insured is a recognized term in insurance contracts . . . and the well-understood meaning of the term is an entity enjoying the same protection as the named insured. If any of the claims against an insured arguably arise from covered events, the insurer is required to defend the entire action.

.

"The phrase 'arising out of' . . . requires 'only that there be some causal relationship between the injury and the risk for which coverage is provided'" with . . . premises for which the insurer has not evaluated the risk and received a premium'".

.

Here, ENIA failed to establish its prima facie entitlement to judgment as a matter of law. ENIA's policy unambiguously provided that 523 BWAY, as an additional insured, was entitled to coverage for "liability arising out of the ownership, maintenance or use of that part of the premises designated below leased, rented or loaned to the named insured," which premises were defined as "dentist office."

Although the lease only described the subject property as "approximately 2,350 square feet . . . comprising approximately one-half (½) of the building" located on the subject premises, it is undisputed that the subject property was utilized pursuant to the lease as a dental office for a dental practice. Therefore, even though the parking lot was not expressly included as part of the subject property, it appears that the subject property had at least a license to use the parking lot, since Pacheco testified in the underlying action that she parked in the parking lot when she came to work. Moreover, the photographs from the investigation report prepared for ENIA by VanKleeck-Winne Adjusters, Inc., established that the premises was designed in such a way that anyone seeking access to the subject property must pass through the parking lot). Under these unique circumstances, Pacheco's injury arose out of the use of the subject property.

Here, the only way to access the subject property was to cross over the parking lot, whereas in Atlantic Ave., there appeared to have been multiple ways to access the leased premises. Moreover, in a different case, the leased premises were expressly identified in the additional insured endorsement as the unit of the building leased by the lessee. Here, however, the additional insured endorsement defined the designated premises as the less-precise "[d]entist office."

The Late Notice/Late Disclaimer Issue

Pursuant to Insurance Law § 3420(c)(2)(A), "[i]n any action in which an insurer alleges that it was prejudiced as a result of a failure to provide timely notice, the burden of proof shall be on: (i) the insurer to prove that it has been prejudiced, if the notice was provided within two years of the time required under the policy; or (ii) the insured, injured person or other claimant to prove that the insurer has not been prejudiced, if the notice was provided more than two years after the time required under the policy."

Here, the insurance policy stated that "[i]n case of an occurrence or if you become aware of anything that indicates there might be a claim under this policy, you must give us or our agent notice (in writing if requested) as soon as practicable." It is undisputed that the injury occurred in November 2016, and the underlying action was commenced in January 2018. 523 BWAY first informed ENIA of the claim on April 16, 2020, more than 3½ years after the accident date and more than 2 years after the underlying action was commenced. Under these circumstances, it was 523 BWAY's burden to establish, prima facie, that ENIA was not prejudiced by the late notice of the claim.

Insurance Law § 3420(c)(2)(C) provides that "[t]he insurer's rights shall not be deemed prejudiced unless the failure to timely provide notice materially impairs the ability of the insurer to investigate or defend the claim." Here, 523 BWAY established, prima facie, that shortly after receiving notice of the claim, ENIA opened an investigation and performed a full review of the claim. Accordingly, 523 BWAY established, prima facie, that ENIA's rights were not prejudiced, and that 523 BWAY's failure to timely provide notice did not materially impair ENIA's ability to investigate or defend the claim.

Here, 523 BWAY established that in a letter dated April 16, 2020 (hereinafter the April 2020 letter), addressed to ENIA, Merchants Mutual Insurance Company, on behalf of 523 BWAY, "tender[ed] their defense and indemnification and additional insured coverage to Gary Berson, DDS," ENIA's insured. The April 2020 letter also provided the caption and parties to the underlying action, the facts underlying that action, and a copy of the lease agreement and the complaint in the underlying action, which contained the date and location of the accident.

Therefore, as of April 2020, ENIA "was on notice of the underlying accident several months before it disclaimed coverage."

Moreover, the record discloses that by letter dated April 17, 2020, ENIA informed Berson of the additional insured claim, indicating that ENIA had immediately opened an investigation into the underlying claim discussed in the April 2020 letter.  ENIA did not disclaim coverage until September 22, 2020, several months later. Such a delay is unreasonable as a matter of law.

 

03/14/25       Freas v. John W, Danforth Company
Appellate Division, Fourth Department
An Indemnity Agreement in a Construction Contract, Signed After an Accident Can be Effective if the Parties Intended it to be Effective Retroactively.  In this Case, a Question of Fact on that Issue

Freas commenced a Labor Law claim after when he slipped and fell at a construction site on September 2, 2016. John W. Danforth Company (Danforth), was the general contractor and hired as a subcontractor Davis-Fetch who was plaintiff's employer, eventually a third-party defendant. stating causes of action for contractual indemnification and failure to procure insurance.

Davis-Fetch contended that there was no agreement prior to plaintiff's accident for Davis-Fetch to indemnify Danforth or to procure insurance for Danforth's benefit. The Fourth Department agreed.

The subcontract included both an indemnification provision and a provision requiring Davis-Fetch to procure insurance coverage and add Danforth as an additional insured. The subcontract was dated July 19, 2016, but it was not signed by Davis-Fetch and Danforth until September 13, 2016, and September 21, 2016, respectively.

 "An indemnification agreement that is executed after a plaintiff's accident . . . may only be applied retroactively where it is established that (1) the agreement was made as of a date prior to the accident and (2) the parties intended the agreement to apply as of that prior date". Here, the subcontract was made as of a date prior to the accident, but there is a triable issue of fact whether the parties intended the indemnification provision of the subcontract to apply retroactively.

Two of Davis-Fetch's executives testified that prior to signing the subcontract, there was no discussion between Danforth's representatives and Davis-Fetch's representatives concerning the terms of the subcontract, including any indemnification provision. There was evidence, however, that the parties had worked together before on a project that included a subcontract with an indemnification provision, and that subcontract, like the one at issue here, was also signed after its effective date.

Accordingly, there was a question of fact which must be resolved by a fact finder.

 

03/10/25        Utica National Assurance Company v. Amazon.com Services et. al.
Southern District of New York
Southern District Holds that an Insurer is Not Estopped from Withdrawing a Defense to an Additional Insured Where the Insurer Did Not Control Defense; Court also Rules that a Finding in a Trial Court of No Proof of a Written Contract for Contractual Indemnification Purposes Collaterally Estops Additional insured from Re-litigating the Existence of a Written Contract in Insurance Dispute

Guest Editor (and successful lawyer on the case):  Sherri Pavloff – note contact information at the bottom of this summary.

Amazon hired Bond, a subcontractor, to perform work in connection with a construction project.  Deljanin, an employee of Bond, fell from a scaffold while performing Bond’s work, and sued Amazon alleging violations of Labor Law §§240, 241(6), and 200. Amazon filed a third-party action against Bond seeking contractual indemnification based upon a Purchase Order between Amazon and Bond, and Terms and Conditions to the Purchase Order. 

Amazon also tendered its defense and indemnification in the underlying suit to Utica National, Bond’s insurer, based upon the same documents, contending that the Terms and Conditions required Bond to procure insurance naming Amazon as an additional insured.  Utica National agreed to defend, indemnify and provide additional insured coverage to Amazon, without reservation, based upon an additional insured endorsement which triggered coverage where required by a written contract between Bond and the additional insured, for injuries “caused in whole or in part” by Bond.  Amazon refused to allow Utica National to appoint its own counsel.  Utica National agreed to allow Amazon its choice of counsel and to pay 50% of Amazon’s defense costs.  Amazon controlled its own defense but reported it to Utica National regularly.

During the discovery and depositions in the underlying suit, Amazon could not establish that the Purchase Order or the Terms and Conditions applied to the work being performed at the time of the accident.  As a result, the court in the underlying action granted Bond’s motion for summary judgment, dismissing Amazon’s contractual indemnification claim against Bond.

When Utica National learned that Amazon could not prove that the Purchase Order or the Terms and Conditions applied to the work being performed (but before the summary judgment motions were decided in the underlying suit), Utica National withdrew from Amazon’s defense and filed a declaratory suit seeking a declaration that it owed no coverage to Amazon for the underlying suit.  Amazon counterclaimed and the parties’ filed motions for judgment on the pleadings based upon the documents and testimony exchanged in the underlying suit.

Amazon argued in its motion that Bond knew that the Purchase Order and Terms and Conditions controlled the work based upon a prior course of dealing between the two.  The Southern District rejected this argument, ruling that Amazon was collaterally estopped from re-litigating the issue of whether there was a written contract requiring additional insured coverage even though the decision issued by the court in the underlying action was an interlocutory decision, based upon well-established Second Circuit and New York state law.

The Southern District also rejected Amazon’s argument that Utica National was estopped from denying coverage, explaining that Amazon and not Utica National, controlled Amazon’s defense in the underlying action, and that Amazon had not shown any other prejudice as a result of Utica National’s conduct.  Amazon argued that because it provided reports to Utica National and because Utica National also defended Bond in the underlying suit, albeit with different counsel, Amazon was “presumptively” prejudiced by Utica National’s withdrawal of a defense that Utica National provided for over four years.  The Southern District disagreed, explaining that Amazon failed to provide any evidence that Utica National influenced Amazon’s defense in any way.  The Southern District therefore upheld Utica National’s denial of coverage.

Editor’s Note: Thanks, and congratulations to my friend and superb coverage lawyer, Sherri Pavloff of Stonberg, Hickman & Pavloff, LLP, for her victory in this one and for authoring this summary.  If you want a copy of the decision, you can contact Sherri or me.  Her email address is [email protected].

 

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

Potpourri

03/18/25       Tamm Consulting v. Cincinnati Ins. Co.
Appellate Division, First Department
Two Year Suit Limitation Clause Enforceable Where Clearly Attaches Two Years After the Occurrence Giving Rise to the Claim

Plaintiff commenced this action seeking recovery for damages under a Commercial Property policy issued by Cincinnati.  Cincinnati moved to dismiss based upon the two-year suit limitation clause found within the insuring agreement.  Here, the insurer was able to demonstrate that claims for advanced under the First and Third Causes of Action, respectively, were commenced more than two years from the occurrence date of the fire.  Because the language of the policy was clear and unambiguous, and tied directly to the occurrence of the loss, the Appellate Division found that Cincinnati had met its burden.

However, with respect to certain coverage for fine arts and valuable papers, the Court noted that the applicable two-year suit limitation clause was slightly different.  Essentially, the clause applicable to this discrete coverage was measured as two years from the date of discovery of the loss.  On the Record submitted to the Appellate Division, it was unclear when plaintiff discovered damage which fell within the fine arts/valuable papers coverage.  Accordingly, that portion of the claim was remanded back to the trial court for further proceedings.

 

03/14/25       Dersam v. Ontario Ins. Co.
Appellate Division, Fourth Department
Court Denies Motion of Late Proof of Loss Where there No Proof the Form was Attached to Email; Applies Pavia Standard to Companion First Party Bad Faith Claim  

Plaintiffs submitted a claim for fire loss to Ontario Insurance Company. During the course of the investigation/adjustment of the loss, the claims professional handling the file for Ontario sent an email to Ms. Dersam.  Attached to that email, apparently, was a blank Proof of Loss form.  When the form was not returned within sixty days, as per the requirement of the policy and statute, Ontario denied the claim.  And, upon the filing of the instant lawsuit, Ontario immediately moved to dismiss. 

The trial court granted dismissal for Ontario on the basis of long-established principles that failure to timely proffer a Proof of Loss is an absolute defense.  The Appellate Division reversed, however, on the narrowest issue of fact.  As noted by the opinion, the Proof of Loss form was attached to an email sent to Ms. Dersam.  Although the email may have constituted proper notice, Ontario’s motion failed because it was unable to conclusively establish that the Proof of Loss was attached to it upon receipt by Ms. Dersam. 

The Appellate Division did affirm dismissal of plaintiffs’ Second Cause of Action which sought a Declaratory Judgment.  The Court noted that the relief sought was duplicative of the breach of contract claim asserted in the First Cause of Action.

With regard to the Third Cause of Action, the Appellate Division intervened to modify the trial court’s decision granting dismissal to Ontario.  This particular cause of action, asserting a breach of the duty of good faith and fair dealing, was revived where the plaintiff asserted that Ontario acted unreasonably when it refused to extend the time to complete the aforementioned Proof of Loss form and a claim made by plaintiffs’ presumed public adjuster which argued that Ontario “deviated industry practices” when handling the claim.   

Based on these assertions, which the Court advised it was compelled to accept as true on a motion to dismiss, the Appellate Division explained here plaintiffs had pleaded a claim which appropriately alleged “the insurer’s conduct constituted a ‘gross disregard’ of the insured interests- that is, a deliberate or reckless failure to place on equal footing the inters of the insured with the insurer’s own interests.”  The Court goes on to equate a breach of the duty of good faith and fair dealing with bad faith when it stated “[i]n the context of a cause of action for breach of the duty of good faith and fair dealing, in order to establish a prima facie case that an insurer acted in bad faith…” 

Finally, in addressing the dismissal of plaintiffs’ Fourth Cause of Action, the Court opined that there was no independent tort action for bad faith where an insurer allegedly does not perform its obligations.

Peiper’s Point: This matter is the latest in a series of decisions over the past five to seven years which conflate the First Party Bad Faith Standard expressed by the Court of Appeals in NYU v. Continental Casualty Corp. and the long-understood standard governing Third Party Bad Faith claims as set forth in Pavia v. State Farm. 

This is a troubling trend from the Appellate Division because decisions like Dersam are eroding, if unintentionally, long established, binding precedent from the Court of Appeals. 

 

Potpourri
03/14/25       Prusik v. Liberty Mutual Insurance Group, Inc.
Appellate Division, Fourth Department
Entry of Final Order Terminates Appellate Rights Attached to Intermediated Orders

Plaintiff filed an appeal from an intermediate order which granted defendant’s Motion to Strike the Note of Issue and reopen discovery.  However, thereafter, a final order was granted which effectively superseded the order upon which appellate relief was sought.  Accordingly, plaintiff’s appeal was dismissed as not properly before the Court.

 

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

03/24/25       Billie v. Plymouth Rock Assur. Corp.
United States District Court, D. Connecticut
Failure to Cooperate Nullifies Homeowner’s Coverage

The District Court made a rare finding that the insured’s systematic and unexcused noncompliance with Plymouth Rock's document requests was substantial and material, breaching the "Duties After Loss" provision of the insurance policy.

Plymouth Rock issued a homeowners policy to Caribe D. Billie, for a residence in Waterbury, Connecticut. Within one month of the issuance of the policy, the house was damaged in a fire. In July 2019, Billie bought the property at a tax auction for $16,000. Billie intended to renovate the property but instead installed his cousin and others as tenants. Billie moved to North Carolina, because Connecticut was too cold, so he never actually lived in the premises, although he claimed that he would stay at the property on occasion when traveling to Connecticut for business.

In September and October 2020, Billie obtained building permits. He obtained the Plymouth Rock coverage at the same time, incepting on October 30, 2020, with dwelling limit of $302,000. The structure failed its electrical inspection and service to the home was terminated. Days later, a fire of unknown human origin substantially damaged the home. Billie put in a claim for $226,991.45 for damage to the structure [a substantial return on a $16,000 investment!].

Plymouth Rock issued an ROR and launched an investigation, finding that this was Billie’s fourth fire loss (two homes and one vehicle). The carrier requested documents, including financial records, such as tax and banking information. Despite 18 months of follow-ups, Billie did not provide the documents. Plymouth Rock took Billie’s EUO, even though it did not have the responsive documents. A final 30-day letter was sent seeking the outstanding documents. Billie did not reply, and Plymouth Rock denied the claim for breach of the duty to cooperate. This lawsuit followed (actually preceding the denial letter by one day).

In the action, removed to federal court, Billie never responded to its discovery obligations, nor did he propound discovery. Plymouth Rock moved for summary judgment to which Billie did not oppose. The court found that the carrier was entitled to summary judgment because the insured breached his “Duties After Loss.” The provision states that Plymouth Rock has no duty to provide coverage if the policyholder's failure to comply with certain duties is prejudicial to Plymouth Rock Home. Plaintiff failed to comply with: (1) his duty to cooperate in the investigation of the claim; and (2) his duty to provide requested records and documents.

The court found that the breach of the duty prejudiced Plymouth Rock’s ability to investigate the claim. “Plymouth Rock Home needed Plaintiff's financial and tax records in order to investigate "whether he and his family were experiencing financial distress that might raise questions regarding an unexplained fire and subsequent insurance claim."” Additionally, the court struck the plaintiff’s CUTPA/CUIPA claims.

 

03/06/25       Bottass v. United Ohio Ins. Co.
Superior Court of Connecticut, Waterbury District
Medical Payments Coverage is Not a Set-off to UM

Danielle Bottass was severely injured in a motor vehicle accident by an uninsured driver. When United Ohio did not settle her claim, she sued for breach of contract. Following a jury trial, she was awarded $2 million, reduced to $1.7 million for her comparative negligence.

On post-trial motions, United Ohio sough remittitur of the jury’s award to the policy limits of $500,000 and sought a $5,000 credit for medical payments previously paid by United Ohio. The court found that, pursuant to CGS § 38a-336, the plaintiff’s recovery was statutorily capped at the amount of uninsured motorist coverage. “[T]he plaintiff contracted with the defendant for $500,000 of uninsured-underinsured motorist coverage. Accordingly, pursuant to § 38a-336(b), the plaintiff was not entitled, under any circumstance, to recover more than $500,000 in policy benefits.”

The court, upon construing the United Ohio policy, refused to reduce the award by the amount of medical payments, finding that it did not follow Connecticut regulations. The policy provided that, “No one will, be entitled to receive duplicate payments for the same elements of loss under this coverage and Part A [liability coverage] or Part B [medical payments coverage] of this policy." The uninsured motorist policy also provides, "We will not make duplicate payment under this coverage for any element of loss for which payment has been made by or on behalf of persons or organizations who may be legally responsible."

However, the court found the duplicate payment provisions did not limit the additional coverage because the terms of the policy did not correspond with the regulations in all material respects. Because the UM/UIM coverage does not provide for any additional reduction in the limit of liability paid or payable to the insured person under the medical payments coverage part of the policy, the carrier cannot seek a reduction in limits on this basis. 

[Ed. Note: United Ohio has appealed the decision. I guess $5,000 aggregated over many claims makes the cost worth the effort.]

 

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

03/25/25       Morrobel v. Alicea
Appellate Division, First Department
In a Case of First Impression, Court Holds that Health Care Providers who   Treat No Fault Patients, May Charge at Rates Great Than Workers Compensation Schedule Once $50,000 Basic Economic Loss Ceiling has Been Reached

This appeal sought to reduce a verdict rendered in an auto accident lawsuit and modify an interest award, a verdict of $625,000 for past pain and suffering and $1.53 million for future.  The court found that the verdicts did not deviate materially from what would be reasonable compensation and upheld the verdict.

The interesting question from a No-Fault coverage perspective was whether a doctor charged for services was limited to the WC/NF rate once the $50,000 limit for Basic Economic Loss was exhausted.

The defense argued that according to Insurance Law § 5108, charges for health services provided as a result of motor vehicle accident injuries, both as a part of and in excess of basic economic loss, may not exceed the charges permissible under Workers' Compensation Board schedules (see Insurance Law § 5102[a][1]).

Thus, defendants concluded, Insurance Law § 5108 limits the damages that plaintiff may recover for future medical expenses.

In a case of first impression, apparently, the First Department disagreed holding that Insurance Law § 5108, as part of New York's No-Fault Law, applies only to claims for first-party benefits.  Specifically, health service providers who accept an assignment of first party (no-fault) benefits but continue treating the covered person beyond the exhaustion of those benefits do not limit the right of recovery for economic loss in excess of basic economic loss in actions by covered persons for personal injuries arising out of negligence in the use or operation of a motor vehicle.

Furthermore, the jury's award for future medical expenses was not excessive. Plaintiff's treating physicians testified to each of the treatments that plaintiff would require, explained why she would require them, and approximated their cost. This testimony, which was within the jury's province to credit, established plaintiff's future medical expenses with the requisite degree of reasonable certainty.

.

The court did modify the interest award from 9% to 3% because the defendant was the NYC Transit Authority, and it is subject to a lower interest rate.

 

03/12/25       American Transit Insurance Company v. Comfort Choice Chiropractic, P.C.
Appellate Division, Second Department
Separate Arbitration Awards May Not Be Combined to Meet the Jurisdictional Threshold for De Novo Review of No-Fault Claims

The issue on appeal, an issue of first impression before the Court, was whether, under certain circumstances, separate and distinct arbitral awards can be treated by a court as a single arbitral award under Insurance Law § 5106(c) and pursuant to 11 NYCRR 65-4.10(h)(1)(ii) for the purposes of determining whether the requisite $5,000 threshold establishing subject matter jurisdiction has been met, in order to allow for a de novo review of claims for no-fault insurance benefits. 

American Transit Insurance Company commenced this action pursuant to the above statutes to seek de novo review of four separate arbitral awards issued by a master arbitrator. The four awards were issued by the same master arbitrator, following separate arbitration proceedings upon the plaintiff's denial of payment for medical services performed by the defendant for the claimant who was injured while she was a passenger in a taxi insured by the plaintiff. The arbitration proceedings arose upon the denial of the four claims submitted by the same provider for a repeated course of chiropractic treatment. After each of the four arbitration proceedings, the master arbitrator issued an arbitral award in favor of the defendant. American transit sought de novo review. The supreme court held that the four arbitral awards, in effect, constituted a single arbitral award and also denied the defendant's request pursuant to 11 NYCRR 65.4.10(j)(4) for an award of attorney's fees. The defendant appeals.

Upon a review of the applicable statutes, the court stated that Insurance Law § 5106(c) provides, in relevant part that “The award of a master arbitrator shall be binding except for the grounds for review set forth in article seventy-five of the civil practice law and rules, and provided further that where the amount of such master arbitrator's award is five thousand dollars or greater, exclusive of interest and attorney's fees, the insurer or the claimant may institute a court action to adjudicate the dispute de novo.” Similarly, pursuant to subdivision (h)(1) of 11 NYCRR 65-4.10, a decision of a master arbitrator is final and binding except … where a master arbitrator's award is $5,000 or greater, exclusive of interest and attorney's fees, a court may conduct a de novo adjudication of a no-fault insurance claim.

The court determined that the use of the singular in the statute and the regulation, "arbitrator's award" in Insurance Law § 5106(c) and "the award" in 11 NYCRR 65-4.10(h)(1)(ii), means one, single award, not a combination or collective group. The Legislature did not opt to use the plural, and there is no other language in either the statute or the regulation that would allow for the singular to be interpreted as encompassing the plural. Therefore, the court found that the plain language contained in both statutes did not allow a court to treat separate arbitral awards as, in effect, a single, combined arbitral award for the purposes of meeting the subject matter jurisdictional threshold for de novo review. This is the case even where, as here, the service provider was the same in each circumstance, the insurance company was the same, the service recipient was the same, and the services that were provided were the same.

Since the language of the statute and the regulation is plain and unambiguous, it is unnecessary to consider the legislative history. Nonetheless, as set forth herein, the history underpinning the legislation at issue, which was implemented to relieve the burden of these types of cases on the courts, lends further support to our conclusion that the singular language in the legislation referring to "award" was deliberate and that the Legislature did not contemplate that courts would invoke their authority to exercise discretion to treat multiple arbitral awards as, in effect, a singular arbitral award to meet the $5,000 statutory threshold.

Accordingly, given the plain language of Insurance Law § 5106(c) and 11 NYCRR 65-4.10(h)(1)(ii), the legislative intent of the statute, and related persuasive authority, it was not proper for the Supreme Court to expand the scope of the legislation by construing it to allow for multiple arbitral awards to be treated as, in effect, one, or as a single, combined arbitral award in order to meet the requisite threshold.

 

03/20/25       Unitrin Safeguard Insurance Company v. Jermail Manuel et al.
Appellate Division, First Department
Insurer Had No Duty to Pay No-Fault Claims Due to Founded Belief the Claimant’s Injuries Did Not Arise Out of the Accident

In this case, the Supreme Court granted the insurer’s motion for summary judgment declaring that it had no duty to pay no-fault insurance claims to defendant medical providers arising out of the underlying accident, unanimously affirmed, without costs. The defendant claimants claimed they were passengers in a covered vehicle when they sustained injuries and notified the insurance company that they intended to submit claims for no-fault benefits. However, claimants never answered the insurers declaratory judgment complaint or appeared in this action, and plaintiff obtained a default judgment against them. The remaining defendants are medical providers that submitted no-fault claims as assignees of the claimants.

The Appellate Court determined the Supreme Court properly granted the insurer’s summary judgment declaring that it had no duty to pay no-fault claims to defendant providers, as it demonstrated a founded belief that claimants' injuries did not arise out of the accident as required by Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195, 199 (1997). The insurer submitted an affidavit from a claims investigator detailing the circumstances of the accident that led to the investigation, including the absence of any claims for damage to the vehicle and the lack of a police report, as well as affidavits from occupants of the other vehicle, who characterized the accident as a bumper "tap" resulting in no visible damage to the covered vehicle or injury to the driver, and asserted they saw no passengers in the vehicle. There were also several red flags in the claimants' examinations under oath which undermined the credibility of their claims.

In opposition, defendant providers failed to raise an issue of fact, as they did not submit an affidavit of someone with personal knowledge of the legitimacy and circumstances of the accident or any other admissible evidence to rebut plaintiff's showing. Therefore, insofar as claimants asserted in their EUOs that they were passengers in the vehicle at the time of the accident, the court properly construed claimants' default as an admission that their EUO statements were false, and their injuries were not the result of the accident.

 

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

03/17/25       Navigators Insurance Company v. Goyard, Inc.
United States Court of Appeals, Second Circuit
Remand Ordered to Permit Consideration of Extrinsic Evidence Submitted by Insurer in Support of its Interpretation of Policy Wording

On appeal, Navigators Insurance Company argued that the district court erred in finding coverage for the lost goods of its insured, Goyard, Inc., due to Strikes, Riots, and Civil Commotion (“SS&RC”), as well as its application of a ten percent add-on to the claimed loss amount by failing to construe the lost goods as raw materials, supplies in storage, and/or used goods within the meaning of the Policy. Specifically, Navigators argued that:

the district court erred by (1) interpreting the Policy, and its attached endorsements, to unambiguously include SS&RC coverage for the lost retail goods; (2) considering some but not all of the extrinsic evidence available when interpreting the Policy, including evidence relating to the Policy negotiations, customs and practices in the insurance industry, and Navigators’ expert’s testimony; and (3) applying the rule of contra proferentem in reading ambiguities in the Policy against Navigators, the insurer.

The Second Circuit avoided addressing (2) and (3) above, by finding instead that the district court had erred in finding that the Policy unambiguously provided SS&RC coverage for the lost retail goods.

The parties agreed that “pursuant to Endorsement No. 1, goods in transit were insured for losses attributable to SR&CC,” but the question was “whether the goods at Goyard’s store . . . were similarly insured.” Goyard identified three potential sources of coverage for these goods, including “(1) the Policy Binder; (2) the Declarations Page of the Policy; and (3) Endorsement No. 4.

Quickly dispelling number (1) above, the court noted that in accordance with New York Court of Appeals precedent, “the Policy Binder ‘terminate[d] when [the] [P]olicy [] issued’ and could not provide any coverage, much less SR&CC coverage, at the time of Goyard’s loss.”

Moving to (2), the Second Circuit noted that “[w]hile portions of the Declarations Page reference SR&CC coverage . . . , the Policy later explains that ‘[r]isks of [] strikes, riots and civil commotions are included in the rates detailed on the attached Policy Declarations . . . so long as the separate . . . strikes, riots, and civil commotions endorsement remain[s] in force.’”

Given the above, and turning to (3), the Second Circuit advised that “the SR&CC coverage contemplated in the terms of the Declarations Page hinges on the existence of the SR&CC endorsement i.e., Endorsement No. 1.” But after discussing the parties competing interpretations of whether any coverage extended included losses attributable to SR&CC under Subsection 9(E) of Endorsement No. 4, the court found that “it is impossible to say that one interpretation is unambiguously correct. Both are reasonable.” And that is a problem.

Specifically, “because the Policy terms are ambiguous, the district court should have admitted and considered relevant extrinsic evidence to resolve the ambiguity.” And “while the district court found that ‘[e]xtrinsic evidence provides further support for summary judgment in Goyard’s favor,’ its assessment took place against the backdrop of its prior independent finding that the text of the Policy unambiguously extended SR&CC coverage to the retail goods.” Accordingly, the Second Circuit remanded the matter to the district court in order for it “to conduct a more thorough examination of the extrinsic evidence to resolve the ambiguity.”

Maxwell’s Minute: This case raises an important issue that is often missed in practice. While it is true that a court may apply the doctrine of contra preferentum in favor of coverage, it should only do so absent relevant extrinsic evidence submitted in support of one interpretation of ambiguous language versus another Many choose to simply ignore potentially supportive extrinsic evidence altogether in favor of an all or nothing argument that a policy provision is unambiguous in their favor. While that may be true, courts are not to consider extrinsic evidence until an ambiguity is found. Submitting extrinsic evidence should not be viewed as a sign of weakness. While we tend to favor our arguments over the other guys, try to avoid wearing blinders or you may very well and rather avoidably paint yourself into a contra preferentum corner the next time around.

 

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

03/19/25       Pager v. Greater N. Ins. Co.
United States Court of Appeals, Second Circuit.
Coverage Denial for Untimely Sworn Statement in Proof of Loss Upheld on Presumption of Receipt of Mailing

Plaintiffs had an insurance policy with Greater Northern covering their residential property in Brooklyn.  On 4/29/21 the plaintiffs discovered that their floating dock and gangway had allegedly disappeared.  The plaintiffs maintained approximately fifteen surveillance cameras at their home, but none were operational at the time of the incident, having been shut off several days earlier for upgrades. Plaintiffs did not alert the police of the missing dock and gangway. Greater Northern sent the plaintiffs a letter on 6/24/21 requesting that they submit sworn proof of loss statement within 60 days and enclosed blank proof of loss forms.  The plaintiffs did not submit the proof of loss.  Greater Northern denied the claim. 

An insured's failure to file a proof of loss statement within the required period after receiving written notice and a suitable form from the insurer is an absolute defense to an action on the policy, absent waiver or estoppel.  Greater Northern established a presumption of receipt by providing evidence of its regular office procedures for mailing the notice and forms, and the plaintiffs failed to rebut this presumption.  The mere denial of receipt does not rebut the presumption that notice was received when proof of proper mailing has been provided.

Although plaintiffs claimed to have not received the proof of loss forms, their statements did not amount to a categorical denial of receipt of the mailings, let alone provide some proof that the regular office practice—which was to include the proof of loss forms in the mailing—was not followed or was carelessly executed so the presumption that notice was mailed becomes unreasonable. On the contrary, the exhibits depicting the letters as they were mailed clearly demonstrate that the proof of loss forms were included.

Other record evidence further bolsters this presumption of receipt. Plaintiffs do not point to any evidence which disputes that the 6/24/21 letter constituted Greater Northern's attorney’s first correspondence with plaintiffs, and there is no evidence that the attorney sent any further correspondence to plaintiffs before they responded to him on 7/29/21. Plaintiffs offer no alternative explanation for how they would have known to contact the attorney but for that letter of 6/24/21.  It is beyond genuine dispute that plaintiffs received written notice of Greater Northern's request for proof of loss and a suitable form to provide such proof.

 

03/13/25       State Farm Fire & Cas. Co. v. Aviles
Supreme Court, New York County
Denial of Assignee Medical Provider’s Claim Upheld Due to Insured’s Failure to Attend EUO

State Farm issued an auto policy to Carrion.  Aviles was allegedly driving the vehicle on 6/24/22 when involved in an accident.  Aviles failed to appear for two EUOs on 9/9/22 and 10/4/22.  State Farm disclaimed coverage.  State Farm sought summary judgment against medical providers who were assignees of Aviles.

The court held that the failure to appear for two timely requested EUOs is a breach of a condition precedent to coverage and voids the insurance policy ab initio, which applies to assignees of an insured.  An EUO request mailed three days after receiving a bill for treatment is timely.

The arguments that the EUO requests were untimely are contrary to First Department precedent and insufficient to defeat Plaintiff's motion. Nor do the arguments about the need for discovery preclude summary judgment as they fail to provide an affidavit from any individual with personal knowledge of the facts underlying the claim regarding what discovery, if any, is necessary to oppose the motion.  The opposing defendants rely solely on an attorney affirmation to oppose the motion. 

 

03/12/25       Shiloah v. GEICO
United States District Court, W.D. New York.
Case Survives Motion to Dismiss Whether Insurer Must Pay Sales Tax for Total Loss Leased Vehicles

Plaintiff brings this putative class action against GEICO, asserting breach of contract based on GEICO's failure to pay sales tax for total loss vehicles that are leased.  GEICO has moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6).   

The Court finds that Plaintiff's proffered interpretation of the policy is not unreasonable—to require actual cash value to include the payment of sales tax on a leased vehicle. As a result, the motion to dismiss must be denied.  Even if New York law is correctly interpreted as argued by GEICO to not require the payment of sales tax on leased total loss vehicles, this does not mean that GEICO was prohibited from contractually agreeing to pay sales tax. Plaintiff's proffered interpretation of the policy as requiring the payment of sales tax is not unreasonable -- contending that the policy's definition of "actual cash value" as "the replacement cost of the auto or property less depreciation or betterment" is reasonably interpreted to include sales tax.

 

03/07/25       State Farm v. Quinones
Supreme Court, New York County
In Staged Accident case, Evidence from Third-Party Sources like Accurint Reports, CarFax Reports and Information from the Other Vehicle's Event Data Recorder Deemed Inadmissible Hearsay

Quinones, Burgos and Gonzalez were allegedly involved in an automobile collision.  State Farm sought to disclaim coverage for medical treatment provided. Quinones failed to appear for EUOs on multiple dates.  State Farm alleged the collision was staged based on various inconsistencies and suspicious circumstances.

The court granted State Farm’s motion in part, declaring no obligation to pay claims submitted by a certain medical provider based on Quinones's failure to appear for his EUOs.  However, its motion for summary judgment on the basis that the collision was staged is denied.

State Farm has established its compliance with 11 NYCRR 65-3.5 through an affidavit attesting to plaintiff's mailing of the EUO scheduling letters prior to receiving the subject bills in conformity with standard office procedure, copies of the EUO scheduling letters with affidavits of service attesting to their mailing, contemporaneous statements by plaintiff's counsel on the record at those EUOs recording Quinones's failure to appear, and the denial of claim sent to plaintiff.

State Farm failed to meet the "heavy burden" of proving the collision was staged, as inconsistencies in EUO testimony did not pertain directly to the nature of the collision itself.  Furthermore, evidence from third-party sources like Accurint reports, CarFax reports and information from the other vehicle's Event Data Recorder, was deemed inadmissible hearsay.

 

03/11/25       Eloise Holdings, LLC v. Mt. Hawley Ins. Co.
United States District Court, S.D. New York.
Anti-Concurrent Causation Clause Applies if Any Excluded Cause Contributes to the Loss, Even if Other Covered Causes are also Involved

Eloise Holdings owns a commercial building in Tampa, Florida that was insured by Mt. Hawley.  A storm on 3/15/22 allegedly damaged the building's roof, causing interior water damage.  The roof had been improperly constructed, with a modified bitumen membrane installed over the original gravel roof.  Experts agreed this improper installation made the roof more susceptible to damage.  Mt. Hawley denied the claim based on the policy's anti-concurrent causation clause.  The court granted Mt. Hawley's motion for partial summary judgment regarding the claims for interior water damage and post-storm roof tarping.

The policy's anti-concurrent causation clause unambiguously excludes coverage for the claimed interior water damage, as the damage was contributed to or made worse by faulty workmanship and inadequate repairs to the roof.  The anti-concurrent causation clause applies if any excluded cause contributes to the loss, even if other covered causes are also involved.  The undisputed evidence shows the roof's improper construction and inadequate repairs constituted "faulty, inadequate or defective workmanship" that contributed to or worsened the claimed damage.  Even if wind also contributed to the damage, the policy excludes coverage because faulty workmanship was a contributing factor.

The policy also excludes coverage for the post-storm roof tarping, as it was a consequence of the excluded interior water damage.

 

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

03/20/25       Vermont Mut. Ins. Co. v. New England Prop. Servs. Grp, LLC
Rhode Island Supreme Court
Appraisal Process Could be Equated With Arbitration. Appraisal Award Vacated Due to Evident Partiality of Defendant’s Appraiser

The plaintiff, Vermont Mutual Insurance Company appealed from a Superior Court order denying its petition to vacate an appraisal award and granting the defendant’s, New England Property Services Group, LLC, cross-petition to confirm the appraisal award. Vermont Mutual argued that the Superior Court justice erred in failing to vacate the award because there was evident partiality by the defendant’s appraiser.

Vermont Mutual issued a homeowners policy for Rhode Island property that sustained windstorm damage. After retaining an independent adjuster and roofing expert to inspect the property, Vermont Mutual paid the claim. Vermont Mutual was later informed that the insured had engaged NEPSG to complete the restoration work. The contractor was the sole owner and operator of NEPSG. Vermont Mutual learned of additional damages claimed and reinspected the property. The contractor disagreed with the scope of the assessment of the additional damage. Vermont Mutual issued an additional clam payment. The insured assigned her insurance claim to NESPG in exchange for its work on the property. NESPG demanded appraisal, and the contractor was named as an appraiser on behalf of NESPG. Vermont Mutual objected to the contractor acting as an appraiser because he was not disinterested, and it reserved its right to dispute the award.

Vermont Mutual filed a petition to vacate the appraisal award, noting that under the Arbitration Act, the Superior Court had jurisdiction to vacate, modify, or correct an award. NESPG filed a response and cross-petition to confirm the award, in which it requested the court grant the cross-petition for the award to be confirmed pursuant to the Arbitration Act. Vermont Mutual argued that the Arbitration Act requires an award be vacated if there is evident partiality or corruption on the part of the arbitrators. The insurer asserted that the contractor had a direct financial interest in the appraisal award because his company was assigned the claim from the policy holder and was contracted to perform the claimed repairs to the home. NESPG argued that the policy only required a competent appraiser, and that the contractor’s interest did not have a causal nexus to the award that was issued. The Superior Cour denied the petition to vacate and granted the cross-petition to confirm the award.

On appeal, Vermont Mutual contended that the hearing justice erred by failing to apply the relevant standard in determining whether the appraisal award should have been vacated due to the presence of evident partiality. Specifically, Vermont Mutual disagreed with NEPSG’s argument that the appraisal did not constitute arbitration, so the Superior Court did not have “subject matter jurisdiction.” The Rhode Island Supreme Court noted that the Superior Court acted properly, and NEPSG did not object to Vermont Mutual filing its petition to vacate pursuant to the Arbitration Act; moreover, it admitted to the Superior Court’s jurisdiction under the Arbitration Act in its response and cross-petition to confirm the appraisal award. The Court also determined that the appraisal process could be equated with arbitration, and NEPSG did not object to the applicability of the Arbitration Act.

Next, the Court considered whether the defendant’s appraiser was evidently partial. First, the appraiser had a direct financial interest in the award. The defendant’s appraiser was the sole owner and operator of NESPG and the assignee of the insured’s insurance claim. NESPG acted as its own appraiser with the entire award being payable to the appraiser. Second, there was a causal nexus between the appraiser’s conduct and the final appraisal award. The Court did not believe it was irrational to suggest that the appraiser’s inflated amount was potentially motivated by his direct financial interest in the award. As a result, the Court vacated the order and remanded for further proceedings.

 

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

03/21/25       State Farm Fire & Cas. Co. v. Hole
New Jersey Superior Court, Appellate Division
Appellate Division Rules Tortious Interference Claim Intrinsically Includes Allegations of Intent, Barring Coverage Under Policy’s Personal and Advertising Injury Exclusion

State Farm’s insured, Dr. Hole, was accused by a colleague, Dr. Russonella, of making false statements regarding Dr. Russonella’s alleged misconduct at their shared place of employment, a hospital. After amendment of pleadings and preliminary motion practice, Dr. Russonella’s tortious interference claim was the only one left standing. State Farm brought this declaratory judgment action, seeking a declaration that it had no duty to indemnify Dr. Hole against this claim. The trial court granted State Farm’s motion for summary judgment, finding that the policy’s personal and advertising injury exclusion applied, and that State Farm therefore had no duty to defend or indemnify Dr. Hole against the tortious interference claim. This appeal followed.

In New Jersey, a tortious interference claim must allege that the interference was done intentionally, and with malice. New Jersey courts have ruled that “malice,” as used here, means that the harm must have been inflicted intentionally, and without justification or excuse. Indeed, in Dr. Russonella’s amended pleadings, he alleged that Dr. Hole fabricated allegations, made misrepresentations, and intentionally interfered with Dr. Russonella’s business relationships.

Meanwhile, the State Farm policy contained a “personal and advertising injury” exclusion for “personal and advertising injury” caused by or at the direction of the insured, with knowledge that the act would violate the rights of another and would inflict “personal and advertising injury.” The same exclusion also barred coverage for “personal and advertising injury” arising out of oral or written publication of material when done by or at the direction of the insured with knowledge of its falsity.

Once the tortious inference claim was the only one left standing, State Farm brought this declaratory judgment action, seeking to withdraw from Dr. Hole’s defense in and deny indemnity for the Russonella action. State Farm pointed out that the Russonella pleadings alleged that Dr. Hole “intentionally” interfered with his business relationships, in making “untrue” and “malicious” statements “targeted to injure” Dr. Russonella.

The trial court granted State Farm’s motion for summary judgment, holding that the remaining allegations in the Russonella action fell wholly into State Farm’s “personal and advertising injury” exclusion. The trial court also ruled that the exclusion was unambiguous and did not violate public policy.

On appeal, Dr. Hole argued that the exclusion did not exclude the entirety of Dr. Russonella’s allegations and was ambiguous and void against public policy in any event. Dr. Hole further argued that summary judgment was improperly granted, as there was a material issue of fact regarding his subjective intent to cause injury.

The Appellate Division disagreed. The Court noted that, under New Jersey law, the duty to defend is governed by the pleadings as compared to the language of the insurance contract. Turning to whether the tortious interference claim fell within the policy’s “personal and advertising injury” exclusion, the Court mentioned that, under New Jersey law, a tortious interference claim, when properly pled, includes a claim that the interference was done intentionally and maliciously.

Because Dr. Russonella’s tortious interference claim “require[s] an intentional inference,” the Court continued, such a claim “intrinsically includes an intent to harm.” Meanwhile, Dr. Russonella alleged that Dr. Hole made the false statements with knowledge that his acts would indeed cause such harm.

Holding that the policy’s “personal and advertising injury” exclusion barred coverage for the Russonella action, the Court reasoned that Dr. Hole’s subjective intent was irrelevant. The Court explained that an inquiry into subjective intent is only required when the damages are not the probable outcome of the alleged tort. Here, because Dr. Hole’s intent to harm was an essential element of the tortious interference claim, and by definition required malice or intent, the Appellate Division held that the trial court did not err in not considering Dr. Hole’s subjective intent in making the statements.

The Court then addressed Dr. Hole’s argument that the policy’s “personal and advertising injury” exclusion violated public policy. Dr. Hole argued that coverage should be extended to claims arising from the same conduct that otherwise would have been covered (likely referring to other causes of action that were pled previously and subsequently no longer part of the case). Dr. Hole went on to assert that because State Farm initially agreed to provide coverage for the Russonella action (under reservation of rights), he should be entitled to coverage against the amended pleadings.

The Court was unpersuaded by Dr. Hole’s public policy argument. It reasoned that just because State Farm initially provided a defense for the Russonella action (again, that was done under a reservation of rights), does not compel it to defend Dr. Hole against any subsequently amended pleadings.

The Court also briefly addressed Dr. Hole’s argument that the exclusion was ambiguous. However, the Court deemed that argument waived on the ground that Dr. Hole’s brief did not flesh out the issue, other than citing a few cases discussing ambiguity generally.

Editor’s Note: Would the result have been different if Dr. Russonella’s pleadings were broader?  

 

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

03/21/25       Wolf v. Riverport Ins. Co.
United States Court of Appeals, Seventh Circuit
Insured Cannot Extend Auto Policy’s Insuring Agreement in Liability Part Regarding an Insurer’s Right to Investigate a Claim to the Policy’s Uninsured/Underinsured Motorist Endorsement

Riverport issued Wolf’s employer a commercial general liability policy. Wolf was insured in a motor vehicle accident which resulted in her suffering several pelvic fractures. She collected the other driver’s auto policy limit of $100,000. After this, she filed claims with her personal auto carrier and Riverport. Wolf’s personal auto insurer settled her claim for $150,000, which left Riverport as the last insurer standing.

Four years later, Riverport and Wolf settled the claim in arbitration. At arbitration, Wolf received an award of $905,000 against the Riverport policy limit of $1,000,000. After deducting the $250,000 Wolf received from the other carriers, Riverport paid the outstanding balance. Unhappy with Riverport’s conduct, Wolf filed an action shortly after Riverport’s payout. Riverport promptly moved to dismiss the complaint after it removed the state court action.

Wolf sought relief under Sec. 155 of the Illinois Insurance Code only. That statute permits recovery of attorney’s fees, costs, and statutory damages for an insurer’s unreasonable delay in settling a claim or paying a claim. However, the statute does not create a cause of action, rather it supplements the remedies available for a breach of contract or other tort.

So, Wolf needed to allege more than a vexatious or unreasonable delay under in settling her claim. The Court of Appeals noted Wolf needed to allege facts containing a possible breach of another right, thus enabling her to the relief of Sec. 155. Wolf asserted that contract law creates rights under a breach of contract theory. Thus, the appeal looked at whether Riverport breached the policy at issue.

Wolf’s theory centered on the policy’s business auto coverage form, which obligated Riverport to indemnify an insured for third-party liability. She looked at the standard liability insuring agreement that conferred Riverport with the right to investigate and settle claims regarding actions brought a third-party. Which she felt extended to the policy’s uninsured motorist endorsement.

This theory was rejected. Because that language applies only to defending an insured from other parties, not in a suit brought by an insured. Indeed, Wolf herself was a qualified insured under the Riverport policy. While Riverport possessed discretion over the investigation of Wolf’s claim, that discretion was beyond the policy’s liability insuring agreement. The proper relief for Wolf would have been to sue Riverport for the policy’s proceeds prior to settling her claim. By settling her claim, she mooted that potential form or relief. And for those reasons, the Court of Appeals affirmed Riverport’s motion to dismiss.

 

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

Nothing notable recently from the Appellate Division on Serious Injury Threshold. Check back in two weeks.

 

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

03/04/25       Certain Underwriters at Lloyd’s, London v. Southwest Mar. & Gen. Ins. Co.
New York Supreme Court, New York County
Court Finds Third-Party Complaint Triggers Duty to Defend Additional Insured

This declaratory judgment action stems from an underlying Labor Law complaint, alleging injuries to two individuals at a construction site.

Certain Underwriters at Lloyd’s, London (“Certain Underwriters”) insured Arsenal Scaffold Inc. (“Arsenal”), who was hired to build a sidewalk shed at the construction site. Arsenal subsequently subcontracted all work at the site to JGR Services, Inc (“JGR”). The Certain Underwriters policy issued to Arsenal contained a clause identifying the policy was excess to any coverage available to Arsenal as an additional insured.

Certain Underwriters commenced an action against Southwest Marine & General Insurance Company (“Southwest”), the primary liability carrier for JGR. Certain Underwriters filed a partial motion for summary judgment, seeking a declaration that Southwest owes an obligation to provide Arsenal with a defense in relation to the underlying action.

Southwest cross-moved, seeking an order to stay the declaratory judgment action pending a completion of discovery in the underlying action, insisting that Certain Underwriter’s motion is premature. Southwest contended that JGR did not perform any work which contributed to the injuries alleged in the underlying action. In addition, Southwest argues that there is no contract between JGR and Arsenal requiring additional insured status, and thus the additional insured endorsement within the policy was not triggered.

In the discussion, the Court began its analysis by looking at the contract between Arsenal and JGR, which specifically requires JGR to acquire insurance and name Arsenal as an additional insured. The Court then turns to the additional insured endorsement in the Southwest policy, which provides additional insured coverage to, “all entities required by written contract to be included as additional insureds but only with respect to operations performed by the Named Insured or on their behalf.”

The Court identified that in its view, the additional insured endorsement was clearly triggered based on the language of the contract between JGR and Arsenal.

Next, the Court turned to the pleadings in the underlying Labor Law action. In the Labor Law action, the injured parties did not bring a suit against JGR directly. Instead, Arsenal commenced a third-party action against JGR. The Court acknowledged that the third-party complaint was “self-serving.”

However, the Court pointed to the fact that Southwest did not cite any case law for the proposition that a third-party complaint can be ignored, for the purposes of determining whether a defense obligation arises. The Court instead cites to case law, in the First Department, identified by Certain Underwriters, which held allegations in a third-party complaint can be sufficient to trigger a duty to defend.

The Court further wrote that, “[t]his Court’s role is not to perform its own evaluation of the evidence and make a factual determination about liability for the underlying plaintiffs’ injuries.” Further, the Court found it was not dispositive that no direct suit against JGR was commenced for defense obligations to exist under the Southwest policy.  

Accordingly, the Court granted Certain Underwriters’ motion for summary judgment and denied Southwest’s motion in its entirety. The Court declared that Southwest must defend Arsenal in connection with the underlying action on a primary and noncontributory basis.

Interestingly, there is no discussion in the decision regarding the decision that coverage would apply on a primary and noncontributory basis under the Southwest policy. A review of the online docket shows that Southwest did not address this point in the papers. Instead, Southwest argues that the contract is not legally enforceable, as it does not specify the work JGR was required to perform at the construction site in question.

 

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

03/28/25        New York Senate Bill S8481
Act to Amend Insurance Law to Prohibit Increases in Rates of Homeowners’ Insurance in Excess of Twenty-Five Percent Per Year

Senate Bill S8481 seeks to add a new section, section 2351-a, to insurance law which provides that no insurer shall increase the rate of homeowners’ insurance more than twenty-five percent of the same policy from one year prior unless agreed to by the policyholder prior to being issued, renewed, modified, altered, or amended.

The bill justification provides that the escalating rates of homeowners’ insurance have posed a severe financial burden on individuals. This legislation is part of the important goal of ensuring that insurance premiums remain stable and accessible to those who rely on it. Further, by establishing a reasonable limit, homeowners will be able to plan their budgets more effectively.

Section 1 of Bill S8481 reads:

The insurance law is amended by adding a new section 2351-a to read as follows:

   § 2351-a. Homeowners' insurance policies; rate increases. (A) for  the purposes  of  this  section, "homeowners' insurance" means a contract of insurance insuring against the contingencies described in  subparagraphs (A),  (B)  and (C), or (B) and (C) of paragraph two of subsection (A) of section three thousand four hundred  twenty-five  of  this  chapter  and which  is  a  "covered policy" of personal lines insurance as defined in such paragraph; provided, however, that  the  coverages  provided  under such  subparagraphs (B) and (C) shall not apply where the natural person does not have an insurable interest in the real property, or  a  portion thereof, or the residential unit in which such person resides.

 (B) No insurer shall increase the rate of homeowners' insurance such that the rate is more than one hundred twenty-five percent of the rate of the same policy from one year prior unless agreed to by the policyholder prior to the policy being issued, renewed, modified, altered or amended.

 

DOMENICA’S DIARY on BAD FAITH
Domenica D. Hart
[email protected]

03/21/25       Gross v. Scottsdale Insurance Company, et al.
United States District Court for the Northern District of California, San Jose Division
Attorney-Client Privilege and Work-Product Doctrine Can be Waived by Failure to Use Reasonable Steps to Rectify an Inadvertent Disclosure

Plaintiff, Terry Gross, asserts claims for breach of contract, breach of the implied covenant of good faith and fair dealing and bad faith against Scottsdale Insurance Company based on Scottsdale’s alleged breach of obligation to defend and indemnify two former directors of the now defunct company, Flora Biosciences, Inc. in connection with a state court lawsuit. In the coverage action, a common discovery dispute arose dealing with attorney-client privilege and work-protect doctrine.

In December 2018, counsel for Mr. Gross (a Flora Shareholder) sent a letter to Flora’s Board of Directors demanding the company pursue legal action against Flora’s former CEO. Flora tendered the demand letter to Scottsdale, its insurer. Scottsdale retained an attorney, Joseph Breen, to represent the company for the purpose of investigating the allegations in the demand letter. Breen conducted an investigation and provided a report (“Breen Report”) to Scottsdale and Flora’s Board of Directors on May 21^st, 2019.  Mr. Gross became a member of Flora’s Board of Directors on May 22, 2019, but resigned three weeks later in June 2019. Subsequently after resigning, another member of the Board of Directors, Mr. Vergas, shared the Breen Report with Mr. Gross., At Breen’s deposition in February 2025, Scottsdale objected to the Breen Report being used as an exhibit at the deposition, asserting both Attorney-Client Privilege and Attorney Work Product Production.

The Attorney-Client Privilege is governed by state law. Under Cal Evidence Code § 952, if a confidential communication between lawyer and client exists, the client has the privilege against disclosure, and the attorney has an obligation to refuse disclosure until otherwise instructed by the client.  CA recognizes the “tripartite relationship” among the insured, the insurer, and defense counsel retained by the insurer for the insured.  Absent any conflict, an attorney retained by the insurer to defend its insured under the insurer’s contractual obligation owes a fiduciary duty to both the insurer and the insured. The Work Product Doctrine is governed by federal law here.  Rule 26(b)(3), shields from discovery materials that are prepared by or for parties in anticipation of litigation and protects discovery of legal strategies and mental impressions of the party’s counsel.

Scottsdale had the burden of proving that both the privilege and doctrine applied. At the time of the Breen Report preparation and delivery to the Board of Directors, the Court found Breen, Flora and Scottsdale had a “tripartite relationship”, finding the report was subject to the Attorney-Client Privilege.  However, both the privilege and doctrine may be waived.  Waiver is governed by Fed R. Evid 502(f).  Fed R. Evid 502(b),  provides in part: The disclosure of the communication or information covered by the attorney-client privilege or the work product protection does not operate as a waiver in a federal or state case if:(1) the disclosure is inadvertent;(2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder probably took reasonable steps to rectify the error.

The court found that Scottsdale waived both the Attorney-Client Privilege and the Work Product Protection. The Breen Report was disclosed to shareholders that were not entitled to it and Scottsdale failed to take prompt action to retrieve the report, or asset privilege, after knowledge of the disclosure. Also, Gross publicly disclosed portions of the Breen Report in the underlying Complaint, filed in 2013. Scottsdale took no action to protect the privileges for over a year after the public disclosure. Simply objecting to disclosure of the report “now” was not sufficient.

 

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

02/11/25       Sniper Pressure Services Ltd v Northbridge General Ins. Co.
Alberta Court of King’s Bench
A Lawyer Prosecuting a Subrogated Claim for an Insurer Does Not have a Retainer with the Insured and Therefore is Not in Conflict Should that Same Lawyer Act Against the Insured in a Coverage Action on the Same Policy that Generated the Subrogated Claim.

The Alberta Court of King’s Bench has issued a decision as to whether counsel appointed by a subrogating insurer is in a conflict if that counsel also defends a coverage action on the same policy that generated the subrogation.

Background

Sniper Pressure Services Ltd. is a privately owned oilfield service company that operates in north central Alberta. Sniper owns a fleet of 100 oilfield service trucks, and, as well, stores and sells oilfield chemicals out of Whitecourt, Grande Prairie, Hinton, Edson, Fox Creek and Swan Hills, Alberta.

Sniper’s facility in Whitecourt, Alberta was visited by a streak of bad luck. The roof collapsed on March 4, 2020. Sniper was insured by Northbridge Financial who replaced the roof. The roof collapsed again on January 17, 2022.

The Legal Actions

Sniper on its own account sued the alleged tortfeasors for about $5 million. Northbridge paid Sniper about $2 million. Northbridge then sued (apparently naming the same parties as defendants) to recover its subrogated interest. Sniper then sued Northbridge saying that it is owed about $650,000 of additional funds under its policies.

Northbridge retained Ken Haluschak of Bryan & Company in Edmonton on all files involving Sniper’s roof collapse(s). That meant that Haluschak was defending Northbridge against Sniper on the coverage claim and, concurrently acting as plaintiff counsel in Sniper’s name to prosecute the subrogated claim.

The Issue

Sniper objected to Haluschuk’s retainer asserting in this application to the Alberta Court of King’s Bench that Haluschak has a conflict of interest and, as a consequence, should be disqualified from acting for Northbridge in the coverage case and the subrogated claim.

Sniper argued that because Ken Haluschak is Counsel on the subrogated claim that Sniper is properly characterized as its client and, therefore, he cannot act as Counsel in defence of this claim against Northbridge. Haluschak who argued this application, took the opposite view stating that when counsel is retained by an insurer on a subrogated claim that it is incorrect to characterize that retainer as creating a solicitor client relationship between that counsel and the insured.

The Decision

The application Judge clearly wanted to address the duplication of actions arising from the collapse of the roofs. However, the parties were clear that the issue before the court was whether Ken Haluschak had a conflict of interest - the duplication of actions is an issue for another day.

The application to remove Haluschak as counsel was supported by an affidavit sworn on behalf of Sniper. There was a cross examination on that affidavit. The wording of the affidavit is not disclosed by the court in this decision but apparently Sniper objected to Haluschak acting as Plaintiff Counsel in the subrogation as he would be ‘privy’ to Sniper’s confidential information which creates a conflict given that Haluschak was also defence counsel in the coverage case.

Haluschak conducted the cross examination and asked for particulars of what information would be confidential or privileged. The deponent of the affidavit refused to answer the question. Haluschak filed an application to the court to compel an answer. The application judge ordered Sniper to answer the question. The answer was, apparently, generic “…without actual production or satisfactory description of specific information of concern.” The Court in this application stated, “I have no basis to conclude that the concern is valid or warranted.”

The Court held that there are three actions in play: Sniper has sued the tortfeasors for the two instances of roof collapse for about $5 million; Sniper is a nominal plaintiff in the subrogated claim against the same parties for about $2 million; Sniper has sued its insurer Northbridge for additional monies under the coverage that applies to the two instances of roof collapse. The Court held that as Sniper is the nominal plaintiff in the subrogated claim, then Sniper is a “nominal client’ of Haluschak. Northbridge is entitled to bring the action and is entitled to select its counsel to do so. Although it will be awkward for the principals of Sniper to work with Haluschuk, he can continue to act as counsel for Northbridge on the subrogated claim and on the defence of the coverage action as there was no retainer between Sniper and Haluschak.

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