Coverage Pointers - Volume XXVI No. 22

Volume XXVI, No. 22 (No. 695)
Friday, April 11, 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

.

Happy Easter.  Happy Passover.  And for those of you who prefer the obscure, Happy National Pet Day.  Happy Barbecue Quartet Day and most importantly, Happy International Louie Louie Day (so selected because Richard Berry, its composer, celebrates his birthday on April 11)

It’s been a busy couple of weeks.  Steve and I did presentations at the PLRB Claims Conference in Indianapolis (thanks to those who came by to say “hello”).  One of the nice surprises was gifts brought to me from my good friends at Island Insurance in Honolulu. In July 2018, I was asked to speak to their claims staff, and my wife and I spent two wonderful days on Waikiki Beach.  Claims folks from Island were at the conference in Indy and delivered some delightful treats from the Island paradise.  Thanks.

My presentation was on my favorite topic, Risk Transfer – Additional Insured Coverage and Contractual Indemnity.  For those who attended, or even those who did not, we can reprise that presentation for your claims team, via Zoom, should there be an interest.

The ups and downs of the stock market have surely presented some challenges over the past week or so.  Luckily, I have no plans on soon retiring.

Ryan Maxwell and I also were honored to be part of the New York Insurance Association Insurance Roundtable, where we talked about the recent First Department decision on car rental insurance.  If you are unaware of the implications of the Second Child decision out of the First Department, you can read my article in the New York Law Journal on April 14.

 

Need a Mediator for an Inter-Company Dispute?

Coverage mediation is a thing!  Subject matter expertise may be useful.

Hey coverage lawyers.  Hey professionals. Have you and a friend, adversary, or lawyer for whom have respect reached a stalemate on a coverage dispute?  Look, we know each other.  We know that.  We don’t want to litigate every coverage disagreement.  Why?   Because the position we oppose today may be the one we advocate tomorrow.  Face it.  We all understand that.

A growing percentage of my practice has been a mediator (and sometimes as an arbitrator) in insurance coverage, commercial, personal injury, and other disputes.  With a robust national client base, I am regularly called on by friends and colleagues from around the country, folks who know me and trust me, to help resolve disputes.  Often, particularly in mediated matters, I know the insurers and lawyers on both (or several) sides of the dispute.  Since they all trust me as a fair dealer, they feel comfortable having me try to help close the file (and avoid precedent).  Just pick up the phone, 716.849.8942 or send an email to [email protected]  and I’ll try to help.

Let me help mediate your disagreement to see if there is some mutual agreement, we can reach that will not box us into a corner. Reach out to me.  I will be pleased to mediate your dispute.

You don’t want adverse precedent that will bite you next time you might have a slightly different view on coverage issues. You don’t want to spend tens of thousands of dollars to litigate a coverage issue before a motion judge or appellate justice that knows as much about insurance coverage as you do about nuclear physics.  For those in the Western District of New York, I am certified by the Court and on the WDNY Mediation Panel as are Mike and Ann.

Try mediation.

President TR’s Sons ….

In case you were keeping track, James Simpson-Roosevelt Asiatic Expedition, sponsored by the Field Museum of Natural History and organized by Kermit Roosevelt and his brother, Theodore Roosevelt Jr. (that was the late President’s son who was also first cousin to Eleanor), departed from New York City on 11 April 1925 aboard SS Leviathan for the purpose of collecting wildlife specimens from mountainous regions in Asia, particularly in the Pamir Mountains and the Tian Shan Mountains. It would return with over 2,000 specimens of small mammals, birds and reptiles, and 70 large mammals, including the Ovis Poli, the great wild sheep.  They followed in their dad’s footsteps.

 

LinkedIn:

For those who need to keep up to date on insurance coverage between issues of Coverage Pointers, we’re happy to help.  Just follow me on LinkedIn and we’ll keep you up to date.  I’m easy to find – my linked in name is (ready for this unusual and unexpected name):  Kohane (now there’s a shock) and you can find me here:   https://www.linkedin.com/in/kohane/

 

One Hundred Years Ago:

You may have heard something about tariffs over the last few weeks.  So, you know, history has a habit of repeating itself. You’ll see that in some of this year’s 100 years ago stories.

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.

 

Tariffs? – 100 Years Ago:

The Buffalo News
Buffalo, New York
11 April 1925

SWISS AROUSED AT
U.S. TRADE TACTICS

Diplomats May Take Up Issue
Of Cost Probes by American
Treasury agents

GENEVA, April 11. – A cry of protest against the United States is spreading throughout manufacturing circles in Switzerland ever the system of establishing special treasury agents here who, under the new American tariff law are authorized to insist upon examination of the books of manufacturers to determine the cost of the articles they produce. This information is sought by the Americans, as a help in fixing tariff schedules when goods exported from Switzerland arrives at American ports.

The impression exists here that the affair has gone so far, and both the Swiss and merchants’ authorities have become so aroused, that the question may cause serious diplomatic difficulties between Berne and Washington, unless a way is found for relief.

According to information given out at Berne, the United States has already exercised the embargo prerogative in the case of a shipment of Swiss dyestuffs to New York.

 

Peiper on Property (and Potpourri):

We bring this first issue of April to you through the swirling snowflakes that are outside my window.  For all of you about to depart for a week in Florida, we envy you. Please return to the Northeast with sunshine.

Not too much to report on this week.  We do have an interesting decision where the Third Department tries to explain that a vacant building is not vacant under the terms of the policy.  Ok, so maybe it’s not quite that simple, but it’s not too far from it.  Do take a moment to review in the Property column this week.

Speaking of property, a big thank you to the folks at PLRB who welcomed me to speak at last week’s annual claims conference in Indianapolis.  And, perhaps even more importantly, an especially big thank you to those of you brave enough to sit through an hour and a half discussion on construction defect coverage issues.  Not even a yawn was seen, by the way.  A testament to the quality of professionals attending PLRB events, and their engagement in the discussion.  

That’s it for this week.  See you again in two more.  In the meantime, Happy Easter and/or Passover to those who celebrate. 

Steve
Steven E. Peiper
[email protected]

 

Tariffs? – 100 Years Ago:

The Grand Rapids Press
Grand Rapids, Michigan
11 April 1925

FORDNEY’S VISIT
TO WHITE HOUSE
OCCASIONS TALK

Michigan Man Sees No
Reason to Revise
Tariff

BACKED BY BUSINESS

Flexible Provisions Are Taking Levy Program out of Politics

Washington, April 11. – Presence of former Congressman Joseph W. Fordney in Washington and his call at the White House shortly after President Coolidge spoke before he convention of the National Cotton Manufacturers’ association have occasioned a lot of tariff talk. The textile manufacturers are avowedly favorable to a revision of the tariff and were greatly disappointed that the president gave them no encouragement along this line.

Mr. Fordney declared while here that he saw no reason for a revision of the tariff by the next congress. Even if there are inequalities in the schedules, he said he did not think this was the time for tariff-tinkering. He said the present law was as good as can be written at this time, and that the next congress would have all it can do to consider tax revision, railroad legislation and other pressing matters.

Move Held Unwise

Business interests of the country are likely to share the opinions of the president and Mr. Fordney that any tariff revision now is unwise. The present law is the realization of the hope of a lifetime for Mr. Fordney, and he can be pardoned in desiring to see it remain in the statute books indefinitely. Wholly aside from that fact, however, many of those who opposed the bill at the time it was enacted, and see many inequalities and crudities in the schedules, are set against changes now.

 

Lee’s Connecticut Chronicles:

Dear Nutmeggers:

Well, it seems another two weeks have passed by unnoticed. I’m writing this column as our esteemed editor is breathing down my neck to finish. It reminds me of my college newspaper days, typing furiously against deadline pressure as we approached press time. Fun times.

This edition’s case is a doozy. The unfortunate insureds were arrested and held captive by the Iranian Revolutionary Guard for six years and only released after more than $2 million of back-channel payments and State Department maneuvering. Terrible, you say, but how does this impact insurance coverage? Well, the insureds had some unique coverages, but the carriers ran into some basic rules of construction problems. Undefined terms that are key to coverage need to be defined, especially in unique policies and circumstances. Please read on for some interesting facts and arguments.

Until next time, keep keeping safe and bring on Spring!

Lee
Lee S. Siegel
[email protected]

 

More Tariffs – 100 Years Ago:

The Austin American
Austin, Texas
11 April 1925

HIGH TARIFF
ADVOCATED BY
TEXAS GINNERS

Traditional Democratic Policy
Is Ditched by State
Association

“OLD GUARD” FIGHTS

Minority in Gathering at Dallas
Vigorously Opposed
Protectionists.

DALLAS, April 10. – A protective tariff on vegetable oils was advocated here today by the Texas Cotton Ginners’ association for the first time since the organization was founded 16 years ago. This action and the election of J.T. Andres of Waxahachie as president featured the closing session of the association’s two-day convention.

W.V. Angell of Hillett was elected vice president and C.B. Hunt of Dallas was re-elected secretary. The tariff question caused the only division in the convention many members resisting the action on the ground that it was undemocratic, that it would lead the organization into politics, and because free trade has been the traditional principle of the democratic party.

 

Ruffner’s Road Review:

Dear Readers,

March Madness has come to a close, with the Florida Gators taking home a National Championship. Due to my extensive college basketball expertise (I watched no college basketball until this tournament), I had picked them to win in multiple brackets, leading to a first-place finish in the one where I had Houston in the final, and second place in the Hurwitz Fine bracket. In other sports news, less than a week after Alex Ovechkin set a new NHL record for most career goals, the Buffalo Sabres have officially extended an NHL record of their own, missing the playoffs for the 14^th straight season. Quite a feat considering half of the teams in the league make the playoffs each year…

I have two no-fault cases this week, both addressing the failure of an insured to attend an examination under oath or medical examination, leading the insurer to deny coverage. In the first case, the Appellate Court denied the insurer’s motion for summary judgment, holding an objective justification for the examination under oath was not established. In the next case, the insurer’s motion was granted, as the court held the IME was properly noticed and the failure to attend was a non-precludable defense to coverage.

Kyle
Kyle A. Ruffner
[email protected]

 

Good Choice – 100 Years Ago:

The Buffalo Times
Buffalo, New York
11 April 1925

Says Girls Want
Equal Rights Over Cigarettes

CHICAGO, April 11. – Co-eds of Northwestern University in objecting to the rule forbidding them smoking declare it is not because they want to smoke, but because it is discriminatory against woman and creates a distinction.

Such is the gist of an editorial in the Daily Northwestern, written by Miss Ellen Cole Fetter, ’25.

“There is no reason for a double standard of morals so far as smoking is concerned,” Miss Fetter declared.

 

Ryan’s Federal Reporter:

Hello Loyal Coverage Pointers Subscribers:

The University at Buffalo Bulls Women’s Basketball team are WNIT Champions! While I was not part of the broadcast this year, it was amazing to see the growth exhibited by the program from losing to Monmouth in the first-round last year, to taking the crown in front of a sold-out home crowd in Alumni Arena. That place was built for events like this. Hopefully, we will see more big games in the years to come.

In this edition of Coverage Pointers, my column contains a Second Circuit decision that touched upon the interplay between priority of coverage and “insured contracts”.

Until next time,

Ryan
Ryan P. Maxwell
[email protected]

 

Advice to the Lovelorn – 100 Years Ago:

The Kansas City Post
Kansas City, Missouri
11 April 1925

Dear Miss Fairfax – I have read the kind advice you have given to so many others so I wish you would answer a few questions for me.

1. What time do you think a girl at the age of 16 should get in at night?

2. Should she be allowed to go to the dances if accompanied by an older sister?

3. Is it better to go with one boy, at that age, or several?

4. I have a friend who is considered tough and is tough around boys but is a real friend to me. Do you think it right for me to run around with her?

5. How many nights should a girl at the age of 16 get to go out with boys? – Mickey

1. It depends entirely upon where you are and what you are doing.

2. If she behaves properly, I should think she might go with her sister.

3. Be friendly with the boys, why single out one and exclude the other? But, of course, you cannot be a sweetheart to all of them.

4. You are judged and influenced by the company you keep, Therefore, the only sane thing you can do is to choose your friends from among nice girls and boys.

5. No certain number. It depends on the entertainments and parties to which you are invited. A girl of 16 should not be out very often.

 

Storm’s SIU:

Hey Team:

Three cases for this edition of CP:

• Court Granted Insurer’s Motion to Compel Appraisal During Litigation on the Amount of Business Income and Extended Business Income Loss. 

• Insurer’s Use of Software by Xactimate, Known as "New Construction," and its Labor Efficiency Setting to Estimate the Repair Costs for Fire Damage to the Plaintiffs' Home, was Not Bad Faith Manipulation of the Xactimate Estimating Application" or Bad Faith for Use of the Appraisal Process.

• A Signature is Whatever the Signatory Says it is, but a Notarial Signature Must be Consistent with the Signature Affixed Upon the Oath of Office Filed with the Licensing County Clerk's Office.

So happy baseball is back in season.  Hope for warm weather ahead. 

We appreciate the opportunity to team with you!

More case digests in two weeks.

Scott
Scott D. Storm
[email protected]

 

Never Mind … – 100 Years Ago:

The Buffalo Times
Buffalo, New York
11 April 1925

AREN’T WOMEN FUNNY.

LONDON. – Miss Olive Fry, who won $2,500 with a letter advocating that women remain single, got married the next week.

 

Fleming’s Finest:

Hi Coverage Pointers Subscribers:

Now that we are in Spring, as I watch snowflakes fall, I can’t help but wonder when the warmer weather will arrive. We have been faked out a few times, but I remain hopeful that this will be the last week of cold weather.

This week’s case from the South Dakota Supreme Court considers whether an “owned but not insured” exclusion to UIM coverage was against public policy when used to deny coverage to an insured under the circumstances. The decision discusses the public policy behind UM/UIM coverage.

Shoutout to the UConn Huskies on the big W. See you in a fortnight.

Kate
Katherine A. Fleming
[email protected]

 

A Kiss is But a Kiss – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
11 April 1925

Cruel Caresses of
Original Caveman
Result in Divorce

Chicago, Ill., April 10 (A.P.). – What he called “cruel caresses” were named by Judge Sabath as grounds for divorce granted by him today to Mrs. Tessie Menza Fritz. The woman said her husband gave her kisses so intense her lips became numb and even bled, and that his hugs were so arduous they bruised her ribs.

 

Gestwick’s Garden State Gazette:

Dear Readers:

Congratulations to the other Evan who works in our office, Evan Bussiere, for winning our Firm’s March Madness bracket. CP’s own Kyle Ruffner came in second. Alabama’s loss was the fall of my fiancé’s reign, and Duke and Auburn both losing is what took out yours truly.

The case I have for you this week is full of good tidbits. A cause of action for a declaratory judgment can only be sustained if the declaration sought is to define the rights and obligations of the parties in anticipation of some future conduct; not to declare present liabilities. And that cause of action will be dismissed if duplicative of an accompanying breach of contract cause of action. A cause of action for bad faith will also be dismissed as duplicative of a breach of contract cause of action if the former is based on the same conduct as the latter. This does not change even if the breach of contract claim is also dismissed, like it was here.

See you in two weeks.

Evan
Evan D. Gestwick
[email protected]

 

Car Insurance? Hey, it’s a Good Idea – 100 Years Ago:

Dunkirk Evening Observer
Dunkirk, New York
11 April 1925

EVERY DAY – The Papers Say –

Another Automobile Accident – Cars Collided – Some One Injured – Perhaps fatally – People Found in Garages Overcome by Fumes – Cars Stolen – Others Found – Some Burned.

IF YOU OWN A CAR –

– You can’t afford to be without protective insurance. A serious accident might result in the loss of your home or other property if you are not insured.

Why not let an insurance company assume the risks that they are willing to carry for a comparatively small annual premium? It pays to be protected – Ask anyone who has had an accident. Those whose names figure in today’s reports, yesterday thought they never would have one.

For Liability, Property Damage, Collision, Fire, Theft or
Automobile Personal Accident Insurance, See
L. F. HUMPREY
310 Washington Avenue
INSURANCE – ALL KINDS

 

O’Shea Rides the Circuits:

Readers,

This week Spring is hitting and so is the winter coat blowout. No, not at Burlington Coat Factory, rather both of my dogs are shedding their winter coats. So, that’s a few hours of brushing the dogs out this past weekend. As a side note, if my hair starts looking fuller, please do not ask any questions . . .

This week I have a couple of cases involving Texas law from the Fifth Circuit. Both involve first party property claims, both involve appraisal rights, and both involve unlucky insureds.

Until Next Time,

Ryan
Ryan P. O’Shea
[email protected]

 

Tariffs! – 100 Years Ago:

The San Bernardino County Sun
San Bernardino, California
11 April 1925

TARIFF TINKERING NOT
WANTED

TOTAL of $830,000,000 was provided by congress for the fiscal year 1926 to meet the interest on the public debt. Congress also authorized $485,000,000 for the “sinking fund and other public debt retirement funds.” The Republican tariff law is yielding something like $550,000,000 annually. The average rate on all imports is about 15 per cent; on dutiable imports alone, about 35 per cent. The rates per cent were 14.88 and 37.6, respectively, the first year the Democratic tariff law was in force – 1914. Last year 58 per cent of our imports were free of duty. Importations of partly and wholly manufactured foodstuffs and artifacts totaled about $1,930,000,000. Or more than $100,000,000 greater than our entire imports in 1914. Imports from Europe totaled $895,000,000 in 1914, and $1,096,000,000 last year – they totaled $780,000,000 for the eight months ended February last.

 

Rob Reaches the Threshold:

Hello Friends,

Welcome to The Masters week. For all you golf fans out there, like me, this is one of the best weeks of the year. We get to enjoy all the best golfers as they come together for the first time of the year at one of the best venues in all of sports. Last year, I was fortunate enough to visit Augusta for one of the tournament's practice rounds – and it was an incredible experience. As I now look back and reminisce, I realize that one of the best 'traditions' that contributes to the wonder of The Masters is that no patron is allowed to bring a cell phone in. Just thousands of people in the moment, enjoying golf and the course and the experience. It really is a tradition unlike any other. 

The lull in any cases from the Appellate Division on Serious Injury Threshold continues this time around, so no article from me. We will try again in two weeks. 

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

Rob
Robert J. Caggiano
[email protected]

 

A Penny-Ante Robbery – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
11 April 1925

Two Burglars Bind
Aged Woman to Bed
And Steal 32 Cents

Beacon, April 10 (A.P.). – police today sought two burglars who last night bound an aged woman to her bed before robbing her of all the money in her purse. – 32 cents. Mrs. Mary Husted, 70 years old, who lives alone, reported the robbery after her assailants had made good their escape with the “loot” and she had worked free from her bonds.

 

LaBarbera’s Lower Court Library:

Dear Readers:

Been a busy bee last few weeks. With the weather getting warmer (hopefully soonish), we are trying to push through some projects inside before we begin to tackle the outside. Based on how the weather is acting here in Buffalo, it seems like we may have more time than expected.

This week I am reporting on a New York County decision. Upon a motion to renew, the court took a second look at a special proceeding brought by a carrier to dismiss an arbitration award procured by corruption, fraud, and misconduct. This case takes a look at what steps can be taken, after a fraud case is fully investigated, for carriers to dispute past, potentially fraudulent claims.

Until next time…

Isabelle
Isabelle H. LaBarbera
[email protected]

 

Daylight Savings Time Controversial Even Then – 100 Years Ago:

Daily Sentinel
Rome, New York
11 April 1925

TOPICS TREATED BY
THE MAN ABOUT TO WIN

Daylight Saving – Liked by the
City Man and Disliked
By the Farmer.

Rome, April 11. – The daylight-saving period approaches, and those interested in saving daylight for various purposes are active in behalf of the movement. Different periods are advocated by different people. Some want five months, some four months and some three months, but I believe that the majority favor five months. They desire to have the clocks set forward an hour on the first Sunday in May, the 3d, and set back again on the last Sunday in September, the 27^th. This is the same period that was observed here last year, and it seemed to meet the requirements very well. The daylight-saving proposition is very popular with the people of Rome, who a year ago last fall at the regular election voted for it by a large majority. The same sentiment prevails in the other cities of the state. Last year I believed only two cities failed to observe daylight saving, and they were Rochester and Syracuse, and it is believed that if the matter were put to a vote of the people of those cities the daylight-saving proposition would be carried out. In Syracuse, a great deal of dissatisfaction was expressed because the Common Council refused to pass a daylight-saving ordinance, and people there are demanding that the matter be put to a popular vote.

Editor’s note: Daylight savings time started during WW I.  We may see the end of it this year.

 

Lexi’s Legislative Lowdown:

Dear Readers,

It was difficult to willingly return to the cold, snowy Rochester, New York, after a beautiful weekend in Charlston, South Carolina.  Nonetheless, I am here, back in my winter coat.

This week we discuss changes to Insurance Law § 3420(g) effective March 26, 2025, regarding the issuance of supplemental spousal liability insurance.

Stay warm. Thanks for reading.

Lexi
Lexi R. Horton
[email protected]

 

Was it Worth it? – 100 Years Ago:

Buffalo Post
Buffalo, New York
11 April 1925

Woman Saves Husband’s Life
In Fire; Dies Saving Jewels

Endicott, April 11. – Mrs. Leila M. Teetsal of this city was burned to death today when she returned to her burning apartment to save her valuables after she had carried her crippled husband, Richard M. Teetsal, to safety. Mr. Teetsal was seriously burned.  

The couple were trapped by the fire in a bedroom off the kitchen of their second-floor apartment. Teetsal, with both legs severed above the knees, was powerless to save himself. His wife took him in her arms and fighting her way through the flames, she carries him downstairs to safety.

She returned before anyone could restrain her to obtain valuable left in the apartment. She did not reappear and when the fire was extinguished thirty minutes later her charred body was found on the kitchen floor. 

 

Domenica’s Diary on Bad Faith:

Dear Readers,

As I celebrated my “29th” birthday last week, I return to wondering how fast time flies.  I am grateful for every year, but it needs to slow down. There are many things on my constantly evolving bucket list!

This week’s Pennsylvania case focuses on how an insurer’s diligent and reasonable handling of a UIM claim, including constant communication with Plaintiffs’ counsel for medical records and making reasonable settlement offers pre-litigation, can defeat a bad faith claim by Plaintiff.

See you in two weeks!

Domenica
Domenica D. Hart
[email protected]

 

Bring Your Easter Bonnet – 100 Years Ago:

The Ithaca Journal
Ithaca, New York
11 April 1925

 

North of the Border:

The world news makes it difficult to muster the strength to push back the covers and face another day … markets are in turmoil; coupled with the near certainty that prices will continue to rise while our shrinking asset base pushes the dream of retirement further out of reach … but in my three-foot world, the brown fields are starting to green up. The sun is warm. Our puppy still chases his ball in the morning with wild abandon. Our granddaughter reached up her tiny arms and said ‘Grandma’. We are resilient.

My column this week discusses a case where a failure to correct errors in policy drafting resulted in a denial that was overturned on appeal.

Until next week.

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]

• Bond Carrier’s Obligation to Indemnify for Third Party Claims Preserved

• Question of Fact as to Whether Employer’s Liability Was a Proximate Cause of the Plaintiff’s Injuries BUT Any Culpability on the Part of the Plaintiff Would Be Imputed to the Employer When Making That Determination

   

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

• Sporadic Presence at Building Creates Question of Fact on “Occupancy” and “Vacancy” Issues
• Trial Transcripts are Recoverable as Taxable Costs After Successful Appeal of Trial Verdict
• Lack of Negligence Results in Dismissal of Common Indemnity/Contribution Claims

 

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

• Lack of Defined Terms Sink Coverage Defenses

   

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

• Summary Judgment Denied as Premature as Insurer Did Not Give Provider an Objective Justification for Requesting Examination Under Oath
• Failure to Attend IME is Non-Precludable Defense Applicable to All Claims

 

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

• While Policy is Primary for Liability Assumed Under “Insured Contract,” Court Finds it Co-Excess Due to Direct Insurer-Insured Relationship

 

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

• Court Granted Insurer’s Motion to Compel Appraisal During Litigation on the Amount of Business Income and Extended Business Income Loss

• Insurer’s Use of Software by Xactimate, Known as "New Construction," and its Labor Efficiency Setting to Estimate the Repair Costs for Fire Damage to the Plaintiffs' Home Was Not Bad Faith Manipulation of the Xactimate Estimating Application or Bad Faith Use of the Appraisal Process

• A Signature Is Whatever the Signatory Says it Is, but a Notarial Signature Must Be Consistent with the Signature Affixed Upon the Oath of Office Filed with the Licensing County Clerk's Office

   

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

• Parents Entitled to UIM Benefits After Child’s Death in VMA With Uninsured Motorist.  Exclusion Against Public Policy Under the Circumstances

 

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

• Court Dismisses Declaratory Judgment and Bad Faith Claims as Duplicative of Breach of Contract Claim, and in Turn Dismisses Breach of Contract Claim Upon a Finding of No Coverage

 

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

• Texas’ Concurrent Cause Doctrine Bars Coverage Where Insured was Unable to Segregate Covered and Non-Covered Portions of Claim
• Payment of Appraisal Award Precludes Bad Faith Claim Absent Independent Tort or Breach

 

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

• Still a lull in any cases on serious injury threshold from the Appellate Division. We will try again in two weeks.  

 

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

• Court Grants Motion to Renew Petition and Vacates Master Arbitration Award, Based on Recent December 2023 Plea Allocution Finding Fraud, Corruption, and Misconduct

 

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

• Amendments Made by Chapter 356 of the Laws of 2024 to Insurance Law § 3420(g), Effective March 26, 2025

 

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

• An Insurer’s Low Offer, Failure to Conduct an IME, Failure to Settle a Claim Within Full Reserve Authority, and Disputed Causation Do Not Support a Finding of Bad Faith Where the Insurer Acted Reasonably

 

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

• The Reference to the Wrong Statute in a Marijuana Exclusion Found in a Homeowners’ Policy Introduced Ambiguity as to Whether That Exclusion Applied to the Cultivation of Marijuana for Medical Purposes Under License; In View of That Ambiguity, This Exclusion Did Not Apply to Exclude a Fire Loss

 

Enjoy the holiday season.

Dan

Hurwitz Fine P.C. is a full-service law firm providing legal services throughout the State of New York and providing insurance coverage advice and counsel in Connecticut and New Jersey.

In addition, Dan D. Kohane is a Foreign Legal Consultant, Permit No. 0119144, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]

COPY EDITOR
Evan D. Gestwick
[email protected]

 

INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]

Steven E. Peiper, Co-Chair
[email protected]

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Scott D. Storm

Domenica D. Hart

Ryan P. Maxwell

Kyle A. Ruffner

Katherine A. Fleming

Evan D. Gestwick

Ryan P. O’Shea

Isabelle H. LaBarbera

Lexi R. Horton

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]

04/09/25       Malan v. QPS 23-10 Development, LLC
Appellate Division, Second Department
Bond Carrier’s Obligation to Indemnify for Third Party Claims Preserved

Under a contract (the “original contract”) QPS 23-10 Developer, LLC (“QPS”) hired New Millennium Structures, LLC (“NMS”) to undertake concrete work for a construction project in Long Island City. Under the original contract, NMS agreed to indemnify QPS for any liability for personal injury sustained as a result of the performance of the concrete work.

In October 2014, as permitted by the terms of the original contract, QPS assigned the original contract to the defendant QPS 23-10 Development, LLC (“QPS Development”). That same month, General Casualty Company of Wisconsin (“General Casualty” |”) issued a performance bond and established itself as the surety with respect to the concrete work.

In June 2015, QPS Development declared that NMS had defaulted on its obligations under the original contract. Thereafter, QPS Development and General Casualty entered into a surety takeover agreement (the “takeover agreement”) whereby General Casualty undertook "to cause the performance of each and every one of the terms, covenants and conditions of the [original contract]." In August 2015, General Casualty, as surety, entered into a completion contract with Alpha/Omega Concrete Corp. (“AO Concrete”) to complete the concrete work.

On October 8, 2015, Malan, an employee of AO Concrete, allegedly sustained injuries when he fell at the construction site. In December 2015, the plaintiff commenced this personal injury action against the defendants, including QPS Development.

In January 2016, QPS Development submitted a claim to General Casualty in the sum of $12,580,506.56 for damages allegedly relating to New Millennium's default under the original contract. QPS Development and General Casualty settled that claim pursuant to a settlement agreement and release (“settlement agreement”) and an associated assignment of General Casualty's rights and obligations under the completion contract to QPS Development.

In March 2019, QPS Development commenced a second third-party action against General Casualty, asserting, inter alia, a cause of action for contractual indemnification. In its answer, General Casualty asserted a counterclaim against QPS Development for contractual indemnification.

QPS Development demonstrated its prima facie entitlement to judgment as a matter of law on the cause of action for contractual indemnification against General Casualty, and General Casualty failed to raise a triable issue of fact in opposition.

QPS Development submitted, the original contract, the takeover agreement, the settlement agreement, and the assignment. The original contract contains a broad indemnification provision obligating New Millennium to "defend, indemnify and hold harmless" QPS Development, as assignee of QPS Developer's rights under the original contract, with respect to "all losses [and] claims . . . arising out of or in connection with," inter alia, any personal injury sustained as a result of the performance of the concrete work. The takeover agreement incorporates the original contract by reference except in the case of conflict or inconsistencies, in which case the terms of the takeover agreement would "supersede and amend" the original contract. Further, the takeover agreement requires General Casualty to ensure that AO Concrete procured insurance, naming QPS Development and affiliated entities as additional insureds.

General Casualty contended that its indemnification obligation to QPS Development with respect to the plaintiff's personal injury claim was extinguished by the settlement agreement and the assignment. This contention is without merit.

Paragraph 8 of the settlement agreement expressly exempts from release "any claims by third parties for personal injury for which [General Casualty] is liable." This exception to the general release provisions is a specific provision that overrides the general release language. A contrary interpretation would nullify the personal injury exception contained in paragraph 8 of the settlement agreement. Under relevant principles of interpretation, the language of the settlement agreement demonstrates the parties' intent to preserve General Casualty's obligation to indemnify QPS Development with respect to the plaintiff's personal injury claim.

 

04/03/25       Structure Tone, Inc. v. Merchants Preferred Insurance Co
Appellate Division, First Department
Question of Fact as to Whether Employer’s Liability Was a Proximate Cause of the Plaintiff’s Injuries BUT Any Culpability on the Part of the Plaintiff Would Be Imputed to the Employer When Making That Determination 

Old Republic's motion for summary judgment was properly denied because there are questions of fact as to whether the negligence of its named insured, Port Morris Tile & Marble Corp. (“Port Morris”), was a proximate cause of the underlying accident, thus triggering indemnification by Old Republic. The Court found, however, that If the injured plaintiff in the underlying action is found to have been a proximate cause of his accident, then respondeat superior would impute that culpability to Port Morris, his employer. Additionally, Port Morris's foreman testified that Port Morris was responsible for ensuring proper lighting and safety for its employees, which also raises a question of fact as to whether Port Morris may be found negligent.

Where two or more insurers bind themselves to the same risk and one pays the whole loss, the paying insurer has a right of action against his coinsurers for a ratable portion of the amount paid". However, even looking past the issue of whether Old Republic and Scottsdale bound themselves to the same risk, the two are not coinsurers because Old Republic's "other insurance" provision makes it primary, sharing pro rata with other primary policies, while Scottsdale's provision makes it excess. Therefore, "the coverage under Scottsdale's policy containing the excess clause does not come into play, and [its] duty to defend is not triggered, until the coverage under Old Republic's policy containing the pro rata clause has been exhausted".

Editor’s Note:  The issue of whether the plaintiff’s culpable conduct – then the plaintiff is an employee – can be imputed to his or her employer is one that has been the subject of debate.  If you can impute that liability, can a court ever find that the employer’s liability did not cause the accident, in whole or in part?  I don’t like that decision.

 

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

Property

04/03/25          Lok-N-Logs v. Leatherstocking Coop. Ins. Co.
Appellate Division, Third Department
Sporadic Presence at Building Creates Question of Fact on “Occupancy” and “Vacancy” Issues

Plaintiff is the owner of a commercial warehouse facility in Sherburne, New York.  The premises were damaged when individuals broke into the premises and stripped out the copper and brass within the building.  Plaintiff then presented a claim for coverage under his commercial property policy with Leatherstocking.  During the investigation, Leatherstocking confirmed that the second and third floors of the building were classified as vacant, and the last tenants to occupy the first floor of the premises left in December of 2019.  As a result, Leatherstocking denied the claim on the basis of the vandalism exclusion which applies where the premises are vacant for more than 30 days prior to the loss and a second exclusion which removes coverage where the premises are vacant or unoccupied for more than 60 days. 

In addressing Leatherstocking’s arguments, the Court noted that although unoccupied is undefined “it is the regular presence of inhabitants that makes occupancy.” 

With respect to the vacancy exclusion, the Court noted that the policy is classified as “Cold Storage, Warehouse.”  Here, plaintiff testified that although there were no active tenants in the building, he did store building materials in the premises as part of his construction business.  On balance, the Court noted that a jury could find that the building was used for storage by the owners’ business and, therefore, was not “vacant.” 

In addressing whether the building was “unoccupied,” the Court noted that plaintiff’s employees performed maintenance checks two times per week, occasionally stored items in the building and, perhaps even more occasionally, held garage sales at the building.  However, the electric was disconnected, and no one was assigned to the premises, by plaintiff, on a regular basis.  Thus, as with “vacancy,” the Court concluded a question of fact existed as to whether the building was “unoccupied.” 

 

Potpourri

04/02/25          Thandi v. Otsego Mut. Fire Ins. Co.
Appellate Division, Second Department
Trial Transcripts Are Recoverable as Taxable Costs After Successful Appeal of Trial Verdict

After a successful appeal, defendant sought to tax all appropriate costs under CPLR 8301.  This included, inter alia, the costs of trial transcripts.  On application to the Queens County Clerk, the Clerk’s Office struck the costs for trial transcripts but entered the judgment on the remaining taxable costs and disbursements. 

Defendant appealed, and the Second Department modified the judgment accordingly.  Simply, under CPLR 8301, a party is entitled to the cost of trial transcripts because they were necessary for the preparation of the Record on Appeal.

 

04/01/25          Lora v. Manhattan Interiors, Inc.
Appellate Division, First Department
Lack of Negligence Results in Dismissal of Common Indemnity/Contribution Claims

Co-Defendant Owner attempted to maintain its crossclaim for common law indemnification and/or contribution against Remigio.  However, the trial court already determined that Remigio bore no share of the negligence leading to plaintiff’s injuries.  Where, as here, there is no active negligence attached to Remigio, it follows that he cannot be responsible for indemnity or contribution claims brought against him.  There must be some finding of negligence before risk can be transferred via contribution principles. 

 

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

03/28/25       Tahbaz v. Vigilant Ins. Co.
United States District Court, District of Connecticut
Lack of Defined Terms Sink Coverage Defenses

The Tahbazs purchased a Masterpiece Homeowners Insurance policy from Vigilant and umbrella coverage from Chubb. He sued the insurers for breach of contract and bad faith for failing to provide various coverages when he was captured by the Islamic Revolutionary Guard Corp of Iran for espionage.

In January 2018, the plaintiffs were traveling in Iran as part of wildlife conservation efforts in support of the Persian Wildlife Heritage Foundation, an organization co-founded by Mr. Tahbaz, dedicated to protecting endangered species in Iran. On January 10, 2018, Mr. Tahbaz was wrongfully arrested and detained by the IRGC on falsified espionage charges. The IRGC asserted that Mr. Tahbaz's "efforts to photograph endangered species were a guise to illegally access and collect information within numerous sensitive sites in Iranian territory," and accused Mr. Tahbaz of coordinating and funding the efforts of others engaged in similar activities. That same day, IRGC agents ransacked the plaintiffs' temporary residence in Iran and subjected Mrs. Tahbaz—who was present at the residence—to threats of violence.

A show trial was conducted in the IRGC's Revolutionary Courts at which Mr. Tahbaz was not permitted to present evidence or witnesses. Despite his demonstrable innocence, Mr. Tahbaz was convicted and sentenced to prison for ten years and a $600,000 monetary judgment. On September 18, 2023, following nearly six years of wrongful detention by the IRGC, Mr. Tahbaz was released as part of a diplomatic agreement, and both Plaintiffs were permitted to leave Iran and return to Connecticut.

Before, during, and after the IRGC Show Trial, Mr. Tahbaz was held at the notorious Evin prison, where he was "subjected to torture, prolonged solitary confinement, death threats, and other extreme techniques for interrogation and punishment." As a result, Mr. Tahbaz suffered numerous physical and psychological injuries. While Mr. Tahbaz was detained, Mrs. Tahbaz was contacted by anonymous individuals—believed to be IRGC agents—who offered to ransom Mr. Tahbaz's freedom in exchange for money. Mrs. Tahbaz was also wrongfully prohibited from leaving Iran for the duration of Mr. Tahbaz's detention and was further "subjected to other mistreatment by the IRGC."

Mr. Tahbaz incurred more than $100,000 in legal fees. Moreover, Mr. Tahbaz's extensive post-conviction relief efforts resulted in additional defense costs in excess of $2.2 million. Additionally, "[d]ue to their wrongful detention, Mr. and Mrs. Tahbaz lost income exceeding [$4 million] and incurred substantial medical and psychiatric expenses."

Plaintiffs sought coverage for these costs under the Policies. Despite timely notice, the carriers denied coverage, asserting, inter alia, "that trade and economic sanctions imposed by the Office of Foreign Assets Control ('OFAC') against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States barred all coverage for [Plaintiffs] because their wrongful detention occurred in Iran." Defendants were advised that their position was inconsistent with OFAC guidance. Defendants’ refusal to provide coverage resulted in additional injuries to Plaintiffs, such as delayed compensation, psychological distress, and litigation costs.

The insured sued, claiming (1) breach of contract (Personal Liability coverage); (2) breach of contract (Kidnap Expenses coverage); (3) breach of contract (Family Protection coverage); (4) breach of contract (Uninsured/Underinsured liability coverage); (5) breach of the duty of good faith and fair dealing; and (6) unfair and deceptive practices in violation of the Connecticut Unfair Insurance Practice Act ("CUIPA") and the Connecticut Unfair Trade Practices Act ("CUTPA"). The carriers moved to dismiss.

The Court analyzed the motions as a multi-layered coverage dispute arising from the plaintiffs’ wrongful detention. First, the Court addressed whether the insured was entitled a defense for the Iranian Guard trial. The carriers argued that the espionage trial was not a “suit,” and it did not seek damages for personal injuries. Ultimately, the Court found the term “suit” ambiguous, as these covers did not define “suit.” The Court found the plaintiffs’ argument that the undefined term suit encompasses foreign criminal trials was reasonable; the carriers could cite to no contrary caselaw.

Next, the Court found that the policies’ term “damages” included the $600,000 Iranian monetary penalty. "Damages" was defined as a "sum that is paid or is payable to satisfy a claim . . . resolved by judicial procedure." The Court found that the judgment fit squarely within the definition, especially as the policies failed to include any exclusion for fines, penalties, and non-injurious damages.

Finally, the Court agreed with the insureds that the claims against them involved allegations of “wrongful entry” under the personal injury coverage. Though "wrongful entry" itself is not defined, the Court acknowledged that "it is a basic principle of insurance law that policy language will be construed as laymen would understand it . . ." R.T. Vanderbilt Co., 273 Conn. at 462-63. The insureds allege that the Revolutionary Guard’s allegations against Mr. Tahbaz—in particular, that he "engaged in acts of espionage, including illegally accessing and collecting information within numerous sensitive sites in Iran"—constitute "wrongful entry" within its ordinary meaning. In seeking dismissal, the insurers emphasized that "the gravamen of the charge is espionage—not wrongful entry," and argue that "under no reasonable interpretation can this charge be 'accurately characterized' as a suit for 'wrongful entry.'" In response, Plaintiffs contended that it is the facts alleged by the IRGC, not the title of the charge, that dictate Defendants' obligations under their duty to defend, and that here, the crux of the IRGC's allegations were that Mr. Tahbaz entered property where he was not permitted and engaged in misconduct on that property.

The Court agreed with the plaintiffs and refused to dismiss this claim of breach of contract. [It seems that the insureds should have cross-moved, as the Court has found that there was a duty to defend and indemnify the espionage trial.]

The Court then evaluated the KNR coverage claims. Here, the coverage afforded (a) "expenses incurred as the result of the actual or alleged wrongful taking of a covered person that includes a demand for ransom payment and occurs 'anywhere in the world except those places listed on the United States State Department Bureau of Consular Affairs Travel Warnings list at the time of the occurrence'"; and (b) "expenses incurred as a result of an unlawful act of violence or threat of violence to a covered person by a person who unlawfully entered the covered person's temporary residence while a covered person was present.” The plaintiffs argued that they were kidnapped and held for ransom and were entitled to insurance coverage.

The carriers argued that the “civil authority” and the Travel Warnings exclusions bar coverage. The crux of the coverage is whether the Iranian Revolutionary Guard is a “civil authority” within Iran. Since the term was undefined, the Court held that under these circumstances it is ambiguous. Factual disputes, however, precluded the Court from ruling on the Travel Warning exclusion. The Court noted that every country in the world appears, at some level, on the Travel Advisory system. “But even accepting that Iran was on the Travel Warnings list before it was phased out, Defendants seemingly ignore that under the updated Travel Advisory system, every country in the world is listed and assigned a "Level" between 1 and 4, with "Level 4" meaning "Do Not Travel." In this regard, assuming the Travel Advisory system was in place when Mr. Tahbaz was kidnapped, coverage could arguably be excluded altogether under the Policies, regardless of whether the events occurred in Iran or some comparatively safer country for travel, e.g., Canada.”

Because the policies listed an antecedent travel warning system, the Court would not allow the carriers to “summarily re-write the policies.” This prong of the motion to dismiss was also denied.

The Court, however, granted the motion to dismiss the UM/UIM claim under the umbrella policy. The umbrella coverage, apparently, had no ties to auto liability but rather paid those amounts that a covered person is “legally entitled to receive from an uninsured or underinsured negligent person.” The insureds claimed that there were legally entitled to damages for their mistreatment by the Iranian agents. The carriers argued that the pleading did not establish a right to damages and that the Court lacked jurisdiction over the Iranian Revolutionary Guard agents. The Court held that the Complaint did not allege the particular "applicable statutes and regulations" which entitle the insureds to recovery from the IRGC agents. Because of the pleading deficiency, that count was dismissed. [Presumably, the insureds will be able to replead with specificity.]

The Court dismissed the bad faith counts, holding that the allegations were purely conclusory, failing to plausibly allege bad faith. The unique nature of these claims doomed the CUTPA/CUIPA claim, because the insureds relied entirely on the claims in this matter to try to plead an unfair business practice. This is insufficient under the pleading requirements.

 

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

 

04/03/25       State Farm Mut. Auto. Ins. Co. v. Lifeline Med. Imaging, P.C.
Appellate Division, First Department
Summary Judgment Denied as Premature as Insurer Did Not Give Provider an Objective Justification for Requesting Examination Under Oath

State Farm sought a declaration that it was not obligated to provide no-fault coverage for claims submitted by Lifeline, a medical provider. State Farm argued that the provider failed to meet a condition precedent to coverage by failing to appear for duly scheduled examinations under oath (EUOs) and by refusing to produce an individual who could provide the information needed to verify Lifeline's claims. The Supreme Court granted State Farm’s motion for summary judgment declaring that State Farm had no obligation to pay bills submitted by the provider. However, the Appellate Division reversed, denied the summary judgment motion, and vacated the Supreme Court’s declaration.

The Appellate Court held the motion should have been denied as premature, because State Farm failed to offer Lifeline an objective justification for requesting the EUOs, as required by the governing no-fault regulations (see Country-Wide Ins. Co. v. Alicea, 214 AD3d 530, 531 [1st Dept 2023]; Country-Wide Ins. Co. v. Delacruz, 205 AD3d 473, 473 [1st Dept 2022]). The Court explained that the criteria by which State Farm decided that an EUO was required is essential for Lifeline to oppose State Farm's summary judgment motion, and those criteria are exclusively within the State Farm's knowledge and control (11 NYCRR 65-3.5[e]). In addition, despite State Farm's assertion, it did not fully respond to Lifeline's discovery request for a copy of the objective standards relied upon when the EUO was scheduled.

Accordingly, because State Farm's rationale for requesting the EUOs had not been determined, the issue of whether State Farm's no-coverage defense is subject to preclusion could not yet be determined.

 

04/01/25       Nationwide Gen. Ins. Company v. Raheem Gaines, et al
Appellate Division, First Department
Failure to Attend IME is Non-Precludable Defense Applicable to All Claims

The Supreme Court denied the insurer’s motion for summary judgment declaring that they have no obligation to pay no-fault benefits to defendant medical providers in connection with the underlying motor vehicle collision. The Appellate Division reversed, holding the insurer was entitled to summary judgment because they established that the injured claimant failed to attend properly noticed independent medical examinations (IMEs), which precluded coverage under the policy.

In support of its motion, the insurer submitted the affidavit of an employee from the company that scheduled the IMEs, who stated that he sent two IME notices to the claimant and that the claimant failed to appear on either date. Nationwide also submitted the affirmations of the IME doctor, which were consistent with the scheduling employee's affidavit in that claimant failed to appear for the examinations.

The Court held that the medical providers' argument that the IMEs were untimely was unpersuasive. Where an insurer sends notices scheduling IMEs prior to the receipt of claims, the notification requirements for verification requests under 11 NYCRR 65-3.5 and 65-3.6 do not apply (citing Hereford Ins. Co. v. Lida's Med. Supply, Inc., 161 AD3d 442, 443 [1st Dept 2018]). Further, the Court held that the failure to attend a properly noticed examination is a non-precludable coverage defense, which applies to all claims and is not determined on a bill-by-bill basis. As such, the Court rejected the defendant’s argument that the insurer was required to establish timely disclaimer of coverage in light of claimant's failure to attend the medical examinations.

 

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

04/07/25       Cnty. of Ulster v. All. of Nonprofits for Ins. Risk Retention Grp.
United States Court of Appeals, Second Circuit
While Policy Is Primary for Liability Assumed Under “Insured Contract,” Court Finds It Co-Excess Due to Direct Insurer-Insured Relationship

While Barbara Hyde, a Jewish Family Services of Ulster County ("JFS") volunteer, was driving Joyce Northacker to a medical appointment through the County of Ulster’s Senior Transportation Program, Hyde lost control of the car and collided head on with a County-owned bus. Hyde died and Northacker was injured. Northacker sued the County, JFS, and the bus driver to recover for her injuries.

The County separately sued Alliance of Nonprofits for Insurance Risk Retention Group (“ANI”), insurer for JFS, seeking a declaratory judgment that ANI Policy covers the County's liability in the Northacker action. Following cross-motions, the district court granted summary judgment for the County.

The Second Circuit agreed with the County that at the time of the accident, Hyde was an insured JFS volunteer for purposes of the ANI Policy and that, accordingly, the ANI Policy treats the County as an insured to the extent of its liability resulting from Hyde's conduct. Specifically, the ANI Policy provided that the definition of "insured" includes "[a]nyone volunteering services to [JFS] . . . while using a covered 'auto' [JFS doesn't] own, hire or borrow to transport [JFS] clients or other persons in activities necessary to [JFS's] business." The Court found that an Agreement for Professional Services (the "Agreement") between the County and JFS was in effect and that the Agreement unambiguously establishes that drivers like Hyder were JFS volunteers, regardless of whether they also acted as volunteers for the County.

Since Hyde qualified as an insured, the Second Circuit also found that, under the ANI Policy, the County was too. This was because the policy includes as an omnibus insured “[a]nyone liable for the conduct of an insured described above but only to the extent of that liability.” While ANI argued that Hyde was an insured by way of an endorsement, rather than those categories of insureds literally “described above” on the form, the Second Circuit noted that Hyde was an insured by way of an endorsement expressly adding JFS volunteers to the definition of “Who is an insured,” placing it “on the same footing with the other categories of insureds” that were “described above.”

Now for the good stuff.

It was undisputed that Hyde’s personal auto insurance provided the first layer of coverage. However, the County was insured by New York Municipal Insurance Reciprocal (“NYMIR”) and the question became “whether the ANI Policy provides the next layer of coverage, or whether it is co-excess with the NYMIR Policy.” The district court found the former. The Second Circuit disagreed.

Finding the policies co-excess, the Second Circuit noted that while “[t]he ANI Policy and the NYMIR Policy contain nearly identical ‘other Insurance’ clauses, except that the ANI Policy ‘is primary for any liability assumed under an “insured contract,”’” ANI’s coverage was not applicable due to liability assumed under such a contract. While the Second Circuit

“agree[d] that if the ANI coverage applied by virtue of the indemnification provision in the Agreement, the ANI coverage would be primary [,] . . .  [here,] the County is an ‘insured’ under the terms of the ANI Policy itself; its status as an ‘insured’ under the ANI Policy is independent of any potential right of indemnification from JFS pursuant to the Agreement. Because the liability at issue doesn't involve ‘liability assumed under an “insured contract”’ that is part of an agreement ‘other’ than the ANI Policy, the ANI Policy and the NYMIR Policy are co-excess.”

Maxwell’s Minute: Note the importance of this last issue. The ANI Policy expressly provides that its coverage will pay before NYMIR does, so long as ANI’s named insured, JFS, is found liable under an “insured contract.” This in turn means that NYMIR will need to insist upon the continued pursuit of claims by the County against JFS under the Agreement, so that contractual liability remains on the table. That said, the underlying action was discontinued in January 2024, and it is unclear to me whether that issue was preserved by NYMIR or the County leading up to the discontinuance.

 

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

03/31/25       Erenrich v. Cincinnati Ins. Co.
United States District Court, W.D. Pennsylvania
Court Granted Insurer’s Motion to Compel Appraisal During Litigation on the Amount of Business Income and Extended Business Income Loss 

Cincinnati Ins. invoked an appraisal provision in the policy with its insured Weatherizer, Inc., on the amount of business income and extended business income loss.  Weatherizer refused to participate in the appraisal process.  Weatherizer insists that Cincinnati's motion is procedurally defective, untimely, and prejudicial and that the meaning of business income under the Policy is beyond the scope of appraisal. 

Cincinnati's Motion to Compel Appraisal was granted.  Weatherizer was ordered to appoint a competent and impartial appraiser and proceed with the appraisal process.

The case initially involved additional claims and parties, but only Weatherizer's loss of business income and related bad faith claims remain after a partial settlement.  Cincinnati has issued payments exceeding the amount it subsequently determined to be the actual loss.

The Court found that all conditions precedent for appraisal had been met, and that Cincinnati's appraisal demand complied with the policy's procedure.  The timing of the appraisal demand was reasonable, coming shortly after a court-mandated mediation session and within a reasonable time after discovery.  Cincinnati demanded appraisal only eight days after the parties' court-mandated mediation session, a session during which the parties settled part of the litigation. Prior to this settlement, the case involved both additional claims and parties. Post-settlement, only Weatherizer's loss of business income and related bad faith claims remain. The appraisal demand also came within a reasonable time after discovery that included analysis of the loss of business claim and deposition testimony.

The Court relied on precedent from Pennsylvania courts and other jurisdictions to determine that disagreements over valuation methodology fall within the scope of business loss and is appropriate for appraisal.  The appraisal provision does not restrict the appraiser's methodology or prohibit calculating business loss based on forensic accounting principles.  As Cincinnati explains, methodology determinations pertain to the value of the business loss, not whether the loss was covered, and, thus, are appropriate topics for appraisal.

The well-established public policy of Pennsylvania encourages the settlement of disputes about the amount of loss by appraisal. A condition precedent to appraisal is that the insurer admits coverage and disputes only the dollar value of the loss. A coverage dispute, improper for appraisal, occurs when an insurance company claims an exclusion of a loss under the terms of the insurance policy. A mere disagreement over the extent of damage or whether a covered peril is the cause of certain damage is a dispute regarding the amount of loss and is proper for appraisal. 

The Court emphasized the public policy favoring appraisal in Pennsylvania, even after the commencement of insurance coverage litigation.

 

03/25/25       Belotti v. State Farm Fire & Cas. Co.
United States District Court, M.D. Pennsylvania
Insurer’s Use of Software by Xactimate, Known as "New Construction," and Its Labor Efficiency Setting to Estimate the Repair Costs for Fire Damage to the Plaintiffs' Home Was Not Bad Faith Manipulation of the Xactimate Estimating Application or Bad Faith Use of the Appraisal Process

The Court granted State Farm's motion for summary judgment on all claims. The plaintiffs' motion for class certification and State Farm's motion to exclude expert testimony were denied as moot.

The plaintiffs' home was damaged by fire.  The plaintiffs had a homeowners insurance policy with State Farm.  State Farm estimated repair costs using Xactimate software with a "new construction" labor efficiency setting.  The action challenges State Farm's use of software by Xactimate, known as "new construction," and its labor efficiency setting to estimate the repair costs for fire damage. The plaintiffs argue that the defendant was contractually obligated under the Policy to use a specific estimate setting when estimating the value of their losses. The plaintiffs further contend that when the defendant used a "new construction" setting, rather than its "repair/reconstruction" model, the defendant breached its contract. The defendant has moved for summary judgment on this claim, arguing that it had no contractual duty to use a particular setting when estimating losses and it did not breach its loss settlement obligations. 

The adjuster selected the "new construction" labor efficiency because the plaintiffs' home would not be occupied during the repair work, and because once demolition was completed and the wall finishes removed, the repair work would essentially be new construction. The public adjuster’s estimate was substantially higher and prepared using Xactimate estimating software, but with the application of the "Restoration/Service/Remodel" labor efficiency setting.  The parties disagreed on the amount of the loss and went through an appraisal process.  The final appraisal award was higher than State Farm's initial estimate but closer to its estimate than the public adjuster’s.  The appraisal award was not prepared using Xactimate and did not use either Xactimate's "new construction" or "Restoration/Service/Remodel" labor efficiency settings. 

The Court held that the insurance policy did not contractually obligate State Farm to use a particular estimation method when calculating repair costs.  The Policy unambiguously imposes no contractual duty to use a particular estimate when estimating losses under the provisions, and thus, concludes the defendant did not breach any contractual obligation in creating its estimate.

State Farm did not act in bad faith under the Pennsylvania bad faith statute (42 Pa. C.S.A. § 8371) by initiating the appraisal process or in its handling of the claim and the plaintiffs failed to prove the elements required for a claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law.  An insurer, however, does not need to show correct estimations, but rather a reasonable basis for its decision to deny benefits. 

The plain language of the insurance policy did not require State Farm to use any particular estimation method, so there was no breach of contract.  State Farm promptly paid the initial estimate and the additional amount after appraisal, showing no bad faith in claim handling.  The appraisal process was valid under the policy terms and not evidence of bad faith.

In asserting a bad faith claim, the plaintiffs make allegations of State Farm's bad faith throughout the appraisal process.  The Court finds, however, that the plaintiffs have failed to identify any evidence of any frivolous or unfounded refusal to pay proceeds of a policy as required by a bad faith claim.  The record shows that State Farm provided a check to the plaintiffs for its estimated damages the same day it provided the plaintiffs with an estimated cost of repairs. Moreover, it is undisputed that State Farm paid an additional $66,690.45, the difference between State Farm's estimate and the ultimate appraisal award, promptly after the conclusion of the appraisal process. The Court agrees that the fact the parties' appraisers ultimately assigned a higher value to the claim than State Farm's estimate does not mean State Farm acted in bad faith.  That is, after all, what the appraisal process is for—settling disputes about the value of a claim.

04/01/25       Med. Supply of NY Corp. v. State Farm Mut. Auto. Ins. Co.
New York State Supreme Court, County of Kings
A Signature Is Whatever the Signatory Says it Is, but a Notarial Signature Must Be Consistent With the Signature Affixed Upon the Oath of Office Filed With the Licensing County Clerk's Office

The task of signing with a uniquely scripted flourish of an individualized signature, whether for informal correspondence or legally binding documents, is generally taken for granted until consequences of its unlawful reproduction arise.  A signature is whatever the signatory says it is, but a notarial signature must be consistent with the signature affixed upon the oath of office filed with the licensing county clerk's office.

Plaintiff submitted the Kuperman Affidavit in opposition to Defendant's Motion for Summary Judgment in a No-Fault case.  The notarial acknowledgment on the Kuperman Affidavit contained the proper statutory stamp and language, but the signature line above "Notary Public" was written as "February" instead of the notary's name.  Plaintiff's counsel, who was also the notary public, claimed at oral argument that "February" was his signature.  Defendant did not object to the admissibility of the Kuperman Affidavit in its reply but raised the issue at oral argument.

The purpose of notary public laws is to provide certitude of authentication by a licensed governmental official. N.Y. Exec. Law 135-C deems a notary public's electronic signature reliable if it meets standards approved by the secretary of state, including being unique to the notary public, capable of independent verification, retained under the notary public's sole control, attached to the electronic record, and linked to the data in a manner that detects and may invalidate subsequent alterations.  N.Y. Exec. Law 135-C and 137 imply that a notary's signature should be unique, capable of independent verification, not easily alterable or reproducible, and consistent with the signature affixed upon the oath of office provided to the licensing County Clerk.

While the intent of the principal signatory to the substance of the document may be an element in determining whether an adopted marking is indeed their signature, this is not the case for a notary public.  The defect in the notarial signature on the Kuperman Affidavit is considered a technical defect that can be disregarded in the absence of substantial prejudice to the defendant.  The defendant waived its right to object to the defect by not raising the issue in its reply.

The Court found that while a signature can be whatever the signatory claims it to be for a lay person, a notary public's signature must be consistent and verifiable. The use of "February" as a signature was inconsistent with the notary's oath of office and therefore defective.  However, the Court determined that this defect was technical in nature and could be disregarded, citing precedents where similar defects were not considered fatal to the admissibility of documents.  The Court reasoned that the defendant was not unduly prejudiced by the consideration of the Kuperman Affidavit, as it had a full opportunity to challenge its contents in its reply.

Courts have held that a notary's failure to sign a document is considered a technical defect that may be disregarded or cured by subsequent affidavit if the defect is not jurisdictional and does not cause undue or substantial prejudice to a substantial right. N.Y. C.P.L.R. Law 2001 allows courts to disregard such defects in the absence of substantial prejudice to the defendants.

The Court also held that the defendant waived its right to object to the form of the affidavit by not raising the issue in its reply, pursuant to CPLR § 2001.

The Court granted the Defendant's Motion for Summary Judgment to the extent that Defendant was found to have timely issued its Denials. However, the Court also found that Plaintiff had established a triable issue of fact regarding Outstanding Verification Requests, thus partially denying summary judgment on that issue.

 

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

03/26/25       Earll v. Farmers Mut. Ins. Co.
South Dakota Supreme Court
Parents Entitled to UIM Benefits After Child’s Death in VMA With Uninsured Motorist.  Exclusion Against Public Policy Under the Circumstances

The Earlls’ daughter was killed in a motor vehicle accident when an underinsured motorist (Pigg) ran a stop sign and crashed into her vehicle. The daughter had a policy with Farmers Mutual covering her vehicle that included $100,000 in UIM coverage. Pigg had a policy with Progressive Insurance with limits of $25,000. The Earlls were appointed as co-personal representatives of their daughter’s estate. Progressive tendered the $25,000 to the Earlls and to the Estate. Farmers Mutual gave permission to settle the claim without jeopardizing the UIM claim and paid $75,000 in UIM benefits under the daughter’s policy, offsetting the amount received from Progressive.

The Earlls sought a further $250,000 in UIM benefits under a separate motor vehicle policy they purchased from Farmers Mutual, which provided coverage for two vehicles owned by the Earlls that were not involved in the accident. The policy included UIM coverage for “insureds.” The policy defined an “insured” to include a “relative.” A “relative” was further defined as “a person related to you or your spouse by blood . . . who lives with you.” At the time of the accident, Rebecca lived with her parents and qualified as an insured for the purpose of UIM coverage under the policy.

Farmers Mutual denied UIM coverage to the Earlls based on an “owned by not insured” exclusion in the policy because the daughter was driving a vehicle that was not listed in the declarations of her parents’ policy at the time of the accident. The Earlls commenced a declaratory judgment action, seeking a declaration that they were entitled to UIM benefits for all claims and liability arising from the accident up to the policy limits and that the exclusion violated public policy and was unenforceable. Farmers Mutual argued there were reasonable exclusions from UIM coverage. By contrast, the Earlls argued that the South Dakota Supreme Court has held that similar exclusions violate public policy in the context of uninsured motorist coverage (UM). Due to the shared statutory purpose of UM and UIM coverage and the mandatory requirement both types of coverage, the Earlls argued that the exclusion violated public policy by abrogating the statutorily mandated coverage that is personal to each insured.

The circuit court agreed with Farmers Mutual and granted its motion for summary judgment, acknowledging the purpose of UM/UIM coverage is to protect the injured parties due to the negligence of an uninsured/underinsured motorist. Nevertheless, the circuit court included the exclusion was enforceable based on the South Dakota Supreme Court’s decision in De Smet Insurance Company of South Dakota v. Pourier.

On appeal, the South Dakota Supreme Court noted the public policy of the Legislature for UM and UIM coverage was clear. When read together, the statutes for UM and UIM mandate coverage in every motor vehicle liability insurance policy and require an insurer to pay UM and UIM benefits to any insured who has not fully recovered against an uninsured or underinsured driver. UIM coverage follows the insured and not the insured vehicle. Because the South Dakota Supreme Court’s decision in Pourier had overlooked the public policy underlying UIM coverage and improperly tied the mandatory UIM coverage to the insured vehicle rather than the insured person, the Court found the decision had led to a fragmented application of the law, had created uncertainty in subsequent cases, and was inconsistent with the reasoning in prior and subsequent decisions.

Accordingly, the Court reversed its decision in Pourier and the circuit court’s grant of summary judgment, holding that the “owned but not insured” exclusion to UIM coverage in motor vehicle policies violated South Dakota public policy when used to deny coverage to an insured individual under similar circumstances.

 

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

 

03/29/25       Vincent Cusumano Architect P.C. v. Berkshire Hathaway Direct Ins. Co.
United States District Court, District of New Jersey
Court Dismisses Declaratory Judgment and Bad Faith Claims as Duplicative of Breach of Contract Claim, and in Turn Dismisses Breach of Contract Claim Upon a Finding of No Coverage

The plaintiff, a licensed architect, purchased a professional liability insurance policy to replace one from another carrier that was expiring. Plaintiff alleged that, prior to purchasing the policy, Berkshire Hathaway assured that the policy would provide coverage on a claims made basis for potential claims arising out of the plaintiff’s prior operations.

The policy plaintiff purchased included a provision providing that the policy would cover claims of negligence, errors, or omissions in providing professional services, as well as claims against directors or officers of the named insured arising from their actions taken on behalf of the insured. For those kinds of claims, the policy continued, if the named insured first learns about the claim during the policy period, and previously had continuous insurance coverage that would have covered the claim, Berkshire agreed to cover that claim even though it is not the result of an occurrence during the stated policy period. (Emphasis Supplied).

The policy was issued approximately three months after the plaintiff’s prior professional liability policy terminated.

Later, once the Berkshire policy was in effect, plaintiff was sued over a renovation job gone wrong. Berkshire denied coverage under the above-referenced provision, which the District Court calls the “continuous gap provision.” Berkshire then moved to dismiss a handful of the plaintiff’s several causes of action. This decision followed.

The District Court dismissed the plaintiff’s first cause of action, seeking a declaratory judgment that they were owed coverage. The District Court began by noting that declaratory judgment actions commenced (or in this case, removed to) federal court are governed by the federal declaratory judgment act. That act requires there to be an actual controversy allowing the federal court to declare the rights and other legal relations of the parties. The District Court noted that a declaratory judgment is appropriate where the declaration itself would terminate the controversy giving rise to the proceeding. On the other hand, a declaratory judgment is inappropriate under the federal declaratory judgment act where it calls upon the Court to decide present liabilities of one party to another, or where the cause of action is duplicative of any others asserted in the same case.

In this case, the Court dismissed the plaintiff’s cause of action seeking a declaratory judgment, on the basis that it was duplicative of the plaintiff’s breach of contract claim, since both claims arose out of the very same conduct and sought the same relief. The Court also noted that rather than asking the Court to decide upon legal rights and obligations of the parties in anticipation of some future conduct (which the federal declaratory judgment act requires), the plaintiff was using this cause of action to ask the Court to declare Berkshire’s present obligations. Since the underlying action in which the plaintiff was sued was already ongoing, the Court ruled that a declaratory judgment would be inappropriate as the claim was no longer prospective.

Next, the Court examined the above continuous gap provision in assessing the plaintiff’s breach of contract claim. The Court held that the provision on its face barred coverage for the plaintiff’s claim, since there was a three-month gap in coverage between plaintiff’s prior policy and the Berkshire policy. The Court was unpersuaded by the plaintiff’s argument that Berkshire’s representation that the policy would cover the plaintiff for prior work performed, on a claims made basis, since that was a pre-contractual communication, while a breach of contract claim looks only to what is provided by the contract itself.

Lastly, the Court dismissed the plaintiff’s bad faith claim. Under New Jersey law, to sustain a claim against an insurance carrier for bad faith, the plaintiff must show that the carrier had no “fairly debatable” reason for failing to pay the claim, and that the carrier knew and/or disregarded its lack of reasonable basis in denying the claim. The test to determine whether a carrier has a “fairly debatable” reason for not paying a claim is to ask whether the insured could have established a right to summary judgment as a matter of law on its claim at the time of the alleged bad faith conduct. Because the language of the policy on its face barred coverage for the plaintiff’s claim, plaintiff was unable to meet this standard. Also, the Court noted that if a bad faith claim is based on the same conduct as the breach of contract claim, the bad faith claim must be dismissed as supplicative of the breach of contract claim as a matter of law.

 

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

03/24/25       Mitchell v. Praetorian Ins. Co.
United States Court of Appeals, Fifth Circuit
Texas’ Concurrent Cause Doctrine Bars Coverage Where Insured Was Unable to Segregate Covered and Non-Covered Portions of Claim

In September 2020, Mitchell filed a claim with Praetorian, her homeowner’s insurance company. Mitchell’s claim involved damage to her roof, ceilings, walls, and floors. Praetorian initially concluded that her covered loss fell below her deductible and closed the claim. Through further inspection, Praetorian issued a payment on Mitchell’s claim. Additional payments followed. Mitchell claimed the losses were caused by wind, while Praetorian determined the losses were caused by improper tarping and bathtub water spillover, which fell within exclusions.

Eventually, Mitchell invoked her appraisal rights in October 2021. The appraisal process fell apart as Mitchell contested the proposed scope of settlement. Mitchell then filed suit. After prior motion practice Mitchell’s only remaining claims were her breach of contact claim and statutory bad faith under Texas Code § 541.060(a)(3). Praetorian then moved for summary judgment on the concurrent-causation doctrine. In opposition Mitchell relied upon a report that contained her estimated repair costs.

On appeal, the Fifth Circuit explained Texas’s concurrent-causation doctrine. The doctrine applies when covered and excluded events combine to cause a loss and are inseparable, then the policy’s exclusions apply, and no coverage is afforded. It is the insured’s burden to segregate the damage and an inability to do so is fatal to an insured’s claim.

Under this standard, Mitchell failed to segregate the damages. The report she submitted in opposition contained an estimate of repair costs only. What the report did not do was opine on the causes of loss for any damage claimed. So, Mitchell was left with Praetorian’s expert reports that concluded the loss was either excluded or a combination of both covered and non-covered losses that could not be separated.

Editor’s Note: For those wondering, New York does not follow the concurrent cause doctrine. Instead, New York looks to the dominant proximate cause of a loss to determine coverage. (Greenberg v Privilege Underwriters Reciprocal Exch., 169 AD3d 878 [2d Dept 2019]). Meaning if the dominant proximate cause of a loss is an excluded peril, then the exclusion applies. The inverse is also true.

 

03/24/25       First Baptist Church Daisetta Tex. v. Church Mut. Ins. Co.
United States Court of Appeals, Fifth Circuit
Payment of Appraisal Award Precludes Bad Faith Claim Absent Independent Tort or Breach

First Baptist submitted claim for to Church Mutual for wind and hail damage. Church Mutual found the claimed damage was below the policy’ deductible. First Baptist then enforced its appraisal rights. Church Mutual then paid the appraisal award. Not happy, First Baptist filed a bad faith suit under Texas Code § 541 and violations of § 542 of Texas’s Insurance Code. Section 542 is Texas’s Prompt Payment of Claims Act.

Texas law holds that when an insured seeks only actual damages are policy benefits already paid via appraisal, then an insured cannot recover for bad faith. First Baptist’s acceptance of the appraisal award was fatal because it failed to present any evidence supporting an independent tort or breach of any duty. For this reason, the Court of Appeals affirmed the grant of Church Mutual’s motion for summary judgment.

 

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

Still a lull in any cases on serious injury threshold from the Appellate Division. We will try again in two weeks.

 

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

03/20/25       American Tr. Ins. Co. v. Rutland Med., PC
Supreme Court of the State of New York, New York County
Court Grants Motion to Renew Petition and Vacates Master Arbitration Award, Based on Recent December 2023 Plea Allocution Finding Fraud, Corruption, and Misconduct

In 2018, Denisha Walls allegedly sustained injuries in an auto accident, and filed a first party no-fault claim with American Transit Insurance Company (“American Transit”). In relation to the claim, Rutland Medical PC (“Rutland”) sought reimbursement for treatment to Wells, which American Transit denied.

The claims were submitted to arbitration in 2022, and Rutland was issued an award in its favor. American Transit filed a petition to vacate the award, arguing it was procured by corruption, fraud, and misconduct. American Transit submitted a Federal indictment in support of the petition, alleging that the owners of Rutland participated in a criminal scheme to exploit insurance programs designed to protect victims from 2008 through 2021. The indictment alleges that Respondent’s owners used medical professional corporations they owned to bill insurance companies for unnecessary and excessive medical treatments and falsifying clinical findings of injuries.

The original petition was denied on the grounds that the indictment itself was no proof of fraud.

American Transit subsequently moved to renew the petition, submitting a December 18, 2023, allocution in the Federal action against Rutland’s owners. The plea allocution submitted confirmed that the owner pled guilty and agreed “not to dispute” that from 2008 – 2021 the “defendant…unlawfully own[ed] and r[a]n clinics…including…Rutland Medical.” The plea additionally detailed the scheme perpetrated by Rutland’s owners to fraudulently bill insurance companies in relation to No-Fault benefits, and for coaching medical practitioners to lie under oath during Examinations under Oath.

To succeed on a motion to renew, a party must show that there is (1) new facts not offered on the prior motion or (2) there has been a change in the law that would change the prior determination and offer a reasonable justification for the failure to present such facts in the initial motion.

The Court found that American Transit satisfied the requirements of making a motion to renew. The guilty plea and allocution occurred after the underlying arbitration awards were issued and the original petition was filed. As such, American Transit could not have previously relied on the information to make an argument previously.

Based on the recent evidence submitted, American Transit’s motion to renew was granted. Upon renewal, the Court vacated the prior decision, and vacated the arbitration award dated July 22, 2022, and the master arbitration award dated October 25, 2022.

 

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

04/11/25       N.Y. Insurance Law § 3420(g) and 11 NYCRR 60-1
New York State Department of Financial Services
Amendments Made by Chapter 356 of the Laws of 2024 to Insurance Law § 3420(g), Effective March 26, 2025

Previously, motor vehicle liability insurers were required to provide supplemental spousal insurance unless the named insured elected in writing to decline or refuse the insurance in the policy.

Chapter 356 of the Laws of 2024 (“Chapter 356”) amended Insurance Law § 3420(g) to require that motor vehicle liability insurers automatically provide supplemental spousal liability insurance only where the first named insured has indicated that they have a spouse on the insurance application.

Insurers are not required to automatically add or remove supplemental spousal liability (“SSL”) insurance from a policy when the named insured’s marital status changes after policy issuance. The named insured must request the addition or removal of SSL insurance in writing.

If a motor vehicle liability policy does not include SSL insurance, the insurer must notify the first named insured at least once a year that SSL coverage is available. The notifications must be contained on the front of the premium notice in boldface type and include an explanation of the SSL insurance and the premium of SSL insurance. The notification must notify the insured that SSL insurance is included in the policy or available.

 

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

04/04/25       Ockford, et al v. Encompass Ins. Company
United States District Court for the Eastern District of Pennsylvania
An Insurer’s Low Offer, Failure to Conduct an IME, Failure to Settle a Claim Within Full Reserve Authority, and Disputed Causation Do Not Support a Finding of Bad Faith Where the Insurer Acted Reasonably

On December 16, 2022, Plaintiffs, Ockford and Herbst, were struck by a car, while walking across the street in Newtown, PA. The tortfeasor had liability limits of $25,000. Plaintiffs had an auto policy with Encompass Insurance, providing $100,000 per person in UIM coverage, stacked by two vehicles, for a total of $200,000 per person in UIM benefits. Plaintiffs reported the accident to Encompass on December 22, 2022, and Encompass opened a UIM claim on January 3, 2023. Beginning on January 9, 2023, Encompass periodically contacted Plaintiffs' counsel for information concerning Plaintiffs' injuries, treatment, treatment plans, wage loss, and photographs. Plaintiffs were still treating through September 2023. Upon consent by Encompass, Plaintiffs settled with the tortfeasor for its limits in November 2023. On December 7, 2023, Encompass received emergency room medical records from Plaintiff and was advised further medical records were forthcoming. Based on the medical evidence provided, Encompass made an offer, subtracting the tortfeasor’s payment, to Plaintiffs on December 11, 2023. Further medical records were sent to Encompass in January and March 2024.  Encompass made 2 more offers to settle in January and March.  

In April 2024, Plaintiffs filed suit in state court claiming breach of contract and bad faith, pursuant to 42 Pa. C.S.A. § 8371. The case was removed to Federal Court. In January 2025, while litigation was pending, Mr. Herbst's UIM claim was resolved. Encompass filed a motion for partial summary judgment, seeking dismissal of the Plaintiffs’ bad faith claims.

Recovery for bad faith under PA statutory law requires a plaintiff must show (1) that the defendant did not have a reasonable basis for denying benefits under the policy; and (2) that the defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim. Absent a definition in the statute, PA has defined bad faith to be any frivolous or unfounded refusal to pay proceeds of a policy. Bad faith is a high burden to meet. It must be proven by clear and convincing evidence and not merely insinuated. The Court, citing to Bostick v. ITT Hartford Grp., 56 F. Supp.2d 580, 587 (E.D. Pa. 1999), noted   “[T]his heightened standard requires the insured to provide evidence ‘so clear, direct, weighty and convincing as to enable a clear conviction, without hesitation’  about whether or not the defendants acted  in bad faith”. Ockford v. Encompass Ins. Co. at 9.

To defeat bad faith, a reasonable basis for an insurer’s actions or omissions is needed. The Court found Encompass’ reasonable basis for its actions and omissions and addressed each of Plaintiffs’ allegations. Plaintiffs first alleged Encompass’ initial offer of $3,000 and $10,000 respectively to each Plaintiff was highly unreasonable. The Court disagreed. A low offer is not treated as bad faith if there is a reasonable relationship to the insured’s loss.  The Court found the initial offer reasonable considering the medical records received as of the offer date. Plaintiffs also argued that Encompass’ increase in the offers to $32,000 and $91,000 respectively, despite no significant changes with Plaintiffs' medical conditions, were arbitrary. Distinguishing two cases Plaintiffs cited wherein allegations of bad faith were sufficient to deny summary judgment, the Court found that there was a precipitating event to explain the increased offers. Encompass increased the offers when it received additional information involving Plaintiffs' medical treatment and wage losses. The Court also dismissed Plaintiffs’ arguments that the offers were lower than the reserves. Failure to settle a claim within the full authority of the reserves is not bad faith. The court indicated its reluctance to set a rule requiring an insurer to make an offer reflecting the reserves when set.

Plaintiffs next argued Encompass failed to require Plaintiffs to submit IMEs prior to litigation to better understand Plaintiffs' injuries and the value thereof. Under Federal and PA law, failure to timely obtain an IME is not bad faith. Given the limited medical records Encompass received initially, it had little, if any, time to schedule an IME or EUO. An Encompass representative set forth, when asked about the failure to schedule an IME, that an IME based on ER records and lien information, without treatment records, would not have been fruitful. Encompass was diligent about making offers and following up on medical records. After the latest offer, Encompass asked for further medical records, wage loss information and all radiological reports and films. Encompass advised Plaintiff that it may request EUOs and IMEs in the future to assist in an evaluation. Plaintiff filed suit in April 2024 without providing any additional information.

Finally, Plaintiffs argued that Encompass acknowledged conflicting testimony as to whether Ms. Ockford suffered a herniated disc in response to Plaintiff’s’ expert report indicating that Ms. Ockford suffered lumbar herniations because of the accident.  Addressing well-settled law, the Court held a disagreement on causation or value is not sufficient to establish bad faith.

 

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

03/14/25       Busato v. Gore Mutual Insurance Company
British Columbia Court of Appeal
The Reference to the Wrong Statute in a Marijuana Exclusion Found in a Homeowners’ Policy Introduced Ambiguity as to Whether That Exclusion Applied to the Cultivation of Marijuana for Medical Purposes Under License; In View of That Ambiguity, This Exclusion Did Not Apply to Exclude a Fire Loss

Anthony Edward (“Tony”) Busato suffers from chronic, debilitating, spinal and shoulder pain – the result of five surgeries that he underwent between 2006 and 2013.  In June 2013 Health Canada gave him a license to cultivate marijuana for personal/medical use. He could cultivate up to 73 plants and possess up to 450 gms. The initial license was extended in March 2014 “until the Court otherwise orders”.

Until 2018, marijuana was listed as a controlled substance in Schedule (Section 2) of the Narcotic Control Regulations, C.R.C., c. 1041 (2017), enacted under the Controlled Drugs and Substances Act, S.C. 1996, c. 19 [CDSA].

In 2017, Mr. Busato lived on Vernon Avenue in Peachland, British Columbia. His home was a single storey, well-kept bungalow, situated on a terrace overlooking Lake Okanagan, about a half hour by car south of Kelowna, and about 20 minutes north of Summerland.

On Sunday, April 23, 2017, a fire started accidentally in Mr. Busato’s kitchen that rapidly engulfed his home. He lost everything.

Mr. Busato insured his home with Gore Mutual Insurance Company. The policy was originally issued in 2014 and renewed annually through the fire. Gore investigated and determined that the fire did indeed start in the kitchen. But that investigation also revealed his licensed marijuana grow operation, consisting of about 25 plants. On May 16, 2017, Gore denied coverages for all losses arising from the fire on the basis of the following exclusion:

We do not insure direct or indirect loss or damage, in whole or in part: [. . .]

to dwellings or detached private structures or unscheduled personal property contained in them, used in whole or in part for the cultivation, harvesting, processing, manufacture, distribution or sale of marijuana or any product derived from or containing marijuana or any other substance falling within Schedule (Section 2) of the Controlled Drugs and Substances Act Narcotic Control Regulations; regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage

The exclusion refers to substances listed in the “Controlled Drugs and Substances Act Narcotic Control Regulations”. There is not now, nor was there at the time of the fire, a statute or regulation with this title. The Regulations are enacted under the CDSA.

Following the discovery of the legal grow op, Gore did not void the policy and refund the premium.

Mr. Busato retained counsel who filed an action against Gore. Gore defended on the basis that the exclusion covered a class of property that it did not agree to insure; that is, property used for the cultivation, harvesting, or processing of marijuana.

The action was heard under summary trial procedure on November 15, 2021.

The Trial Judgment

The parties and the Court relied on a 2010 Ontario trial judgment, Pietrangelo v. Gore Mutual Insurance Company, that was upheld on appeal, where the Court in that case interpreted an identically worded exclusion issued by the same insurer. In that case, the insured owned a rental property. The trial judge described the tenant as “… a person of questionable character and of even more dubious entrepreneurial ability.” The tenant decided to use part of his stash to make marijuana resin. He used several canisters of butane gas and tubing to heat the marijuana and turn it into a liquid. Instead of producing resin, he caused an explosion, and “… in the ensuing fire [the tenant] and his friend … were badly burned, and the house destroyed.” The tenant pleaded guilty to two criminal offences: intentionally or recklessly causing damage by fire or explosion to a dwelling house and unlawfully producing cannabis resin. The insured was unaware of the tenant’s activities.  The insured were described by the trial judge as a diligent and innocent landlord. Citing the marijuana exclusion set out above, Gore denied coverage. That court held:

On a plain and simple reading, the Marijuana Exclusion can be seen to consist of three separate and distinct elements: the first relating to marijuana; the second relating to any product containing or derived from marijuana; and the third relating to any other scheduled substance. These distinct elements are not conjunctive; each is set off by the disjunctive “or.” Thus, the excluded property includes: (a) property used for the processing, manufacture, or sale of marijuana, or (b) any product derived from or containing marijuana, or (c) “any other substance falling within Schedule (Section 2) of the Controlled Drugs and Substances Act Narcotic Control Regulations.”  Mr. Arquette’s activity is caught by the second of these disjunctive elements. Any ambiguity arising from the unclear, inaccurate wording in the third element does not and cannot reasonably be seen to derogate from the clear meaning of the first or second element.  Because the elements are disjunctive, the meaning of one is not modified or altered by another.

Mr. Busato argued in this case that the marijuana exclusion is lengthy, poorly drafted, inherently confusing, and ambiguous. The trial judge disagreed, holding that the exclusion is not ambiguous: citing Pietrangelo, the poorly worded third category does not implicate the other two clear instances where the exclusion applies.

Mr. Busato then argued that the exclusion is ‘clearly’ directed at illegal marijuana cultivation. The trial judge disagreed, stating that on a plain reading, it excludes all marijuana-related uses of insured property, whether the uses are legal or illegal. To restrict it to illegal marijuana uses would be an unduly narrow and inconsistent interpretation of the plain wording of the Exclusion.

Mr. Busato then argued that for the exclusion to apply, the fire must have arisen from marijuana cultivation. The trial judge again disagreed, holding that it was not persuaded that the Exclusion requires the insured’s marijuana-related activities to have caused the fire. Rather, citing Pietrangelo, the exclusion removes from coverage all dwellings, used in whole or in part, for any marijuana-related activities, regardless of the cause of the loss.

Mr. Busato then argued that he was entitled to relief from the forfeiture of his insurance, citing s. 32 of the British Columbia Insurance Act that it is unjust and unreasonable for the Court to apply an exclusion that is not causally related to the loss:

 

The trial judge held that the Supreme Court of Canada stated in a decision known as Marche that is not necessary for a breach of condition to be casually related to the loss and therefore Mr. Busato’s argument failed.

For these reasons, the trial judge held that Gore was entitled to rely upon the exclusion to deny coverage for the loss.

The Appeal

Mr. Busato appealed the trial judgment to the British Columbia Court of Appeal. The Court of Appeal found that the exclusion is ambiguous and cannot be relied upon to deny the fire loss.

With reference to Pietrangelo, the Court of Appeal stated that Gore is relying upon the first and third categories excluded by the marijuana exclusion. The third category was found to be “unclear, inaccurate” in Pietrangelo. This creates an ambiguity that cannot be resolved using general rules of construction: “It surely cannot be said that the average person would instinctively read the exclusion as containing “… three distinct subcategories of excluded coverage; each … separated by the disjunctive ‘or.’  Nor can it be said that the average person would be capable of correctly parsing a reference to incorrectly cited legislation and its accompanying regulations and schedules.”

Mr. Busato’s argument that the marijuana exclusion is aimed at limiting the risks associated with the cultivation of illegal drugs demonstrates this ambiguity as that is an alternative, reasonable interpretation of the exclusion. The Court of Appeal then stated:  “I accept that …[Mr. Busato]… did not give evidence about his expectations but it is reasonable for an insured party to expect that an exclusion, which is drafted in a way that targets illegal activity, would not apply to their legal use of property.”

The ambiguity must be resolved against Gore who had the opportunity since 2010 when the Pietrangelo decision was issued to modify the marijuana exclusion to remedy the confusion generated by the inaccurate statutory references. When reading contra proferentum in this fashion, the exclusion does not apply to exclude Mr. Busato’s fire loss.

The Court of Appeal elected to provide comment on the relief from forfeiture argument, even though it was not required to do so, given the findings on ambiguity. In that regard, that Court stated that Marche stands for the proposition that the relief from forfeiture provisions apply where the terms or conditions produce unjust or unreasonable results: Marche at paras. 10–11.  Unjust or unreasonable results may flow from the operation of an exclusion clause as well as a breach of condition, and, therefore, these ameliorating provisions that exist in all common law provinces apply to both exclusions and conditions.  However, this is an equitable remedy. It is contrary to the principles of utmost good faith to apply relief from forfeiture principles where there has been deliberate concealment by the insured of material changes to risk.

In this case, the trial judge erred as she considered the exclusion in the abstract and did not consider whether the operation of the exclusion, in these circumstances, resulted in an unjust or unreasonable result for Mr. Busato.  Gore did not offer evidence of the underwriting intent as to why the marijuana exclusion should apply to licensed and therefore legal marijuana grow operations.  The trial judge improperly relied on the Pietrangelo decision to justify her decision not to extend relief from forfeiture. Here “… [Mr. Busato] … was using medicinal marijuana to relieve chronic and debilitating pain experienced following back surgery. He sought and obtained a license that permitted him to grow up to 73 marijuana plants. He had 25 plants at the time of the fire. While not determinative, the cause of the fire had nothing to do with his marijuana plants, and, as the trial judge found, and there was no suggestion that the appellant misled or misrepresented the insurer in any way… In my view, these circumstances support a finding that it would be unjust or unreasonable to give effect to the exclusion.” (emphasis added). The Court of Appeal concluded by stating that “, if it were necessary to do so, I would grant relief from forfeiture under s. 32 of the Act.”

Comment

There was no discussion at trial or on appeal as to whether Mr. Busato had told his broker that he grew licensed medical marijuana. The Court of Appeal stated that there was no suggestion that Mr. Busato misled or misrepresented that fact to his insurer – however, there does not seem to be an evidentiary reference to that conclusion.

The Court of Appeal seemed to be particularly frustrated by Gore Mutual's failure to correct the statutory reference in the marijuana exclusion clause, despite the nearly seven years that had elapsed following the issuance of the Pietrangelo judgment which highlighted the error and the confusion it caused. This appeared to motivate the Court of Appeal to identify ambiguity in the clause, ultimately leading to a reversal of the trial court's decision. A secondary issue was the fact that Gore failed to distinguish between licensed, legal, marijuana grow operations and those that are illegal and failed to provide any evidence as to why, from an underwriting perspective, they should have the same level of exclusion.

 

 

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