Coverage Pointers - Volume XXVI No. 8

Volume XXVI, No. 8 (No. 681)
Friday, September 27, 2024
A Biweekly Electronic Newsletter
 

As a public service, Hurwitz Fine P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York and Connecticut appellate courts and Canadian appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.

In some jurisdictions, newsletters such as this may be considered Attorney Advertising.

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.

You will find back issues of Coverage Pointers on the firm website listed above.

 

 Dear Coverage Pointers Subscribers:

Do you have a situation? We love situations.  We love your feedback – do drop in and say “hi” from time to time.

It surely feels like autumn is finally arriving in Western New York and Southern Ontario.  I’m living in the wrong climate, because I do not like cold weather. So, I consider the first day of autumn, “one day closer to spring.”

Slowly but surely the courts are awakening after a long summer slumber.  There are a number of very interesting cases in the attached issue of Coverage Pointers, including a “voluntary payment” opinion out of the First Department, a case about the impact of suit limitation clauses, a subro discovery case out of the Northern District of New York, yet another COVID business interruption case out of the First Department, an examination of claims made coverage in New Jersey, CD case out of the Fifth Circuit, and so much more.

We have exciting news about new hires, but we’ll have to wait to announce that news at a later date. 

 

Our staff is ready to assist you, in New York, Connecticut, New Jersey and beyond. We really do love situations and at least once a week, a call or file comes in with someone telling me that they have one!

Ryan Maxwell and I had the honor and pleasure of participating in the New York Insurance Association’s Insurance Roundtable earlier this week, and we spoke about the “cooperation clause” in liability policies.  Our talk was entitled, How Uncooperative is Uncooperative?.  If you’re interested in securing the outline of our talk, let me know.

Let’s salute Arthur Elliot (“Buddy”) Crump, who debuted for the New York Giants one hundred years ago tomorrow, which was his first and last game in the bigs.  He went 0-4 in the penultimate game of the regular season, played center field, and never wore a Major League uniform thereafter.  He coached in the local leagues, served in the military, married, became a housepainter and died at age 76.  But he did do something that few have done.  He played in the Majors.

 

Intercompany and Coverage Mediation Services are available.

For insurers preferring a less expensive method of resolving disputes between and among insurers or between and among policyholder and insurers, give me a call.  You don’t want the expense of litigating every matter or, even worse, creating precedent that may haunt you for years to come.

 

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.

 

[INSERT HEADLINE HERE] – 100 Years Ago:

The Buffalo News
Buffalo, New York
27 Sept 1924

“SILENT” CARSON’S LIPS
REMAIN SEALED TO END

Notorious Bandit Dies After Maintaining Silence for Fifteen Years.

STOCKTON, Cal., Sept. 27. – “Silent Carson, former notorious bandit, is dead. He died maintaining the silence he had preserved for 15 years, and which had saved him from the gallows.

Charles Carson, whose real name was Corcorcan, had a long prison record, beginning in New York, when he was nine years old. Other terms in prison followed. While confined in the Folsom, Cal., penitentiary in 1907, he was one of seven convicts who captured Captain J. R. Murphy and Guard Jolly, as well as all of the convicts. Were wounded, four of the prisoners fatally.

Carson was sentenced to be hanged for his part in this affair and in September 1909, while occupying a cell in the condemned row awaiting execution, he suddenly stopped talking. No intelligible word ever was heard to pass his lips again.

He was subjected to many tests by alienists and finally in January 1913, was declared insane and committed to the hospital for the insane here, where he died Wednesday. The insanity verdict provided that if he ever recovered his sanity the sentence of death would be carried out. Even the announcement in February 1917, that Governor Hiram W. Johnson had commuted his sentence to life imprisonment in case of recovery, failed to bring a single syllable from him.

Editor’s Note:  I always liked hoodlum nicknames. 

 

Peiper on Property (and Potpourri):

Another COVID claim, another COVID claim dismissed. Ho-hum.  The Appellate Division, First Department again found that the pleading, at a minimum, needed to assert direct physical loss to avoid summary dismissal.  This decision should not come as a surprise as the Court of Appeals, as well as almost every other appellate court at this point, has already weighed in on this issue. 

The Second Department issued two interesting first party decisions this past week as well, however, and they both deserve further discussion.  The first, Fifth Avenue Properties, addresses the evolving issues of proof on insurance summary judgment motions.  AIG’s motion was dismissed not because they failed prove the exclusion referenced in their disclaimer was applicable, but rather because they failed to further disprove any other potential cause of loss.  In simpler terms, their proffered expert demonstrated why AIG was correct but failed to demonstrate why plaintiff’s opposition was wrong.  Having failed to, essentially, disprove alternative theories on the cause of loss, AIG was ruled to have not met its burden. 

This case follows a similar decision from the Third Department earlier this year.  If you are moving for summary judgment, it may not be enough to simply prove your position. You, too, must disprove your opponent’s position to successfully petition the court for summary judgment.    

The final case that requires some additional ink is the Filasky decision.   This comes up from time to time, so we’ll repeat it again here. 

• The suit limitation clause IS NOT a statute of limitation. 

• It is also not a coverage defense. 

• It is a contractual limitation on when an insured can challenge a proffered coverage defense. 

You cannot, as the carrier appears to have tried here, disclaim coverage after the expiration of the suit limitation, and then rely upon it to inoculate you from a challenge to the very reason expressed for the denial.

Further, as an aside, a one-year suit limitation clause is unenforceable under a fire policy because it violates the standard fire policy set forth in Insurance Law 3404.  It is converted, immediately, to a two-year suit limitation clause to reconcile with the mandatory minimum fire coverage.  This is a point, apparently, overlooked by the parties and the court. One wonders how this may have turned out if the carrier had argued that the suit limitation clause was two years, and thus plaintiff had approximately a year from the inception of the coverage dispute to exercise its rights under the contract.   

That’s it for this week.  See you in two more. 

Steve
Steven E. Peiper
[email protected]

 

High School Dress Codes – 100 Years Ago:

The Buffalo News
Buffalo, New York
27 Sept 1924

STUDENTS BITTEN BY
DRESS REFORM BUG

OLEAN, Sept 27. – Dress reform has struck the Olean High school. Many of the students wore old clothes to school Friday. Heavy flannel shirts and old trousers were the most popular. A member of the freshman class who appeared in cute golf stockings and knickers was given the “bum’s rush.” Members of the faculty broke up an attempt of the students to have a huge dress reform demonstration. The physical director, learning from the students that bow ties were passe, took off the one he was wearing. Sweaters are taboo, according to students.

Olean district of the Baptist church will have its annual Sunday school convention in Olean Thursday, October 9. The sessions will be in the First Baptist church, in South street. The afternoon one will be at 2:30 o’clock and the night one at 7 o’clock. Rev. Charles A. Briggs of Syracuse, and Miss Margerette Grove of Buffalo will address the convention.

 

Barnas on Bad Faith:

Hello again:

October is almost here and with it one of the two best months on the sports calendar is upon us.  We have playoff baseball starting, the NHL and NBA seasons getting underway, and the National Football League, college football, and the Premier League are all in full swing.  We are even down to the last 12 of the NASCAR playoffs for my fellow race fans out there.  The jam-packed sports schedule does not leave much time for Fall Activities, but we will try to squeeze a few of those in as well.

I have two cases from closer to home than normal this week.  The Mandarin case is a COVID-19 coverage case with different language from the normal direct physical loss language that we have seen so many decisions on.  The court allowed the breach of contract claim to go forward.  It also allowed the insured’s good faith and fair dealing claim based upon alleged bad faith claim handling to proceed.  The other case is an interesting trial court decision from Bronx County where the defendants’ insurer sought to pay its policy limits into court after an excess verdict.  The plaintiff opposed, arguing that a pending bad faith claim precluded the relief requested.  The court disagreed with the plaintiff, holding that paying the amount of the policy limit into court only stopped interest from running on that amount and had no impact on the pending and still unproven bad faith claim.

Brian
Brian D. Barnas
[email protected]

 

Compulsory Auto Insurance is Coming – 100 Years Ago:

The Buffalo News
Buffalo, New York
27 Sept 1924

The Motor Budget

***

          This year and the next,  there is going to be a lot of agitation in many states over the proposal for compulsory automobile liability insurance. All this bard wants to know about compulsory insurance is that in Switzerland, where it is being given a very thorough tryout, it has increased the number of accidents, due to the lessening of personal responsibility. If it works that way in Switzerland where there are few cars. What would it do in this country? The sensible driver, however, will continue to carry liability insurance, and will consider it a real asset although not one which lowers his responsibility.

 

Lee’s Connecticut Chronicles:

Dear Nutmeggers:

The band Bowling For Soup wrote, “The truth is getting old sucks, but everybody’s doing it…but we’re doing it right.” I found comfort in those lyrics recently as I struggled to recover from a San Francisco to Hartford red eye. A younger me would have easily hit the ground running after an 11:30 pm departure and 10 am arrival (including a two-hour O’Hare layover spent entirely in a Starbucks line). But the older me savored the long weekend my wife and I spent touring wine country and catching up with a dear friend. These moments and experiences more than make up for the stiff muscles and sleep deprivation. Yes, we’re getting older but we’re doing it right.

The Connecticut courts, I’m sad to say, didn’t seem to do it right. In this edition, we highlight two highly suspect coverage decisions – one involves the pleading standards and the other involves how to read a separation of insureds provision. If you think I’m wrong and the courts got these two cases right, shoot me a line and let’s discuss.

Until next time, get your COVID booster and keep keeping safe.

Lee
Lee S. Siegel
[email protected]

 

Grand Jurors Need Higher Pay than $3/Day – 100 Years Ago:

The Buffalo News
Buffalo, New York
27 Sept 1924

MORE PAY FOR FEDERAL
GRAND JURORS ASKED

Judge Hazel Will Forward Recommendation to Attorney General.

CANANDAIGUA, Sept. 27. – Recommendations that the pay of federal grand jurors be increased from $3 to $5 a day, were made to Judge John R. Hazel by members of a grand jury which made its final report here yesterday afternoon. Judge Hazel told the jurors that while he is thoroughly in sympathy with such an increase, he has no jurisdiction in the matter other than to forward the recommendation to the attorney general, He urged the jurors to interest Senator James W. Wadsworth and congressman John Taber in the matter to the end that the law fixing salaries of federal grand jurors be changed.

 

Kyle's Noteworthy No-Fault:

Dear Readers,

Happy Fall! Great to see the Bills off to such a fast start this year – looking forward to getting out to the stadium for a game soon.

In this week’s no-fault case, the insurer brought a summary judgment motion for declaratory relief that it need not pay any claims arising out of an accident due to the failure to the insured and passengers to attend an examination under oath. However, the court denied the motion on the basis that the insurer did not sufficiently establish grounds for the investigation and requesting EUOs.

Kyle
Kyle A. Ruffner
[email protected]

 

Minister Caught with His Pants Down? – 100 Years Ago:

The Buffalo News
Buffalo, New York
27 Sept 1924

REV. PENFOLD
WILL APPEAL
HIS SENTENCE

          Minister Convicted of Out-raging Public Decency Spends Two Hours in the County Penitentiary and Is Released in $500 bail.

The Rev. Charles Penfold, pastor of Sentinel M. E. church, spent two hours in the county penitentiary at Alden yesterday as a prisoner following his commitment there by Judge Rozan of Cheektowaga to serve a sentence of 30 days for outraging public decency. The minister was fined $50 in addition.

The Rev. Mr. Penfold was arrested on Tuesday, September 16, in East Delavan road, Cheektowaga, in company with a woman. He told three constables who approached his automobile that the woman was his wife. At his trial the Rev. Mr. Penfold swore his companion was Mrs. Penfold. The woman also swore she was his wife. Judge Rozan found the Rev. Mr. Penfold guilty of outraging public decency with his companion.

Three days later the woman was arrested and repudiated her former statements made under oath that she was Mrs. Penfold. Her trial on a charge of outraging public decency is to be held in Cheektowaga Tuesday evening. She is Mrs. Freda Lohr, a singer in the Rev. Mr. Penfold’s choir, the mother of four children and a clerk in an east side department store. Her home is at 351 William street.

 

Ryan’s Federal Reporter:

Hello Loyal Coverage Pointers’ Subscribers:

By the time this edition comes out, I will have already made a fool of myself on the links as part of the NYSSIU 10th Anniversary Golf Outing at Kaluhyat Course, Turning Stone Resort, Verona, New York. To the other three of my foursome, I am truly sorry. I did hit that one shot we used (I hope), my irons were at least respectable, and my putter worked its magic once. That said, I take everything back in the unlikely event that I straighten my driver out by 1:20pm (it’s a longshot, I know).

My column this time ‘round highlights a NDNY decision from earlier this week, which involved the requirements of an insurer responding to document and interrogatory requests in a subrogation action. Be careful whose shoes you stand in…

Until next time,

Ryan
Ryan P. Maxwell
[email protected]

 

Staten Island Ablaze – 100 Years Ago:

The Buffalo News
Buffalo, New York
27 Sept 1924

$750,000 FIRE SWEEPS
STATEN ISLAND RESORT

Four Hotels, 65 Summer Homes Razed at Midland Beach

NEW YORK, Sept. 27. – Heaps of smoldering runs today cover the area occupied yesterday by Midland Beach, as amusement resort on the south shore of Staten Island. Property valued at approximately $750,000, most of which was owned by John C. Hinchcliffe of Paterson, N.J. was destroyed by a five-alarm fire of unknown origin in spite of the efforts of the entire Staten Island fire-fighting forces, 14 companies from Manhattan and three fireboats. Although the flames spread rapidly under the impetus of a strong wind, no one was injured.

Four Hotels and 65 summer homes in a nearby bungalow colony which were destroyed were but inadequately covered by insurance. Three hundred families have been ordered by the fireman to vacate their dwellings and half of them had removed their furniture to points of safety when the wind shifted and turned the flames in another direction.

The crowds which flocked to the scene from all parts of the island became so unmanageable that all available reserves were summoned to keep them out of danger. The flames were plainly visible to thousands of persons in Brooklyn, Manhattan, Long Island, and New Jersey.

 

Storm’s SIU:

Hi Team:

One interesting case this edition:

• Action for Wrongful Use of Civil Proceedings by Dr. Who was Accused of Insurance Fraud by Insurer Dismissed on Statute of Limitations Grounds.

Let’s talk again in two weeks!

Scott
Scott D. Storm
[email protected]

 

Arson in the Flower City – 100 Years Ago:

Democrat and Chronicle
Rochester, New York
27 Sept 1924

ON TRIAL FOR ALLEGED
FALSE INSURANCE CLAIM

Ralph Blumenthal was placed on trial in County Court yesterday charged with filing a false claim to recover $2,000 insurance on furniture he claimed was burned when fire broke out in his former residence, No. 73 Birr Street, on April 3^rd.

The claim was rejected by the insurance company, represented by James G. Clements. It is claimed that investigation proved that much of the furniture listed by Blumenthal was not in the house. Battarion Chief George J. Moran, of the Rochester Fire Department, was a witness for the people.

Although Blumenthal was indicted on May 7^th, he could not be found until about six weeks ago, when he was arrested at Sodus Point. He is at liberty in $2,000 bail.

Hampton H. Halsey defense attorney objected yesterday to Agent Clement’s taking the proofs of loss from Blumenthal. An Adjournment to Monday as taken to permit getting proper authority from New York.

 

Fleming’s Finest:

Hi Coverage Pointers Subscribers:

In this week’s case from the Maine Supreme Judicial Court, the plaintiff obtained a settlement from her deceased spouse’s employer, so the exclusivity and immunity provisions of the workers’ comp law barred her from pursuing an action against the husband’s co-employee.

See you in a fortnight,

Kate
Katherine A. Fleming
[email protected]

 

Chinese Overflow Jails – 100 Years Ago:

The Buffalo News
Buffalo, New York
27 Sept 1924

JAIL FILLED; CHINESE
HAVE NO PLACE TO GO

Eighteen Laborers Arrested Near Binghamton Are Problem for Immigration Men

Eighteen Chinese, arrested by United States marshals near Binghamton today as being illegally in this country, will not find a warm welcome from the immigration authorities when they arrive in Buffalo this afternoon.

The Erie county jail is now housing its capacity quota of prisoners and Jailer Lieb told the government officers that he had no room for the Chinamen, when quarters were sought for them in the county prison.

Inspector Shirley D. Smith, in charge of the Buffalo immigration district, said he had no idea just what would be done with the Chinese when they arrive.

The Chinamen were arrested, Inspector Smith said, after complaint had been made that they were employed in road construction work near Binghamton. All of them are thought to be deserters from foreign ships which have touched at American ports.

 

Gestwick’s Garden State Gazette:

Dear Readers:

Happy fall! My favorite season by far. Life is busy, between working and packing to move a few towns over with my girlfriend. This will be my third move in as many years and will hopefully be the last for a while.

Fear not, as I have made time to find a case for you. This one addresses a claims made and reported policy in the face of New Jersey legislation requiring home inspectors to maintain professional liability insurance. An individual hired a home inspector to, you guessed it, inspect their home, and the inspection was performed negligently, causing damages to said individual. After obtaining defaults against the home inspector in the underlying tort action, the customer brought this direct action against the carrier. The customer argued that the policy, written on a claims made and reported basis, should be reformed to be written on an occurrence basis, since the former basis deprived her of benefits under the policy in the face of legislation requiring home inspectors to carry E&O insurance. The Court disagreed, upholding New Jersey precedent standing for the proposition that this is better addressed by new legislation or regulation, rather than judicial reformation of insurance policies.

That’s it for two weeks. Time to hit the links at the NYSSIU charity golf tourney. See you in two.

Evan
Evan D. Gestwick
[email protected]

 

When There’s a Will, There’s a “Weigh” – 100 Years Ago:

The Brooklyn Daily Times
Brooklyn, New York
27 Sept 1924

To Judge Amount That Baby Eats,
Weigh It Before and After Meals

By MYRTLE MEYER ELDRED

In answer to the letter of Mrs. U. W. M.: In the immediate past it used to be considered correct to nurse a baby for twenty minutes. In the modern days the hospitals suggest that seven to ten minutes is sufficient. After all, it is purely an individual matter. A good strong “nurser” can get all he wants and needs in five minutes, while a baby who lags at the breast, who stops frequently to view the scenery, is sure to take from fifteen to twenty. It is better to keep the baby nursing, allowing short intervals for patting up the gas then to allow him to get into the very bad habit of loafing and taking a long time for his meal.

If the baby stops and whines and cried at the breast, pulls away and then comes back again, the mother can feel fairly certain that her breast supply is not sufficient, even though she can express milk from the breasts. Babies who act this way should be kept at the breast until they began to fuss and cry, then they should be given a supplementary feeding of milk and water to make up for the lack in the breasts.

It is a good idea when the mother is in doubt about how much the baby is getting to weigh him before and after nursing – in this way she can judge by the gain in ounces exactly how much the baby has imbibed. (Be sure his diapers are dry at both weighings, a wet diapers would increase the weight). Sometimes it is advisable to weigh before and after each nursing throughout the day and thus get an accurate idea of how much food the baby is getting. This is better than guess work.

 

O’Shea Rides the Circuits:

Hey Readers,

Not much going on in the O’Shea home this month after an eventful summer, aside from the normal day to day. But it looks like October will be a swift change with a couple of upcoming weddings and a yearly Halloween party.

For this edition, I have an interesting case that explains the j(5) and j(6) exclusions found in typical commercial liability policies. The exclusions apply to property damage caused by construction defects. In this case, the Fifth Circuit found the exclusions were inapplicable, one based on the present evidence and the other due to an exception.

Until October,

Ryan
Ryan P. O’Shea
[email protected]

 

Predicting Chaos at the Presidential Election – 100 Years Ago:

The Buffalo News
Buffalo, New York
27 Sept 1924

COOLIDGE OR CHAOS

If the coming election creates a situation that finds no candidate for the presidency with a majority in the electoral college – if the election is thrown into Congress – the business activities of the country will be greatly disturbed. In such a confusing situation as this, enterprise and initiative would be discouraged. If things are to go on well, there must be a positive decision at the polls.

The constitutional provisions to meet such a contingency as has been suggested, with the election thrown into Congress, are so indefinite that there is no certainty as to what would happen. The legal experts moil over the question, but they cannot reach an agreement. Even were the House to make an early choice of president and the Senate of vice-president, there still would be doubts and misgivings in the ranks of business. The choice might come about as a result of a coalition of Democrats and insurgent Republicans. Such a coalition might not hold beyond the first message from the White house. If it did hold, the adjustment would be unsatisfactory. A president would not make much progress riding two horses. As the creature of Congress, a chief executive would cut a sorry figure.

Such a situation is not likely to arise, but it is within the realm of possibilities. President Coolidge is admittedly the strongest candidate in the field, for his party I most strongly organized. The Democratic party is demoralized. John W. Davis is making no headway with his campaign. Senator LaFollette has cut heavily into his support. In the northwestern states only the shadow of Democracy is left. The party practically has been absorbed there is in the contest between Coolidge and LaFollette. In the industrial centers of the East, the Wisconsin candidate has made large inroads into the Democratic ranks. Davis has assurance of support only in the Solid South. If it should appear that LaFollette is gaining sufficient strength to throw the election into Congress, then it will be time for responsible citizens to put aside partisan considerations and unite behind the stronger of the candidates of the two old parties, Coolidge. For if there is not a decision at the polls, assuredly there will be chaos.

Editor’s note:  Some things just don’t change.

 

Rob Reaches the Threshold: 

Dear Readers,

As I hinted at in our last installment, last weekend I got married!!  My new wife, Sydney, and I are so grateful to have had such a wonderful long weekend surrounded by our friends and loved ones, who all gathered to celebrate our union and love. I cannot speak more highly of the venues and vendors that were wonderful for all the events, and to our guests who truly made the day something we will never forget. Five days into marriage and still getting used to the ring, but I cannot wait for countless more. 

Finally, after over a month of barren wasteland of decisions, the Second Department is back up and writing about Serious Injury Threshold. This week, we examine one of those decisions involving an interesting injury claim from a NYC bus passenger, and how courts scrutinized the submissions from each party in motion practice. 

I hope you all enjoy the read.

Rob
Robert J. Caggiano
[email protected]

 

Advice for the Lovelorn – 100 Years Ago:

The Brooklyn Daily Times
Brooklyn, New York
27 Sept 1924

Girl Three Years Older.

Dear Miss Chester:

I am a fellow of eighteen years and am in love with a girl of twenty-one. We have been going pretty steady for the past eight months. I have a very good position and have been around more than most fellows of my age. My girl says there is too much difference in our ages and although she loves me very much says we must part. I want her to wait until I am twenty-one and then we could be married. She has asked me to write to you for advice.

ANXIOUS ROY.

                  Wait Awhile.

Dear Anxious Roy:

Wait the three years and then see how both feel about marriage. You are too young anyhow to think seriously of marrying now. In three years, your girl will be only twenty-four, and that it not long for a girl to wait nowadays. If you both love each other, you will not mind waiting, and I can see no reason for your parting now.

SUSAN CHESTER

 

LaBarbera’s Lower Court Library:

Dear Readers:

Painted my first pumpkins of the season last week. Many more to come…

New York County has been active the past few weeks. This time around, I will be discussing a New York County decision granting Mt. Hawley Insurance Company’s motion for summary judgment. This case has a great discussion regarding ambiguity, I highly suggest the read!

See you in two weeks!

Isabelle
Isabelle H. LaBarbera
[email protected]

 

We Checked – She Was Convicted and Sentenced to 20 Years – 100 Years Ago:

The Buffalo Enquirer
Buffalo, New York
27 Sept 1924

GAVE HUSBAND DEATH

DRINK TO BE FREE TO
WED “STAR BOARDER”

Pretty Matron Bares Horror Story of Murder of
Miner Near Scene of Hight-Sweetin Arsenic Killings in Illinois

Marion, I., Sept. 27. – Mrs. Ruby Harrington Tate today confessed the murder of her husband, Joseph Harrington, a miner, in order to marry Robert Tate, another miner.

The scene of this poisoning at Johnston City, Ill., is in the vicinity of the sensational Hight-Sweetin case.

Constable James P. Sutton, together with two West Frankfort policemen, arrested Ruby, who was married to Tate, September 24, just twenty-one days after the death of Harrington, on order of Sheriff George Galligan of Williamson county,

The police officers and a newspaperman obtained the confession from Mrs. Tate in the county jail here.

 

Lexi’s Legislative Lowdown:

Dear Readers,

I am looking forward to a weekend full of football, starting with the Syracuse football game on Saturday!

This week’s column is an interesting one. This week the Senate sent Bill S9481 to the Governor for signature. This bill seeks to allow stand-alone business interruption insurance. Currently, business interruption insurance is tied to property damage. This bill would seek to amend Insurance Law § 1113(a) to allow for stand-alone business interruption coverage in the event of events not tied to property damage, like a pandemic or an active shooter threat.

Have a great weekend!

Lexi
Lexi R. Horton
[email protected]

 

Sweaters in High School?  Oh Lord, NO! – 100 Years Ago:

The Buffalo Times
Buffalo, New York
27 Sept 1924

SALVATION ARMY
TO TRAIN WIVES

Will Organize Clubs to Educate Incompetent and Slovenly ones.

NEW YORK. Sept. 27. – Commissioner Thomas Estill, head of the Salvation Army in the United States, announced yesterday at a meeting of divisional commanders and general secretaries from Eastern and Southern states that the Salvation Army was organizing the Salvation Army Home League, the purpose of which was to educate incompetent wives.  There would be 5,114 housewives’ clubs formed throughout the East, he said for married women who could not comb their hair.

“Our officers every day meet housewives who have never had a needle in their hands and know absolutely nothing about repairing their children’s clothing,” stated Commissioner Estill; “women who have never owned a toothbrush or nailbrush and make use of soap perhaps once or twice a week; women who haven’t worn a trim, neat garment but, perhaps, ten or twelve times! Women who know how to cook, perhaps, two or three simple dished that their husbands get weary of eating, and women who haven’t the slightest idea as to how to treat minor injuries suffered by their children.

“These are not conditions in some far-off corner of the earth. They exist right here in our own country.”

 

North of the Border:

I’m now 48 hours away from flying to Lisbon, Portugal, with my husband of 40 years to celebrate our wedding anniversary. It is almost impossible to believe that so many years have passed. When we realized our 40^th was creeping up, we decided it was a milestone worth celebrating. One never knows what the future will bring. So just a couple of weeks ago we decided we would head off for a week. We will spend three days in Lisbon, three days in Algarve, then back to Lisbon and home.  It will be grand.

My column this week deals with the interpretation of a second excess claims made and reported policy. Enjoy!

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

 

Headlines from this week’s issue, attached:

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

• Irrebuttable Presumption of Prejudice Leads to a Denial of Coverage where Notice to Carrier Given After Verdict

• Umbrella Coverage of Tortfeasor Not to be Considered When Determining whether SUM Coverage Triggers

• Insured Not Entitled to Pre-Tender Defense Costs. They are Voluntary Payments

 

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

• COVID Business Interruption Claim Dismissed for Failure to Demonstrate Actual Physical Damage

• Expert Proof Incomplete as to Causation and Results in Denial of Motion for Summary Judgment

• Suit Limitation Clause is Not Enforceable when Disputed Work Could not be Completed within One Year of the Date of Loss

 

BARNAS on BAD FAITH
Brian D. Barnas
[email protected]

• Good Faith and Fair Dealing Claim Based On Delayed Claims Handling in COVID-19 Coverage Case Was Not Duplicative of Breach of Contract Claim

• Pending Bad Faith Lawsuit was Not a Basis for Denying Insurer’s Motion to Pay Policy Limits into Court to Discharge Interest Following Verdict in Personal Injury Action

   

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

• Motion to Dismiss CUTPA/CUIPA Denied for Failure to Demand a More Particularized Statement of Allegations

• Liberty Must Defend Household Relatives for Claims of Sexual Abuse

 

KYLE'S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]

• Court Denies State Farm’s Summary Judgment Motion, as Insurer did not Establish a Reasonable Basis for its Investigation

 

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

• Insurer-Subrogee Required To Respond To Discovery Demands Calling For Documents and Information in the Control of Its Insured-Subrogor

 

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

• Action for Wrongful Use of Civil Proceedings by Dr. Who was Accused of Insurance Fraud by Insurer Dismissed on Statute of Limitations Grounds

 

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

• Exclusivity And Immunity Provisions Of Worker’s Comp Law Bar Additional Damages Against Co-Employee Following Settlement From Employer

 

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

• Claims Made and Reported Policies Are Valid Where Legislation Requires Insured to Maintain Coverage, Rather Than Require Insurers to Provide Coverage

 

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

• Defective Work Exclusions in CGL Policy Did Not Apply to Defective Construction of Silos, Still Issue of Fact Due to Ambiguous Arbitration Award

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

• Second Department Affirmed the Decision Granting Defendants’ Summary Judgment Motion Dismissing the Complaint on the Ground That Plaintiff Did Not Sustain a Serious Injury Pursuant to §5102(d) Where Plaintiff Failed to Raise an Issue of Fact

 

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

• Court Determines “Interior Tiling” is Not Ambiguous Based on Dictionary Definition

 

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

• Act to Amend Insurance Law, in Relation to Stand-alone Business Interruption Insurance

 

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

• A Second Excess Insurer that Did Not Receive Notice of a Claim Within the Policy Period is Not Obliged to Respond to that Claim, Where the Policy is a Claims-Made and Reported Policy that Requires Both the Claim and the Report of the Claim to be Made During the Policy Period

 

Stay safe.

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. 000241, 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

Brian D. Barnas

Ryan P. Maxwell

Kyle A. Ruffner

Katherine A. Fleming

Evan D. Gestwick

Ryan P. O’Shea

Isabelle H. LaBarbera

Lexi R. Horton

 

FIRE, FIRST PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]

Michael F. Perley

Scott D. Storm

Brian D. Barnas

 

NO-FAULT/UM/SUM TEAM
Dan D. Kohane
[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
Barnas on Bad Faith

Lee’s Connecticut Chronicles

Kyle’s Noteworthy No-Fault

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

North of the Border

 

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

09/26/24       American Pipe & Tank Lining Co. v. National Union Fire Ins. Co.
Appellate Division, First Department
Irrebuttable Presumption of Prejudice Leads to a Denial of Coverage where Notice to Carrier Given After Verdict

The lower court properly granted Scottsdale's motion for summary judgment declaring that it owed no duty to satisfy a judgment against American Pipe. Scottsdale's policy required a notice of a claim to be given "as soon as practicable." Contrary to IOA's contention, its email chain regarding the judgment and an affidavit of a Scottsdale field consultant, who reviewed the company's business records, established, prima facie, that Scottsdale did not receive notice of the claim until after a verdict had already been rendered in the underlying action.

There being no excuse for the delay, "an irrebuttable presumption of prejudice" applies (Insurance Law § 3420[c][2][B]; Nothing in the record raises a question of fact in opposition. IOA's argument that more discovery is needed as another party could have notified Scottsdale of the potential claim is speculative and thus should be rejected.

 

09/26/24       In the Matter of Berkley Insurance Company v. Schnall
Appellate Division First Department
Umbrella Coverage of Tortfeasor Not to be Considered When Determining whether SUM Coverage Triggers

In determining whether SUM (Supplementary Uninsured/Underinsured Motorists Coverage) triggered, the lower court properly compared the insured's per person coverage with the per incident coverage in the tortfeasor's bodily injury policy Moreover, because it was not clear from the face of the policies whether the tortfeasor's $300,000 per incident policy, which also covered property damage, exceeded the insured's $250,000 per person coverage, the court properly ordered a limited issue hearing’

Finally, the court properly declined to consider the insured's excess insurance in comparing coverage for purposes of determining the trigger for SUM coverage.

Editor’s note:  For trigger purposes, the endorsement defined “uninsured motor vehicle” to include one where:

(3) There is a bodily injury liability insurance coverage or bond applicable to such motor vehicle at the time of the accident, but: the amount of such insurance coverage or bond is less than the third-party bodily injury liability limit of this policy.

However, the maximum sum payments one would be able to secure would be reduced by the payments received from the umbrella policy:

6. Maximum SUM Payments

Regardless of the number of insureds, our maximum payment under this SUM endorsement shall be the difference between:

1. The SUM limit; and

2. The motor vehicle bodily injury liability insurance or bond payments received by the insured or the insured's legal representative, from or on behalf of all persons that may be legally liable for the bodily injury sustained by the insured.

 

09/24/24       Enchante Accessories, Inc. v Navigators Insurance Co.
Appellate Division, First Department
Insured Not Entitled to Pre-Tender Defense Costs. They are Voluntary Payments

Navigators issued a policy of insurance to Enchante, including coverage for personal and advertising injury liability. It also included a "voluntary payments provision," providing in relevant part that "[o]ther than first aid or emergency cleanup costs, no insured shall, except at its own cost, . . . voluntarily make a payment, assume any obligation, or incur any expense for damages [or] loss" without the insurer's prior consent.

 In 2021, Enchante commenced a declaratory judgment action against a competitor, and the competitor interposed counterclaims. On March 30, 2022, plaintiff's coverage counsel submitted a letter to Navigators, asserting that the policy entitled Enchante to a defense in the underlying suit at Navigator’s expense. Navigator’s responded to the tender letter, agreeing to defend plaintiff subject to a reservation of rights and agreeing to pay reasonable and necessary costs for the defense only from March 30, 2022, the date that plaintiff provided notice.

Enchante eventually filed this action, seeking reimbursement of the attorneys' fees and expenses that it had incurred defending the counterclaims, including those that it had incurred before March 30, 2022, and contending that the voluntary payments provision was no bar to coverage.

Enchante loses.  The voluntary payments provision requires the insurer's consent where the insured voluntarily makes payments, assumes any obligation, or incurs any expense for damage. The plain language of this provision encompasses the pre-tender defense costs that Enchante paid to its counsel in the underlying litigation, and therefore bars reimbursement for those costs because plaintiff did not tender the claim to defendant before incurring defense.

                    

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

09/26/24       Envision Healthcare Corp. v. XL Insurance America, Inc.
Appellate Division, First Department
COVID Business Interruption Claim Dismissed for Failure to Demonstrate Actual Physical Damage

Another COVID business interruption case, another win for commonsense policy interpretation.  Plaintiffs’ claims for business interruption were dismissed where the amended complaint did not properly allege “direct physical loss or damage.”  The court reached this conclusion by noting that the complaint did not allege persistent and complete contamination to render the premises uninhabitable and/or otherwise unusable.  Because plaintiff failed to meet this basic threshold, the Appellate Division passed on rendering an opinion on whether the policy also required “actual, physical alteration to the property caused by the COVID particles.” 

The Appellate Court also affirmed the trial court’s dismissal of claims that the interruption was caused by contamination to medical equipment.  Because there was no allegation of the equipment having sustained structural damage, plaintiff failed to state a claim for direct physical damage.

 

09/25/24       Fifth Avenue Properties, LLC v. AIG Prop. Cas. Co.
Appellate Division, Second Department
Expert Proof Incomplete as to Causation and Results in Denial of Motion for Summary Judgment

Plaintiff commenced this action for breach of contract seeking coverage benefits under a policy issued by AIG.  The loss was caused by extensive water damage and resultant mold formation.  AIG denied the claim, apparently, by relying on the exclusions for defective construction and/or defective design.

In reversing the trial court’s summary judgment order, the Appellate Division noted that AIG’s submission did not establish the loss was wholly within the scope of the exclusion.  AIG’s submission established the existence of water and mold damage.  In addition, AIG provided an expert report that opined on the “suspected cause of some of the damage.”  However, because the report did not discount other proposed causes of loss (some of which may have fallen outside the scope of the defective design exclusion), AIG did not meet its burden on summary judgment.  

 

09/25/24       Filasky v. Andover Companies
Appellate Division, Second Department

Plaintiffs sustained a fire loss in 2015 which was covered under a policy issued by Andover.  It appears the ACV was promptly paid without issue.  A dispute arose when Andover released holdback monies to a fire restoration contractor prior to a final inspection.  When the restoration contractor’s work needed revision, and they were already paid, not surprisingly, the homeowners were allegedly left holding the bag. 

In November of 2021, plaintiffs commenced this lawsuit asserting claims sounding in breach of contract, breach of the implied covenant of good faith and fair dealing and fraud.  In response, Andover moved to dismiss on the basis that the claim was barred by the suit limitation clause in the policy, and, otherwise, barred by the applicable statute of limitations.  The trial court granted the motion to dismiss, and plaintiffs appealed to the Second Department.

In resolving the suit limitation clause issue, the Appellate Division acknowledged that such clauses are generally given their plain meaning.  However, the period in which the action may be commenced “must be fair and reasonable” and “in view of the circumstances of each case.”  Here, the one-year suit limitation was unreasonable because repairs could not be completed within that time frame.  Thus, under Andover’s interpretation if the suit limitation was mechanically applied plaintiffs would never have an ability to challenge a dispute that arose during the adjustment of a lengthy claim.  Not surprisingly here, there, the Court refused to apply the contractual limitation to this claim because the dispute did not arise until after the limitation period had expired.   

In addition, the Court also noted that the actions for breach of contract and the breach of the covenant of good faith and fair dealing were timely under the relevant statute of limitations. This is because the claim here accrued on the breach of the agreement which allegedly occurred on January 27, 2016; the date of the inspection of the property which revealed the defective work.  The lawsuit was filed in November of 2021, just under six years later, and, as such, was timely under the CPLR.  In rejecting Andover’s position, the Court noted that the statute of limitations did not trigger on the date of the fire loss.  Rather, again, it was the breach of the agreement that plaintiffs were suing to remedy which controlled the timing.

 

BARNAS on BAD FAITH
Brian D. Barnas
[email protected]

09/19/24       Mandarin Oriental, Inc. v. HDI Global Insurance Company
United States District Court, Southern District of New York
Good Faith and Fair Dealing Claim Based On Delayed Claims Handling in COVID-19 Coverage Case Was Not Duplicative of Breach of Contract Claim

Mandarin commenced an action alleging its insurers failed to honor a special perils provision of the policies by not paying for business interruption losses caused by COVID-19 manifestations within a five mile radius of four of its hotels.  The full policies were not before the court, but they contained an endorsement providing business interruption coverage “in consequence of” infections or contagious diseases manifested by any person while on the premises of the insured or within a five mile radius thereof.  The endorsement contained a $10 million per occurrence sublimit.

Mandarin alleged that four of its hotels were impacted by the COVID-19 pandemic and that there were manifestations of COVID-19 within five miles of each hotel.  Mandarin notified Defendants of its claims by email on March 24, 2020.  The parties corresponded through the end of 2020 regarding the claims.  It was alleged that no written coverage position was taken.  Mandarin alleges that it sustained almost $70 million in losses and that no payments were made.

Mandarin filed a lawsuit against its insurers.  The first count sought a declaratory judgment that the policies provide coverage.  The second count asserted breach of contract.  As part of the breach of contract claim, Mandarin also alleged that the insurers violated the implied covenant of good faith and fair dealing.

The allegations supporting the good faith and fair dealing claim were as follows: not attempting in good faith to effectuate prompt, fair, and equitable settlements of the claims submitted in which liability had become reasonably clear; failing to advance any payment of claims when liability had become reasonably clear; failing to advise Mandarin of acceptance or denial of the claim; and compelling Mandarin to initiate the suit to recover amounts due under the policies.  Mandarin sought approximately $223 million in damages as a result of the breach.

The court denied the motion to dismiss the breach of contract claim.  The parties disputed what degree of causal relationship the endorsement’s “in consequence of” language required.  The court identified the core question as how far the causal chain reached between the business interruption and the infectious or contagious disease manifested by a person within the five mile radius of the hotel.  The court found the complaint alleged sufficient facts on causation within the language of the endorsement that dismissal was inappropriate.  At the pleading stage and without the full policies, the language was not so clear as to impose a demanding causation requirement that would preclude the breach of contract claim from going forward.

The court also declined to dismiss the good faith and fair dealing claim.  The court rejected the insurers’ argument that the claim was only supported by conclusory allegations.  Mandarin alleged it notified its insurers of its claims by March 24, 2020, that it identified the details of loss for each hotel location, that it timely submitted to Defendants supplemental information about its claims and damage calculations, that it had paid all applicable premiums under the policies and otherwise complied with any obligations or conditions of the policies, and that neither Defendant provided Mandarin with a written coverage position letter in the normal course of its handling of the claim or otherwise attempted to satisfy its coverage obligation.  The court also found the Complaint alleged the specific conduct that triggered breach of the implied duty.

In addition, the argument that the claim was duplicative of the breach of contract claim was rejected.  The breach of contract theory was based on the failure to pay covered losses, while the breach of the implied covenant theory rested on the alleged bad faith in engaging with the claim and the delayed claims handling process.

The court did dismiss the request for a declaratory judgment.  It found that the parties’ rights would be adjudicated through the breach of contract claim in the same action.

 

09/13/24       Lewis v. Ganesh
New York State Supreme Court, Bronx County
Pending Bad Faith Lawsuit was Not a Basis for Denying Insurer’s Motion to Pay Policy Limits into Court to Discharge Interest Following Verdict in Personal Injury Action

In this motor vehicle personal injury accident, the defendants moved for an order pursuant to CPLR § 2601 to allow their insurer to deposit $100,000 into court.  $100,000 was the bodily injury coverage limit of the policy.

Plaintiff opposed the motion.  He argued that he had instituted a bad faith claim against the insurer, and that the motion must be denied unless the insurer deposited the entire sum awarded to him after a jury trial.

The purpose of paying money into court pursuant to CPLR § 2601 is to stop the accrual of post-judgment interest.  Pursuant to the plain language of the statute, a party is discharged from further liability to the extent of the money paid in.  Such disposition does not affect the defendant’s liability for payment of any further amounts that may be assessed as costs.  In addition, the fact that a party believes an insurer’s liability is higher than the sums to be deposited into court has no bearing on the application.

Plaintiff submitted a copy of the jury verdict for $1.3 million and the judgment entered by the court for that amount and pre-judgment and post-verdict interest.  Plaintiff also submitted a copy of his lawsuit in the bad faith case, as the defendants had assigned their rights to a bad faith claim to Plaintiff.

The court found that the pendency of the bad faith action had no effect on whether the application should be granted.  The depositing of $100,000 into court only stops interest from accruing on that amount.  It does not affect other amounts that may be due subsequently or impact the bad faith action in any way besides lowering the alleged damages by $100,000 and stopping post-judgment interest from running on that $100,000.

 

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

09/16/24       Pavano v. Main Street America Assurance Co.
Superior Court of Connecticut, Litchfield
Motion to Dismiss CUTPA/CUIPA Denied for Failure to Demand a More Particularized Statement of Allegations

Pavano, a landscaper, sued Main Street America and its broker, Stratham Winch Insurance, LLC, for a variety of claims arising from losses it suffered when a motor vehicle damaged Pavano’s landscaping equipment. The tortfeasor carried insufficient limits to fully indemnify Pavano for the damage. So, Pavano turned to his insurance carrier. Main Street denied the claim for business income losses, “citing exclusions contained within the policies that only provided coverage for loss of business income when the damage to business’ equipment and vehicles occurred on the business’ property, meaning the plaintiff Pavano's residential lot.”

The insured brought this suit, claiming that its broker failed to obtain “proper” insurance. It also claimed that Main Street, self-servingly, subrogated against the tortfeasor’s insurance for its property damage payments, thereby reducing the funds available to compensate its insured; and that Main Street mislead the insured about the scope of coverage because it only provided the declarations page and not the full policy terms when selling Pavano the policy. The plaintiff also asserted statutory bad faith claims against both defendants.

The defendants moved to dismiss the CUTPA/CUIPA claims, but the court declined. While recognizing that the complaint’s allegation that Main Street made false representations was bereft of any specific factual assertions, the court noted that Main Street “did not avail itself of the opportunity to seek a more particular statement of the allegations by way of a request to revise, and Main Street will now be left to the discovery process to adduce the specific facts upon which the plaintiff will rely at trial.” The court observed that Main Street would have the opportunity to move for summary judgment on the count following discovery.

[Ed. Note: Given that this was the third amended complaint, the likelihood of a more particularized pleading seems remote. Further, since Connecticut is a fact pleading state, requiring a plain and concise statement of the material facts on which the pleader relies, it seems that the court overlooked that the pleading burden belongs to the plaintiff in the first instance. If the plaintiff cannot meet the pleading standard, the defendant insurer should not need to do anything more than point that out to the court.]

 

09/12/24       Liberty Ins. Corp. v. Amenta
Superior Court of Connecticut, New Britain
Liberty Must Defend Household Relatives for Claims of Sexual Abuse

Jane Doe alleges that she was repeatedly sexually assaulted by Matthew Amenta and that he repeatedly violated orders of protection. Doe sued Amenta, his parents, and his grandparents for damages. She claims that all the defendants lived together and that the parents and grandparents were negligent in allowing Amenta’s conduct. She claimed that the relatives failed to take reasonable precautions to protect a minor from a known or reasonably foreseeable unsafe situation, among other claims.

Liberty insured the home owned by Amenta’s parents for, among other things, bodily injury caused by an occurrence and brought this declaratory judgment action seeking to be relieved from the defense of the insureds. [Liberty did not contest that each of the defendants qualified as insureds.] Liberty argued that the complaint did not assert an occurrence and that even if it did the exclusions for expected or intended injury and for sexual molestation precluded coverage.

While the court agreed that Amenta is owed no coverage, it found that the relatives are entitled to a defense. The court reasoned that the claims against the relatives alleged negligent, not intentional, conduct (e.g., negligent supervision). “Thus, the physical injuries which Jane Doe allegedly sustained were the result of the alleged negligence and carelessness of the defendants.”

Having found an occurrence, the court turned to the exclusions. It easily dispensed with the expected or intended exclusion because Liberty could not meet its motion burden to establish that each of the relatives, from their standpoint, expected or intended the injuries claimed by Doe. The court pointed out that the policy contained a separation of insureds provision. “If Liberty wished to exclude its liability for certain conduct committed by their co-insureds, it could clearly so state in its contract and its failure to do so should be strictly construed. Especially is this true when the policy contains a severability clause, for there it can be implied that the insurer is actually recognizing a separate obligation to others, distinct and apart form (sic) the obligation it owes to the named insured.” (citation omitted).

The court, however, finds itself on less solid ground when it concluded that the sexual abuse exclusion only applied to Amenta. The exclusion was summarized by the court as applying to claims “arising out of sexual molestation, corporal punishment or physical or mental abuse.” Here, the court used the severability clause to (wrongly) conclude that the exclusion—rather than applying to any claim arising out of sexual abuse—only applies to an insured alleged to have committed the sexual abuse. The court reasoned that: “Where an insurer has included a severability clause, warranting to each of the insureds that their coverage is separate and distinct from the coverage afforded to others insured under the policy, can it deny that coverage because another insured has engaged in excluded conduct? The court's answer is the same: it cannot.”

[Ed. Note: The court misunderstood the impact of the separation of insureds clause in applying the sexual abuse exclusion. While each insured was entitled to a separate consideration of coverage independent from any other insured, nonetheless, the exclusion likely says that the policy does not apply to any claim arising out of an allegation of sexual abuse or molestation. This exclusion is no different, for example, than the homeowners policy’s exclusion for claims arising out of the use of an auto. If this had been a car accident case in which Amenta had been driving a car, surely the court would have had no difficulty finding that the exclusion precludes coverage to all insureds under the policy and not just to the insured driving the car. This decision seems to be ripe for a motion to reargue or it will surely be reversed on appeal; however, Liberty will have to continue defending until the courts set this one right.]

 

KYLE’S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[email protected]

09/10/24       State Farm Fire and Cas. Co. v. Grand Medical Supply Corp.
Supreme Court, New York County
Court Denies State Farm’s Summary Judgment Motion, as Insurer did not Establish a Reasonable Basis for its Investigation

In this no-fault action, the insurer sought declaratory relief that it need not pay any claims arising out of an accident involving the insured and two passengers. There was no police report for the accident. State Farm received over $100,000 in medical bills from the medical provider defendants, and commenced an investigation on the basis that its insured was involved in a prior accident that resulted in what the insurer deemed to be excessive and questionable medical treatment. Further, State Farm contended that the subject vehicle was a livery vehicle, formerly registered as a taxi, and the subject accident was an intentional act.

State Farm sought summary judgment on the ground that defendants failed to appear for their EUOs. In opposition, several medical provider defendants argued that there was no reasonable basis for an EUO, and that the insurer did not establish that injured defendants failed to appear for the EUOs.

The Court denied State Farm’s motion because there were issues of fact surrounding the basis for plaintiff's EUO requests, finding that the insurer did not adequately substantiate the need for EUOs with admissible evidence. First, the court noted that the notice of motion only referenced an attorney's affirmation, which was not sufficient evidence to support the motion. State Farm also included, as an exhibit, an affidavit submitted in connection with its prior default judgment motion. The court agreed with the defendants that this affidavit did not properly substantiate the insurer’s purported justifications for commencing an investigation into the loss at issue. The claims representative in the affidavit contended that there were two prior claims on the policy from 2018, however, these claims were not included in the motion, and she did not explain how the fact that there were two prior losses supported the assertion that the present claim was "an intentional act." She also claimed the insured vehicle used to be registered as a taxi but does not submit any proof of that or explain why that might justify an investigation. Finally, the affidavit stated the insured defendant was in a prior collision in January 2013, but no proof of that incident was included, nor was any explanation of why evidence of one prior loss justified the investigation in this case.

Therefore, the court determined that, despite defendants raising these issues of fact in opposition, State Farm did not reply to specifically address the reasons why it started an investigation and include proof (such as documents about prior claims) to justify its conclusion. Accordingly, State Farm's motion for summary judgment was denied.

 

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

09/23/24       Great Northern Ins. Co. a/s/o Shira White v. ADT LLC
United States District Court, N.D.N.Y.
Insurer-Subrogee Required To Respond To Discovery Demands Calling For Documents and Information in the Control of Its Insured-Subrogor

We will keep this one short and sweet, but it is an important concept for insurers to know relative to subrogation in federal courts. Great Northern Insurance Company provided insurance to its insured, Shira White, and following payment of a claim, sought to recover from ADT LLC, as the responsible tortfeasor in a subrogation action. During discovery, ADT LLC contended that Great Northern not only failed to respond to discovery in a timely manner, but when it eventually did so, it provided inadequate responses. Great Northern, however, took the position that Shira White was a subrogor that was “not a party to this action” because Great Northern was the “[r]eal party in interest,” and that it had actually timely responded to ADT LLC’s demands, but advised that Ms. White would need to be subpoenaed “to gain the relevant information/deposition being sought.” Still, Great Northern sought the cooperation of Ms. White for requested documentation, which resulted in various extension requests, but “after those efforts failed, and no further clarification or documentation could be produced.” Great Northern further contended that ADT LLC has the burden of demonstrating that it has control over the discovery materials and information sought.

The NDNY sided with ADT LLC, largely on the basis of the well-settled principle that when an insurer is a subrogee, it “stands in place of the insured and success to whatever rights or disabilities [the subrogor] may have in the matter.” Instead,

The Court does not agree that Ms. White is a “third party” to this action rendering plaintiff without duty to provide responses relevant to information and material within Ms. White's possession or knowledge. . . . Plaintiff Great Northern has a duty to provide discovery responses and materials and if these responses or materials are in the knowledge and possession of Ms. White, they must take all necessary and reasonable steps to obtain that information or material for defendant as party of the discovery process.

The NDNY found that other courts have determined that Rule 30(b)(6) requires an insurance company pursuing a subrogation claim to produce a witness who can testify to the underlying facts supporting the company's claims, even if the source of the information comes from its insured-subrogor. Accordingly, it follows that this rationale applies to general discovery responsibilities, such as the interrogatories and requests for production in question here, because it is based in the duty the insurer takes on as subrogee. Thus, even if information is in Ms. White's exclusive possession, it is plaintiff's responsibility to obtain and produce it in discovery.

Maxwell’s Minute: The remainder of the decision outlines responses to specific requests and while I would love to go line by line, I think the above is sufficient (and informative of the discovery landscape in federal subrogation litigation).

 

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

09/18/24       Dworkin v. Liberty Mut. Holding Co., Inc.
United States District Court, E.D. Pennsylvania
Action for Wrongful Use of Civil Proceedings by Dr. Who was Accused of Insurance Fraud by Insurer Dismissed on Statute of Limitations Grounds

Dr. Gerald Dworkin sued Liberty Mutual for wrongful use of civil proceedings arising out of a previous lawsuit accusing Dworkin of insurance fraud. Defendants move to dismiss on the grounds that Dworkin's suit is barred by the statute of limitations. The Court grants the motion.

Dworkin was sued in 2017 by Liberty Mutual for alleged insurance fraud. The Philadelphia County Court of Common Pleas granted summary judgment in Dworkin's favor, and Liberty Mutual appealed to the Pennsylvania Superior Court, which affirmed in a November 29, 2021, unpublished opinion. Liberty Mutual never sought rehearing en banc nor leave to appeal to the Supreme Court of Pennsylvania. On March 22, 2022, the Superior Court remanded the record to the Common Pleas Court.  Dworkin filed his initial complaint in this case on March 20, 2024.

A court may only dismiss a claim under Rule 12(b)(6) based on the statute of limitations when the basis for the limitations defense is evident from the complaint itself or other materials the court may consider, which include exhibits attached to the complaint and matters of public record. Both Dworkin and Liberty Mutual agree that Dworkin's Complaint and attached exhibits provide a sufficient basis to answer the statute-of-limitations question

The statute of limitations for a claim of wrongful use of civil proceedings is two years. 42 Pa. Cons. Stat. § 5524.   A claim's limitations period generally begins to run as soon as it accrues; that is, "as soon as the right to institute and maintain a suit arises."  And a plaintiff's right to institute and maintain a suit for wrongful use of civil proceedings generally arises when underlying proceedings have "terminated in [his] favor." 42 Pa. Cons. Stat. § 8351(a)(2).

The Pennsylvania Supreme Court has stated that underlying proceedings "terminate" for the purposes of a wrongful-use claim when the defendant in the underlying proceedings "successfully defeats the plaintiff's attempts to have him held legally liable."  The defendant "successfully defeats" the plaintiff when judgment for the defendant becomes final, which generally happens when the judgment "has been upheld by the highest appellate court having jurisdiction over the case or the judgment has not been appealed." 

Dworkin, relying on Buchleitner v. Perer, 794 A.2d 366 (Pa. Super. Ct. 2002), contends his claim accrued when the Superior Court remanded the record to the trial court on March 22, 2022. That is incorrect, and Buchleitner doesn't help him. That case says nothing about the effect that actions occurring after a judgment becomes final might have on the limitations period for wrongful use of civil proceedings. The Buchleitner court held that a federal district court's grant of summary judgment in the underlying case to one of many defendants without an express determination of finality did not trigger the limitations period for that defendant's later claim for wrongful use of civil proceedings (citing Fed. R. Civ. P. 54). The court explained that the grant of summary judgment was by law "subject to revision" during the pendency of the claims against co-defendants and was therefore not a final judgment until, at the earliest, the date on which the plaintiff in the underlying proceedings agreed to settle and release all defendants. 

One Pennsylvania court, however, has addressed the effect of an action occurring after a judgment becomes final, holding that the "ministerial act" of taxing costs has no bearing on the accrual date for a wrongful use of civil proceedings claim because taxation of costs is irrelevant to the finality of the underlying judgment. Eisenberg, v. Gardner, Carton & Douglas, 2002 WL 34097306, at *3-5 (Pa. Com. Pl. June 28, 2002), aff'd 819 A.2d 120 (Pa. Super. Ct. 2003). Remanding the record is a ministerial task which cannot happen until after the Superior Court's ruling becomes final. See Pa. R.A.P. 2572(a)(2) (court cannot remand the record until thirty days have elapsed from entry of judgment and any post-decision applications have been disposed of).   

Dworkin's claim accrued at the expiration of Liberty Mutual's time to appeal the Superior Court's ruling because that is the point at which he "successfully defeated Liberty Mutual's attempts to have him held legally liable."  Dworkin may not amend his Complaint because it would be futile for him to do so.

 

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

09/24/24       Fama v. Bob’s LLC
Maine Supreme Judicial Court
Exclusivity And Immunity Provisions Of Worker’s Comp Law Bar Additional Damages Against Co-Employee Following Settlement From Employer

Mr. Fama, an employee of Sanford Contracting, a Massachusetts business, was working on a project in Maine. Mr. Fama and two coworkers stayed at a nearby hotel, which Sanford paid for. The coworkers consumed several beers in the hotel parking lot, had more alcohol and dinner at a tavern (Bob’s LLC), and then Mr. Fama and Defendant Clarke later had an altercation in the hotel parking lot. Clarke struck Mr. Fama, and Mr. Fama later died from his injuries. Ms. Fama filed a worker’s compensation claim in Massachusetts and settled the claim for a lump sum. The Massachusetts Department of Industrial Accidents approved the settlement agreement.

Ms. Fama had filed a complaint in the Cumberland County Superior Court, naming Bob’s LLC and Clarke as defendants with claims for liquor liability, wrongful death, conscious pain and suffering, loss of consortium, and battery. Clarke and Bob’s LLC filed their respective answers with affirmative defenses and then motions for summary judgment. After these motions were denied followed by a denial of a joint motion to alter or amend the order denying summary judgment, Clarke and Bob’s LLC filed notices of appeal and, because a final judgment had not yet been entered, a joint motion asking the Maine Supreme Judicial Court to accept the appeal. Ms. Fama opposed the joint motion, and the Court ordered the parties to address the interlocutory status of the appeals in their briefing on the merits.

The Court permitted the interlocutory appeal because Clarke argued he was immune from suit under the worker’s compensation law, and the denial of a motion for summary judgment would be immediately reviewable pursuant to the death knell exception to the final judgment rule. The Court permitted an interlocutory appeal for Bob’s LLC in the interest of judicial economy. Since Ms. Fama settled with Sanford, the settlement precluded her suit against Clarke as an employee. Ms. Fama argued that the worker’s compensation settlement did not definitely establish that Clarke’s actions arose out of and in the course of employment, but the Court disagreed, reasoning that Clarke fell within the exemption from suit based on his undisputed status as an employee at the time of the injury—not whether he was acting within the scope of his employment when assaulting Mr. Fama. Further, the Legislature specifically enacted a limited exception to immunity for sexual harassment or assault, implicitly confirming that the exemption from suit protects employees who commit other intentional torts. Thus, by accepting a settlement, Ms. Fama chose the exclusive worker’s compensation remedy, and the Court concluded that the worker’s compensation law precluded Ms. Fama from obtaining a settlement then alleging the same injuries fall outside the scope of the worker's compensation law in a subsequent action against an employer or co-employee. Since Clarke was exempt from civil liability, Bob’s LLC was entitled to judgment as a matter of law for the claims against it.

 

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

09/17/24       Doria v. American International Group et al.
United States District Court, District of New Jersey
Claims Made and Reported Policies Are Valid Where Legislation Requires Insured to Maintain Coverage, Rather Than Require Insurers to Provide Coverage

Doria hired US Inspect to perform a home inspection at her home. Doria later commenced an underlying tort action against US Inspect, alleging that the home inspection was performed negligently. Upon learning the identity of US Inspect’s errors and omissions carrier, AIG (National Union), Doria penned a letter to AIG requesting that it indemnify its insureds in her lawsuit. AIG denied coverage, and Doria obtained defaults against its insureds in the underlying action. Doria then commenced this direct action seeking to recover the judgments against AIG.

National Union issued one Specialty Risk Protector Policy to US Inspect, LLC effective from January 1, 2018, to January 1, 2019 (the “2018 Policy”). It issued a separate policy to USIG (another US Inspect entity) in effect from January 9, 2020, to June 15, 2020 (the “2020 Policy”). Each policy was an errors and omissions policy, written on a claims made and reported basis. The policies limited coverage to claims “first made against an Insured during the Policy Period . . . and reported to the Insurer pursuant to the terms” of the policy.

National Union denied coverage under the 2018 Policy because the underlying action was filed on March 23, 2020, and was therefore not “first made” during the policy period. National Union also denied coverage under the 2020 Policy because that policy was cancelled effective June 15, 2020, and while the underlying action was commenced on March 23, 2020, it was not reported to AIG until September 2, 2020, outside of the policy period.

While Doria did not dispute the bases for denying coverage, it is worth mentioning the difference between a “claims made” and a “claims made and reported” policy. The latter type of policy requires only that the claim be made (i.e., asserted by the claimant) during the policy period. A claim made within the policy period, but reported after the policy period expires, falls within the policy terms. Had the 2020 Policy been a claims made policy, instead of a claims made and reported policy, I would submit that National Union’s basis for denying coverage as it did would have been nullified. But a claims made and reported policy requires not only the claim to be made, but also reported to the carrier, during the policy period. This is the situation we have here—Doria made the claim during the 2020 Policy period, but it was not reported to AIG until after the 2020 Policy was cancelled.

Counts I and II of Doria’s complaint sought, in relevant part, reformation of the Policies on the ground that the claims made and reported language was void against public policy. Doria argued that, under the Home Inspection Licensing Act (“HILA”), home inspectors are required to maintain an error and omissions policy. The statute of limitations under the HILA is four years. Doria argued that home inspectors should not be permitted, under the HILA, to maintain claims made and reported policies, and should instead be required to maintain occurrence-based policies.

The Court rejected Doria’s argument for two reasons: (1) the risk that an injured third party may sustain a financial loss under a claims made policy is better vindicated by legislation or regulation designed to assure uninterrupted professional liability coverage rather than by judicial invalidation of claims made policies; and (2) the HILA provisions relied on by Doria only dictate the minimum amount of coverage that a home inspector must maintain, and do not obligate insurers to provide such minimum coverage.

Indeed, New Jersey had already addressed an argument similar to the one Doria tried to make. In Zuckerman v. Nat’ l Union Fire Ins. Co., 495 A.2d 395 (N.J. 1985), the Court upheld the enforcement of a claims made policy in the face of a similar public policy argument. There, the plaintiff was the policyholder, rather than the injured third party. While the Zuckerman Court recognized that an injured third party could sustain a financial loss under a claims made policy due to the insolvency of the insured coupled with a lack of notice to the insurer prior to policy expiration, the risk is better vindicated through legislation or regulation, rather than by judicial reformation of the policy itself.

 The Court here found no reason to deviate from Zuckerman and dismissed this portion of Doria’s complaint.

 

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

09/20/24       TIG Ins. Co. v. Woodsboro Farmers Coop.
United States Court of Appeals, Fifth Circuit
Defective Work Exclusions in CGL Policy Did Not Apply to Defective Construction of Silos, Still Issue of Fact Due to Ambiguous Arbitration Award

In this case the Fifth Circuit analyzed the j (5) and j(6) exclusions in a typical CGL policy. Recently, our coverage team discussed those exclusions, so the topic is fitting. The exclusions at issue provide that there is no liability coverage for property damage if:

j. (5)   “That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations.”

j. (6)   “That particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.”

The factual backdrop is that Woodsboro contracted with Erwin to construct two grain silos. Erwin subcontracted with AJ Contractors Inc. (“AJC”), with Erwin being the construction supervisor. Erwin noticed what it deemed cosmetic defects after AJC completed the silos. Woodsboro identified the silos leaked before it tendered a final payment. Erwin agreed to repair the silos but could not make the roofs watertight. Woodsboro retained a third-party to inspect the silos, Pitcock Supply, who noticed several structural defects and that AJC’s poor workmanship caused the issues. Most significant was the silos’ roofs that would bend and shift in the wind, which would cause structural fatigue and deterioration as opined by Pitcock.

Unable to fix the silos while standing, Pitcock had to deconstruct, repair, and rebuild the silos. Pitcock needed brand new roof kits and a substantial amount of new steel components to complete the reconstruction that deteriorated due to wind and weather exposure. Woodsboro sued Erwin and was awarded a large arbitration award. The arbitration panel found AJC negligently constructed the silos, the silos were defective, did not conform to the terms of the contracts, and Erwin was unwilling or unable to repair the silos.

TIG, Erwin’s insurer, filed a declaratory judgment action. On TIG’s motion for summary judgment the district court found no property damage occurred and even if it two exclusions applied, which included j(5). The district court found that the exception to j(6) also applied.

The appellate court found property damage occurred. Why? Because AJC’s faulty construction exposed the silos’ steel components to harm and due to this harm Woodsboro incurred the reconstruction and repair costs. Pitcock testified at arbitration that the defects in the roof exposed the steel components of which a large amount needed to be replaced with new parts and the silos needed completely new roof kits. The court distinguished a line of cases where the defective work caused no harm. Here, it determined the defective work caused the silos to bend, fatigue, and deteriorate, ergo tangible harm, or damage, occurred to the property.

On j(5) the court looked to the term “performing operations” to find the exclusion applies to property damage caused during the active performance of work. Woodsboro did not challenge that the damage occurred on “that particular part of the property”, meaning the silos, it argued the exclusion was inapplicable because the damage did not occur until the operations were complete. The Court agreed that there was evidence to support this theory. It noted that AJC concluded work in June or July 2013, that Erwin noticed the defects but determined the silos structurally sound. There was also evidence that between AJC’s work and Pitcock’s assessment in May 2014, wind and weather damaged the silos, thus, damaged occurred after AJC’s active work. So, there was evidence that suggested j(5) did not apply.

As for j(6), the court reasoned the exclusion applies only to parts of property damaged that was the subject of the defective work and does not bar coverage to property damaged that was not the subject of the defective work.

This means if you hire somebody to work on your furnace and they damage part of the furnace, then the exclusion applies. If while working on the furnace and the contractor puts a hole in your drywall, the exclusion does not apply to bar coverage to the damaged drywall. This is because the furnace was the subject property of the defective work, not the drywall.

With that in mind, the district court previously determined the entire project was Erwin and AJC’s defective work, thus, the j(6) exclusion applied. Woodsboro challenged this by stating AJC’s defective work was limited to the improper installation, tightening, and securing of the silos’ bolts and roof vent covers. The court noted AJC was retained to construct the silos completely from a premanufactured kit. AJC’s work was not limited to a single, distinct component. However, it noted the j(6) exclusion contains an exception, that it does not apply to property damage’ included in the ‘products-completed operations hazard.’

That products-completed operations hazard” includes, as relevant, all “‘property damage’ occurring away from premises you own or rent and arising out of ‘your product’ or ‘your work’ except ... [w]work that has not yet been completed or abandoned.” Moreover, “[w]or that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.”

The district court determined the exception applied because the damage did not occur on Erwin’s rented or owned property, arose from away from its property and occurred after the project was completed because the need for repair or replacement does not affect the project’s completed status. That finding was consistent with the terms plain text, and even if that language were ambiguous Texas law would require the court interpreted the policy in favor of coverage. Thus, the district court properly found the exception applied.

For the above reasons, the court found TIG should not have been awarded summary judgment. Despite the above, the court noted there were still issues of fact due to the ambiguity in the arbitration award and the lack of an arbitration transcript. Thus, absent additional evidence summary judgment could not be awarded for either party.

 

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

09/18/24       Walker v. Metropolitan Transp. Auth., et al
Appellate Division, Second Department
Second Department Affirmed the Decision Granting Defendants’ Summary Judgment Motion Dismissing the Complaint on the Ground That Plaintiff Did Not Sustain a Serious Injury Pursuant to §5102(d) Where Plaintiff Failed to Raise an Issue of Fact

Plaintiff appealed from an Order of Supreme Court, Kings County, which granted Defendants’ motion for summary judgment seeking to dismiss the complaint on the grounds that Plaintiff did not sustain serious injury pursuant to Insurance Law § 5102(d).

By way of background, this matter stems from an incident on February 13, 2018, where Plaintiff Charlene Walker alleged personal injury after her foot became caught under a wheelchair lift while she was a passenger on a New York City bus. As a result, Plaintiff sued Metropolitan Transportation Authority and New York City Transit Authority (collectively “Defendants”). She claimed numerous injuries to her left foot/ankle, left knee, right hand, right thumb, cervical spine, and lumbar spine. Plaintiff argued that these injuries constituted serious injury under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In the underlying decision, Supreme Court, Kings County, granted Defendants motion for summary judgment findings that Plaintiff did not sustain a serious injury.

On review, the Second Department first similarly found that Defendants met their requisite burden of proof showing Plaintiff did not sustain a serious injury within the meaning of § 5102(d). In support of their motion, Defendants submitted competent medical evidence from an IME provider showing that the alleged cervical and lumbar injuries did not constitute serious injury under either of the alleged categories of § 5102(d). Additionally, the medical evidence submitted also established that the alleged left ankle/foot, right hand, and right thumb injuries were all preexisting and degenerative in nature, therefore not caused by the subject accident. Notably, the Second Department highlighted that since Plaintiff did not raise the ‘90/180’ category of § 5102(d) in her Bill of Particulars, Defendants did not need to address the category in its motion.

In opposition, the Second Department found that Plaintiff failed to raise a triable issue of fact. Plaintiff submitted reports from her medical providers, but these submissions failed to address the findings from Defendants’ radiologist who opined that the left ankle/foot, right hand, and right thumb injuries were degenerative in nature. Further, Plaintiff’s experts failed to raise an issue of fact regarding the claimed cervical or lumbar injuries.

Accordingly, the Second Department unanimously affirmed the Order of the Supreme Court, Kings County, granting summary judgment as Plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

 

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

09/04/24       Mt. Hawley Ins. Co. v. Michelle Kuo Corp.
New York State Supreme Court, County of New York
Court Determines “Interior Tiling” is Not Ambiguous Based on Dictionary Definition

On July 5, 2017, an MKC employee was performing welding activities at 168 Bleeker Street, New York, New York (the “Premises”) in preparation to secure a metal hatch and prepare subfloor prior to the placement of floor tiles. During the work, a fire occurred at the Premises, which caused damage to neighboring properties.

After the fire, Argonaut Insurance Company (“Argonaut”) and Sentinel Insurance Company (“Sentinel”) commenced separate subrogation actions against MKC, seeking reimbursement for the costs paid to their respective insureds resulting from the fire.

Mt. Hawley Insurance Company (“Mt. Hawley”) issued a CGL and Excess Liability policy to MKC. After the subrogation actions were commenced, Mt. Hawley disclaimed coverage under the CGL and Excess policies. Following the disclaimer, Mt. Hawley commenced a declaratory judgment action that it had no obligation to defend or indemnify MKC in connection with the fire, and subrogation suits arising out of it. Argonaut, Sentinel, and MKC filed counterclaims against Mt. Hawley.

Mt. Hawley alleges that the claims were excluded from coverage based on the Exclusion – Designated Ongoing Operations endorsement within the CGL policy, because the fire arose from welding operations. In pertinent part, the endorsement precluded coverage for ongoing operations defined in the Schedule. The Schedule lists, amongst other things, “exterior work” and “all claims resulting from any Insured’s own labor (does not include the Insured’s interior carpentry, interior painting, drywall, interior tile and executive supervisory personal acting in those capacities) …”

Sentinel and Argonaut moved jointly for summary judgment asking the Court to dismiss the complaint, grant the counterclaims, and issue a declaration that Mt. Hawley has an obligation to defend and indemnify MKC. MKC cross-moved seeking the same relief. Ht. Hawley cross-moved, seeking a declaration it has no duty to defend or indemnify MKC in the subrogation actions, and a dismissal of each counterclaim against it.

Sentinel and Argonaut allege that the disclaimer was improper, because (1) the damage did not result from exterior work; and (2) the exclusion for MKC’s own work does not apply. Sentinel and Argonaut allege that the exclusion contains an exception for MKC’s own labor, when the claims are related to interior tile work. As such, MKC alleges that since the MKC employee was engaged in interior tile work while the damage occurred, the Designated Ongoing Operations endorsement does not apply to preclude coverage. In support, Sentinel and Argonaut rely on an expert opinion of a licensed contractor, who stated that the work being performed falls squarely within the scope of interior tile work. MKC adopts the arguments raised by Sentinel and Argonaut.

In opposition, and in support of the cross-motion, Mt. Hawley argues that it is undisputed that MKC’s employee was performing welding work at the time of the fire. Mt. Hawley posits that the policy requires MKC to retain a subcontractor to perform welding work, should it wish to preserve coverage. As such, the Designated Ongoing Operations endorsement precludes coverage.

In response, Sentinel and Argonaut argue that the exclusion is ambiguous and unenforceable as a matter of law, as the term “interior tile” is undefined in the policy, and thus ambiguous. However, the Court promptly dissects and rejects all arguments regarding ambiguity of the term “interior tile.”

After discussing the standards for summary judgment, the Court addresses key principals involved in contract interpretation. The Court highlights that unambiguous provisions in a contract must be given their plain and ordinary meaning. Acknowledging that a term in a policy is deemed ambiguous when it is susceptible to two reasonable interpretations, the Court stated that where one party attaches a “particular subjective meaning to a term that differs from the term’s plain meaning, it does not render the term ambiguous.” Additionally, the Court points to First Department case law, which held that the lack of a definition within an insurance policy does not render a word ambiguous.

Since the policy did not define the term interior tile, the Court relies upon the dictionary definition to determine the plain and ordinary meaning. Looking at the Merriam Dictionary definitions of “interior” and “tile,” the Court determined that “interior tile” is the arrangement of tiles on a surface; and in this case, specifically ceramic floor tiles on subfloor. The act of welding was not a necessary component of tile work, both by definition and by admission of the MKC employee performing the welding which led to the fire.

The Court determined that Mt. Hawley satisfied its burden, establishing that the exclusion to coverage applies, and is subject to no other reasonable interpretation. In response, the defendants did not demonstrate that the welding work performed by the MKC employee at the time of the fire was reasonably considered tile work within the meaning of the exclusionary clause.

As such, the Court determined that the welding at issue was not a covered activity under the Mt. Hawley policy. Since Mt. Hawley established that there is no possible factual or legal basis on which it might eventually be obligated to indemnify MKC, it established as a matter of law it is relieved of its duty to defend MKC.

Accordingly, the Court denied Argonaut, Sentinel, and MKC’s motion for summary judgment, and granted Mt. Hawley’s motion.

 

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

09/25/24        New York Senate Bill S9481, Stand-Alone Business Interruption Insurance
Act to Amend Insurance Law, in Relation to Stand-alone Business Interruption Insurance

On September 20, 2024, the Senate sent the Governor a bill to be signed that would amend the Insurance Law to authorize stand-alone business interruption insurance.

As it stands, business interruption insurance typically covers loss of profits when a covered cause of loss causes physical loss or damage to the insured property that results in a closure or reduction of business. Businesses have the option to purchase additional coverage that is applicable if the business closes by an order of a civil authority. However, this coverage extends the business interruption insurance only if the business closes because of physical damage to a neighboring property.

The COVID-19 pandemic demonstrated that businesses may close without property damage to the insured or neighboring properties.

If signed by the governor this bill would amend Insurance Law § 1113(a) to make business interruption insurance an authorized kind of insurance that does not need to be tied to physical damage. Further, Insurance Law § 2105 would permit this insurance to be written in the excess line market.

 

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

08/09/24       Kestenberg Siegal Lipkus LLP v. Royal & Sun Alliance Insurance Company of Canada
Ontario Court of Appeal
A Second Excess Insurer that Did Not Receive Notice of a Claim Within the Policy Period is Not Obliged to Respond to that Claim, Where the Policy is a Claims-Made and Reported Policy that Requires Both the Claim and the Report of the Claim to be Made During the Policy Period

On August 9, 2024, the Ontario Court of Appeal released its decision on the appeal of a case reported in this column on July 7, 2023, Volume XXV, No. 2 (No. 649). I am pleased to advise that the Ontario Court of Appeal upheld the trial level decision and declared that the failure by the insured to report the claim to a second excess insurer within the policy period breached a condition precedent to coverage. As coverage was not triggered, the trial judge also correctly found that relief from forfeiture was not available.

Until December 31, 2022, when they disbanded, Michael Kestenberg, Alan Siegal and Lorne Lipkus practiced law together for more than 40 years out of a building that the law firm owned that is not far from the Royal Ontario Museum in Toronto. At the time of the firm’s dissolution, they carried on a practice of banking, intellectual property law, general civil litigation and, ironically, the defence of professional liability claims.

In July 2018, about four years before the firm dissolved, Tallman Truck Centres made a demand against the law firm alleging professional negligence. The firm reported the claim to their insurance broker, HUB and told the broker that their excess insurers were to be notified.

The firm held a primary professional liability with LawPro with limits of $1 million per claim, a first excess issued by Lloyds’ with limits of $9 million per claim and a second excess issued by Royal SunAlliance Company (RSA). The Second Excess Policy covered the period January 1, 2018, to January 1, 2019, and did not have to respond until the limits of the LawPro and First Excess Policies have been exhausted (i.e., beyond $10 million per claim). Once triggered, the Second Excess provided $50 million in coverage.

All layers of the insurance programme were composed of claims made and reported liability policies. The RSA second excess contained a notice condition, Condition C, which read “as a condition precedent to its rights under this policy, an Insured must provide written notice of any claim as soon as practicable….” The policy also contained the following provision, Condition D:

This policy only covers claims first made against the Insured and reported to the Insurer during the policy period and provided that such claim arises out of an act, error or omission committed or alleged to have been committed on or after the retroactive date set forth at Item. 6 of the Declarations.

The insured law firm was aware of its potential liability as the events were unfolding. At the time, the law firm contacted its professional liability broker who duly reported the claim to the first excess. However, the broker \admitted to the law firm that it did not report that claim to the second excess until 2021. At the time of that report, the 2018 policy issued by the Second Excess that was in effect when the claim was made had long expired. As the claim was not made during the currency of the 2018 RSA policy, RSA denied coverage.

The underlying action was hotly contested. The insured law firm lost at all levels and leave to appeal to the Supreme Court of Canada was denied in October of 2022.  In response to a negligence action brought by the insured’s former client, the insured sued the broker. The insured resolved that action by agreeing to a settlement agreement under which the Broker admitted it was negligent in failing to report the Claim to the Second Excess insurer. As part of that settlement, the insured allowed the broker to bring this application in their name and the broker agreed to indemnify the insured for any damages awarded against insured in the action arising out of the claim that would have been covered by the Second Excess Policy had notice been given.

The trial judge found that the Second Excess was a “claims made and reported” policy. In particular, he found that the requirement that the appellants provide notice of a claim to the respondents during the policy period was a condition precedent to coverage for the Claim. It was not in dispute that notice of the Claim was given to the respondents in March 2021, after the expiration of the Second Excess Policy. As such, following this court’s decision in Stuart v. Hutchins (1998), 1998 CanLII 7163 (ON CA), 40 O.R. (3d) 321 (C.A.), the application judge found that relief from forfeiture was not available.

The Court of Appeal held that under a claims-made and reported policy, the insured contracts for coverage of claims that are reported during the term of the policy. This affects the price of the policy. To require the insurer to cover a claim under a claims-made and reported policy that was not reported to the insurer during the term of the policy would “distort the plain meaning of the contract and require the insurer to provide coverage for an event outside the scope of the policy … for which it had received no remuneration.”

As this is the bargain struck between the insured and the insurer under a claims-made and reported policy, the failure to report the claim during the policy period means there is no coverage under the policy. It is not open to a court to excuse the insured’s failure to report the claim during the policy period by granting relief from forfeiture, as that would rewrite the contract and provide coverage that was not part of the policy and that was not paid for. This is so whether the insurer suffered prejudice because of the failure to report the claim during the policy period, or not.  The absence of notice within the policy period means that the policy was never triggered. Where coverage has not been triggered, relief from forfeiture is not available. 

The Court provided an in-depth analysis as to why it concluded that the Second Excess Policy was both a claims-made and reported policy and not just a claims-made policy which is a worthwhile read.  The wording of Condition D put it beyond doubt that this was a claims-made and reported policy.

As the brokers’ liability insurers claiming through the insured were wholly unsuccessful, they were ordered to pay $28,000 in costs to the Second Excess insurer.

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