Coverage Pointers - Volume XXVII No. 1

Volume XXVII, No. 1 (No. 700)
Friday, June 20, 2025
A Biweekly Electronic Newsletter

 

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

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

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

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

Dear Coverage Pointers Subscribers:

 

Do you have a situation? We love situations.

Juneteenth Celebrated:

What it is all about.  Quite simple.

Just imagine, if you were a slave, and read the June 21^st 1865, edition of the Galveston Daily News.  If you can put yourself in that position and read this proclamation, you’ll never again wonder why Juneteenth is celebrated as a national holiday.  Such a simple statement – “all slaves are free”.

 

 

A Coverage Pointers Milestone – Actually Two:

This issue – attached -- marks our 700^th and the first issue of our 28^th Year of publication.

It’s kind of cool for us.  We so appreciate the kind comments we receive from our several thousand subscribers, some on whom have been with us since the beginning.  If you know of anyone out there who loves insurance coverage as much as we do, pass the issue along and we’d be happy to add them to our ever-growing subscription list.

This week’s issue brings you a nice array of interesting coverage decisions, as well as one “Thousands Flee” offering.  For regular subscribers, you know we add that tag line when a decision comes down that is so off the mark it deserves special attention.  I think I stole that from a 1960’s newspaper – maybe it was “National Inquirer” that would offer headlines like “ Aliens Attack Cleveland– Thousands Flee”.

There’s a SUM (underinsured motorists) decision out of the Second Department that turns the processing of these claims on its head.  Jonathan Dachs, the guru of SUM coverage, will undoubtedly add this one to his treatise in the next edition.

You’ll also find a case reminding our subscribers that the “30-day Rule” for disclaimer letters in New York based on policy exclusions and breaches of policy conditions, only applies to bodily injury and wrongful death cases, not property damage cases.

And you’ll find a lower court case handled by Evan Gestwick and yours truly where we were able to demonstrate to the court, successfully,  that our client did not owe $1,000,000 in coverage on a significant personal injury case.

 

If Risk Transfer Issues Need a Mediated Resolution

Give Me a Call – 716-849-8942

Coverage and risk transfer mediation is a thing!  Subject matter expertise may be useful. What are the benefits of this approach?

Time and Cost Efficiency

Mediation is generally much faster and more cost-effective than traditional litigation:

• The process can typically be completed within weeks, compared to months or years for court cases.
• It avoids expensive court fees, attorney costs, and other litigation-related expenses.

Control and Flexibility

• Parties have more control over the outcome in mediation.
• They can actively participate in crafting solutions tailored to their specific needs and circumstances.
• There is flexibility to explore creative resolutions that may not be available through court proceedings.

Confidentiality

• Mediation proceedings are typically confidential, which offers several benefits:
  • Parties can discuss sensitive matters openly without fear of public disclosure.
  • It avoids the publicity and public record associated with lawsuits and trials.

Relationship Preservation

• The less adversarial nature of mediation can help maintain or improve relationships between parties.
• It fosters open communication and collaboration.
• This can be especially valuable in disputes involving ongoing business relationships.

Risk Mitigation

• Mediation helps alleviate some of the risks associated with litigation.
• It avoids precedent that may provide unfortunate results for parties – or for the industry – in the future.
• It offers a compromise-based approach, reducing the "all-or-nothing" risk of a court decision.
• Even if unsuccessful, the process can provide valuable insights into the strengths and weaknesses of each party's position.

Empowerment and Communication

• Mediation empowers parties in ways that litigation often doesn't.
• Clients have a more active role in the process and outcome.
• It provides a forum for parties to tell their stories and feel heard4.

While mediation isn't suitable for every situation, these advantages make it an attractive option for resolving many insurance coverage disputes efficiently and effectively.

 

LinkedIn

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

 

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.

 

Nice Try – 100 Years Ago:

Buffalo Post
Buffalo, New York
20 June 1925

Amundsen Party To Be Accorded
Enthusiastic Welcome on Return

Failure to Reach Pole Will Not Overshadow Heroism and
Survival Amid Untold Hardships

Oslo, Norway, June 20 (A.P.) – Captain Roald Amundsen and his five fellow explorers will have an enthusiastic welcome when they arrive here, within the next few days, on their return from their perilous airplane expedition into the artic.

Though they failed in their main object, that of being the first to reach the North Pole by air, their exploit in flying to a point within 150 miles of their goal, their survival amid untold hardships and their return to Spitzbergen in their remaining plane, are regarded as forming a wonderful feat, shedding glory upon Norway as well as the individual participants.

 

Peiper on Property (and Potpourri):

We review a good “reminder” case in this week’s column.  In KO Bar & Grill, the insured leased commercial space where it operated a bar.  As part of the insurance package, however, it appears that KO also purchased some limited amount of coverage for the actual building.   Because it didn’t own the dwelling portion that was damaged, the carrier reasoned that was no insurable interest.  No so fast, however, found the Third Department.  The Court correctly recalled that ownership, title and the like are not dispositive issues for who can purchase and carry insurance.  Rather, the question to be answered is whether “would [the insured] profit by or gain some advantage from the property’s continued existence or suffer some loss or disadvantage by its destruction.”  Because, obviously, fire damage would result in loss of operation for the bar/tavern, it was not a huge leap to recognize that KO had an interest in the continued viability and operation of the leased building.  On that basis, the claim for damage to property not otherwise owned, in title, by KO was permitted to continue. 

We also take a look at a policyholder’s attempt to undue an appraisal award that he, himself, appears to have requested.  Not surprisingly, absent fraud, bias or bad faith, the award was correctly enforced by the Appellate Division. 

That’s it for this week.  Enjoy the weekend, and for the first time this year Summer’s emergence in the Northeast.  I hope you have your air conditioners ready. 

Steve
Steven E. Peiper
[email protected]

 

Oh Good – 100 Years Ago:

Buffalo Post
Buffalo, New York
20 June 1925

TEACHERS
MAY MARRY

New Ruling Handed Down
Following Albany Test
Case.

School teachers of Buffalo and New York state may marry and still retain their positions, according to a new ruling made at Albany by State Commission of Schools Frank P. Graves. A copy of the ruling was received to-day by Corporation Counsel Frederick C. Rupp and will be turned over to Superintendent of Education Ernest C. Hartwell.

Marriage is not grounds for a dismissal, the ruling declares. Heretofore, when teachers in Buffalo married their positions were automatically declared vacant. The new ruling is a result of a test case in Albany. Emma McClelland Thomas, a teacher in the Albany public schools, who was declared to have lost her position through marriage, fought the ruling and won. The state commissioner decided that the provision was illegal.

 

Lee’s Connecticut Chronicles:

In Greece, up to my elbows. Coming back to the States today. See you in two weeks.

Lee
Lee S. Siegel
[email protected]

 

Just Like Now … – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
20 June 1925

Smokes Cigar, Hears Music
As Operation is Performed

Local anesthetic is used for treatment of New
York magistrate as surgeons work for hour.

New York, June 19 (special). – Smoking a big cigar and smiling at jazz music from a radio loud speaker, Police Magistrate August W. Glatz Meyer underwent a major operation, lasting more than an hour, this morning at Hunt’s Point hospital. The operation, which was for a strangulated hernia, was performed by Dr. Lewis J. Amster, former health commissioner of New York, and was pronounced successful.

Magistrate Glatz Meyer’s activity during the process was made possible by the fact that he was not given either or chloroform, but the pain of the surgeon’s knife was killed by the administration of regional anaesthesia. A solution of Novocain was injected into the sensory nerve connecting with the region involved.

The magistrate, who formerly was license commissioner, was stricken while sitting in Morrisiana police court several days ago.

 

Ruffner’s Road Review:

Dear Readers,

The NHL Stanley Cup Finals and NBA Championships have not disappointed thus far, with both locked in a close and entertaining series. I am hoping for at least one game 7 (and preferably a Florida Panthers win)! HF Softball continues its search for signs of life, looking for our first win of the year this Thursday after an 0-4 start.

In the first case this week, the Court denied the insurer’s Article 75 petition to vacate an arbitration award issued in favor of the applicant medical provider, holding that the arbitrator's award was not irrational and was based on the applicable no-fault regulations. For the second, the Supreme Court granted the medical provider’s petition to vacate the arbitration award in favor of the insurer, holding the denial was improper. The Appellate Court remitted for a recalculation of statutory interest and attorney’s fees which the Supreme Court failed to properly award.

Kyle
Kyle A. Ruffner
[email protected]

 

Some Predictions Don’t Come True – 100 Years Ago:

Finger Lakes Times
Geneva, New York
20 June 1925

BELIEVES KITCHEN WILL BEOMCE
EXTINC IN HOMES OF FUTURE

Babson Says He Thinks Common Cooking Utensils of Today Will be Found Only in Antique Shops- On Verge of New Era Which Will Revolutionize Housekeeping for Women.

Babson Park, Mass, June 19. – Roger W. Babson today made the radical statement that he believe the kitchen will become extinct in the average home of the future and that common cooking utensils of today will be found only in antique shops. He believes that we are just on the verge of a new era which will revolutionize housekeeping for women. “Up to the present time,” says he, “the term housekeeping meant the task of keeping the woman interested in the house. This can be done only by practically eliminating the kitchen. The kitchen will be eliminated and great fortunes will be made by those manufacturers and investors who have a real part therein.”

Mr. Babson’s complete statement is as follows:

“The recent development of labor-saving machinery and implements for the home, together with the huge increase in the manufacture of food products (which heretofore have been solely in the domain of the individual house-wife) are fast changing modern life. These changes will solve one of the most distressing problems disrupting the American family. I have never been able to understand why a well-educated, intelligent woman will tacitly agree as part of her marriage contract (assuming a man is not wealthy enough to afford servants) to do work which a peasant immigrant girl, with no brain and plenty of muscle, might do just as well. We lament that our young girls ae not now trained to make bread; but why should they make bread any more than should their mothers weave cloth and work in the fields as did their grandmothers?”

 

Ryan’s Federal Reporter:

Hello Loyal Coverage Pointers Subscribers:

Short column this week. Even shorter head note here.

Until Next Time…

Ryan
Ryan P. Maxwell
[email protected]

 

Assisted Suicide – 100 Years Ago:

Daily Sentinal
Rome, New York
20 June 1925

Sister Gets Two years in Prison
For Killing Sister Hopelessly Ill

Paris, June 20 – Guilty of killing her sister at the latter’s request, to put her out of her suffering from an incurable lung disease, Anna Lavasser, Paris dressmaker, today faced the necessity of atoning to the law by undergoing two year’s imprisonment.

Mlle. Lavasser was found guilty and sentenced last night after telling a graphic story on the stand of the death scene.

Her sister, Anais, wracked with pain, brought her to put her out of her misery and her argument finally prevailing, they decided together upon the means to be used.

“I seated her in a chair,” Anna testified. “she told me: ‘you shoot and I will move my head until it is finished.’”

The dressmaker with trembling hand was unable to finish the deed with one shot. A second, a third and a fourth followed and “finally Anais’s head did not move,”

Anna said she had planned to shoot herself afterward but that she was so unnerved that she was unable to put the cartridges in the gun. Then she has decided that she must live to avenge her sister, against their landlord who, she testified had ordered them out of their poor lodgings although knowing of Anais’s condition.

 

Storm’s SIU:

Hi Team:

Busy, busy week so only one case this edition:

• Medical Provider’s Attorney Admonished by the Court for Not Disposing of an Inadvertently Produced Draft Affidavit; But His Actions Did Not Rise to the Level of Acting in Bad Faith or Engaging in Wrongful Conduct to Warrant Sanctions. 

Talk to you again in two!

Scott
Scott D. Storm
[email protected]

 

Good Advice, Still Today – 100 Years Ago:

Dunkirk Evening Observer
Dunkirk, New York
20 June 1925

NO INSURANCE!

After the fire, the burglary or the auto accident – words “no insurance” have a sorry sound. They are usually a frank admission of lack of foresight. Remember that regrets are unsatisfactory substitutes for sound insurance policies.

Call, write or phone this agency. Male sure that you have complete protection.

KAISER & STARR  425 Central Ave., Phone 3457 Dunkirk, NY.

 

Fleming’s Finest:

Hi Coverage Pointers Subscribers:

Somehow, it feels like Summer is already flying by before it has even begun. My calendar is filling up, and I am looking forward to some fun activities with family.

It seems to have been a slow couple of weeks for the courts. No case this week.

Happy Summer and catch you later,

Kate
Katherine A. Fleming
[email protected]

 

Young Murderer Convicted – 100 Years Ago:

The Gaffney Ledger
Gaffney, South Carolina
20 June 1925

MANSLAUGHTER VERDICT
FOR DOROTHY PERKINS

Seventeen-Year-Old New York
Girl Guilty of Killing
Sweetheart.

New York, June 18. – The youngest girl ever tried for homicide in New York was found guilty tonight when a jury brought in a verdict of manslaughter in the first degree against 17-year-old Dorothy Perkins. Dorothy, described by her counsel as “product of tenements and the daughter of a drunkard, born to live in misery,” was accused of shooting her sweetheart, Thomas Templeton.

The girl fainted as the foreman announced the verdict. Two court officers near her caught her as she fell. Attempts to revive her by slapping her wrists failed, and Judge McIntyre held that the defendant was in no condition to answer questions following conviction.

As she was being carried from the court room, Dorothy began to revive, pressed her right hand against her forehead and moaned:

“Mama, mama.”

Sentence Monday.

The crime of which she was found guilty is punishable by a maximum of from 10 to 20 years imprisonment. Judge McIntyre will pass sentence Monday.

The jury, the members of which all were fathers of girls, reported the verdict at 11:59 o’clock after deliberating two hours and 59 minutes.

 

Gestwick’s Garden State Gazette:

Dear Readers:

The Florida Panthers are repeat Stanley Cup champs! I do feel bad for Connor McDavid (and I suppose Leon Draisaitl, who has been with the Oilers for even longer), but I have family down in Florida who are Panthers fans, so I am happy nonetheless. Now that hockey, football, and lacrosse are all out of season, my attention had turned solely to baseball, where my Toronto Blue Jays appear somewhat improved from the last few seasons (though I am an avid golfer, I cannot bring myself to watch it on TV).

The case I have for you this week is one of my own. It serves as a reminder to the plaintiff bar that third parties cannot maintain an action against a tortfeasor’s insurance carrier (i.e., a direct action) unless the plaintiff has first obtained a judgment against the tortfeasor that has gone unsatisfied due to the tortfeasor’s insolvency or bankruptcy. My insurance carrier client was sued by the underlying plaintiff in the same case in which the plaintiff sued my client’s insured in tort. At first glance, it would appear that a proper thing to do would be move to sever the actions—but a more expeditious thing to do was to simply move to dismiss the insurance carrier-defendants out of the suit. A win is a win.

Talk to you in two weeks.

Evan
Evan D. Gestwick
[email protected]

 

Oh My – 100 Years Ago:

Ledger-Star
Norfolk, Virginia
20 June 1925

He Thrills Her

Dear Miss Fairfax:

My problem may shock you, but I need advice, and I need it bad. A few years ago I was so bashful I would hardly look at a boy, but I am just the opposite now. I found that you could not be an angel and be popular in this town. Kissing, petting – oh I’m disgusted with it all, and still I do both. Since I started letting the boys hug and kiss me I have found it impossible to stop.

Miss Fairfax, I have never really liked it. There are only two boys in all my years of experience that I really and truly like to kiss. One of them I am engaged to, but he doesn’t live here and I have been going with others when he is away. The other I go with but do not love, but there is something about him that draws me to him like a magnet. He thrills me.

How can I stop all this? I really want to stop all but those two boys but I can’t give them up. Do you really think there is any harm in kissing a boy you love and who you know loves you, if you are strong enough to stop at that?

Please help me by advising me soon as possible. I am no kid, I am 20 years old.    JEAN.

No, you’re no kid and plenty old to know better. If you find it impossible to resist the fascinating boy’s charms why not plan in advance to have other people along so that your thrills will not be given such free door to develop? Thrills are exceedingly dangerous forms of recreation, Jean. They often turn to shudders.

 

O’Shea Rides the Circuits:

Readers,

Not much to report on this week other than I have a bathroom faucet replacement in the near future. This replacement will likely turn into a new sink, vanity, and shower.

This week I have a short case from the Ninth Circuit that looks to the application of the Protective Safeguards Endorsement. It is an unpublished decision but is useful in noting in what context the endorsement is unambiguous.

Until Next Time,

Ryan
Ryan P. O’Shea
[email protected]

 

Jay Walking Legal in Paris – 100 Years Ago:

The Springfield Daily Republican
Springfield, Massachusetts
20 June 1925

Jay Walker Gets
Decision of Judge
In Paris Tribunal

Paris, June 19 – (AP) – Declaring a police regulation against jay walking illegal, a Paris judge today said, if the police had the right to regulate pedestrian traffic, they might also require those who walk to carry a light or to proceed at stipulated speeds. The magistrate, in releasing a man arrested for crossing the Champs Elysees, ruled that the police could regulate vehiculate traffic, but that they could not infringe upon the ordinary citizen’s right to move as he pleases so long as he does not violate other laws.

 

LaBarbera’s Lower Court Library:

Dear Readers,

After finishing the new greenhouse two weeks ago, I cannot stop acquiring new plants. Since last week, my collection has grown by eleven. Eventually I will have to run out of room. When that day comes, I will let you know.

This week I have two cases for you. The first is a New York County case identifying that the carrier was not obligated to provide coverage for certain medical bill submitted following a car accident, based on the intentionality of the accident, and the insured’s failure to return an executed examination under oath transcript.

The second case is an Albany County case discussing a bakery owner’s status as an insured under a businessowners policy issued to the bakery with respect to catastrophic injuries suffered by her daughter who was at the bakery being looked after by her mother/the baker. The case also discusses whether the mother’s homeowners carrier waived its right to rely on an exclusion when it cited the pre-amended version in its initial disclaimer letter. Shout out to Dan Kohane and Evan Gestwick of our office, who represented the businessowners carrier in this one.

Until next time…

Isabelle
Isabelle H. LaBarbera
[email protected]

 

Don’t Run Into Firebugs Like We Once Did – 100 Years Ago:

Buffalo Courier
Buffalo, New York
20 June 1925

NET CLOSING
ON ALLEGED
FIREBUGS

Arrests Likely Today or Tomorrow in “Arson Ring” Enquiry – Police, Insurance Operatives Busy.

Possibility of arrests loomed yesterday in investigation by police and detectives of the National Board of Fire Underwriters of the alleged arson ring suspected of burning more than twenty-five houses and business places in Buffalo since January 1. Losses from the fires are placed around $500,000.

It is expected that persons questions by detectives assigned by Detective Chief James W. Higgins to work with Special Agent Walter J. Cullen of the national board of underwriters will be arrested today or Sunday. One or two alleged incendiaries whose movements have been closely checked before and after suspicious fires probably will be in custody soon, police said.

Cullen and Chief Higgins conferred yesterday at police headquarters. Chief Higgins promised the insurance investigator as many detectives as he needs to obtain evidence against the arson ring.

 

Lexi’s Legislative Lowdown:

Dear Readers,

My fiancé is heading to the Adirondacks this weekend, so I am hoping for a weekend full of shopping, relaxing, and hanging out with our pups!

This week we discuss the Grieving Families Act passing both houses.

Thanks for reading,

Lexi
Lexi R. Horton
[email protected]

 

In Sickness and in Health – 100 Years Ago:

Buffalo Courier
Buffalo, New York
20 June 1925

HUSBAND, WIFE
IN THIRTY-THIRD
LEGAL BATTLE

New York, June 19 – Patrick J. Murphy postal employee today was made defendant in the thirty third legal action instituted by his wife in the past twenty five years. Mrs. Murphy demands that her husband be compelled to pay alimony pending her latest suit for separation. Murphy remarked in court he intended to hire a lawyer by the year.

 

Victoria’s Vision on Bad Faith

Dear Readers,

It's my birthday this week, and I have officially entered my late twenties (yikes). To celebrate, I'm headed towards the Adirondacks for a couple days, followed up by a bridal shower in Canandaigua.

This week, I have a decision from the Southern District of New York which held reserve information discoverable where the insured alleged bad faith against the insurers.

Happy Juneteenth and have a great weekend,

Victoria
Victoria S. Heist
[email protected]

 

Some Things are Never Resolved – 100 Years Ago:

Buffalo Courier
Buffalo, New York
20 June 1925

Voice of the Press.

“Daylight Saving” at Hand.

On Monday Syracuse will resume its trial of daylight saving, after a three or four years’ abstention. We trust that the benefits promised by the experiment will be realized.

Nobody knows whether the Syracuse advocates of this contrivance for gaining an extra hour of daylight in the summer months outnumber its opponents or the reverse. Only by a referendum could that question be answered. Bu the fact of present importance is that the Aldermanic ordinance will go into effect on Monday next, and it will have all the force of a State law within the boundaries of this city.

Nearly all of the smaller cities in this section of the state will co-operate with Syracuse in observing daylight savings this year. The most conspicuous exception is Auburn, where a majority of the citizens declared for standard time by referendum in November, 1923. Many of the villages hereabout will be in line with Auburn rather than with Syracuse in this respect. In other words, we shall have a dual system of time measurement in central New York, with the rural communities generally adhering to standard time and the cities, as a rule, keeping their clocks and watches an hour ahead.

 

North of the Border:

It’s been an eventful week here in Alberta.  While the Stanley Cup finals wrapped up without Lord Stanley’s Cup returning to Canadian soil, hockey fans were treated to some truly thrilling games. Meanwhile, the province played host to the world as G7 delegates made their way through Calgary to Kananaskis, complete with impromptu motorcades and security escorts. In their honour, the wildfire smoke cleared, revealing those iconic mountain vistas we cherish, and now, as Canadian fighter jets prepare to depart our skies and security barricades come down, Kananaskis will soon reopen to all. For three days, the world caught a glimpse of what we are privileged to enjoy every day—a truly beautiful corner of the globe.

As the extraordinary gives way to the everyday, we turn our focus back to the meat and potatoes of commercial insurance law. This week, I examine a case that delves into the complex relationship between a commercial insurer and its broker, that came apart when the broker was tasked with placing coverage for interlocking companies with diverse operations.

Until next time.

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

 

Headlines from this week’s issue, attached:

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

• Thousands Flee. SUM Arbitration Award Affirmed, Even Though (a) No Offer by Tortfeasor of Policy Limits, (b) SUM Coverage Should Not Have Triggered, and (c) No Article 75 Proceeding Commenced 
• Can’t Rescind New York Auto Policy Retroactively.  Nobody Raised the Fact That a Florida Policy Can Be Rescinded
• In a Non-Construction Contract, Port Authority Able to Secure Indemnification, Even for Its Own Negligence
• Reservation of Rights Letter OK in Property Damage Cases, and Preclude Claims of Prejudice
• Long-Tail Environmental Claim Remanded for New Trial, Based on Improper Jury Instruction and Improper Preclusion of Evidence to Support Untimely Notice Defense by Excess Carrier

 

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

• Renter Has Insurable Interest in Property Damaged by Water Loss
• Court Affirms Appraisal, Dismissed E.C. Claims in a Singular Decision

 

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

• In Greece, up to my elbows.  Heading back to the states today.  See you in two.

 

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

• Article 75 Proceeding Brought by Insurer to Vacate Arbitration Award in Favor of Medical Provider Is Denied
• Appellate Court Remits to Supreme Court for Recalculation of No-Fault Interest and Attorney Fees

 

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

• Insured Fails to Provide Alternative Explanation for Excluded Damages

 

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

• Medical Provider’s Attorney Admonished by the Court for Not Disposing of an Inadvertently Produced Draft Affidavit; But His Actions Did Not Rise to the Level of Acting in Bad Faith or Engaging in Wrongful Conduct to Warrant Sanctions

 

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

• See you in a fortnight

 

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

• Court Dismisses Declaratory Judgment Action as an Improper Direct Action

 

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

• Failure to Correctly Identify Fire Safety System Breaches Protective Safeguards Condition

 

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

• Intentional Acts and Failure to Return Executed Examination Under Oath Transcript Results in Loss of Coverage for Medical Payment Providers
• On a Very Sad Set of Facts, Court Finds Mother Not an Insured Under Businessowners Policy for Injuries to Child in Mother’s Bakery

 

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

• The Grieving Families Act has Passed Both Houses

 

VICTORIA’S VISION ON BAD FAITH
Victoria S. Heist
[email protected]

• SDNY Finds Reserve Information Discoverable When the Insured Alleges Bad Faith

 

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

• A Broker's Actions and Communications Can Reasonably Indicate to an Insured That the Broker Has the Insurer's Implied Authority to Commit the Insurer to Coverage

 

Finally, today (well, Thursday, anyway) is:

We will raise a glass, honor of our subscribers.  See you in two.

Dan

 

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

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Agnes A. Wilewicz
[email protected]

COPY EDITOR
Evan D. Gestwick
[email protected]

 

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

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

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Scott D. Storm

Ryan P. Maxwell

Kyle A. Ruffner

Katherine A. Fleming

Evan D. Gestwick

Ryan P. O’Shea

Isabelle H. LaBarbera

Lexi R. Horton

Victoria S. Heist

 

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

Michael F. Perley

Scott D. Storm

 

NO-FAULT/UM/SUM TEAM
Dan D. Kohane
[email protected]

Ryan P. O’Shea
[email protected]

Kyle A. Ruffner
[email protected]

 

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]

 

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri
Lee’s Connecticut Chronicles

Ruffner’s Road Review

Ryan’s Federal Reporter

Storm’s SIU

Fleming’s Finest

Gestwick’s Garden State Gazette

O’Shea Rides the Circuits

LaBarbera’s Lower Court Library

Lexi’s Legislative Lowdown

Victoria’s Vision on Bad Faith

North of the Border

 

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

06/18/25       Laxton v. Hagerty Insurance Company
Appellate Division, Second Department
Thousands Flee. SUM Arbitration Award Affirmed, Even Though (a) No Offer by Tortfeasor of Policy Limits, (b) SUM Coverage Should Not Have Triggered, and (c) No Article 75 Proceeding Commenced  

So, here’s what happened.  Two car accident.  Laxton was insured by Essentia Insurance Company with liability and SUM Limits of $100,000.  Accident with Allstate-insured tortfeasor with liability limits of $100,000.

Immediately, the reader should appreciate that even though Allstate offers its liability limits of $100,000, a SUM claim (underinsured motorist claim) cannot be pursued because Laxton’s liability limits do not exceed the Allstate policy.

So, what does Laxton do?  It bypasses chasing down the tortfeasor’s policy and files a SUM claim.  Now the proper thing for Essentia to do at that point is to file an Article 75 proceeding, within 20 days, to stay arbitration on the ground that (a) coverage doesn’t trigger and (b) there was not a written offer of the policy limits.  For reasons that escape us, that doesn’t happen. In fact, Laxton’s counsel had advised Allstate that it was not going to pursue the claim against the tortfeasor, and it should close its file.

Because no application to stay arbitration was made, the parties appeared before the SUM arbitrator.  The Arbitrator issued an Award denying the claim:

It is well established that as a condition precedent to payment of uninsured or underinsurance benefits, the limits of liability of all bodily injury … policies applicable at the time of the accident shall be exhausted by the payment of judgment or settlements.  Here, it is uncontroverted that Claimant …. Failed to exhaust the [Allstate} policy.

True enough, but was that within the arbitrator’s authority?

In the underlying proceeding, Laxton argued that since Essentia did not move to stay arbitration as required under Article 75, the Arbitrator exceeded his power when he denied the award.  Can’t argue with the law.

Essentia argued that Laxton should never have filed a demand to arbitrate (no argument there) since it was not eligible for the benefits.

The lower court found that under CPLR 7511 an arbitration award may be vacated if, among other things, it exceeds an arbitrator’s power.  However, it concluded that the arbitrator did not exceed its power since the award was based on documentary evidence and admissions from Laxton’s counsel that it was aware of the Allstate policy limits.

That ain’t the rule.  Essentia should have moved to stay arbitration and failing to do so, the arbitrator’s power was exceeded.
The Second Department affirmed.

Pursuant to CPLR 7511(b)(1)(iii), an arbitration award shall be vacated if the court finds that the rights of a party were prejudiced by an arbitrator exceeding his or her power or so imperfectly executing it that a final and definite award upon the subject matter submitted was not made. "A party seeking to overturn an arbitration award on one or more grounds stated in CPLR 7511(b)(1) bears a heavy burden and must establish a ground for vacatur by clear and convincing evidence.

Here, the arbitrator properly determined that arbitration was not available to the petitioner because he failed to exhaust by payment the limits of an applicable bodily injury insurance policy (see Insurance Law § 3420[f][2]; Matter of Sutorius v Hanover Ins. Co., 233 AD2d 332, 333-334). Furthermore, the petitioner failed to establish by clear and convincing evidence that the arbitrator exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made (see CPLR 7511[b][1][iii]).

Clearly, Laxton had no right to file an arbitration demand without exhausting the tortfeasor’s policy (and couldn’t anyway, because his liability limits did not exceed the tortfeasor’s liability limits.  No question.  However, the law required Esteria to file an application to stay in Supreme Court and the arbitrator had no power to act on this question.

Editor’s Note  We thank our friend and subscriber Albert Galatan for his note on this one.  He was a shocked as we were.

 

06/18/25       Peak Property and Casualty Insurance Corporation v. Mulverhill
Appellate Division Second Department
Can’t Rescind New York Auto Policy Retroactively.  Nobody Raised the Fact That a Florida Policy Can Be Rescinded

This involved rescission of a Florida auto policy, but nobody paid attention to that

The court found that "Vehicle and Traffic Law § 313 (1) (a) supplants an insurer's common-law right to cancel a contract of insurance retroactively on the grounds of fraud or misrepresentation, and mandates that the cancellation of a contract pursuant to its provisions may only be effected prospectively. That’s true, when there is a New York policy involved, under the holding in Teeter v. Allstate, 9 NY2d 655.

However, this was a Florida policy and Florida allows retroactive rescission and New York courts have allow Florida policies to be rescinded.  Nobody raised it.  Oh well.

 

06/18/25       Collado v. Port Authority of New York and New Jersey
Appellate Division, Second Department
In a Non-Construction Contract, Port Authority Able to Secure Indemnification, Even for Its Own Negligence

In 2012, Port Authority of New York and New Jersey (“Port”) and Gateway Security, Inc. (“Gateway”), entered into a contract, whereby Gateway agreed, to provide taxi dispatch services at John F. Kennedy International Airport (“JFK”). The contract required Gateway to procure specified insurance coverage and to name the Port as an additional insured. In the contract, Gateway agreed, to the extent permitted by law, to indemnify and hold the Port Authority harmless "from and against all claims and demands, just or unjust, . . . arising out of or in any way connected . . . with the Contract and all other services and activities of [Gateway] under this Contract . . . whether they arise from the acts or omissions of . . . the Port Authority."

In April 2016, the plaintiff, an employee of Gateway, allegedly was injured when she tripped and fell on uneven pavement in one of the parking lots at JFK while performing her duties for Gateway. She sued the Port Authority to recover damages for personal injuries. The Port Authority commenced a third-party action against Gateway, asserting, among other things, causes of action for contractual indemnification and alleging breach of contract for failure to procure insurance.

The right to contractual indemnification depends upon the specific language of the contract. Here, the Port established, prima facie, that the plaintiff's allegations fell within the broad indemnification provision of the contract, which encompassed even those claims that were alleged to arise out of the Port’s own negligence.

While one cannot secure indemnification for one’s own negligence in a construction contract under General Obligations Law § 5-322.1. that section is inapplicable to this case, as the contract was unrelated to "the construction, alteration, repair or maintenance of a building."

There is another lesser known section of the GOL, Section 5-323.  It provides that.

Every covenant, agreement or understanding in or in connection with or collateral to any contract or agreement affecting real property made or entered into, whereby or whereunder a contractor exempts himself from liability for injuries to person or property caused by or resulting from the negligence of such contractor, his agent, servants or employees, as a result of work performed or services rendered in connection with the construction, maintenance and repair of real property or its appurtenances, shall be deemed to be void as against public policy and wholly unenforceable.

That section is inapplicable because the contract is not one "affecting real property" or for "services rendered in connection with the construction, maintenance and repair of real property" within the meaning of General Obligations Law § 5-323.

Additionally, the Port Authority established its prima facie entitlement to judgment as a matter of law on the third-party cause of action alleging breach of contract for failure to procure insurance, by demonstrating that Gateway failed to procure all of the coverage required by the contract.

 

06/10/25       Certain Underwriters at Lloyd's v. Nissanoff
Appellate Division First Department
Reservation of Rights Letter OK in Property Damage Cases, and Preclude Claims of Prejudice

Underwriters commenced this action for a declaration that it has no duty to defend or indemnify Nissanoff, et al in the underlying action which stemmed from the loss of a diamond. Plaintiff claimed that coverage was unavailable because defendants breached a warranty of the insurance policy and failed to meet a condition precedent to coverage, as there was no working security system at the time of the loss.

The court properly found that defendants breached a warranty in their insurance policy and failed to meet a condition precedent to coverage by failing to have a working security alarm system at the time of loss. Defendants' argument that plaintiff waived its right to disclaim coverage is unavailing. Plaintiff's reservation of rights letter is irrelevant to whether plaintiff timely sent a notice of disclaimer.  While that is true,  the strict timeliness standard under Insurance Law § 3420(d) applies only for denials of coverage "for death or bodily injury" and is inapplicable to the property insurance claim in this action.  Plaintiff's explicit reservation of rights precluded any arguments as to waiver and equitable estoppel.

Editor’s Note:  The Court’s opinion serves as a reminder.  Insurance Law Section 3420(d)(2) disclaimer requirements only apply to NY bodily injury and wrongful death claims, not property damage claims.

 

06/05/25          Century Indem. Co. v. Brooklyn Union Gas Co.
Appellate Division, First Department
Long-Tail Environmental Claim Remanded for New Trial, Based on Improper Jury Instruction and Improper Preclusion of Evidence to Support Untimely Notice Defense by Excess Carrier

The instant matter involves twenty-five-year-old litigation centralized around clean-up costs associated with three manufacturing gas plants formally owned and operated by Brooklyn Union Gas Company (“Brooklyn Union”), all sites which bordered the Gowanus Canal. When processing gas, the sites environmentally contaminated the canal and subsoil. In the early to mid-2000s, Brooklyn Union received a series of orders from the NYS DEP and the EPA, requiring an investigation and remediation of the pollution in the canal and subsoil. After an unrelated threat to sue by New York City, Brooklyn Union placed certain carriers on notice of the pollution and clean-up efforts occurring at the cites boarding the Gowanus Canal.

Century Indemnity Company (“Century”), one of the excess liability insurers for Brooklyn Union filed suit, seeking a declaration that it lawfully disclaimed excess coverage for contamination remediation and related costs, based on the untimely notice of an occurrence. Century had issued six policies to Brooklyn Union, from 1941-1969, providing coverage for third-party property damage claims. Each of these policies contained a one-year term, a self-insured retention, and was renewed annually. Four policies contained an objective notice provision which required Brooklyn Union to give notice upon the happening of an occurrence or accident that appears reasonably likely to involve liability on part of Brooklyn Union.  The remaining two contained a subjective notice standard, requiring Brooklyn Union to provide notice upon learning of an occurrence which is likely to result in a claim in excess of the self-insured retention.

During the action, both parties made multiple motions, resulting in two successive appeals. In 2009, the Appellate Division affirmed the denial of Century’s summary judgment motion on its claim of untimely notice, finding material issues of fact regarding whether Brooklyn Union considered pro rata allocation of damages in its notice analysis, as to whether the costs of remediating the waste contamination were likely to implicate excess coverage prior to February 1993. Had Brooklyn Union considered pro rata allocation in its notice analysis, there was a question of fact as to whether notice was untimely, based on the fact that the contamination and clean-up efforts over time, were unlikely to satisfy the self-insured retention, which would require notice to be provided to Century.

Ten years later, the Appellate Division affirmed the holding that Century’s successive policies were subject to a pro rata allocation for all losses resulting from long term, continuous contamination that spanned successive policy periods. However, the Appellate Division modified to deny Century’s motion for summary judgment, finding that the policies were ambiguous as to the application of the per-occurrence limits.

After a trial in 2022, a jury returned a verdict in favor of Brooklyn Union, finding that there was coverage for the remediation at the cites boarding the Gowanus Canal, and that Century’s defense of untimely notice lacked merit. Century made a motion to set aside and modify a jury verdict, and for a new trial. The motion was denied, and Century appealed the decision. Century argued that there is no controlling precedent which allows an instruction to the jury that they must simply perform a pro rata allocation calculation of potential clean-up costs and retention over the extensive periods of contamination. Century argued that the instruction wrongly allowed the jury to conclude that the attachment point was not reached in February 1993, even if the sum of damages exceeded the $100,000 self-insured retention threshold. As such, the calculations led the jury to wrongly determine that notice was timely sent. In addition, Century contended that it was inappropriately precluded from presenting two pieces of crucial evidence at trial, which would support its claim that notice was untimely provided by Brooklyn Union.

The Appellate Division determined that the trial court erred in its instruction to the jury. Instead, the Appellate Division opined that the jury should have been left to consider all factors relevant to determine when the original retention amount was reasonably likely to be exceeded. The Appellate Division identified that this determination should include Brooklyn Union’s motive, and other evidence which the trial court erroneously excluded regarding whether Century was provided timely notice of the remediation efforts and clean-up costs. It was determined that the trial court should have let the jury decide whether Brooklyn Union was on inquiry notice of an occurrence, and if so, whether it properly investigated the alleged contamination claims.

Accordingly, the Appellate Division unanimously modified the trial court’s decision on the law and remanded the case for a new trial on notice and the duty to investigate.

Editor’s Note: The Appellate Division was additionally asked to consider the application of contra proferentem in resolution of ambiguities in the excess policy. Although for academic purposes, the Appellate Division chose to address this point in their decision. They found that the trial court properly refused to apply the doctrine of contra proferentem. The Appellate Division pointed to facts indicating that Brooklyn Union was a sophisticated insured, employing a large in-house insurance department, processing dozens of claims in house monthly, self-insures for large amounts, and has numerous lawyers and brokers. Accordingly, because Brooklyn Union is a sophisticated party in insurance coverage matters, with sufficient knowledge and bargaining power to craft an agreement to its benefit, there was no basis to apply the doctrine of contra proferentem.  

 

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

06/06/25       KO Bar & Grill, Inc. v. Midstate Mut. Ins. Co.
Appellate Division, Fourth Department
Renter Has Insurable Interest in Property Damaged by Water Loss

Plaintiff operated a bar and grill at a leased premises and apparently secured first party coverage on the property through Midstate.  When that premises was damaged, plaintiff presented a claim for payment.  Midstate denied the claim, in part, due to a lack of insurable interest.  The Appellate Division, in affirming the trial court, noted that insurance interest can be satisfied by merely showing a person “would profit by or gain some advantage from the property’s continued existence or suffer some loss or disadvantage by its destruction.”  Against this standard, the Court ruled that even a leasehold interest in a property was sufficient to create an insurable interest.  Thus, because Midstate could not demonstrate that plaintiff would have, or did in fact, suffer pecuniary or economic loss, it did not reach its burden on summary judgment.

Midstate also argued that even if an insurable interest was found, coverage was still removed by the “wear and tear” exclusion found on the policy.  Midstate’s motion was supported by an expert affidavit which determined that the loss was subject to the “wear and tear” exclusion.  Plaintiff, however, countered that the damage was caused by frozen and leaking pipes which would, potentially, trigger coverage.  Faced with two experts contradicting the ultimate cause of the loss, the Court determined that a question of fact existed and remanded the matter to the trial court for jury resolution. 

 

06/19/25          Koffler v. Cincinnati Ins. Co.
Appellate Division, Second Department
Court Affirms Appraisal, Dismissed E.C. Claims in a Singular Decision

Not an issue of coverage defenses in this case, but rather the tricky subject of a good faith disagreement on valuation.  When the parties could not reach resolution, plaintiff made a claim for appraisal as was his right under the policy.  Unfortunately for plaintiff, the appraiser’s award was apparently significantly less than plaintiff requested.  As such, in April of 2022, plaintiff commenced a lawsuit against Cincinnati seeking to set aside the appraisal award.  Plaintiff also alleged claims for extra-contractual damages therein asserting that Cincinnati deliberately undervalued the amount of damage.  Cincinnati, in turn, moved to dismiss the extra-contractual portions of the claim.  At the same time, it moved to confirm the appraiser’s award which established damages for the otherwise covered loss. 

With regard to the appraisal process, the Appellate Division confirmed that the appraisal was conducted pursuant to the terms proscribed by the policy.  Further, because plaintiff failed to demonstrate the aware “was the product of fraud, bias or bad faith” there was no reason to disturb the calculations.  The Court went on to dismiss plaintiff’s claim for breach of the implied warranty of good faith and fair dealing, therein holding that it was duplicative of plaintiff’s breach of contract claim.  The Court also ruled that the claim for “bad faith” should also be dismissed because “there is no separate tort for bad faith refusal to comply with an insurance contract.”  Finally, the Appellate Division dismissed plaintiff’s claims for punitive damages and attorneys’ fees because neither are appropriate remedies for an “ordinary breach of contract.” 

 

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

In Greece, up to my elbows.  Heading back to the states today.  See you in two.

 

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

06/02/25       Am. Trans. Ins. Co. v. Neptune Medical Services P.C.
Supreme Court, New York County
Article 75 Proceeding Brought by Insurer to Vacate Arbitration Award in Favor of Medical Provider Is Denied

Pursuant to an independent medical examination report of Peter Chiu, M.D., dated February 20, 2023, American Transit denied coverage for medical bills submitted by Neptune Medical on the basis that the treatment provided to the non-party insured was not medically necessary. In the underlying arbitration, the arbitrator found that Dr. Chiu's report met the insurer’s burden of showing the medical treatment billed as unnecessary but also found that the medical provider successfully rebutted this report with the affidavit of a doctor who opined that the EMG/NCV studies were necessary given the insured’s symptoms of cervical radiculopathy and peripheral neuropathy. The rebuttal report cited medical literature in support of the argument that all patients who have suspected cervical radiculopathy should undergo any such treatment. The award was further affirmed by a Master Arbitrator, and the insurer brought a petition to vacate the award.

In the context of no-fault arbitrations, an arbitrator's decision will not be vacated as long as it is “rationally based.” An Article 75 proceeding is not an opportunity for "judicial second-guessing" of an arbitrator's findings, and courts are bound by the arbitrator's factual In this case, the Court found the master arbitrator's affirmance of the lower arbitrator's award was not irrational and was based in the applicable no-fault regulations, as the arbitrator rationally concluded that the provider’s rebuttal affidavit showed the medical services provided were medically necessary. The court explained that, when presented with conflicting evidence, it is up to the arbitrator to evaluate and weigh which evidence is determinative. Therefore, there was no basis to vacate the arbitration award and the insurer’s petition to vacate was denied.

Further, because the provider successfully defended this petition to vacate an arbitration award, the court held it is entitled to attorneys' fees pursuant to 11 NYCRR § 65-4.10(j)(4) in an amount fixed by the Court adjudicating the matter. However, because the Medical Provider did not submit an affirmation of services detailing the number of hours spent opposing the application and/or any reason why the $400.00 an hour rate is reasonable, its cross-petition for attorney’s fees was denied without prejudice.

 

06/04/25       Lam Quan M.D., P.C. v. LM General Insurance Company
Appellate Division, Second Department
Appellate Court Remits to Supreme Court for Recalculation of No-Fault Interest and Attorney Fees

Petitioner, a medical provider, was the assignee of a claim for no-fault benefits in the amount of $1,002.74 for treatment it rendered to the respondent’s insured. After the respondent denied the claim, the provider submitted the claim to arbitration and the arbitrator denied the claim, which was affirmed by a Master Arbitrator.

Thereafter, the provider commenced this proceeding pursuant to CPLR article 75 to vacate the master arbitrator's award, which was unopposed. The Supreme Court granted the petition and entered judgment which, among other things, awarded the petitioner interest on the overdue claim in the sum of only $39.40 and failed to award the petitioner attorneys' fees pursuant to 11 NYCRR 65-4.6(d). Therefore, the petitioner provider appealed.

The Appellate court noted that, pursuant to Insurance Law § 5106(a) and 11 NYCRR 65-3.9(a), interest accrues on overdue no-fault insurance claims at a rate of 2% per month, which is to be "calculated on a pro-rata basis using a 30-day month" (11 NYCRR 65-3.9[a]). The interest which accrues on overdue no-fault benefits is a statutory penalty designed to encourage prompt adjustments of claims and inflict a punitive economic sanction on those insurers who do not comply. Here, the Supreme Court failed to properly calculate the amount of interest to which the petitioner was entitled on the overdue claim in accordance with Insurance Law § 5106(a) and 11 NYCRR 65-3.9(a). Further, having determined that the denial of the claim was improper, the Supreme Court should have awarded the petitioner attorneys' fees pursuant to 11 NYCRR 65-4.6(d) and 11 NYCRR 65-4.10(j), to be fixed by the court.

Therefore, the Appellate court modified the judgment and remitted the matter to the Supreme Court, Nassau County, for a recalculation of the award of interest and attorney’s fees.

 

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

06/18/25       Northway Medical v. Sentinel Insurance
Second Circuit Court of Appeals
Insured Fails to Provide Alternative Explanation for Excluded Damages

Short and sweet. Northway brought suit against Sentinel, alleging that Sentinel breached an insurance contract by denying coverage for damage to a building owned by Northway. Sentinel provided prima facie evidence showing that the damage to the building was caused by negligent work and/or rust and corrosion, and that coverage for the damage would therefore be excluded under the insurance policy. Northway failed to provide an alternative explanation supported by record evidence. Checkmate.

 

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

05/28/25       Govt. Empls. Ins. Co. v. Clarke
United States District Court, Eastern District of New York.
Medical Provider’s Attorney Admonished by the Court for Not Disposing of an Inadvertently Produced Draft Affidavit; But His Actions Did Not Rise to the Level of Acting in Bad Faith or Engaging in Wrongful Conduct to Warrant Sanctions

Geico moved for sanctions against Colin Clarke, M.D. and Wesley Mead, Esq., counsel for Clarke. 

The Court had granted Plaintiffs' motion for a protective order as to "drafts of . . . the affidavit signed by Defendant Melana Kay."  Ms. Kay's counsel had inadvertently produced a draft of her affidavit to Mr. Mead.  Plaintiffs demanded that Mr. Mead destroy the document, but he refused.

Mr. Mead does not dispute that a draft of Ms. Kay's affidavit was inadvertently disclosed, clearly marked as a draft of affidavit.  He contends instead that his refusal to destroy the document was proper for two reasons. First, Mr. Mead states that he had an ethical duty to preserve the document to present it to the Court for purposes of a potential application for reconsideration of the Order.  Mr. Mead contends that in their motions for a protective order, Plaintiffs made material misrepresentations to the Court about the documents they sought to be protected from disclosure, such that Mr. Mead had a "duty of Candor" to apprise the Court of these purported misrepresentations.  Secondly, Mr. Mead argues that sequestration of the document was the appropriate method of handling the inadvertent disclosure.

Pursuant to 28 U.S.C. § 1927, the Court may impose sanctions on an attorney "who so multiplies the proceedings in any case unreasonably and vexatiously."  "A party seeking sanctions under either 28 U.S.C. § 1927 or the Court's inherent authority must provide 'clear evidence that (1) the offending party's claims were entirely without color, and (2) the claims were brought in bad faith—that is, motivated by improper purposes such as harassment or delay.'" A court need not make a finding of bad faith, however, when an attorney "violates a court order or engages in other misconduct that is not undertaken for the client's benefit."  The Court may also sanction a party or counsel under its inherent powers "for conduct which abuses the judicial process." The Court's inherent powers "must be exercised with restraint and discretion."

Mr. Mead is wrong on both points. First, even if Mr. Mead sought to apply for reconsideration of the Order based on Plaintiffs' purported misrepresentations to the Court and his ethical "duty," he had no need to "prevent destruction" of a document that was clearly already in the possession of Plaintiffs and Ms. Kay's counsel.

Second, by invoking Fed. R. Civ. P. 26(b)(5)(B) and insisting on sequestration, Mr. Mead expressed his intent to seek the Court's "direction" as to the "status" of the document—despite the Court having already established in the Order that the document's "status" was protected from disclosure. Mr. Mead implies ambiguity where there was none.

Mr. Mead's ethical duty upon receipt of the draft affidavit was to "promptly notify the sender", which he failed to do. Instead, Mr. Mead reviewed the document—comparing it with the final affidavit —and thereafter communicated to Plaintiffs his intention to use the document to seek the Court's reconsideration of the Order. Mr. Mead's review and use of a document that is clearly protected by a Court order is improper.

Finally, when Plaintiffs moved for sanctions following his steadfast refusal to destroy the protected document, Mr. Mead doubled down, not only filing a 10-page single-spaced letter but also cross-moving for sanctions, as well as filing an impermissible sur-reply. Throughout these filings, Mr. Mead provides scant legal support for the proposition that a document clearly protected from disclosure must be sequestered for judicial review or that such a document could properly be used to move for reconsideration of the Order. Similarly, he provides no legal support for his own cross-motion for sanctions, which this Court has already denied.

Despite being incorrect, Mr. Mead advanced a legal theory to support his belief in sequestration, which both sought to further his clients' interests and was not "entirely without color."  Moreover, while his actions were misguided and wrong, there is no evidence before this Court that he undertook them for "improper purposes." As a result, the Court, therefore, does not find that Mr. Mead acted in bad faith or engaged in misconduct "that is not undertaken for the client's benefit." Accordingly, the Motion is denied.

Nevertheless, the Court admonishes Mr. Mead for both his failure to comply with the clear Order of the Court and for his excessive and unauthorized filings. Mr. Mead is cautioned to comply with all Court orders and Individual Practice Rules of any Judge assigned to this case.

 

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

See you in a fortnight.

 

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

06/03/25       Beyond Point LLC v. ACMP Transport LLC et al.
Superior Court of New Jersey, Essex County (Special Civil Part)
Court Dismisses Declaratory Judgment Action as an Improper Direct Action

Beyond Point rented a truck to ACMP Transport and its owner, Cantos, for a period of several months. According to Beyond Point, the truck was returned at the conclusion of the rental period with severe property damage. Beyond Point brought suit against not only ACMP Transport and Cantos, but against three insurance companies it alleged insured ACMP Transport and Cantos at various points during those months.

An action brought by a third-party claimant directly against the alleged tortfeasor’s insurance carrier is known as a “direct action.” No right to bring such an action exists at common law; rather, a statute granting to bring one must be in place in order for such an action to stand.

Many jurisdictions, including New Jersey, have such a statute. One can find New Jersey’s direct action statute here. The statute provides that, in New Jersey, no direct action can be maintained unless three conditions precedent are satisfied: (1) the third-party claimant bringing the action has already obtained a judgment against the alleged tortfeasor; (2) that judgment has gone unsatisfied; and (3) the unsatisfaction of the judgment was due to the alleged tortfeasor’s insolvency or bankruptcy.

Each of the three defendant carriers moved to dismiss the complaint on the basis that it constituted an improper direct action. As the carrier-defendants noted, the plaintiff did not purport to have a judgment against ACMP Transport (their purported mutual insured), and, to the extent that it did have such a judgment, the action would have to be dismissed anyway on res judicata grounds, because ACMP Transport was included as a defendant in the instant action. The carrier defendants also noted that even if the plaintiff had a judgment against ACMP Transport that would not result in the action being dismissed on res judicata principles, the action was subject to dismissal nonetheless because the plaintiff neither alleged nor submitted any proof that any purported judgment went unsatisfied, or that any purported unsatisfaction of the judgment was due to ACMP Transport’s insolvency or bankruptcy.

The plaintiff cross-moved for leave to amend its Complaint to add a cause of action seeking a declaratory judgment was owed. In New Jersey (and many other jurisdictions), leave to amend is freely granted as justice so requires, unless amending the complaint in the manner proposed would be futile. Here, the carrier defendants opposed the cross-motion on the basis that adding a cause of action seeking a declaratory judgment does not cure the fact that the plaintiff has not satisfied the direct action statute.

The Court denied the plaintiff’s cross-motion to amend its pleadings, noting that the direct action rules described above apply equally to declaratory judgment actions. However, the Court granted the carrier defendants’ respective motions to dismiss, noting that none of the conditions precedent, provided by the direct action statute, were satisfied.

A copy of the decision has not yet been made publicly available but is available upon request from the over-signed.

Editor’s Note: I had the humble privilege of representing one of the carrier defendants in this case. Since this decision came down, the plaintiff has moved for a default against ACMP Transport and Cantos. Will the legal landscape change as to the carrier defendants if plaintiff’s motion is granted? I think not, since even if a default judgment is granted and returned unsatisfied, the direct action is only proper once it is established that the unsatisfaction is due to either the insolvency or bankruptcy of the alleged tortfeasor—neither of which has been established. That, and the fact that the decision reported on now dismissed the carrier defendants from the case on the merits and with prejudice, tells me that a decision on the default application will make no difference in terms of coverage.

 

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

06/06/25       Razuki v. AmGuard Ins. Co.
United States Court of Appeals, Ninth Circuit
Failure to Correctly Identify Fire Safety System Breaches Protective Safeguards Condition

Razuki owned a multi-tenant commercial building that was damaged by fire. Razuki’s building was insured through AmGuard. The policy contained a Protective Safeguard Endorsement (“PSE”). The applicable Symbol within the PSE was P-1, which provides in pertinent part:

"P-1" Automatic Sprinkler System, including related supervisory services. Automatic Sprinkler System means:

a. Any automatic fire protective or extinguishing system, including connected:

(1) Sprinklers and discharge nozzles;

(2) Ducts, pipes, valves, and fittings;

(3) Tanks, their component parts and supports; and

(4) Pumps and private fire protection mains.

b. When supplied from an automatic fire protective system:

(1) Non-automatic fire protective systems; and

(2) Hydrants, standpipes, and outlets. . . .

AmGuard denied coverage for the loss due to the lack of a sprinkler system in violation of the PSE’s condition. Instead, the building only contained an Ansul system which is a wet chemical fire extinguishing equipment. Notably, an Ansul system falls under Symbol P-9G in the PSE.

Razuki contested that the PSE is ambiguous because the broadness of P-1 could include the Ansul system. In support, he submitted an expert opinion that the policy was ambiguous. The appellate court disagreed finding the PSE separately identified Ansul systems in the P-9G symbol, and its inclusion under P-1 would be redundant.

The court further rejected Razuki’s estoppel argument. Razuki submitted AmGuard failed to inspect the building, paid a $50,000 advance without reservation, and continued to insure the building post-loss. But, Razuki’s broker represented the type of sprinkler within the application and AmGuard was entitled to rely on that representation. Also under California law, estoppel cannot be used to extend coverage after a loss.

For these reasons, the Ninth Circuit affirmed the grant of AmGuard’s summary judgment.

 

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

05/22/25       St. Farm Mut. Auto. Ins. Co. v. All City Fam. Healthcare Ctr., Inc.
Supreme Court, New York County
Intentional Acts, Fraudulent Statements, and Failure to Return Executed Examination Under Oath Transcript Results in Loss of Coverage for Medical Payment Providers

State Farm Mutual Automobile Insurance Company (“State Farm”) started a declaratory judgment action, seeking a declaration that it owed no coverage for medical bills submitted by certain medical providers following an automobile accident.

State Farm issued an automobile insurance policy to Jose Ordonez, and his auto repair and body shop, providing coverage for a 2013 Lincoln MKT. In November 2020, three individuals were allegedly inside of the insured vehicle, which was reported to be involved in a side-swipe automobile accident. After the incident, all individuals in the vehicle received around one hundred thousand dollars of medical bills.

During the investigation, State Farm requested an examination under oath of all three individuals reported to be involved in the incident. All three appeared, but two failed to return the subscribed transcripts. State Farm disclaimed coverage for failure to return the transcripts. As to the third individual, State Farm disclaimed on the basis that false statements, with the intent to conceal, were made during the examination.

The court granted State Farm’s motion for summary judgment in its entirety. Under New York law, it is well established that the failure to return an executed examination under oath transcript is a breach of a condition precedent to coverage. Doing so bars coverage to the insured, and all assignees of an insured. Based on the evidence submitted, it was undisputed that two individuals seeking benefits failed to return the transcripts subsequent to the examination under oath.

Further, the court found that State Farm submitted sufficient evidence in support of the portion of its summary judgment motion that the accident was intentionally caused, or the result of fraud. The court looked at the testimony of a claims investigator. In addition, the court pointed to the fact that all three individuals failed to appear in the declaratory judgment action and had defaulted. The court identified that by failing to appear, the defendants had admitted that their examination under oath statements were false, and their injuries were not the result of the accident. As the appearing defendant medical providers failed to produce any evidence of a person with knowledge supporting the legitimacy of their claims, there was insufficient proof offered to rebut State Farm’s position.  

Accordingly, the court granted the motion in its entirety, finding that State Farm has no obligation to provide medical payments under the automobile policy issued to Jose Ordonez.

 

06/05/25       Main St. Am. Assur. Co. v. Calabria et al.
New York State Supreme Court, County of Albany
On a Very Sad Set of Facts, Court Finds Mother Not an Insured Under Businessowners Policy for Injuries to Child in Mother’s Bakery

Trigger warning: This case involves very serious, albeit accidental, injuries to a little girl. I will do my best to keep the facts light.

Anna Calabria owned a bakery called Café Crisan. Calabria specialized in cake decorating and had one employee, Dohner, to assist in baking the sweet treats. Calabria’s husband, Ignatius, dropped off their young daughter at the bakery due to a lack of alternative childcare. At depositions, the Calabrias each testified that this was outside of the normal sequence of events; usually, as they testified, they hired a sitter to look after the young Calabria at times when both parents were at work.

When Ignatius dropped the girl off at the bakery, Anna gave her some dough with which to play. The girl fed the dough through a dough and fondant sheeter (a heavy machine used to flatten fondant before it is wrapped around a cake). Sadly, the girl’s hand became caught in the machine.

The girl, through a guardian ad litem, sued the bakery and Somerset Industries (the manufacturer of the machine). Somerset impleaded Anna.

The bakery was insured by Main Street under a businessowners policy. Anna and Ignatius were insured under a homeowners policy issued by Travelers. Anna sought coverage for the third-party action under each policy.

Main Street denied coverage to Anna under the businessowners policy on the basis that she did not meet the definition of an “insured.” Even though Anna owned the bakery, the policy defined an “insured” as the named insured (i.e., the bakery itself), as well as the bakery’s “executive officers” and “directors,” but only with respect to their duties as officers or directors of the bakery. At the crux of the issue in the declaratory judgment action, as far as coverage under the Main Street policy went, was whether Anna’s potential liability in the third-party action was for acts or omissions taken within the scope of her duties as owner of the bakery.

The Court agreed with Main Street that the act of supervising her own daughter within the bakery was not an act taken within the scope of her employment by or ownership of the bakery. As the Court put it, “Calabria was performing duties related to Café Crisan’s business when the injury occurred, but her supervision of [her daughter] within the bakery room relates to her duty as a mother and guardian of PC.” The Court explained further that a reasonable businessperson would not expect that an insurer for businessowners’ coverage would cover just any act occurring while an employee happens to be performing a business-related duty, regardless of whether the act related to that business duty or not.

The Court then turned to the Travelers homeowners policy. That policy contained an exclusion for bodily injury to any person who is related by blood, marriage, or adoption to a covered person and who is a resident of the household of that person. However, the Travelers policy contained an amendatory endorsement, deleting that exclusion, and replacing it with one that excluded coverage for bodily injury to any insured, as well as to any claim to share or repay damages with anyone else who may be liable for bodily injury.

The difference between the two Travelers exclusions is an important one—the original exclusion did not include an exclusion for claims to share or repay damages, but the amended exclusion did. This distinction is of the utmost importance because Anna was only a third-party defendant in the underlying tort action—Somerset sought to have her share or repay damages for which Somerset may be found liable.

Travelers issued a disclaimer letter to Anna, citing the text of the original exclusion, but not the amended version of the exclusion. Calabria, by counsel, objected to that disclaimer, prompting Travelers to send another letter, this time citing the amended exclusion. By the time the second disclaimer (citing, for the first time, the correct exclusion) was issued, more than 30 days had passed (frequent readers of this newsletter will understand that New York Insurance Law 3420(d)(2) requires third-party bodily injury insurers to issue disclaimer letters “as soon as is reasonably possible,” a phrase understood to mean roughly 30 days).

However, the Court did not buy the argument that Travelers lost its right to rely upon its exclusion by citing the wrong version of it in its initial coverage letter. While the Court acknowledged the important difference between the two versions, it also noted that both versions preclude coverage for bodily injury to a relative who is a resident of the named insured’s household, and that this was mentioned in Travelers’ original disclaimer. Since, in the Court’s view, Travelers informed the Calabrias of this in its initial disclaimer letter, thereby identifying both the applicable policy exclusion and the factual basis for its application, Travelers did not lose the right to rely upon the correct version of the exclusion.

Editor’s Note: Coverage Pointers’ own Dan Kohane and Evan Gestwick successfully litigated this case for Main Street.

 

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

06/20/25    New York Senate Bill S4433
New York State Senate  
The Grieving Families Act Has Passed Both Houses

The Grieving Families Act, S4423, was passed in both the Senate and Assembly. For the fourth year in a row, the Grieving Families Act seeks to provide for the types of damages that may be awarded to the persons for whose benefit an action for wrongful death is brought.

This legislation attempts to amend the estates, powers, and trusts law, in relation to payment and distribution of damages in wrongful death actions. The bill seeks to expand the available economic or pecuniary losses, including damages for grief and anguish, available to “surviving close family members.”

Bill S4433 is substantively the same as Bill A9232-B which was vetoed by the Governor last year. Notably, Bill S4433 does not address Governor Kathy Hochul’s concerns regarding the negative impact on the health care systems and the increased costs, such as insurance premiums.

 

VICTORIA’S VISION ON BAD FAITH
Victoria S. Heist
[email protected]

06/10/25       Mandarin Oriental, Inc. v. HDI Glob. Ins. Co.
United States District Court, SDNY
SDNY Finds Reserve Information Discoverable When the Insured Alleges Bad Faith

This is a declaratory judgment action in which the insured, Mandarin Oriental, Inc. ("Mandarin") is seeking coverage from two of its insurers, HDI Global insurance Company ("HDI") and Assicurazioni Generali S.p.A. ("Generali") pursuant to a special perils provision in each of their respective policies.

Mandarin alleges that the action turns on four issues. First, the trigger of coverage under the special perils endorsement. Second, the number of occurrences under Mandarin's claim. Third, the period of recovery. Fourth, whether the insurers adjusted Mandarin's claims in bad faith.

This case arises out of the COVID-19 pandemic. Mandarin operates hotels in Miami, New York, Washington, DC, and Boston, and seeks coverage from HDI and Generali, amongst other insurers, pursuant to Endorsement No. 3 in each policy, which provides coverage for special perils including "loss resulting from interruption of or interference with the business carried on by [Mandarin] in consequence of (a) Infectious or contagious disease manifested by any person while on the premises of [Mandarin] or within a radius of 5 miles thereof."

On March 24, 2022, Mandarin notified the insurers that it was asserting claims for their business interruption losses at the hotels from the pandemic. On June 1, 2020, the insurers issued a letter notifying Mandarin that they will investigate the claim under a reservation of rights.

After the Court denied Mandarin's motion to dismiss in 2024, the parties entered discovery. The defendant insurers withheld 500 documents from discovery as privileged and provided the applicable privilege logs. This decision arises out of Mandarin's motion to compel discovery of the 500 documents. Specifically, Mandarin challenged the withheld discovery, stating the insurers improperly withheld reinsurance information, reserve information, and other documents under the attorney-client privilege.

First, the Court found the reinsurance information discoverable. The Court found that the insurers did not properly explain how reinsurance information is irrelevant to the action, and the insurers already disclosed some information about the reinsurance policies. The Court discussed how the insurers' communications with their reinsurers could reflect their understanding of the risk, the merits of the claim, and the likelihood of coverage.

Second, the Court found the reserve information discoverable because Mandarin alleged that the insurers breached the covenant of good faith and fair dealing in failing to provide a coverage opinion or payment under the policy. Thus, the Court found the reserve information discoverable because it is relevant to assessing the insurer's motivations. However, it is only discoverable so long as there is not another ground to limit disclosure. The Court also found that the reserve information was not privileged, because reserves are required by New York law and occur in the normal course of business, not in the anticipation of litigation.

Third, the Court found communications and documents exchanged between the insurers, their adjusters, and accountants, without attorneys, discoverable. Further, the Court found communications and documents between non-attorney employees at the insurance companies discoverable.

 

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

The content of this column also appears in the ‘Liability & Insurance,” a monthly newsletter focusing on Canadian coverage and published by Heather Sanderson.  Contact her for a subscription.

05/29/25       Deasan Holdings Ltd. v. Continental Casualty Company
British Columbia Court of Appeal
A Broker's Actions and Communications Can Reasonably Indicate to an Insured That the Broker Has the Insurer's Implied Authority to Commit the Insurer to Coverage

Beginning on the morning of September 30, 2018, and over the next several days, the small community of Old Fort, British Columbia, found itself isolated when a slow landslide moved down from the slopes above the town.

Old Fort is located just south of Fort St. John, which is the nearest population centre, and a regional hub in northeastern British Columbia. The area surrounding Old Fort is defined by steep, unstable slopes along the Peace River valley, a landscape shaped by layers of shale, clay, and gravel, with a history of landslides and geotechnical challenges.

The landslide began as a slow-moving event, but rapidly escalated, ultimately displacing millions of cubic metres of earth and destroying the sole access road to the community of about 200 to 300 residents. As the slide progressed, the Peace River Regional District declared a state of local emergency and issued mandatory evacuation orders, forcing the evacuation of approximately 145 people and placing the remainder of Old Fort’s population under evacuation alert as the threat persisted for weeks.

The origin of the landslide has been the subject of intense investigation and community concern. While initial suspicions focused on a gravel pit operation above the community, geotechnical experts concluded that, although the weight of stockpiled material may have contributed, the root cause lay in the inherently unstable nature of the valley’s slopes—conditions exacerbated by natural geological processes over time. The provincial government classified the event as a "dangerous occurrence" and the Ministry of Energy, Mines and Petroleum Resources launched a comprehensive geotechnical assessment to determine the root cause and contributing factors, a process that continued for months after the disaster.

As lawsuits emerge from the aftermath of the Old Fort landslide, questions remain about responsibility, the adequacy of oversight, and the long-term safety of the community nestled in this precarious landscape.

One of those lawsuits involves Deasan Holdings Ltd., who operated the gravel pit on the slopes above Old Fort. Local speculation was rampant that the gravel pit was the source of the landslide.  Deasan Holdings Ltd. was eventually sued by neighbouring property owners. Deasan reported the claim to Continental Insurance Company (CNA), who denied a duty to defend Deasan, and the coverage fight was on. Unlike most coverage actions, this dispute centred on what information the broker gave to underwriting when the policy was written and whether the broker had authority to bind the insurer.  It is a fact intensive but interesting decision.

The Initial SWS Policy

Through the agency of CMB Insurance Brokers, an insurance wholesaler, Specialty Wholesale Services with ties to the London market, issued an insurance policy to DRS Energy Services Inc. DRS provides oil field services, including hauling equipment to and from oilfield sites. The shares of DRS were largely owned by the privately owned companies of Sandy Beech, Dean Swanberg and a minority silent partner, Russell Parker. The companies owned by Beech and Swanberg also owned the shares of an inactive, numbered B.C. shelf company. In August of 2017, that shelf company was re-named Deasan Holdings, which was a contraction of the first three letters of the first names of Beech and Swanberg. That renamed shelf company became active when DRS transferred the title to some developed land in Fort St. John to that shelf company.

DRS stored oilfield equipment in buildings at the site of an old, inactive gravel pit above Old Fort – the very gravel pit that was subsequently suspected as being the origin of the landslide. That property was listed in the application for insurance with SWS as ‘vacant land.’

In October of 2017, DRS transferred the title of that land to Deasan Holdings. About that time, Mr. Beech called Brett Kanuka at CMB Brokers and told him about the gravel pit land transfer; that their plan was to start a gravel pit operation in the future. Mr. Beech wanted liability insurance on the gravel pit in case someone ventured into the area and hurt themselves.

Mr. Kanuka told Mr. Beech that Deasan Holdings would be added as an additional insured to DRS’s policy; that the gravel pit lands would be described as vacant; that if and when the gravel operation gets underway, they should move to a different company which would offer better terms and rates. That information was relayed to SWS with the comment that DRS and Deasan Holdings have common ownership. SWS replied that under their definition of ‘insured,’ Deasan Holdings was already an insured.

Prior to the SWS policy expiry, Mr. Kanuka began looking at alternative markets. He had a producer agreement with Continental/CNA and sent a request for a quote to CNA.  That request contained several errors:  The forms wrongly indicated insurance was being sought for the preceding year, not the current year. In the forms, Mr. Kanuka summarized the business of DRS but did not explain the ownership or business of Deasan; or even mention that Deasan required coverage. He listed the real property owned by both companies on a “property statement of values” but did not identify the fact that Deasan owned several of the properties. He described as “vacant lands” the gravel pit lands and one parcel of the original lands, seeking coverage for liability in relation to this property, but elsewhere he set out that there were no vacant properties. The scheduled equipment included equipment owned by Deasan but this ownership was not identified. The same document requested a broad definition of ‘insured.’

The Continental/CNA Policy

The CNA underwriter that received the request understood that the coverage being sought for the gravel pit was for liability only. He sent a quote to Mr. Kanuka for insurance coverage, and on December 29, 2017, the Broker responded to the Continental quote asking that the Underwriter to “please bind coverage” for the year beginning December 31, 2017.

On January 5, 2018, Mr. Kanuka created a certificate of insurance that he sent to Mr. Beech. He did not send it to Continental. That certificate listed DRS as the named insured with respect to Rig Relocation and Movement of Oilfield Equipment.  Deasan Holdings was listed as an additional insured ‘wrt’ ownership of the Fort St. John property.  The gravel pit was listed in the statement of values to the Certificate (no mention of who owned it) but that it was insured for liability only.

DRS paid the full premium to CRM/Kanuka who remitted it to CNA. CNA then forwarded the policy wording to Mr. Kanuka who did not send it to Mr. Beech until after the landslide. 

On August 31, 2018, just under a month before the landslide,  Mr. Beech told Mr. Kanuka that Deasan intended to activate the gravel pit.  Both believed that Deasan had coverage under the CNA policy. Mr. Beech sent Mr. Kanuka the legal description of the gravel pit  and a list of equipment that required coverage. On September 4, 2018, Mr. Kanuka spoke to the CNA underwriter about covering the active gravel pit. Mr. Kanuka’s team at CMB took steps to send that material to CNA but CNA did not receive it before the landslide occurred on September 29, 2018.

This is clearly not brokering’s finest hour.

CNA denied a duty to defend Deasan Holdings against its liability arising from the ownership and operation of the gravel pit.

The Trial Judgment

The trial judge concluded that the insurance broker acted as an agent for Continental but the broker’s authority as agent did not extend as far as having the authority to bind coverage for Deasan's gravel pit operations.   The judge found that the broker had authority to deliver a certificate of insurance naming Deasan as an additional insured but limited this to a building on the original Fort St. John land, not the gravel pit.  The judge rejected Deasan's argument that the policy definitions included Deasan as an insured.  Accordingly, CNA did not have a duty to defend Deasan.

The Appeal Judgment

The British Columbia Court of Appeal reversed the trial judgment and determined that CNA is obligated to defend Deasan.

The Court of Appeal found that the trial judge erred in limiting the broker's authority to what was expressly stated in the certificate of insurance. The broker, acting as an agent for CNA, had the authority to extend coverage to Deasan, including coverage for an active gravel pit. The trial judge failed to consider the entire factual matrix and the context of the relationship between the broker and Deasan, which indicated that the broker had implied authority to extend such coverage. Relying upon a Manitoba Court of Appeal decision, Berryere v. Fireman’s Fund Insurance Co., the British Columbia Court of Appeal held that an insurance agent’s implied authority is based on conduct, and, as regards, third parties it is what the agent “is reasonably, believed to have having regard to all of the circumstances.” 

In addition, the Court of Appeal held that Mr. Beech’s notice to the broker that it was activating the gravel pit was noticed to CNA, and, that nullified any argument that the policy is void for misrepresentation.

The Court of Appeal also dismissed CNA’s argument that the certificate of insurance stated that it was not part of the policy and that the certificate could not modify or expand the coverage under that policy; the policy did not ensure an active gravel pit, and therefore there is no duty to defend Deasan. In opposition to this argument that Court held that the certificate when viewed on its own is ambiguous and can only be explained by the factual matrix known to Mr. Kanata and Deasan at the time the certificate was issued.  The certificate list of the gravel pit on the schedule of property insured; it was known to Mr. Kanata that the land was owned by Deasan and that there were no buildings on that land. That meant that the fact that the certificate stating that Deasan was an additional insured with respect to ownership of the Fort St. John property was an ambiguous statement. That ambiguity is to be resolved in favour of coverage: Progressive Homes.  That Court continued:

The only way to resolve the ambiguity in the certificate of insurance, in the context of Mr. Kanuka’s prior conversations with Mr. Beech and conduct, was to conclude that the certificate of insurance communicated to Deasan exactly what Mr. Kanuka intended and thought to be the case, consistent with what Deasan expected: that the gravel pit lands were covered by the Policy for liability no matter which of DRS or Deasan owned the lands; and Deasan was an additional insured including with respect to its ownership of the gravel pit lands, but that the only buildings it owned that were covered by the insurance were located on the original lands.

On this basis alone, then, the judge ought to have found that Deasan was added to the Continental Policy as an insured, together with DRS. The Broker informed Deasan that it was an “additional insured” by way of the certificate of insurance, and therefore, in accordance with the history of the Broker’s communications with Deasan’s principal, this meant Deasan was an insured under the Policy.

Comment

This judgment does not rule out the possibility of CNA suing the broker for the costs of defending and possibly indemnifying Deasan.

A copy of this decision is available upon request to the over-signed.

 

 

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