Coverage Pointers - Volume XXVII No. 2

Volume XXVII, No. 2 (No. 701)
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.

John C. Trimble (1955–2025)

You will forgive me for doing nothing else in this cover note than speak of my friend John Trimble.

So many of you knew John Trimble, my colleague, friend, and co-presenter.  John passed away this week, after a battle with cancer.  If you didn’t know him, you knew of him because I cannot imagine a civil practitioner, trial lawyer or insurance professional who had not heard from him or of him.

I will miss him in so many ways, and the legal and insurance industry has lost a gentle giant. I offer the obituary included on his firm’s website.

John C. Trimble, a luminary in Indiana law and a deeply beloved mentor, husband, and father, passed away peacefully during the early morning hours of July 2, 2025, with his family by his side. His loss leaves a great void in the legal profession and the hearts of those who knew him, and all of us at the firm.

John forged his career over four decades at Lewis Wagner—now Lewis Wagner & Trimble in his honor—where he was noted as “one of Indiana’s most sought‑after legal minds,” especially in complex litigation and mediation. A prolific insurance coverage lawyer and mediator, he was repeatedly ranked No. 1 in Indiana by Super Lawyers (2011–2021), honored as DRI’s 2021 Louis B. Potter Lifetime Professional Service Award recipient, and named a Sagamore of the Wabash in 2024.

Throughout his career, John held leadership roles as President of the Indianapolis Bar Association, Chair of DRI’s Judicial Task Force, President of the Indianapolis Legal Aid Society, and helmed the Board of Visitors at IU Robert H. McKinney School of Law. He frequently lectured at conferences—his presentations described as “excellently delivered”—and he wrote the “Eye on the Profession” columnist series, transparently sharing insights on ethics, trends, and legal practice.

But John’s legacy extended far beyond accolades. He was renowned for his generosity—always making time for young lawyers, law students, and anyone seeking advice, regardless of how busy his docket. Colleagues inside and outside the firm remember his warm, accessible mentorship and his ability to tell compelling stories that both entertained and enlightened. His speeches inspired countless legal professionals nationwide.

His deep commitment to bettering the profession and supporting its future led to his name being added to the firm’s masthead in May 2025—a testament to his instrumental impact. Yet, John’s proudest roles were personal. He was a devoted husband to his beloved wife, Ann, and a loving father to two daughters, Laura and Marie. For John, family always came first.

 

In Celebration of a Life Well-Lived

John’s life was one of service—to his clients, colleagues, community, and family. Generous and principled, he approached every challenge with integrity, mentors with patience, and each courtroom with clarity and conviction. His gift for storytelling—whether during a mediation, a speech, or a counsel session—made complex legal concepts accessible and memorable. His life’s work advanced not just cases, but the character of the legal profession itself.

As we say goodbye, we honor a remarkable man and a good friend whose legacy endures in the countless young lawyers he nurtured, the legal reforms he championed, and the ideals he embodied. John’s life stands as a testament to the power of mentorship, the importance of generosity, and the enduring impact of a loving family. May his memory continue to inspire and guide us.

Earlier this year, in recognition of his unparalleled contributions to our legacy and our future, our firm was proud to announce a rebrand of our firm to Lewis Wagner & Trimble. John’s name now stands alongside those of their founders, not only as a tribute to his legal excellence but as a reflection of his vision, values, and enduring impact.

While his professional accomplishments were many, John often said that his proudest achievements were outside the courtroom: his enduring marriage to his wife, Ann, and his role as a father to daughters Laura and Marie. We extend our heartfelt condolences to the Trimble family and all who were fortunate to know John. His absence is deeply felt, but his influence will continue to guide our firm and inspire our work.

 

The “John and Dan Shows” had thousands of attendees over the years.  I treasured my time with him, as did those who enjoyed our presentations.  An example:

John’s Own Words on Professional Generosity:

On June 26, 2019, I published an article entitled “Want to be a Successful Marketer?  Be Professionally Generous”.  Of course, I asked John to include his advice, because John defined professional generosity.  John wrote these words, which should be read, considered and taken to heart:

Dan, we live in a time when the billable hour and the profit motive of law firms can be a disincentive for lawyers to be professionally generous. It is wonderful of you to bring this topic front and center.

All of the lawyers I know who are truly professionally generous will tell you that they believe that they have gained far more than they have ever given to the profession. The friendships, the opportunities, the invitations, and the business that flow from professional involvement are all too abundant to ever calculate.

Smart law firms actually do incentivize their lawyers to be professionally involved. They track the level of involvement of their lawyers and staff, and they support it financially. What they find is that their lawyers and staff are happier and more productive, and the reputations of their firms rise along with the spirits of their colleagues.

It is well known in all voluntary groups that they desperately need reliable volunteers and future leaders. Bar associations are no exception. To my young lawyer friends, I implore you to join and get involved in bar associations and be persistent for your entire career. Look for the professionally generous lawyers in your circle of bar leaders and emulate them, learn from them, and position yourself to succeed them. You are not too busy for professional service...believe me.

If you can learn the taste of the secret sauce of professional generosity, you will have a career that is successful and satisfying beyond anything you ever dreamed. You will learn that law is about friendship and service and problem solving and justice and equity. You will make your mentors proud, and you will position yourself to mentor the next generation coming up behind you.

Bless you, my friend. I will share the celebration of his life at his funeral on Wednesday in Indianapolis. 

There is a memorial fund set up in his honor, through the Federation of Defense & Corporate Counsel Foundation for those  who may wish to remember him by a contribution.  Click here to contribute.

 

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.

 

Well, Maybe in Another 100 years – 100 Years Ago:

The Peninsula Times Tribune
Palo Alto, California
4 July 1925

Up and Down the State

BAITING THE ALIEN AN OLD AND EVIL PRACTICE HERE

Some of our national disfigurements take their beginning almost with the establishment of the nation itself.

One of these is rank intolerance and prejudice disclosed against aliens by some loudest in their professions of being liberty-loving American citizens.

For example, an investigator recently disclosed this editorial from a leading American newspaper of 1817:

“Let us not forget, before it is too late, what motive brings these people to our shores. Let us remember that they come with all the prejudices which are the result of race and early training, and that in welcoming what seem to be the oppressed of other lands, we are really taking an adder into our bosom.”

Yet the immigrants to which such vigorous objection was taken over a hundred years ago were practically all from the northern and western part of Europe.

In their arteries coursed the blood of the Nordic. From the standpoint of our alien baiters of to-day, their own ancestors were hopelessly wrong in their estimate of the worth of those then coming here to make their homes.

Americans a hundred years from now will feel the bigots of today were equally in error in their unjust and shameful attitude toward the aliens from the south and east of Europe.

Is it too much to hope they will have entirely cleansed their minds and hearts of this feeling, of which there is none more unworthy an American citizen?

 

Peiper on Property (and Potpourri):

Dear Readers:

If you are reading this on July 4^th, we have some useful information for you.  Did you know that 39% of all hot dogs consumed in the United States are eaten on this very day? That is more than 150,000,000 hot dogs from 12:01 to 11:59 today.   A standard hot dog with a bun accounts for 300-350 calories.  Collectively, that accounts for something that adds up to 5.25e10.  If it is more math than Siri can perform, suffice to say we did not ask how many more calories are added by potato/macaroni salad. 

Ahhh…who cares.  Eat hot dogs, drink beer and celebrate.  See you on 7/7, America. 

Steve
Steven E. Peiper
[email protected]

 

Oh, That’s Good – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
4 July 1925

SHERIFF’S STAFF CLEAN

No evidence of bribery found;
Campaign on motorists.

After investigating charges that deputy sheriffs are shaking down motorists and rum traders, Sheriff Tyler yesterday announced that he had found no sign of misconduct among members of his staff. The investigation was made after Robert H. Ruhlson, special deputy, was held for the September grand jury, charged with extortion. Charles Knight, owner of the Riverdale inn, swore he paid Ruhlson $50 recently. Ruhlson was released on bail on Thursday.

The sheriff also announced that 40 deputies will patrol the county roads today and tomorrow and arrest motorists who drive without licenses.

 

Lee’s Connecticut Chronicles:

Dear Nutmeggers:

Welcome back to, well, me. It’s been a minute since I’ve been home. In the last two months, I think I slept in my own bed for maybe 10 nights or so. Some of the reasons have been tragic, and some of the reasons spectacular. I finally fulfilled a life-long desire to tour the ancient ruins of Greece. My high school summer plan was put on hold a few decades but maybe it was made all the sweeter for the long wait. It’s hard to put into words what it feels like to walk in the shadows of 2700 year-old ruins and marvel at the ingenuity and genius of ancient engineers and architects.

On the insurance front, it seems like the Connecticut courts have taken an early summer vacation. We don’t have much to offer this edition, but we are closely monitoring the Supreme Court for a decision which may fundamentally alter the obligations of insurance brokers post-policy issuance. Once that decision comes down, you’ll read all about it in this space.

Until next time, keep keeping safe. 

Lee
Lee S. Siegel
[email protected]

 

Since There is a Seven-Eleven at the Location Now, I Guess They Moved the Temple – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
4 July 1925

MASS MEETING TO DECIDE
ON JEWISH TEMPLE SITE

A mass meeting of Jewry of the North and Central Park section will be held at Temple Emanuel, No. 281 Parkside Avenue, on Wednesday evening, July 18^th. It will be decided at this meeting whether the present temple should be kept or whether a new location in the North Park section should be selected.

Editor’s Note:  There is a 7-ELEVEn at that location now, about a block and a half from my house, so I guess the Temple did move.

 

Ruffner’s Road Review:

Dear Readers,

Happy Fourth of July!

Our case this week involves an insurer’s declaratory judgment action alleging it was not required to indemnify any party under the policy for the subject accident in New York. The insurer argued the insured’s material misrepresentation with respect to her residency and garaging address, which she claimed were in Florida, rendered the Florida policy void at its inception. While the court correctly explains that New York law prohibits retroactive rescission, courts have held Florida law should apply as the State where the contract was made:

There is a conflict of laws between Florida Statutes Annotated, title 37, § 627.409, which permits retroactive cancellation of an insurance contract if there has been a material misrepresentation in the application for insurance… and New York law, which prohibits retroactive cancellation…. Since the appellant issued its insurance policy to Tettis and his wife in Florida, who purportedly were residents of Florida, for vehicles registered in Florida, which terms incorporated Florida law, and where the only connection between the policy and New York is that Tettis was driving the vehicle in New York at the time of the accident, Florida law is controlling under New York's conflict of law rules…

Gov’t Emples. Ins. Co. v. Nichols, 8 A.D.3d 564 (2^nd Dept. 2004). See also Omphil Coare, Inc. v. Pearl Holding Group, 2019 NY Misc. LEXIS (Civ. Ct. Kings Cty. 2019):

New York utilizes the 'grouping of contacts' or 'center of gravity' analysis as the appropriate approach to resolve choice of law questions, in cases premised on breach of contract. . . . In the case at bar, it is uncontested that the insured entered into and negotiated the insurance contract in Florida, and obtained the Florida policy from defendant, a Florida Insurance provider. The insured further informed defendant that he was a Florida resident, and that he would garage the insured vehicle in Florida.

In this week’s Peak Property case, the insured had purchased an automobile insurance policy for this vehicle through plaintiff and, on her application, listed an address in the state of Florida as her residence and the location where the vehicle would be garaged. Following the accident, plaintiff initiated an investigation and determined Mulverhill to be a New York resident at the time of the accident. However, it appears the insurer failed to raise a choice of law argument in this case, as the court applies NY law precluding retroactive recission without considering whether Florida or New York substantive law should apply.

Kyle
Kyle A. Ruffner
[email protected]

 

Oxymoronic Death – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
4 July 1925

SAFETY FIRST
SIGN CAUSES
DEATH OF MAN

Niagara Falls, July 3. – Gardner Rose, 30 years old, of No. 14 B Street, Echota, died early to-day in the Memorial hospital of blood poisoning. A safety-first sign in a local industrial plant indirectly caused Rose’s death.

Rose and several other workmen were lowering a sliding door from the ceiling of the plant. The safety-first sign, made of glass, was attached to the door. The sign broke loose and a piece of the glad fell and struck Rose in the back as he was leaning over. The glass penetrated the man’s back and blood poisoning set in.

Rose was married and leaves a wife and three children.

 

Ryan’s Federal Reporter:

 

Ryan

Ryan P. Maxwell

[email protected]

 

A Different Kind of Shot – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
4 July 1925

PROHIBITION AGENT
IS ATTACKED BY MOB

Hoboken, N.J., July 3 (A.P.) – Jesse Harvey, negro prohibition agent, was attacked today by a Jersey City mob, which ignored his revolver, after his automobile had run down and seriously injured four-year-old Frank Witka.

The accident followed a “dry Fourth” raid, in which 21 places were entered and 26 arrests made. All the defendants were arraigned before Commissioner Stanton of Hoboken and held in $1,000 bail each.

Charles Green of Jersey City was arrested by Harvey, charged with assaulting a government officer. 

 

Storm’s SIU:

Hi Team:

Two cases for you this edition:

• In a Fire Claim Litigation, the Court Denied the Insured’s Motion for the Judge to Recuse Herself Because of Comments She Made Regarding a Criminal Action Against the Plaintiff and His Lack of Employment.

• The Court Granted the Insurer’s Motion to Compel Appraisal and Denied the Insured’s Motion of Alleged Bad Faith.

Have a great 4^th of July!

Scott
Scott D. Storm
[email protected]

 

An Act of God – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
4 July 1925

Court REVERSES DECISION
IN CITY ACCIDENT CASE

Ruling that cities are not liable for accidents due to the acts of providence, the appellate division of the supreme court has reversed on appeal a judgment given recently against the city of Buffalo in favor of the late Mrs. Clara Van Ness. The woman was awarded $1,600 when she sued for injuries suffered when struck by a traffic standard that had been blown over in a wind storm. Her heirs continued the action after death.

 

Fleming’s Finest:

Hi Coverage Pointers Subscribers:

Happy Fourth of July! Hope you are having a nice week and enjoying Summer. I’ve been working through a rather large list of activities for the Summer, including visiting a national park, seeing my niece, and trying New Haven pizza so far.

This week’s case from the Alaska Supreme Court considered whether an insurer’s internal mailing procedures for a nonrenewal notice met the statutory requirements and when prejudgment interest began to accrue for breach of the insurance contract.

See you in a fortnight,

Kate
Katherine A. Fleming
[email protected]

 

Dear Miss Fairfax – 100 Years Ago:

The Kansas City Post
Kansas City, Missouri
4 July 1925

Advice to the
Lovelorn
By Beatrice Fairfax

Dear Miss Fairfax: I read your column every day and think you give sound advice to the young folks. I would like to have you answer the following questions:

What is the proper thing to do when a young man brings a box of candy and there are others in the room? Should you open it and pass it around? When no one is there but you should you open it before going out for a drive or after you returned?

If young man wants to go swimming is it proper to go by ourselves, or should there be others in the party?

What is the proper way of ending a letter to a boy?

When a young man, whom your parents don’t know, calls on you, should you bring them into the room and introduce them on his arrival? – Gloria

Open the candy whenever you choose; it is the young man’s gift to you and whether you open it before a roomful or before the drive makes little difference. A swimming party is always more enjoyable in a party rather than a twosome. “Sincerely” is a safe and dignified ending to a letter. Take your caller in to meet your parents; under no circumstances bring them to meet him. It is his honor to meet them, not theirs to meet him.

 

Gestwick’s Garden State Gazette:

Dear Readers:

I was awake for a full 24 hours last Thursday due to a flight cancellation. The kind agent of the airline, which shall remain nameless, offered to book me on a new flight…that left at 10:50 p.m. the following evening. Even worse, I was travelling on business, so all I had were the clothes on my back and a briefcase full of papers and my laptop. Needless to say, an overnight stay simply wouldn’t have worked. Instead, I began my vehicular voyage at 8:30 p.m., arriving (safely) back to the Buffalo Airport at 4:00 a.m. My saint of a fiancé dragged herself out of bed to get me.

Happy belated Canada Day to our Canadian contingency. George Springer celebrated Canada Day with 7 RBIs and a grand slam against the Yankees in the Toronto Blue Jays’ all-red Canada Day uniform. The next day, the Jays beat the Yankees again, taking the lead in the AL East. If that’s not a Canada Day gift, I don’t know what is.

The first case I have for you is about rescission. What is a timely rescission, anyway? Read on to find out.

The other case I have for you this week is about property damage. If an insured’s policy says they are only entitled to collect actual cash value (ACV) until repairs are completed, and yet, they have only established replacement cost value (RCV) with no meaningful way to determine the ACV, can the insured establish damages on a breach of contract cause of action? Food for thought.

Speaking of food, eat lots of hot dogs, sausages, steaks, and whatever else tickles your fancy this Fourth of July weekend. Happy America Day.

Evan
Evan D. Gestwick
[email protected]

 

July 4^th Prayer from Buffalo Mayor – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
4 July 1925

Mayor’s Proclamation

Whereas the city of Buffalo as a part of our glorious nation will celebrate the Fourth of July, our great national holiday, I, as mayor of the city of Buffalo, urge our citizens to participate in the various celebrations to take place throughout the city in honor of the great day, and to celebrate safely and sanely to afford every protection for the children; and

Whereas, custom has established these various celebrations, I also urge upon our citizens to honor this day in our churches and our homes by offering prayers and thanksgiving to Almighty God for His watchful care over our nation; and urge upon men and women of the older generation, by lesson and example, to teach our youth the benefits of peace and security which we enjoy and which we owe to the Ruler of mankind.

 

O’Shea Rides the Circuits:

Hey Readers,

This weekend we are heading to Finger Lakes to enjoy the holiday weekend. The forecast looks great, and I look forward to showing off my impeccable swimming skills (or lack thereof). But it comes with a reminder that sleeping in a pop-up camper with two large animals has its drawbacks. Particularly, the fact that once they enter the camper, there is little room left.

This week I have case regarding business income loss and consequential damages. Notably, the trial court justified its decision on testimony that was never provided.

Until Next Time,

Ryan
Ryan P. O’Shea
[email protected]

 

Punctuation Matters – 100 Years Ago:

The Evansville Journal
Evansville, Indiana
4 July 1925

Congressional Comma

It doesn’t seem to have been generally recognized that the real criminal in the Teapot Dome case was a missing comma. The 25,000-word ruling handed down by a federal judge in Wyoming, seems to have turned on that. In the interest of sound punctuation, if not of sound law and morals, the matter should be made clear and memorable.

It appears, according to a digest of that ruling made at the time by the Associated Press, that congress, in omitting a comma from its act of June 4, 1920, regarding jurisdiction over the naval oil reserves, assigned all authority to the secretary of the Navy and tied its own hands.

“The phrase referred to provides that the navy secretary is directed to ‘conserve, use and operate the same (naval oil reserves) in his discretion’/”

The omission of a comma after the word “same,” the judge declared, prevented any construction being placed on the phrase that would enable congress to participate in directing the manner in which the law was to be administered. The insertion of a comma at that critical place would have made it all different, permitting congress to hold Secretary Fall to account. With the comma missing, everything was straight and ok.

Punctuation, like law, is admittedly a mystery to the laity. Sometimes it is also a mystery to the press. Even editors and copy readers accustomed to traffic in commas find themselves a bit dazed by the potency attributed to the mystic punctuation mark in this case. Evidently commas – and the lack of them – have never been taken seriously enough. 

 

LaBarbera’s Lower Court Library:

Dear Readers:

Hope everyone has a fun and safe Fourth of July! We will be celebrating my German Shorthaired Pointer’s eleventh birthday this weekend. A cake was baked, the presents have been wrapped, and the dust is wiped from the birthday hat. We will be enjoying his favorite place and favorite things: grilling, boating, swimming, and dock diving after bumpers. He doesn’t seem to care that throwing bumpers off the dock gets a bit repetitive on our end, or that his excitement howls he lets out while swimming echoes across the lake. Oh well!

Not many recent cases to report on, so I am bringing it back a few weeks to a New York County decision from May. The Court held that the underlying pleadings triggered a duty to defend an additional insured landlord. However, the Court found that the Plaintiff did not submit sufficient proof to support a declaration regarding reimbursement of past defense costs, or a duty to indemnify.

Until next time…

Isabelle
Isabelle H. LaBarbera
[email protected]

 

Didn’t Last Long, “Defense Day” – 100 Years Ago:

Daily News
New York, New York
4 July 1925

MARTIAL PARADE
TO MARK CITY

TEST IN DEFENSE

Millions of loyal Americans are turning out today in answer to the president’s proclamation of six weeks ago naming July 4 as Defense Day to show what military strength the country could muster in case of need.

Soldiers of the regular army, 118,000 strong, an even greater number of national guardsmen and volunteer soldiers for a day, whose numbers can only be guessed at, will take part in the parades and other patriotic demonstrations scheduled in every town and city in the country.

Sixteen million patriots answered the muster call last year, the nation’s first Defense Day test.

Editor’s Note – Defense Day was celebrated for about two years and then forgotten.

 

Lexi’s Legislative Lowdown:

Dear Readers,

I am heading to Boston for the Fourth of July. I am told I must have a lobster roll while I’m there. I am not a huge seafood fan, and have never had lobster before, but perhaps I will give it a try.

This week we discuss two bills that passed both houses relating to pets. First, Senate Bill S364 which relates to preventing breed restrictions for renter’s insurance and Senate Bill S5324A which seeks to provide a regulatory framework for pet insurance.

Thanks for reading!

Lexi
Lexi R. Horton

[email protected]

 

Keep a Watchful Eye – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
4 July 1925

Watch for eloping couple.

Buffalo police were asked yesterday by Lockport authorities to watch for an eloping young couple from that city who are believed to be posing as man and wife. The girl is Gladis Smith, thirteen years old, daughter of Mrs. Sarah Smith, No 14. Main street Lockport. Her companion is believed to be Savern Elster, nineteen years. They are believed to be traveling by automobile.

 

Victoria’s Vision on Bad Faith

Dear Readers,

Happy Fourth of July! I'm looking forward to a quiet three-day weekend in Buffalo after traveling and being out of town each weekend for the last month or so.

This week I have a decision from the Eastern District of Pennsylvania where the Plaintiffs allege bad faith against an insurer for failing to investigate and pay their Underinsured Motorist claim timely.

Have a great long weekend,           

Victoria
Victoria S. Heist
[email protected]

 

Earthquakes in California? Nevah. – 100 Years Ago:

The Toronto Star
Toronto, Ontario, Canda
4 July 1925

RUSH FOR INSURANCE
AGAINST EARTHQUAKES

Comes From All Districts
Including Sections Where Occurrences
are Unknown

New York, July 4. – Endeavors to forecast the future are as old as man. But endeavors to protect corporations and individuals from the foreseen have given a new impetus in the last year to one important line of business endeavor – insurance. Business men have discovered that they can gauge the trend of trade to a large degree by scientific methods exactly as the weather bureau forecasts the prevailing winds, but they know they cannot forecast nature and have determined to protect themselves accordingly. This tendency has been emphasized in the last two weeks by the tremors in Montana and Santa Barbara.

Insurance

There has been a rush for earthquake insurance not only from sections where such phenomena are not unknown, but from districts where such occurrences have never taken place. It is reported from Boston today that the Edison Electric has taken out $45,000,000 earthquake insurance. Underwriters throughout great New England insurance centres are generally quoting premiums of four cents per hundred dollars.

 

Shim’s Serious Injury Segment

Hi Readers,

I’m excited to join Coverage Pointers – that’s right, it’s my first column. My name is Stephen Shimshi, but everyone calls me “Shim” for short. Naturally, when I began writing the serious injury column, I chose the name “Shim’s Serious Injury Segment.” I work out of Hurwitz Fine’s Long Island office in Melville, New York, and handle motor vehicle and premises cases.

I’m a diehard fan of the New York Mets, so this summer you’ll often find something written about them in this section. After a strong start to the season finding themselves more than 20 games over .500, the Mets became afflicted with the dreaded “June swoon” and lost 13 of their last 16 games dating back to June 13, 2025. However, during the month of June, Juan Soto slashed .322/.474/.722 with 11 home runs and 20 RBIs. As we approach Fourth of July Weekend, we look forward to the Subway Series as the Mets host the Yankees at Citi Field.

In my first column I have shared a case decided in Kings County Supreme Court. The Court held that range-of-motion deficits of 11.11% and 13% were insufficient to constitute a significant limitation of use under Insurance Law § 5102(a). However, a 20% permanent deficit can be deemed significant within the meaning of the serious injury threshold of Insurance Law § 5102(a).

Happy Fourth of July!

Stephen
Stephen M. Shimshi
[email protected]

 

Dance Hall Dangers – 100 Years Ago:

Belleville Daily Advocate
Belleville, Illinois
4 July 1925

MONMOUTH DANCE
HALL IS ORDERED
CLOSED BY STATE

MONOMOUTH, Ill, July 4. – Dances at Swan Creek Hall are a thing of the past. After a conference with the men who have been conducting the affairs, State’s Attorney H.D. Lewis issued the closing order. Practically all of the trouble, which has been giving the sheriff’s force so much trouble recently in quelling the young riots, is attributed to visitors from Macomb, Cholchester, Monmouth, Peoria, Galesburg and other cities. Free and easy sale of liquor has accompanied the unbecoming conduct at the place, reports say, and the closing order comes as the result of numerous complaints against the place.

 

North of the Border:

As summer settles in, I find myself grateful for the simple pleasures: my garden is bursting with life, wildflowers are painting the mountain slopes, and soon we’ll be visiting our son and his family at their cottage in Quebec. Yet, as often happens, the joys of the season are tempered by sorrow. News that my favourite aunt, now 93, has broken her hip casts a shadow—but her resilience inspires me. She recovered from a similar injury at 91, and I have no doubt she’ll be on her feet again. At the same time, a dear friend faces his final battle with cancer. Life, as ever, is a tapestry of joy and heartbreak, and it always stings when tragedy touches those we love. As we navigate these ups and downs, I hope this newsletter provides both useful legal insight and a sense of connection through all of life’s seasons.

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]

• Default Judgment Against the Named Insured in Action Based on Rescission Binding on Additional Insured. Equitable Defensed Raised Did Not Change the Outcome

 

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

• Four Adjourned EUOs Sufficient for Denial on Breach of Conditions 

 

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

• Interim Defense Funding Agreement Supersedes Insurance Policy 

 

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

• Insurer Could Not Rescind Auto Policy and Failed to Comply with No Fault Regulation Timelines for Verification of Claim

 

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

• On parental leave

 

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

• In a Fire Claim Litigation, the Court Denied the Insured’s Motion for the Judge to Recuse Herself Because of Comments She Made Regarding a Criminal Action Against the Plaintiff and His Lack of Employment 

• The Court Granted the Insurer’s Motion to Compel Appraisal and Denied the Insured’s Motion of Alleged Bad Faith

   

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

• Insurer’s Internal Mailing Procedures for Nonrenewal Notice Did Not Meet Statutory Requirement. Prejudgment Interest Began to Accrue from the Date Workers’ Comp Benefits Initially Became Due and Breach of Contract

 

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

• Rescission Timely if Asserted Within a Reasonable Time After Claim Is Made, Or When Rescission Grounds Become Apparent
• Evidence of Actual Cash Value Needed to Satisfy Damages Element of Breach of Contract Claim

 

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

• Expert Testimony Lowers Jury Award from Policy Limit and Speculative, Vague Testimony Sets Aside Award of Consequential Damages

 

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

• Court Holds Insurer Has Obligation to Defend, and Denies the Portion of the Motion Seeking Reimbursement of Costs and an Obligation to Indemnify

 

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

• Proposed Legislation to Amend Insurance Law § 3421 in Relation to Prohibiting Certain Restriction as it Relates to Dog Breed and Proposed Legislation to Amend § 1113 to Create a Regulatory Structure for Pet Insurance Pass Both Houses

 

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

• Plaintiffs Fail to Establish Bad Faith in Underinsured Motorist Policy Claim

 

SHIM’S SERIOUS INJURY SEGMENT
Stephen M. Shimshi
[email protected]

• Range-of-Motion Deficits of 11.11% and 13% Deemed Insufficient to Qualify as a Significant Limitation of Use Under the Serious Injury Threshold. However, a 20% Permanent Deficit Can Be Deemed Significant

 

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

• Depending Upon the Specific Wording of the Supplementary Payments Clause That Is Usually Found in CGL Policies, Class Counsel Fees and Claims Administration Costs, as Usually Ordered in the Settlement of Canadian Class Actions, Can Constitute “Costs Taxed Against the Insured,” Obliging the Insurer to Reimburse the Insured for Those Amounts in Excess of the Policy Limits

 

Hope you have a splendid holiday weekend.

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

Shim’s Serious Injury Segment

North of the Border

 

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

06/25/25       Associated Industries Insurance Company v. Farahnik
Appellate Division First Department
Default Judgment Against the Named Insured in Action Based on Rescission Binding on Additional Insured. Equitable Defenses Raised Did Not Change the Outcome

Associated Industries Insurance Company, Inc. was granted a default judgment against its insured, defendant Farahnik, on its claim seeking rescission of the policy based on allegations that he made material misrepresentations in his application for insurance. As a result of his default, Farahnik is "deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them" including the allegations that he made material misrepresentations in the insurance application.

The policy, therefore, was void ab initio.  Thus, Halpern & Pintel, an additional insured, cannot raise a challenge to the finding of material misrepresentation in opposition to Associated's motion for summary judgment.

 

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

07/02/25          Refolio, LLC v. Certain Underwriters of Lloyd’s of London
Appellate Division, Second Department
Four Adjourned EUOs Sufficient for Denial on Breach of Conditions

Plaintiff sustained a fire loss on February 20, 2019 and promptly submitted a claim to Underwriters.  Eleven months later, in January of 2020, Underwriters disclaimed coverage due to plaintiff’s failure to comply with policy conditions.  Namely, plaintiff did not present a witness to appear at an Examination Under Oath as required by the policy.   Plaintiff, thereafter, sued on a breach of contract, and Underwriters moved for summary judgment promptly thereafter.

The Court noted that to disclaim coverage for the failure to appear at an EUO, the carrier must establish that the insured engaged in “an unreasonable and willful pattern of refusing to answer material and relevant questions.”  Here, plaintiff adjourned four previously scheduled EUO dates, and otherwise attempted to avoid answering Underwriters’ questions as part of the legitimate claims investigation.  Plaintiff also failed to respond to any of the requested documents that were identified as part of the EUO notice. 

On this Record, the Court acknowledged that Underwriters had met its burden.  And, more importantly, plaintiff failed to proffer any proof that its conduct was not unreasonable and willful.  Indeed, plaintiff only submitted an attorney affidavit without any direct knowledge of the situation which provided no evidentiary value to the Court.  As a result, Underwriters’ denial was affirmed and the matter dismissed with prejudice.

 

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

06/25/25       Colt’s Mfg. Co., LLC v. A, Int’ Specialty Lines Ins. Co.
United States District Court, Connecticut
Interim Defense Funding Agreement Supersedes Insurance Policy

The court granted the insurers summary judgment on the insured’s bad faith claims. Here, the parties entered into a series of interim funding agreements that superseded the carriers’ defense obligations under the insurance contract. “Viewing the terms of the Fourth IDFA as a whole, and considering all relevant portions of the Agreement together, the court concludes the Fourth IDFA manifests the parties' intent that it supersedes the Insurance Policy as to the issue of payment of defense expenses arising from the Gary Lawsuit.”

As a result, the claims for bad faith breach of the duty to defend could not stand since the insurance contract was no longer the operative agreement. “Because the Fourth IDFA controls the parties' obligations to pay defense expenses, Colt's claim that the Insurers acted in bad faith by failing to defend Colt's under the terms of the Insurance Policy must fail [*45] because the Policy no longer applies. See Capstone Bldg. Corp., 308 Conn. at 800 ("the covenant [of good faith] is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct that frustrates the other party's rights to the benefits of the agreement." (internal quotation marks omitted)).”

 

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

06/18/25             Peak Prop. & Cas. Ins. Corp. v. MacKenzie Mulverhill et al.
Appellate Division, Third Department
Insurer Could Not Rescind Auto Policy and Failed to Comply With No Fault Regulation Timelines for Verification of Claim

Defendant Velasquez was involved in a rear-end collision, with a vehicle operated by defendant James, while operating a vehicle registered and insured in the name of defendant Mulverhill. Mulverhill had previously obtained auto insurance from Peak Property and, on her application, listed an address in the state of Florida as her residence and the location where the vehicle would be garaged. Following the accident, the insured conducted an investigation and determined Mulverhill to be a New York resident at the time of the accident. Plaintiff mailed requests to Mulverhill and Velasquez to appear for examinations under oath; however, neither appeared.

Therefore, the insurer commenced this declaratory judgment action alleging that it was not required to indemnify any party under the terms of the Mulverhill policy for the subject accident, as Mulverhill's misrepresentation of her address rendered the policy void at its inception and, further, Mulverhill's and Velasquez breached the policy conditions by failing to appear for the examinations under oath. Defendants did not answer, and plaintiff moved for default. The Supreme Court found that the policy was not void, and that there was insufficient proof as to whether Mulverhill and Velasquez had been notified of the examinations in compliance with the required regulatory procedure and, therefore, denied plaintiff's motion. The insurer then filed a virtually identical motion, for reargument, seeking the same relief. A motion for leave to reargue pursuant to CPLR 2221 is addressed to the sound discretion of the court and is granted upon a showing that the court overlooked or misapprehended the facts or the law or mistakenly arrived at its earlier decision. With respect to the insurer’s motion for default judgment, the court indicated it is incumbent upon the court to examine the proof submitted pursuant to CPLR 3215 (f) and determine whether a viable cause of action exists.

As to the first argument, the court determined the insurer could not disclaim coverage on the grounds that its investigation after the accident revealed that plaintiff was not a Florida resident at the time of the accident. 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 affected prospectively. This provision places the burden on the insurer to discover any fraud before issuing the policy, or as soon as possible thereafter, and protects innocent third parties who may be injured due to the insured's negligence. Therefore, as it was undisputed that plaintiff did not cancel the policy before the accident, the court held it may not now annul the policy and disclaim coverage.

With regards to the failure of the claimants to attend scheduled examinations under oath, the court stated that an insurer must affirmatively establish that it complied with the strict no-fault insurance claim procedures set forth in 11 NYCRR 65-3.5. For example, within 10 business days after receipt of an application for no-fault benefits, an insurer is required to send verification forms to the parties required to complete them and, upon return of these forms, must request any additional verification required by the insurer to establish proof of claim within 15 business days, including examinations under oath. If requested verifications has not been supplied to the insurer 30 calendar days after the original request, the insurer shall, within 10 calendar days, follow up with the party from whom the verification was requested. In support of its motion, the insurer submitted letters purportedly sent to Mulverhill and Velasquez, which confirmed that it had received a claim related to the accident in question, as well as scheduling letters for the first and second attempted examinations under oath. However, the court determined that these documents failed to establish that plaintiff complied with the timing requirements set forth in the no-fault regulations.

Accordingly, the court held that the insurer failed to demonstrate that it had a viable cause of action and, therefore, the Supreme Court appropriately denied plaintiff's motion for default judgment. Accordingly, that aspect of plaintiff's motion seeking summary judgment was also properly denied.

 

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

On parental leave.

 

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

06/23/25       Jackson v. Spinnaker Ins. Co.
United States District Court, W.D. Pennsylvania
In a Fire Claim Litigation, the Court Denied the Insured’s Motion for the Judge to Recuse Herself Because of Comments She Made Regarding a Criminal Action Against the Plaintiff and His Lack of Employment 

The case involves coverage for a claim arising from fire loss within approximately seven months of Plaintiff's purchase of the property at a Sheriff’s sale.  The policy provides that the insurer only has to pay the depreciated actual cash value of Plaintiff's house unless Plaintiff completes repair or replacement.  Plaintiff has not completed repairs or replacement and seeks to be excused from this requirement on the ground that Defendant prevented him from doing so by denying coverage.

Plaintiff filed a motion for recuse the Judge under 28 U.S.C.S. § 455 - requiring a judge to disqualify herself in any proceeding where her impartiality might reasonably be questioned.  The Plaintiff alleged the Judge displayed personal bias or prejudice, based upon two statements made during a hearing: (a) during the discussion of availability of witnesses and parties, the Court stated that Plaintiff, unless he is in jail, will have plenty of time to be here (referring to drug-related charges); and (b) when the Court (in discussion of damages) asked what steps Plaintiff had taken toward rebuild/replacement of the property, and counsel replied by identifying Plaintiff's inability to take virtually any steps allegedly due to Defendant's coverage denial, the Court responded that "if Plaintiff had a job, maybe he would have the money to go out and do these things."  The plaintiff had several years' history of scant employment and little other evidence of regular, significant demands on his time.  Plaintiff filed the recusal motion 40 days after the remarks complained of and 12 days after the Court issued an order bifurcating trial and substantially rejecting Plaintiff's position on damages.

Movant characterizes these exchanges as the Court's: (a) "noteworthy and troubling" re-raising, "of its own volition", of "the inadmissible matter" of "Plaintiff's pending charges"; and (b) "concerning" and "unsolicited reference" to Plaintiff's employment status, which "should not be a matter that has any bearing on the duties owed by Defendant to its insured".  And he avers that Plaintiff, having been made aware of them, "is concerned that he will not be able to receive a fair trial and that his prior employment status and the unfounded criminal charges that were made against him may cause the Court to treat him differently."

In its response, Defendant asserted that the Court's inquiry regarding Plaintiff's pending criminal charges was appropriate, both because it could potentially have become admissible and because, as the Court stated, it was relevant to Plaintiff's availability for trial. In response to Plaintiff's objection to the Court's statements regarding his employment, Defendant averred that it was appropriate in the context of the Court's discussion of both: (a) Plaintiff's burden to show that the property was his residence", with very little documentation to support his representations of time/funds spent there in making renovations; and (b) what the trial evidence would be as to damages and how Plaintiff might prove that but for Defendant's alleged breach of contract he could replace the insured property.

The Court held that Plaintiff's motion for recusal was without merit as the Court's inquiries into Plaintiff's criminal proceedings and employment status did not demonstrate personal bias or prejudice.  The Court held that Plaintiff's employment status was relevant to the damages issue, specifically to whether Plaintiff could have completed repair or replacement of the property if Defendant had paid the depreciated "actual cash value."  The Court held that a judge has an "affirmative duty not to recuse herself if the movant fails to establish a reasonable doubt concerning her impartiality."

Case law establishes that recusal is required when a reasonable person, with knowledge of all circumstances, would harbor doubts as to the judge's impartiality.  The Court noted that judges should not recuse themselves lightly, as it is "vital to the integrity of the system of justice that a judge not recuse herself on unsupported, irrational or highly tenuous speculation."

The Court's inquiry into Plaintiff's criminal docket was part of routine case management procedures to inform and facilitate scheduling, not evidence of bias. The existence of criminal charges was not a "disputed evidentiary fact" but rather a matter subject to judicial notice.  The Court's inquiry into Plaintiff's employment status was relevant to the damages issue because under the insurance policy, Plaintiff needed to demonstrate that he could have completed repair or replacement if Defendant had paid the depreciated "actual cash value."  Employment status is relevant to whether Plaintiff had access to sufficient additional funds to make up the depreciation shortfall.

Plaintiff's counsel misunderstood the policy language, incorrectly believing that "actual cash value" meant the full cost of repair without depreciation, which led to his misperception that employment status was irrelevant.  The Court found that Plaintiff's allegations amounted to "misapprehension of the purpose and tenor of the Court's remarks, compounded by conjecture and unwarranted inference."

05/20/25       Cincinnati Cas. Co. v. Welsh
United States District Court, W.D. Pennsylvania
The Court Granted the Insurer’s Motion to Compel Appraisal and Denied the Insured’s Motion of Alleged Bad Faith

A fire destroyed Defendant’s home.  The property was insured by Cincinnati under a policy with Guaranteed Replacement Cost Coverage.  Cincinnati had paid Defendant $2,520,891.17 for the loss.  Defendant estimated the replacement cost to be $3,251,761.  Cincinnati disputed this amount and demanded appraisal, but Defendant refused to participate.

The court held the appraisal provision of the insurance policy as enforceable and mandatory because Cincinnati admitted it owes Defendant full replacement coverage and there is only a dispute over the amount of loss. 

"Appraisal clauses in insurance contracts are enforceable and recognized under Pennsylvania law as favored alternative dispute resolution mechanisms."  To invoke the appraisal provision of an insurance policy, the insurer must admit liability and there must be a dispute only as to the dollar amount of the loss.

Defendant’s bad faith counterclaim against Cincinnati failed as a matter of law because there is no evidence that Cincinnati lacked a reasonable basis for its actions or knowingly or recklessly disregarded the lack of a reasonable basis.

Defendant claims that Cincinnati consistently delayed providing him with information and has no reasonable basis to deny full payment of the replacement cost under the Policy's Guaranteed Replacement Cost Provision. In terms of Cincinnati's response time, the pleadings do not support a finding that Cincinnati ceased communication with Welsh for multiple months or caused any severe delays. After the fire occurred on February 1, 2023, Welsh submitted his initial bid/good faith estimate to Cincinnati on April 18, 2024. Cincinnati responded to Welsh with its own bid on June 5, 2024. Cincinnati then learned that the original bid was an inadequate estimate and proceeded to submit an updated bid on July 25, 2024.  From the time of the fire, Welsh took two and a half months to respond to Cincinnati's initial request for a bid. Cincinnati took less than that amount of time when submitting its bids in response to Welsh.

Concerning full payment of the replacement cost under the Policy's Guaranteed Replacement Cost Provision, Welsh makes a circular and unconvincing argument that Cincinnati does not need the appraisal process to pay him the full replacement cost. As Cincinnati has highlighted, it demanded appraisal to obtain a final determination of the "full replacement cost," because the amount is in dispute, so that it may make the appropriate payment to Welsh.  Cincinnati further points out that there is no requirement that the repairs be complete to trigger the Policy's Guaranteed Replacement Cost Coverage, but rather, the focus is on whether the "amount of physical loss to the dwelling" exceeds the insured's applicable Limit of Insurance.  Welsh acknowledges that a dispute clearly exists as to the amount of physical loss and total replacement cost by the very fact that he remains unsatisfied with the amount he has received from Cincinnati.  Appraisal will resolve this dispute. If the appraisal process determines that the amount of physical loss exceeds the Policy's Limit of Insurance, Cincinnati has conceded that the Guaranteed Replacement Cost Coverage provision will ensure that additional funds are available to Welsh to make any necessary repairs.  This concession does not demonstrate any dishonest purpose, ill-will, or self-interested action on Cincinnati's part. Rather, it displays the exact opposite.

Nothing in the record demonstrates that Cincinnati did not have a reasonable basis for denying benefits under the policy, or that Cincinnati knew or recklessly disregarded its lack of reasonable basis in denying the claim. Not only has Cincinnati not denied Welsh benefits, Cincinnati has simply asked for the matter to proceed to appraisal so that it can pay Welsh more than the $2,520,891.17 it already has if the appraisal exceeds the Policy's limit. Welsh has come forth with no evidence to support a viable claim for bad faith.

 

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

06/27/25       Travelers Prop. Cas. Co. v. Keluco Gen. Contractors, Inc.
Alaska Supreme Court
Insurer’s Internal Mailing Procedures for Nonrenewal Notice Did Not Meet Statutory Requirement. Prejudgment Interest Began to Accrue From the Date Workers’ Comp Benefits Initially Became Due and Breach of Contract

Keluco secured a workers’ compensation policy with Travelers through its broker. Travelers mailed a renewal notice to Keluco and the broker in advance of its policy expiration. The broker testified that they also emailed the renewal notice to Keluco’s bookkeeper, but she sent it to the wrong address. Keluco claimed it never received the renewal notice, and the policy expired. After the expiration of the policy period, Keluco’s employee suffered injuries in a work-related accident. Keluco then learned that the worker’s compensation policy had lapsed. The employee pursued a workers’ compensation claim, and the State pursued civil penalties against Keluco due to the lapse in coverage. Keluco sued the broker and her employer, Country Mutual Insurance Company, for alleged negligence in not communicating with Keluco about its insurance plans. The broker filed a third party complaint seeking to allocate fault against Travelers, alleging Travelers failed to notify her that Keluco had not renewed the policy. The broker also alleged direct claims of negligence and breach of contract against Travelers.

The parties filed motions for summary judgment. The superior court denied Travelers’ motion, finding an issue of fact as to the sufficiency of Travelers’ renewal notice to Keluco prior to the expiration of the policy. Keluco filed a motion for partial summary judgment, arguing Travelers failed to mail its notice of renewal as required by statute. The superior court agreed, finding that Travelers’ internal mailing procedures did not meet the requirements. Keluco filed another summary judgment motion, arguing that because Travelers did not obtain the required certificate of mailing, it also violated the law governing an insurer’s failure to renew a policy and breached its contract with Keluco. The court again agreed, ruling that Travelers violated the statute and breached its contract by: (1) breaching the Alaska Cancellation and Nonrenewal Endorsement, incorporating the statutory requirements; and (2) failing to defend Keluco against its employee’s workers’ compensation claim. The broker and Country Mutual settled with Keluco, and Keluco dismissed its own negligence claim against Travelers, leaving its breach of contract claim before the court. Keluco and Travelers entered and filed a stipulation to final judgment, but they reserved the right to appeal any decision on prejudgment interest and Travelers’ right to appeal other previous decisions and orders by the superior court.

Travelers appealed the superior court’s rulings on summary judgment, its order dismissing Travelers’ contribution claim against the broker, and its determination of the date upon which prejudgment interest began accruing (the date on which Travelers did not obtain a certificate of mailing for the renewal notice).

The Alaska Supreme Court determined the superior court properly granted summary judgment because Travelers did not provide its renewal notice to Keluco in the manner required by Alaska law. Although Travelers argued its internal procedures should be deemed equivalent to a certificate of mailing from USPS, the Court disagreed because its self-certification based on internal procedures was not the same as an independent verification by USPS. The Court affirmed the dismissal of Travelers’ contribution claim against the broker since Alaska law provides for allocation of fault to a party that has settled out of a case, but instead, Travelers did not thereafter seek to allocate fault to the broker and stipulated to final judgment. Finally, the Court reversed the decision regarding when prejudgment interest began to run. Instead, interest began to accrue at the time of breach of contract—when Keluco’s employee was injured and Travelers failed to provide workers’ compensation coverage.

 

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

06/26/25       ResinTech, Inc. v. AIG Spec. Ins. Co.
United States District Court, District of New Jersey
Rescission Timely if Asserted Within a Reasonable Time After Claim Is Made, Or When Rescission Grounds Become Apparent

ResinTech was hit with municipal violations for its alleged discharge of wastewater into a sewer system, which ResinTech alleged caused it to sustain losses. ResinTech submitted a claim to its commercial general liability and pollution legal liability insurer, AIG, for said losses.

The dates are important. One violation was issued on October 28, 2020, and another was issued on February 4, 2021. ResinTech’s policy was effective from January 1, 2020, to January 1, 2021. With its policy about to expire, ResinTech’s insurance broker submitted a renewal application to AIG on November 12, 2020. After renewal negotiations stalled, ResinTech’s broker secured a three-month extension of the policy, making it valid until April 1, 2021, to buy time for ResinTech to secure new coverage elsewhere. ResinTech submitted notice of its claim to AIG on March 26, 2021, after the original policy had expired, and after submitting its renewal application (but after the violations were issued), but within the extension period. Importantly, ResinTech did not disclose the October 28, 2020, violation on its renewal application, or at any point while negotiating the extension of the policy (but could not have disclosed the February 2021 violation as it had not yet occurred).

AIG denied the claim and rescinded the extended portion of the policy, on the basis that it would not have agreed to the extension had it known about the violations. AIG argued that had the policy extension not been issued, the policy would have expired on January 1, 2021, prior to the notice of claim, making the notice of claim untimely under the policy provisions (the opinion does not provide whether the policy was an occurrence-based policy, claims made policy, or claims made-and-reported policy, but perhaps that is a discussion best saved for a later date).

The plaintiff sued AIG under a breach of contract theory. AIG counterclaimed on an equitable fraud (rescission) theory. The instant motion concerns the timeliness of AIG’s counterclaim, filed shortly after ResinTech filed an amended complaint alleging, for the first time, that the policy dates were extended. AIG further contended that its rescission counterclaim was timely because it was not until a recent deposition of ResinTech’s human resources director that it had all of the necessary information to sustain its policy rescission.

The Court began its discussion by setting forth the basic law regarding policy rescissions in New Jersey. Under New Jersey law, the insurer must demonstrate the following three things in order to uphold a rescission of an insurance contract: (1) that the insured materially misrepresented a fact existing at the time of the policy application; (2) the insured intended that the insurer rely on said fact; and (3) the insurer did, in fact, detrimentally rely on the insured’s misrepresentation. Importantly, however, the Court recognized that the insurer need not show that the insured had an actual intent to deceive the insurer. To the contrary, even an innocent misrepresentation can constitute an equitable fraud, justifying a policy rescission.

The Court next explained the “materiality” element of a rescission, nothing that a misrepresentation is “material” if it “naturally and reasonably influenced the judgment of the underwriter in making the contract at all, or in estimating the degree or character of the risk, or in fixing the rate of premium.”

The Court’s analysis then shifted to the timeliness of the rescission. There, the Court noted that this is a highly fact-specific inquiry. On these facts, the Court found that the rescission was indeed timely, because ResinTech did not assert a claim to relief by reason of the extension of the policy until October 2024, while AIG asserted its rescission counterclaim the following month.

 

06/24/25       Kimmel v. Mass. Bay Ins. Co.
United States District Court, District of New Jersey
Evidence of Actual Cash Value Needed to Satisfy Damages Element of Breach of Contract Claim

Lightning struck a tree on the plaintiff’s property, causing the tree to fall over on to nearby ground. According to the plaintiff’s expert, the vibrations caused by the tree falling led to extensive damage to plaintiff’s home. The defendant’s independent investigation of the loss determined that the loss was not caused by vibrations of the tree, but rather, long-term settlement of the building and other unrelated causes. Accordingly, the defendant denied coverage, and this action followed.

The plaintiff’s cause of action against defendant sounded in breach of contract, the elements of which are: (1) the existence of a contract; (2) a breach of the contract; (3) damages flowing from the breach of the contract; and (4) the party asserting the claim performed its own obligations under the contract. The instant motion dealt with the third element—that of damages.

The policy provided, in pertinent part, that the defendant would pay no more than the actual cash value of the damage until actual repair or replacement was complete. Under this provision, the defendant contended that the plaintiff was limited to recovering only the actual cash value (replacement cost, less depreciation). Only after repairs were completed, defendant argued, would the plaintiff be entitled to replacement cost value.

In support of her claim, the plaintiff submitted only a replacement cost estimate. That is, the plaintiff did not permit a breakdown of actual cash value, nor any evidence that would allow a jury to account for depreciation. This, the defendant contended, was insufficient to prove damages, one of the necessary elements of plaintiff’s breach of contract claim.

The Court ultimately agreed with the defendant. While the plaintiff did submit an estimate of replacement cost, the Court reasoned, such was insufficient to support a claim for damages under an insurance contract that limited the scope of recovery to only actual cash value where no repairs were made, and thus, no entitlement replacement cost value existed.

 

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

06/20/25       Coco Rico, LLC v. Universal Ins. Co.
United States Court of Appeals, First Circuit
Expert Testimony Lowers Jury Award From Policy Limit and Speculative, Vague Testimony Sets Aside Award of Consequential Damages

Coco Rico manufactured beverage concentrate in Puerto Rico. In September 2017, Hurricane Maria damaged Coco Rico’s manufacturing facility. Coco Rico then filed a claim with Universal. Universal previously issued Coco Rico a policy that contained business interruption and extra expense coverage. As with most business interruption coverage, the Universal policy provided coverage for a  “period of restoration.” “Period of restoration” was defined as the interval between the date of damage and the date when the damaged property should have been repaired, rebuilt, or replaced with reasonable and similar quality or when business was resumed. The business interruption coverage limit was set at $750,000.

Universal and Coco Rico could not reach an agreement on the amount of business interruption owed. So, Coco Rico commenced suit seeking contractual and consequential damages. At trial, Coco Rico presented an expert witness who testified on that the amount owed for the period of restoration was $686,098. At the close of evidence, Universal moved for judgment on the issue of consequential damages which was denied. The jury awarded Coco Rico $873,000 in damages for the alleged breach of contract and an additional $250,000 in consequential damages for Universal’s “bad faith.” Eventually, the district court reduced the breach of contract damages to the policy limit of $750,000 but maintained the award of consequential damages. Universal again filed post-trial motions to contest both jury awards. An appeal to the circuit court followed.

On appeal, Universal reiterated its challenges to both the $750,000 award and the imposition of consequential damages. The appellate court agreed with Universal on both grounds and reversed the trial court.

While Coco Rico claimed approximately $900,000 in damages, there was no evidence to substantiate this figure. Coco Rico failed to present information about its sales, projected earnings, or attempts to restore its operations. There was also no demonstration of how Coco Rico calculated the $900,000 figure. Notably, Coco Rico’s expert repeatedly highlighted that the insured suffered no more than $686.098 in damages. Coco Rico even reiterated this number at closing arguments. Because of Coco Rico’s specific calculations and lack of any other evidence supporting an award beyond $686,098, the First Circuit reduced the contractual damages award from $750,000 to $686,098.

Next, Universal argued Coco Rico presented no evidence of consequential damages. In denying Universal’s post-trial motion, the district court identified the testimony of Coco Rico’s principal as grounds for a reasonable jury to find consequential damages. Under a Puerto Rico statue, a party is subject to extracontractual damages when it is guilty of fraud, negligence or delay in fulfilling their obligations. And the trial court instructed the jury there must be a finding of bad faith.

According to the district Coco Rico’s principal testified the business would suffer approximately $130,000 per year as a consequential damage in the form of lost business income. However, that testimony did not exist nor was it part of any factual statement. Rather, Coco Rico’s counsel made the argument with a lack of factual backing.  Rather, the record contained only general, conclusory statements. The principal’s actual testimony was that Coco Rico would lose hundreds of thousands of dollars each year. Even more significant is that at trial, the principal testified that business interruption losses were the only losses incurred by Coco Rico. Without supporting evidence, the circuit court reversed the trial court’s denial to set aside the $250,000 consequential damages award.

 

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

05/07/25       Davidson Realty Assoc., LLC v. Hamilton Ins. Co.
Supreme Court, New York County
Court Holds Insurer Has Obligation to Defend, and Denies the Portion of the Motion Seeking Reimbursement of Costs and an Obligation to Indemnify

Davidson Realty Associates, LLC (“Davidson”) commenced a declaratory judgment action against Hamilton Insurance Company (“Hamilton”) seeking a declaration that Hamilton has an obligation to defend and indemnify Davidson in relation to a personal injury action filed against various entities, including Davidson.

Davidson had previously entered into a lease agreement, through Jem Realty Management, Inc (“Jem”), as the landlord, with S&M Electronics Corp. (“S&M”). Pursuant to the lease, S&M leased the ground floor store and basement at a property located at 34 West Burnside Avenue, Bronx, New York (the “property”).

The underlying claimant alleged that she sustained injuries while walking on a sidewalk near the property owned by Davidson. She alleged that the injuries arose out of the raised, cracking, and defective sidewalk at the property. During the course of litigation in the underlying personal injury action, evidence emerged that the claimant’s injury may have instead occurred at a bus stop. Accordingly, the City of New York and New York City Transit Authority were brought into the suit through a Third-Party Action.

Hamilton had issued a business owners insurance policy to S&M, effective at the time of the alleged injuries sustained by the underlying claimant. Davidson was listed as an additional insured, with respect to “liability arising out of the ownership, maintenance, or use of that part of the premises leased to” S&M.

Davidson demanded that Hamilton defend and indemnify Davidson in the underlying action. The third-party administrator for Hamilton denied the tender. Davidson subsequently filed a lawsuit against Hamilton, seeking additional insured coverage, defense and indemnification. Davidson moved for summary judgment, seeking a declaration that Hamilton owes a duty to defend and indemnify on a primary basis. Hamilton cross moved for summary judgment, seeking a declaration that Hamilton has no duty to defend and indemnify Davidson.

To start the discussion, the Court clarified that the instant dispute is not whether Davidson is listed as an additional insured, but rather whether there is coverage under the policy issued by Hamilton. The main dispute between the parties stemmed on whether the claimant’s claim “arose out of the ownership, maintenance or use of that part of the premises leased to” S&M.

The Court turned to the pleadings in the underlying action, whereby the claimant alleged that liability was caused by the failure to maintain the sidewalk adjacent to the property. According to Davidson’s lease, S&M was required to maintain the sidewalk outside the property. As such, since the complaint in the underlying action asserted allegations that give rise to the reasonable possibility of recovery under the policy, the Court declared that Hamilton owes a duty to defend Davidson in the underlying action.

However, the Court found that the remainder of Davidson’s motion must be denied. The Court found that while the complaint in the underlying action triggers a duty to defend, additional facts outside the four-corners of the complaint point away from an obligation to indemnify. Since no determination had been made regarding Davidson’s liability, the Court found it was premature to make a determination regarding the duty to indemnify.

Additionally, the Court held that Davidson had not met its burden in showing it was entitled to reimbursement of defense costs. The Court identified that Davidson had not submitted any evidence regarding any costs or injury it incurred in the defense of the underlying action.

 

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

06/10/25       Senate Bill S364 and S5324A
New York State Senate
Proposed Legislation to Amend Insurance Law § 3421 in Relation to Prohibiting Certain Restriction as It Relates to Dog Breed and Proposed Legislation to Amend § 1113 to Create a Regulatory Structure for Pet Insurance Pass Both Houses

Senate Bills S364 and S5324A passed both houses and will be sent to the Governor for consideration.

In 2021, the governor signed into law an amendment to § 3421 that prohibits homeowners’ insurers from canceling, refusing to issue or renew, or charging a higher premium for insurance based on the breed of dog owned.

The proposed amendments to Insurance Law § 3421 to include renters insurance policies.

The Amendment Reads as Follows: 

Homeowners' liability insurance AND RENTERS' INSURANCE; dogs.  1. With respect to homeowners' insurance policies as defined in section two thousand three hundred fifty-one of this chapter AND RENTERS' INSURANCE POLICIES AS DEFINED IN SECTION THREE THOUSAND FOUR HUNDRED FIFTY-  FOUR OF THIS CHAPTER, no insurer shall refuse to issue or  renew,  cancel,  or charge  or  impose  an  increased  premium  or  rate  for such policy or contract, or exclude, limit, restrict, or reduce coverage under  such policy or contract  based solely upon harboring or owning any dog of a specific breed or mixture of breeds.

Next, Bill S5324A seeks to create a regulatory structure for pet insurance. The purpose of the bill is to regulate and define the issuance of pet insurance that provides coverage for accidents and illnesses of pets. This act would create uniform definitions, offer better protection to owners, and generally reduce regulatory confusion.

The Provisions include an amendment to subsection (a) of section 1113 of insurance law to add a new paragraph including “pet insurance” and amendments to insurance law by adding a new section to 3462.

 

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

6/30/25           Pressley v. USAA Gen. Indem. Co.
United States District Court, Eastern District of Pennsylvania
Plaintiffs Fail to Establish Bad Faith in Underinsured Motorist Policy Claim

Mr. Pressley sustained injuries from an automobile accident in 2023. After, Mr. Pressley sought damages from the tortfeasor's insurance company which resulted in the settlement of the claim up to the tortfeasor's policy limit of $15,000. USAA, Mr. Pressley’s auto insurer, agreed to Mr. Pressley’s settlement with the tortfeasor’s insurer.

Plaintiffs, Mr. and Mrs. Pressley, subsequently submitted a demand to USAA for UIM benefits under their Underinsured Motorist Policy. The Plaintiffs provided USAA with medical documents that showed Mr. Pressley's medical treatments totaled around $500,000. The Plaintiffs now allege that USAA failed and refused to pay Plaintiffs the UIM benefits under their policy.

Plaintiffs, Mr. and Mrs. Pressley, brought suit against Defendant USAA pursuant to benefits under their Underinsured Motorist Policy with USAA. The Plaintiffs allege (1) breach of contract; (2) violation of Pennsylvania's bad faith statute; (3) UM/UIM breach of contract; and (4) unjust enrichment. USAA filed a partial motion to dismiss for breach of contract and bad faith claims.

First, the Court found that the Plaintiffs' allegation of USAA's breach of the implied covenant of good faith and fair dealing under the first cause of action cannot stand as an independent cause of action under Pennsylvania law, because it is included in the third cause of action for breach of contract. The Court stated the breach of contract and UM/UIM breach of contract arise from the same contract, the causes of action are both based on allegations that USAA breached the insurance policy, and the law is well-settled that a breach of the implied covenant of good faith and fair dealing is not recognized as an independent cause of action.

Second, the Court found that the Plaintiffs did not plead sufficient facts to establish a bad faith claim under Pennsylvania law. To demonstrate statutory bad faith under 42 Pa C.S. Sect. 8371, the Plaintiff must show: "(1) that the insurer lacked a reasonable basis for denying benefits; and (2) that the insurer knew or recklessly disregarded its lack of a reasonable basis." The Plaintiffs allege that USAA acted in bad faith by failing to investigate and pay the claim expeditiously, but the Court found one- or two-month delays in investigating and paying the claim insufficient to sustain a bad faith claim. The Court cited to Young v. State Farm Auto. Ins. Co., 614 F.Supp.3d 153, 156-67 (E.D. Pa. 2022), in stating courts generally only infer plausible knowledge or reckless disregard in bad faith cases where the periods of delay were longer than six months. Here, the Court found the Plaintiffs did not submit factual allegations sufficient to show bad faith.

Accordingly, the Court granted USAA's motion to dismiss as to the duplicative breach of contract claim and the claim for bad faith.

 

SHIM’S SERIOUS INJURY SEGMENT
Stephen M. Shimshi
[email protected]

06/23/25       Garcia v. Undensi and BC Leasing Corp.
Kings County Supreme Court
Range-of-Motion Deficits of 11.11% and 13% Deemed Insufficient to Qualify as a Significant Limitation of Use Under the Serious Injury Threshold. However, a 20% Permanent Deficit Can Be Deemed Significant

This case involves personal injuries suffered by plaintiffs Yanira Garcia, Sonia Garcia and Wilber B. Martinez in connection with a motor vehicle accident that occurred on August 10, 2019. The action was commenced with the filing of a Summons and Complaint on March 2, 2020. Defendants served an answer on June 3, 2020. Defendants moved for summary judgment on July 11, 2022, on the basis that plaintiffs could not prove a serious injury in accordance with the threshold requirements of Insurance Law § 5102(a). The Court granted defendants’ motion because the plaintiffs failed to file an opposition and did not present a sufficient explanation for same at oral argument. Plaintiffs sought a vacatur of the Court’s Order dated June 14, 2023, pursuant to CPLR § 5015(a) and in the interest of justice. The Court subsequently granted Plaintiffs motion to vacate the June 14, 2023, Order, and decided defendants’ summary judgment motion on the merits. The Court issued a Decision and Order dated April 25, 2024, and filed same with the Kings County Clerk on May 7, 2024.

With respect to plaintiff Yanira Garcia, defendants’ IME physician found that when testing the extension at the lumbosacral spine, her extension tested 20 degrees whereas the American Medical Association’s (AMA) standard for normal range-of-motion is 25 degrees. The Court found that such a decrease, 20%, can be deemed significant. As such, the defendants did not meet their burden and their motion for summary judgment was denied with respect to Yanira Garcia. Therefore, Yanira Garcia was entitled to seek recovery for all of her injuries.

However, as to plaintiff Sonia Garcia, defendants’ IME physician found a range-of-motion deficit of 11.11% when testing the cervical right and left lateral flexion. Additionally, defendants’ IME physician diagnosed a range of motion deficit of 13.33% when measuring flexion of plaintiff Sonia Garcia’s right knee. The Court found that both the 11.11% and 13.33% range-of-motion deficits were “inconsequential.” The Court based its decision on  Waldman v Dong Kook Chang, 175 AD2d 204 [2d Dept 1991], which held that a 15% limitation is minor and not significant, and  Arrowood v Lowinger, 294 AD2d 315 [1st Dept 2002], which held that limitations of 2-4%, 5-10%, and 7-14% are insufficient to qualify as a significant limitation of use.

 

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.

05/12/25       Tokio Marine & Nichido Fire Ins. Ltd. v. Honda Canada Inc.
Ontario Superior Court of Justice
Depending Upon the Specific Wording of the Supplementary Payments Clause That Is Usually Found in CGL Policies, Class Counsel Fees and Claims Administration Costs, as Usually Ordered in the Settlement of Canadian Class Actions, Can Constitute “Costs Taxed Against the Insured,” Obliging the Insurer to Reimburse the Insured for Those Amounts in Excess of the Policy Limits

The problem first surfaced sometime in 2004 and over the next 15 years, it became, according to some reports, the largest automotive recall in history.

Takata Corporation manufactured airbag inflators.  An inflator is a metal canister containing a propellant—specifically, in Takata’s case, phase-stabilized ammonium nitrate (PSAN).  When the airbag system detected a severe crash, an electrical signal ignited the propellant inside the inflator. The ignition produced a large volume of gas in milliseconds, inflating the airbag almost instantaneously. The intent, of course, is to produce a protective cushion between the occupant and the vehicle interior. However, particularly in areas of high heat and humidity, the Takata inflation canister would violently rupture causing metal fragments from the canister to enter the passenger cabin. Something like shrapnel.

Takata airbags were installed in multiple makes of vehicles. Several investigations occurred, primarily in the United States, including a 2016 Congressional Investigation that determined that Takata had manipulated its test data and did not inform its customers, the vehicle manufacturers, of what it knew.

The Takata airbag issue resulted in the recall of vehicles world-wide. According to Transport Canada, that included about 8 million vehicles recalled in Canada alone. Class actions against the affected manufacturers ensued. Honda Canada Inc., one of the affected manufacturers, was sued in Quebec, Ontario, Saskatchewan and British Columbia.

Honda Canada tendered the defence of these class actions to its insurer, Tokio Marine & Nichido Fire Insurance Ltd. Tokio raised coverage concerns but acknowledged a duty to defend subject to a reservation of rights. However, no agreement was reached regarding the carriage of Honda’s defence and, therefore, Honda retained and instructed its own counsel.

The class actions against Honda settled under a settlement agreement dated January 14, 2019, and were confirmed by an order of the Ontario Superior Court of Justice. That settlement required that Honda pay the:

1. Settlement Administration Costs: $2,873,072.37, excluding HST.These are the fees and expenses of the Honda Settlement Administrator to, amongst other things, disseminate the Notice, handle and process the claims, the distribution of the cash reimbursement payments to claimants under the four programs in the Underlying Settlement: the Customer Out of Pocket Expense Program, the Outreach Program, the Customer Support Program, and the Automotive Recycler Program.

2. Class Counsel fees: $5,401,094.86 in fees, disbursements and taxes of the national consortium of seven law firms that instituted the class actions.These fee accounts were approved by the Ontario Superior Court of Justice.

Tokio agreed to pay Honda’s defence costs to defend the class actions, but refused to pay any amounts ordered payable under the settlement agreement, including the settlement administration costs and class counsel's fees. 

Tokio and Honda agreed to arbitrate the dispute as to whether Tokio was obligated to pay any amounts under the settlement agreement. The stellar three-member Arbitration panel found in an award issued March 15, 2024, that Tokio had breached is obligation to defend Honda under the following policies, all of which were apparently issued by Tokio:

In addition to holding that Tokio had breached its obligation to defend, the Tribunal found that Tokio was obligated to reimburse Honda for class counsel’s fees but that Tokio was not liable to pay the settlement administration costs. Tokio appealed its liability to pay class counsel fees and Honda cross-appealed the finding that Tokio was not obligated to pay the settlement administration costs. That appeal was heard by the Ontario Superior Court of Justice.

Tokio’s Duty to Pay Class Counsel’s Fees

Honda had paid the first $100,000 of its defence costs and therefore, having satisfied its retention, Honda argued that Tokio was obligated to reimburse Honda for the Claims Counsel fees, disbursements that had been confirmed by court order as these are “costs taxed” against Honda that do not reduce the policy limits. The relevant wording reads:

The term “suit” was defined as:

Before the Arbitrators and on appeal, Tokio argued that the costs are only payable for a ‘suit’ as defined; and as a ‘suit’ is a proceeding “to which this insurance applies;” as the policy excludes property damage caused by a recall; as this settlement agreement is in essence a recall; as there is no coverage for Class Counsel Fees under the supplementary payments. In short, argued Tokio, the supplementary payments clauses are conditional upon Tokio having a duty to “indemnify,” which is only triggered by civil proceedings that in fact result in covered liabilities. The Tribunal dismissed this argument, as did the Court, on appeal, but only after significant discussion.

The Court held that the words “when the duty to defend exists” create the condition that engages Honda’s right to coverage for the costs taxed against it in a “suit.” The court agreed with the Tribunal that there was a duty to defend in this case as the underlying actions plead entitlement to damages for the defined terms “bodily injury” and “advertising injury.” Where there is a duty to defend, the supplementary payments portion of the Umbrella Liability Policy (the UL) is engaged. The definition of “suit” includes damages because of “bodily injury,” “property damage,” or “personal and advertising injury” to which this insurance applies are alleged. Tokio’s argument ignored “are alleged.”

Further the supplementary payments provision of the Umbrella Policy constitutes a separate covenant to pay taxed costs (as well as judgment interest, etc.) over and above the policy limits where there is a duty to defend, and, in this case, once the retention is satisfied. As both pre-conditions to the application of the Supplementary Payments clause were met, the Tribunal was correct in directing Tokio to reimburse Honda for the Class Counsel fees.

Tokio Has No Duty to Pay the Settlement Administration Costs

The Court then turned to Honda’s argument that it was entitled to reimbursement of the Settlement Administration costs. Honda argued that these costs are not enhanced recall costs but a necessary element of the settlement of a suit against it and therefore, like Class Counsel fees, are “costs taxed against the insured.” The Court did not agree.

Rather, the Court agreed with the Tribunal that these costs were paid to administer an enhanced recall program which was the element of the claim that was not covered:  “None of the claims in the Underlying Settlement were covered by the CGL or UL policies.”

The following commonly found CGL exclusions made that clear:

• “property damage to the named insured’s product;”

• “property damage” to “impaired property;”

• what is commonly known as the recall and sistership exclusion;

• that “personal and advertising liability” excludes “personal and advertising liability” arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your “advertisement;”

As there was no obligation to defend those allegations; as the settlement administration costs arose out of the administration of an enhanced recall program or a product withdrawal program, those costs are not costs “to which this insurance applies” as they did not apply to the covered aspects of the claims for bodily injury, property damage and advertising liability that had triggered the obligation to defend.

On this basis, the Court agreed with the Tribunal that Tokio had no obligation to pay the claims settlement costs.

Comment

Had the claims settlement administration costs been incurred to settle covered claims, Honda would have been able to rely upon Hersh v. Wawanesa Mutual Insurance Co., to demonstrate that it was entitled to be reimbursed for those costs

 

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