Volume XXVII, No. 21 (No. 720)
Friday, March 27, 2026
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. Hey, we also love to hear from you. Drop us a line and let us know that you actually peek at our newsletter from time to time! Hey, this is our 720th issue of your favorite insurance coverage newsletter.
Back in Buffalo after a few days in Washington DC, where, along with my friend John Hanlon, we presented a Risk Transfer Primer for the PLRB Claim Conference. I have been serving on the PLRB Planning Committee for 16 years and providing risk transfer training at that location for the past 17.
Friday’s program on the AVOID Act, on the changes to NY third-party practice, described below is SOLD OUT. We can only accommodate 500 and we’re oversubscribed. We will provide additional training to your organization if you’re interested.
There are a couple of remarkably interesting cases in today’s newsletter. The three cases in my column are all worth reading for varied reasons. In one case, an insurer’s Answer was stricken due to discovery violations. Warning to the wise.
In a second, an employee was injured on a construction site, but that mere fact was not enough to establish additional insured coverage to be provided by his employer, when the cause of the accident was not his employer’s conduct.
In the third, a particularly fascinating one, an insurer was able to establish that there were ongoing shenanigans that led the underlying plaintiff and the insured to inflate a verdict to tap excess coverage. There were uncovered emails that established the scheme and the court, recognizing the conspiracy, refused to countenance it.
Here are some upcoming HF programs to provide you with some of the best education around – and they’re free. Buy your staff some lunch and schedule a “lunch and learn”.
Litigation Strategies: Removing Cases to Federal Court
April 16, 2026
Via Zoom
After that, our Retail & Hospitality team will be back on April 16th to host “Litigation Strategies: Removing Cases to Federal Court,” where we will focus on navigating the removal of civil actions from state court to federal court. This webinar will focus on the legal bases for removal, key procedural requirements and timing considerations, and the strategic advantages federal court can offer. Attendees will gain practical insight into how removal can serve as more than a procedural step—it can be a meaningful litigation advantage.
For more information and to register, click here.
Understanding Attorney-Client Privilege in Claims Handling
April 23, 2026
Via Zoom
This webinar will explore the evolving scope of attorney-client privilege across the United States and what it means in practice. Join Insurance Coverage attorneys Victoria S. Heist and Lexi R. Horton for a clear, practical discussion of how the privilege applies in real-world scenarios, including dual-purpose communications, interactions with in-house counsel and insurers, bad-faith litigation, and the discoverability of claims files.
Attendees will gain actionable insight into protecting privileged communications while navigating complex coverage and claims environments.
For more information and to register, click here.
Beyond Avoidance: Preparing for the AVOID Act’s Transformation of
Third-Party Practice in New York
March 27, 2026
Via Zoom
While this legislation was primarily aimed at NYS Labor Law/construction accident claims, its impact will be felt across the litigation spectrum, including products and premises liability claims. They will also require early, strategic decision-making by insurers and litigants regarding risk transfer, tenders, additional insured status, and indemnity obligations.
David Adams, Hurwitz Fine’s Labor Law Chair, and Dan Kohane, the firm’s Insurance Coverage Chair, will team up to provide a practical and strategic roadmap for navigating the procedural and coverage challenges that parties and insurers will confront in actions commenced after the effective date.
Sorry, we have more than 500 registered for the program today, so we are unable to accommodate more. If there is sufficient interest, we’ll schedule another program or may be able to arrange one for your company.
For those who need to keep up to date on insurance coverage between issues of Coverage Pointers, we’re happy to help. Just follow me on LinkedIn and we’ll keep you up to date. I’m easy to find – my linked in name is (ready for this unusual and unexpected name): Kohane and you can find me here: https://www.linkedin.com/in/kohane/
Need a Mediator or Arbitrator, Give a Call:
A growing percentage of my practice has been a mediator (and sometimes as an arbitrator) in insurance coverage, commercial, personal injury, and other disputes. With a robust national client base, I am repeatedly called on by friends and colleagues from around the country, folks who know me and trust me, to help resolve disputes. Often, particularly in mediated matters, I know the insurers and lawyers on both (or several) sides of the dispute. Since they all trust me as a fair dealer, they feel comfortable having me try to help close the file (and avoid precedent). Just pick up the phone, 716.849.8942 or send an email to [email protected] and I’ll try to help.
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.
Saved by the Horse – 100 Years Ago:
The Buffalo News
Buffalo, New York
27 Mar 1926
HORSES HAUL AUTOS;
ROADS NIGH IMPASSABLE
SAINT CATHARINES, March 26.- The country roads of Niagara district are today the worst state ever known for this time of year. The ground, which frozen to a depth of two feet, has thawed out so rapidly that dirt roads have become impassable in certain parts of the district.
Many of the farmers owning cars and coming to the city daily are compelled to park their cars on the through highways and walk to and from their homes. Others have teams of horses to drag the cars through the mud. In some cases, motorists found it impossible to get back and were forced to leave their cars overnight in Saint Catharines.
Peiper on Property (and Potpourri):
We start out this edition by congratulating our friends at PLRB for another fantastic three days of programming and networking. We’re honored to have been part of the faculty again this year having taught the Construction Defect course. For our grammarians out there, we’ve got the course for you. Drop me a note if you’re interested in learning more.
Another light week from the courts. We’ll be back in two more and hopefully will have more to share then.
Steve
Steven E. Peiper
[email protected]
Women Running for Office – 100 Years Ago:
The Buffalo News
Buffalo, New York
27 Mar 1926
MANY WOMEN
IN PRIMARIES
OF MID-WEST
One Enters Competition for
Gubernational Nomination in
Ohio – Illinois and Minnesota
Congress Seats Sought by
Members of Fair Sex.
CHICAGO, March 26 (AP). - The spring political primaries this year have attracted an increasing number of women in the middle west, as candidates for various states and national offices, and as the for filing in many states is not yet closed, the roll doubtless will be increased.
One woman has filed for the Republican nomination for governor in Ohio, and Indiana, Illinois and Minnesota have women candidates for Congress, while nearly all the states in the corn belt have a number of women seeking nominations for legislative posts. There are rumors, also, that Ohio may have a woman candidate for United States senator.
There are 16 women in Illinois running for nominations for the lower house of the state legislature, including several for re-election. Iowa has one woman candidate for the state legislature, Nebraska two and Indiana six, among the states where the time for filing has not expired. Only Wisconsin and Michigan in the corn belt have no general election primaries this spring.
Lee’s Connecticut Chronicles:
On the road; see you in two weeks.
Lee
Lee S. Siegel
[email protected]
What's in a Name? – 100 Years Ago:
The Buffalo News
Buffalo, New York
27 Mar 1926
DRIVER SENT TO JAIL
FOR CHANGING NAME
Made False Statement to Get
New License After Old One
Was Revoked
Shieven Washington, 23 years old, 475 East Eagle Street, was sentenced to the Erie County penitentiary for 10 days by Judge Peter Maul in City court Thursday for making false statements in his application for an auto operator's license. He was arrested in Niagara street, while driving with cardboard license plates, and investigation revealed that his operator's license had been revoked some months ago as the result of an accident. Last December, he applied for and obtained a new license by Changing his name from Shieven to Samuel on the application blank.
Ryan’s Federal Reporter:
Hello Loyal Coverage Pointers Subscribers:
I am proud to say that I got my own piece of March Madness this year as I was given the opportunity to do play-by-play for the NCAA Division II East Regional Championship Semi-Finals and Final, hosted by Daemen University here in Buffalo. I won’t spoil it for you if you haven’t heard who advanced to the NCAA Division II Elite Eight, but you can watch (and listen) for yourself here. A local slice of Madness was pretty enjoyable, I must say.
This edition, I tackled a Southern District of New York decision involving the timing of execution of an insurance rider attached to a subcontract (try to say that ten times fast).
Until Next Time,
Ryan
Ryan P. Maxwell
[email protected]
You Like These Boys? Ignore Them and They Will Come Running – 100 Years Ago:
Buffalo Courier Express
Buffalo, New York
27 Mar 1926
Don’t be too eager.
Dear Miss Wayne: We are girls of seventeen and eighteen and are great pals.
There are two brothers in our town who are very nice and good looking, also good sports.
Two girls are always running after them, asking them for dates, etc. The boys know they are keen and can go with almost any girl, which is true.
Do boys care about girls who run after them, try to show off and do that sort of thing?
I sometimes think they do or they wouldn't go with them.
The other two girls get to go with them more than we do simply because they run after them.
Please help us out and advise us what to do.
TWO CHUMS.
Answer: Just let the other two girls win out. You will find that the admiration of these young men for you will increase in direct proportion to your own lack of advance toward them.
Storm’s SIU:
Hi Team:
Just getting back from visiting Mickey in the Magic Kingdom. You’re never too old for a little slice of heaven at Disney.
Happy opening day of major league baseball! In celebration I have four interesting cases for you this edition:
- Reserve Information Relevant and Discoverable Where Bad Faith has Been Alleged.
- Attorney-Client Privilege Applicable to Documents Which Concern the Obtainment or Provision of Legal Advice About the Application of New York Law to the Insurance Policy at Issue.
- Appraisal is Confined to Factual Valuation Disputes; It Cannot Be Used to Resolve Interpretive Questions Embedded in Policy Terms (e.g., What Qualifies as “Like Kind and Quality” Under ACV or Whether Replacement Cost is Available Absent Actual Replacement).
- Motion for Leave to Serve a Subpoena to Google in a Fraud Case Denied as Not Limited to Records That are Relevant and Proportional to the Needs of the Case.
- I hope you have a great two weeks!
Scott
Scott D. Storm
[email protected]
Don't Spend it All in the Same Place – 100 Years Ago:
The Buffalo News
Buffalo, New York
27 Mar 1926
SMITH SIGNS LEGISLATION
TO RAISE JUDGES’ SALARIES
ALBANY, N.Y., 27 (AP) – Governor Smith today signed the Kennedy and Carlin bills bringing the salaries of judges of the Court of Special Sessions in New York and of New York county surrogates up to the compensation now paid to Supreme court justices of the first district, who receive $17,00 a year.
The governor signed the Thayer bill providing for appointment of railroad workers policemen by steam railroads steamboat companies and express companies. Reference to electric railway companies, contained in the bill as originally introduced, was removed on the objection of organized labor.
Fleming’s Finest:
Hi Coverage Pointers Subscribers:
This edition’s case from the Texas Supreme Court considered whether the parties could seek contractual indemnification from a non-settling defendant based on its proportional share of liability for an accident at a refinery.
The HF Forum for Women Lawyers is attending a cool literary event this week with discussion questions, including what makes up an education. Having read the author’s memoir, I am looking forward to hearing more about her story.
Happy Spring! See you in a fortnight,
Kate
Katherine A. Fleming
[email protected]
Depanting – 100 Years Ago:
The Buffalo News
Buffalo, New York
27 Mar 1927
BANDITS TAKE TROUSERS
TO FORESTALL PURSUIT
NEW YORK, March 27 (AP). - Three men who robbed the Joseph Gaydica Iron works in Brooklyn of $5100 took the trousers worn by nine employes with them to avoid pursuit.
"We ain't going to take no chances on being followed," the leader of the robber band announced.
Gestwick’s Garden State Gazette:
Dear Readers:
What a hectic two weeks it has been. Flew into New Jersey last week for an in-person deposition (a rarity these days), and to Brooklyn the other day for oral argument in the Second Department. And cranked out a few disclaimers, coverage opinions, and the like in between! The wonderful life of a coverage lawyer—good thing we love what we do!
On the bright side, we had MLB opening day last night (my Blue Jays start on Friday with a banner ceremony!), and the NHL and NLL regular seasons are in the home stretch. My Sabres are fighting to keep the #1 spot in the Atlantic Division (if you told me at the beginning of the season that I’d be writing that in my column right now, I’d have told you you’re nuts), and my Bandits are fighting to keep a playoff spot. Some entertaining games lie ahead. Oh, and I got to see my first in-person March Madness games last week! Every time the tourney has come to Buffalo, I have been busy, and this time was no different, other than the fact that I made it a priority to get there this time around.
Two cases for you this week. In the first, we are reminded that some (most?) newly enacted legislation applies on a prospective basis, only. In the second, we are reminded of why evidence of insurance is typically disallowed at a trial of an underlying action.
That’s it for this one. See you in April!
Evan
Evan D. Gestwick
[email protected]
Cat Cuts Power, Survives One of Nine Lives. – 100 Years Ago:
Washington Post
Washington, District of Columbia
27 Mar 1926
Cat’s Leap Cuts Off
Entire City’s Power
Fall River, Mass., March 26 (By A. P.). - A stray cat was responsible this morning for the suspension of the activities of Fall River's 111 mills, all its stores, factories, and business places. The cat had had no breakfast, and when it saw a fine, fat sparrow light on a transformer, it made a flying leap for the bird. In so doing the animal caused a short circuit in the huge transformer, suspending electric service in the entire city for nearly half an hour.
The cat will recover.
O’Shea Rides the Circuits:
Dear Readers:
Getting ready to head out to a family vacation next week. Focusing on vacation, not on cases! See you in two.
Ryan
Ryan P. O’Shea
[email protected]
Neat Handwriting? Sign of Low Intelligence – 100 Years Ago:
Salt Lake Telegram
Salt Lake City, Utah
27 Mar 1926
SCRAWLERS ARE
HEAVY THINKERS
Bad Handwriting Usually
Sign of Brains,
Professor Says.
PITTSBURGH, Pa., March 27 (AP). – Persons who have been termed “scribblers” and “scrawlers” will find solace in the words of Dr. William T. Root of the University of Pittsburgh school of education, who expresses the opinion that “as a rule those of low mentality are good handwriters.”
“Intelligent people,” said Dr. Root in an address, “think twenty times faster than they can write and therefore muscular movement is so far behind the activity of the brain that the result is a poor scrawl. A person low in mentality has nothing else to think about but the shaping of his letters.
“But,” continued Dr. Root, “it does not necessarily follow that if you are a poor penman, you are intelligent, or vice versa.”
LaBarbera’s Lower Court Library:
To celebrate the weather warming up, I started to run with my dogs again. My GSP, despite being twelve, only has three speeds: (1) fast walk; (2) trot; or (3) gallop. Bad news is it is nearly impossible for me to stop him from going from trot to a gallop, which means I spend the entire run in a full sprint. Good news is I am back to running the mile time I ran when I was twelve years old.
This week I am reporting on a decision not yet posted. In this case, the court granted the permanent stay of arbitration based on the fact there was no police report filed, a late MV-104 filed, and the claimant offered no reasonable excuse for the delay. A copy of the decision is available upon request.
Until next time…
Isabelle
Isabelle H. LaBarbera
[email protected]
Oh Good – 100 Years Ago:
The Times-Union
Rochester, New York
27 Mar 1926
“Decent Girls Don’t
Do Those Things!”
By KATHLEEN NORRIS
A few weeks ago, when I was talking to an extremely modern girl, I happened to say:
"You see, the fact remains that we older women would rather have our daughters and nieces moral than immoral--we would rather have them refined, quiet, nice girls, than have them give all their time to cigarettes, beauty parlors, rotten plays, books and movies, and the type of young man who lives for dancing, drinking, and rushing about in motor cars."
The girl looked at me thoughtfully, and quite without affectation asked "Why?"
She meant it, too. She was really interested in the contrast between herself and the nice, quiet, refined girl I had mentioned, and she wondered how anybody could possibly prefer the other type to her own.
Twenty-three years old, this girl, and already past her first bloom. To blame her by saying that she lived for pleasure perhaps wouldn't be fair. We all live for pleasure, don't we! It us only the kind of pleasure these youngsters demand that frightens one.
Lexi’s Legislative Lowdown:
Dear Readers,
Nothing much to report on, other than I am hoping it warms up soon.
This week we discuss a Bill to allow a study of lithium-ion battery fires.
Thanks for reading,
Lexi
Lexi R. Horton
[email protected]
More Crime – 100 Years Ago:
The Times-Union
Rochester, New York
27 Mar 1926
Thief Extracts Cash,
Coat And Watch While
Man Sleeps Soundly
James F. Williams, who occupies a ground floor apartment at 92 Plymouth Avenue south, went peacefully to sleep last night with his window wide open, his trousers draped over a chair, his raccoon coat thrown carelessly across the same chair and his wristwatch not on the wrist.
During the stilly hours of the night some wandering person with taking personality, reached in the window. This unidentified and illicit financier extracted $85 from a pocket of the trousers, he lifted the trousers, he lifted raccoon coat which valued at $300 and fastened the watch upon his own wrist. The watch is valued at $40. Total extraction of cash and property was $425. Police have assured Mr. Williams that they will Investigate.
Victoria’s Vision on Bad Faith
Dear Readers,
Headed to Los Angeles this week as the coach for the University at Buffalo team in the ABA National Mediation Competition. I’m looking forward to a break from the cloudy and rainy 40-degree “spring” weather in Buffalo. In other news, please join Lexi and I in our webinar on April 23rd discussing the attorney-client privilege in claims handling. We will be discussing recent case law on the privilege and how it impacts discoverability in litigation.
This week, I have a case from the District of Connecticut whereby the Court declined to dismiss the Plaintiff’s allegation of bad faith for failure to state a cause of action.
Have a good weekend!
Victoria
Victoria S. Heist
[email protected]
Where is it Now? – 100 Years Ago:
Finger Lakes Times
Geneva, New York
27 Mar 1926
FORD BUYS OLD
STAGECOACH
Adds Another Antique to
His Collection of Old Things
Boston, Mar. 27, - Henry Ford has annexed another antique. This time is it a four-horsepower affair – not a flier.
In his search for things very ancient to keep company with the Wayside Inn, Mr. Ford has purchased old-fashioned blacksmith shops, grist mills, a district school and spinning wheel. All date back to the time of the Revolutionary War.
The latest acquisition to his treasures is the antiquated stagecoach owned by the Northboro Historical Society which plied on the highways in the days when the Wayside Inn was the Ritz Carlton of New England.
Shim’s Serious Injury Segment
Hi Readers,
I hope that everyone has been well since our last column. I recently watched the Immortal Man, a film concluding the Netflix/BBC drama, Peaky Blinders, and thought I would share my opinion. Overall, I highly recommend the series to anyone who enjoys historical fiction and anything featuring the talents of Cillian Murphy, who is nothing short of perfect in this film and series.
*********SPOILERS AHEAD*********
There are some obvious plot holes in the film including the treatment of Arthur Shelby and Finn Shelby (who does not appear in the film). It hardly makes any sense that Thomas Shelby, a man who relied on his family for the entirety of the series, would intentionally kill Arthur, his last brother and trusted enforcer. It feels like a cheap escape from casting Paul Anderson in light of his substance abuse problems. The handling of Ada Shelby/Thorne also serves as a poor ending for her character. The Immortal Man was not my favorite part of the Peaky Blinders saga but served to provide a definite ending to the story with closure for Thomas Shelby, its protagonist. The film focuses on Thomas Shelby’s efforts, alongside his eldest son, Duke, and the remainder of the Peaky Blinders to stop Nazi Germany’s Operation Bernhard (which aimed to destabilize the British economy by flooding it with counterfeit currency). It is fitting that Thomas Shelby finally achieves some redemption, by successfully thwarting Operation Bernhard, and making amends with Duke, to whom he passes on his legacy and title of Rom Baro. Perhaps most fitting is that Thomas Shelby, the "Immortal Man," chooses to go out on his own terms by the hand of his son, Duke.
Overall, I rate this film as 70/100. The untimely departures of Arthur (offscreen and out of character for Thomas Shelby) and Ada, key players in the original series, were unsatisfying and frustrating. Despite the interesting subject matter, the plot also feels rushed at times. What saves this film is that it gives Thomas Shelby as fitting an end as possible and manages to set up the sequel series well.
This week I have shared a case decided by the Appellate Division, Fourth Department, which overturns the decision of the Supreme Court, Niagara County, thereby denying, in part, defendant’s motion for summary judgment on the basis that plaintiff did not sustain a “serious injury” within the meaning of Insurance Law § 5102(d) and reinstating the complaint.
See you in the next issue!
Stephen
Stephen M. Shimshi
[email protected]
Oh No! Not That – 100 Years Ago:
Daily Sentinel
Rome, New York
27 Mar 1926
SHERIFF ACCUSED
IN JAIL SCANDAL
Impeachment Hearing Before
Maine Governor.
PRISONERS TELL OF
GAMBLING, DRINKING
Women Permitted to Visit
Inmates in Cells.
Augusta, Me., March 27. – (AP.) – Petitioners for the removal of Sheriff Henry F. Cummins, of Kennebec County expected to complete their case today. The impeachment hearing is before Governor Ralph O. Brewster and executive council.
Twenty-two witnesses have been heard since the hearing opened Thursday, and 30 others were under summons but counsel for the petitioners said many of them would not be called to testify as their testimony already had been covered by previous witnesses.
Most of the witnesses have been former inmates of the Kennebec County jail who have told of drunkenness among prisoners and deputy sheriffs, poker, dice, and blackjack games, for high and low stakes, at the jail and visits of women to prisoners’ cells.
New England Almanack
Dear Readers:
Greetings from the Gaylord at the National Harbor in Maryland, this year’s PLRB Claims Conference venue for approximately 3,000 attendees. At the close of my afternoon session on Limiting Claims File Discovery with my co-presenter Sarannah McMurtry, First Acceptance Insurance Company’s GC, I’ll catch my flight back to Logan Airport, hopefully without any prolonged TSA delays at the Ronald Reagan Washington D.C. airport. While at PLRB, I’ve enjoyed sharing the news about Alex, Iryna and my move to Hurwitz Fine to launch the expansion into New England. During an enjoyable group dinner on Monday evening, Dan, Chris, Steve and I raised a glass (actually a margarita) with our co-presenters and other PLRB friends to celebrate the news.
This week we have two Massachusetts federal court decisions, one addressing an insured’s motion for injunctive relief directing the payment of defense costs by its insurer and the other examining a priority of coverage disputes between two insurers.
Onward to April!
Barbara
Barbara A. O’Donnell
[email protected]
Alexander G. Henlin
[email protected]
Iryna N. Dore
[email protected]
Wet’s vs. Dry's – 100 Years Ago:
Mount Vernon Argus
White Plains, New York
27 Mar 1926
Dry Leaders to Oppose
National Referendum
(By William K. Hutchinson, I. N. S. Correspondent.)
Washington, March 27.-The congressional wet drive for a national referendum on modification of the American prohibition law struck snag today dry leaders announced they would oppose it.
In the face of this opposition, however, the wets laid plans to project not only the referendum an issue but the whole question of prohibition modification into the 1928 campaign, in which a president, the entire membership of the house, and one-third of the senate will be elected. Senator Edge, R, of New Jersey, who sponsored a resolution authorizing the referendum, declared he would lead a fight to carry these issues to the people.
North of the Border:
I took a few days away recently to visit family in Quebec—my 97‑year‑old father‑in‑law in Montreal and my 93‑year‑old aunt in the Eastern Townships, who is now living in the little border town of Stanstead. The Eastern Townships is deeply familiar: Nine generations of my family lived, worked, and are now buried among those hills and lakes. Places like Ayer’s Cliff, where my grandparents once lived, carry a sense of home that never quite fades.
Yet, as much as I feel grounded there, I’m reminded that time moves on. The people I knew have mostly passed on or moved away; the rhythms of life have changed. You can’t really go back—but you can remember where you came from. In some ways, that reflection feels fitting to the law: Understanding where we’ve been, adapting to what has changed, and staying rooted in the principles learned along the way that brought you to where you are today.
My article this week deals with a fiduciary liability policy and a directors’ and officers’ liability policy that got caught up in a pension plan dispute admits CCAA proceedings.
Until next time.
Heather
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
Headlines from this week’s issue, attached:
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
- Carrier’s Answer Is Stricken because of Discovery Violations
- Employee Injury Does Not Necessarily Trigger Application of Indemnity Agreement in Favor of Owner, when it Was Owner’s Property Defect, Not Employer’s Work, Which Led to Accident
- Explosive Emails and Straw Payments Raise Triable Issues of a Scheme to Inflate Judgment to Tap Excess Coverage
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- No cases this week. See you in two.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- On the road this week, see you in two.
Ryan P. Maxwell
[email protected]
- SDNY Finds Genuine Disputes of Material Fact Exist Concerning the Execution Date of Agreement Requiring Additional Insured Coverage
STORM’S SIU
Scott D. Storm
[email protected]
- Reserve Information Relevant and Discoverable Where Bad Faith Has Been Alleged
- Attorney-Client Privilege Applicable to Documents Which Concern the Obtainment or Provision of Legal Advice About the Application of New York Law to the Insurance Policy at Issue
- Appraisal Is Confined to Factual Valuation Disputes; It Cannot Be Used to Resolve Interpretive Questions Embedded in Policy Terms (e.g., What Qualifies As “Like Kind and Quality” Under ACV or Whether Replacement Cost Is Available Absent Actual Replacement)
- Motion for Leave to Serve a Subpoena to Google in a Fraud Case Denied as Not Limited to Records That Are Relevant and Proportional to the Needs of the Case.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- Settlement Did Not Automatically Extinguish Contractual Indemnification Rights. Parties Could Seek Proportional Indemnification From Non-Settling Defendant
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
- The New Jersey Insurance Fair Conduct Act Does Not Apply Retroactively
- A Good Reminder to Us All: Evidence of Insurance Is Usually Inadmissible in Personal Injury Actions Due to Risk of Unfair Prejudice
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
- Nothing from me this week, see you in two more.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
- Petition to Permanently Stay UM Arbitration Granted for Hit-and-Run Accident
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
- Act to Authorize a Study on Lithium-Ion Battery Fires and Prevention
VICTORIA’S VISION ON BAD FAITH
Victoria S. Heist
[email protected]
- Connecticut Court Declines to Dismiss Bad Faith Allegation Against Insurer Pursuant to Underlying Settlement
SHIM’S SERIOUS INJURY SEGMENT
Stephen M. Shimshi
[email protected]
- Appellate Division Finds Plaintiff Did Not Sustain a “Serious Injury” Within the Meaning of Insurance Law § 5102(d)
NEW ENGLAND ALMANACK
Barbara A. O’Donnell
Alex G. Henlin
Iryna N. Dore
- Insured’s Inadequate Showing of Irreparable Harm From Non-Payment of Defense Costs Defeats Preliminary Injunction Motion Against Insurer
- Specific “Other Insurance” Provisions of the Policy Defeated “Other Valid and Collectible Insurance” in Priority of Coverage Dispute
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
- Inside the Halifax Herald’s Pension Fight: How a Fiduciary Liability Policy and a Directors’ and Officers’ Policy Were Pulled Into the Fray
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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
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
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]
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Topical Index
Peiper on Property and Potpourri
Lee’s Connecticut Chronicles
Gestwick’s Garden State Gazette
LaBarbera’s Lower Court Library
Lexi’s Legislative Lowdown
Victoria’s Vision on Bad Faith
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
03/20/26 Hicks v. Unitrin Advantage Ins. Co.
Appellate Division, Fourth Department
Carrier’s Answer Is Stricken because of Discovery Violations
Hicks commenced this breach of contract action seeking no-fault benefits under an insurance policy issued by Unitrin, her automobile insurance carrier, following a motor vehicle accident. Prior to the accident, plaintiff had been employed full time, earning $10 per hour. Defendant partially denied plaintiff's claim for lost wages, and plaintiff now seeks $24,229.20 from defendant, pursuant to no-fault insurance law.
After Unitrin failed to respond to plaintiff's discovery demands, including, inter alia, interrogatories, as well as her good faith demand letter, plaintiff filed a motion to compel responses pursuant to CPLR 3124. After serving incomplete discovery responses, defendant consented to a conditional preclusion order directing it to submit complete responses within 60 days.
On the eve of the 60-day deadline, defendant served supplemental discovery responses, which were again incomplete, and then yet again served incomplete supplemental discovery responses after the deadline passed. Plaintiff moved for sanctions pursuant to CPLR 3126, seeking an order striking the answer and entering a default judgment in her favor Unitrin cross-moved for a protective order.
Here, Hick established on her motion that Unitrin repeatedly failed to comply with her discovery demands and the conditional preclusion order, and that those failures were willful, contumacious, and in bad faith, plaintiff met her initial burden on the motion, thereby shifting the burden to defendant to offer a reasonable excuse. In opposition, defendant did not offer a reasonable excuse but, rather, contended that the discovery demands that it failed to respond to are not relevant. Contrary to defendant's contention, the demands that it failed to respond to sought evidence of potential bias on the part of defendant's independent medical examination physicians and thus are relevant to a proper inquiry We therefore conclude that the court did not abuse its discretion in granting the motion for sanctions pursuant to CPLR 3126.
03/17/26 Calix v. The Union Theological Seminary
Appellate Division, First Department
Employee Injury Does Not Necessarily Trigger Application of Indemnity Agreement in Favor of Owner, When it Was Owner’s Property Defect, Not Employer’s Work, Which Led to Accident
In a Labor Law case, the contractor, Rosemount's agreement with Consigli contains an indemnity provision that is triggered when claims arise out of the acts or omissions of Rosemount. Even though a Rosemount employee was injured, the indemnity provision was never triggered because plaintiff's accident had nothing to do with the performance or non-performance of Rosemount's work but rather was due to allegedly insufficiently taped Masonite floor covering installed by Consigli.
Plaintiff's mere presence on the site is insufficient to trigger the indemnity provision. Defendants' argument that plaintiff was a cause of the accident because he was running is unsupported by any admissible or credible evidence in the record. As to UTS's breach of contract claim, Rosemount submitted a copy of their insurance policy that contains an endorsement providing additional insured status to owners, evidencing that it complied with its contractual obligation.
03/17/26 S.T.A. Parking Corp., v. Federal Insurance Company
Appellate Division, First Department
Explosive Emails and Straw Payments Raise Triable Issues of a Scheme to Inflate Judgment to Tap Excess Coverage
Material issues of fact exist as to whether S.T.A. Parking Corp. (“STA”) and East 77 Owners Co. (“E77”) colluded to engineer an inflated judgment to trigger STA’s excess policy with Federal Insurance Company (“Federal”). The record raised questions about whether the 2013 judgment reflected adversarial litigation or a coordinated, profit‑sharing scheme to get insurance proceeds.
Federal’s allegations are striking. According to its brief, STA—through STA’s counsel quietly aligned itself with E77 years before the judgment. Emails show STA’s counsel encouraging E77 (the claimant) to increase the judgment against STA, noting that STA carried a $4 million Federal excess policy and that a judgment over $1 million would allow E77 to “get to Chubb.” In another message, E77’s counsel reminds STA’s counsel “not to lose focus of the ultimate goal, which is to get some additional insurance money.”
Federal also highlights what it calls a “paper money” scheme designed to create the appearance that STA exhausted $1 million in underlying limits—despite STA contributing nothing out of pocket. Emails between the lawyers show settlement funds from other defendants being “run through STA” to fabricate insurance “exhaustion.” STA’s counsel wrote that “all settlement funds will flow through me for insurance purposes to get access to the [Federal] Policy.” E77’s counsel described this as “exhaustion structuring (to ensure we can get to Chubb).” The First Department found triable issues as to whether STA “actually paid” any amount sufficient to trigger excess coverage. The trial court also flagged ethical concerns about the straw payment structure.
The allegations deepen. In 2012, STA and E77 executed an assignment agreement giving 40% of any insurance recovery to E77, 20% to STA, and 40% to the lawyers—and providing that E77 would never actually collect the judgment from STA. This incentive structure—where a larger judgment meant more money for STA and its counsel—ran counter to typical litigation dynamics and raised concerns the trial court found troubling.
Consistent with this structure, STA’s counsel did not oppose E77’s multimillion‑dollar damages submission at the 2013 inquest, even though he previously elicited testimony that portions of those damages were unrelated to STA’s work. Neither STA nor E77 disclosed the assignment agreement to the inquest judge.
The First Department ultimately held that Federal’s evidence creates triable issues as to collusion, whether STA actually exhausted underlying limits, and offsets, precluding summary judgment. The court also permitted Federal’s counterclaims for bad faith, an unreasonable judgment, breach of the cooperation clause, and violations of the consent‑to‑settle and voluntary‑payments provisions.
Editor’s Note: Kudos to Melissa Brill and John Ewell (one of my former students in Insurance Law) from Cozen O’Connor. An unusual and helpful decision.
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
No cases this week. See you in two.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
On the road this week. See you in two.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
03/23/26 Peleus Ins. Co. v. United Specialty Ins. Co.
Southern District of New York
SDNY Finds Genuine Disputes of Material Fact Exist Concerning the Execution Date of Agreement Requiring Additional Insured Coverage
On May 2, 2022, Jonathan Caceres, employed by Charles Contractors Corp., slipped on water while carrying a stone slab up a staircase at a construction site at 184–198 Nostrand Avenue in Brooklyn, injuring his left foot. He sued BT General Builders, Inc. (BT) and Bais Yaakov Dkhal Adas Yereim (Bais) on May 6, 2022, alleging negligence and violations of New York Labor Law §§ 200, 240, and 241(6) [1].
Bais owned the site and contracted with BT to serve as construction manager for a school project. BT hired Sandstone Structures LLC (Sandstone) to perform stonework at the site. BT and Sandstone used the AIA A401-1997 subcontract “made as of” April 20, 2022, which incorporated five exhibits, including Exhibit E (Insurance Requirements). Section 4.6.1 requires Sandstone to indemnify BT and Bais and states the parties “shall execute the insurance requirements rider” annexed to the agreement, with later clarification that the insurance exhibit is Exhibit E. The record was unclear, however, whether the parties intended the insurance obligations to be effective upon signing the subcontract itself or only upon signing the Rider.
The Insurance Rider required the Owner and Contractor to be named as additional insureds on a primary and non-contributory basis and obligates Sandstone to provide certificates of insurance at least five days before work commenced. The Rider’s signature block shows Sandstone’s principal signed on May 16, 2022, but BT’s signature was undated. The Rider’s field for “Additional Insureds in addition to Owner and Contractor” was left blank.
Sandstone carried a USIC commercial general liability policy, which contained a “Blanket Additional Insured” endorsement extends insured status to any person or organization Sandstone “has agreed by written and executed contract to provide coverage,” and only for “occurrences subsequent to the execution of such contract.” The policy also includes a “Primary and Non-Contributory” endorsement where required by written contract.
On April 20, 2022, Peace of Mind Insurance Brokerage issued certificates of insurance on Sandstone’s behalf stating BT and Bais were included as additional insureds on a primary and non-contributory basis “if required per written contract,” while reciting the standard disclaimer that the certificates confer no rights and do not amend coverage.
BT and Bais were named insureds on a Peleus CGL policy that is excess over “any other primary insurance available … for which you have been added as an additional insured.” Peleus began defending BT and Bais under a reservation of rights on May 25, 2022. However, Peleus tendered to USIC in June 2022, asserting BT and Bais were entitled to defense and indemnity as additional insureds under Sandstone’s USIC policy. USIC denied coverage, citing, among other reasons, the absence of a “written contract executed prior to the date of the occurrence.”
On motion, the SDNY found that there were issues of fact as to the date of execution of the insurance rider. Questions remained whether there was a “written and executed contract” obligating Sandstone to name BT and Bais as additional insureds in place before the May 2, 2022 accident (the USIC endorsement requires execution before the occurrence), because evidence pointed both ways.
Specifically, while the subcontract recited that it was “made as of” April 20, 2022 and COIs were dated April 20, the Insurance Rider itself, bearing Sandstone’s signature, is dated May 16, 2022, and an earlier copy of the Rider provided to Peleus redacted that date. Thus, whether the parties intended insurance obligations to be binding upon execution of the subcontract itself (making later signature of the Rider ministerial) or only upon execution of the Rider (making it a condition precedent to additional insured status) was unresolved.
STORM’S SIU
Scott D. Storm
[email protected]
11/12/25 Berkley Ins. Co. v. Weddle L. PLLC
United States District Court, S.D. New York
Reserve Information Relevant and Discoverable Where Bad Faith Has Been Alleged
Defendant filed a motion to compel Plaintiff to produce two sets of documents relating to Plaintiff's claim investigation and loss reserves.
Concerning the three documents relating to loss reserves, Plaintiff has been ordered to produce those documents to Defendant. Courts in this District have found reserve information relevant where bad faith has been alleged. Although New York does not recognize a separate cause of action for bad faith, courts permit bad faith allegations to be included in a complaint as part of a breach of contract cause of action. Defendant has included bad faith allegations in its counterclaim in connection with its breach of contract claim in support of its request for consequential damages and attorneys' fees. The Court finds that reserve information is relevant under the broad relevance standard of Federal Rule of Civil Procedure 26(b)(1).
11/19/25 Berkley Ins. Co. v. Weddle L. PLLC
United States District Court, S.D. New York
Attorney-Client Privilege Applicable to Documents Which Concern the Obtainment or Provision of Legal Advice About the Application of New York Law to the Insurance Policy at Issue
The Court further ordered Plaintiff to submit for ex parte and in camera review unredacted copies of the documents over which the attorney-client privilege or work product doctrine was asserted.
The Court, having reviewed in camera the disputed documents, denies Defendant's motion to compel production of these documents. The attorney-client privilege protects applicable communications from disclosure and applies when there are "communications (1) between a client and his or her attorney (2) that are intended to be, and in fact were, kept confidential (3) for the purpose of obtaining or providing legal advice." The communications at issue here satisfy each element. The communications (1) occurred between the client and the client's counsel, (2) were intended to be confidential (and there is no allegation that they were not kept confidential, and (3) concern the obtainment or provision of legal advice about the application of New York law to the insurance policy at issue. These communications do not primarily concern the investigation into the underlying facts at issue in the application of that policy. As such, these communications are properly protected by attorney-client privilege.
12/11/25 EBooks Web Com, LLC v. The Hanover Ins. Co.
United States District Court for the Eastern District of Pennsylvania
Appraisal Is Confined to Factual Valuation Disputes; It Cannot Be Used to Resolve Interpretive Questions Embedded in Policy Terms (e.g., What Qualifies As “Like Kind and Quality” Under ACV or Whether Replacement Cost Is Available Absent Actual Replacement)
An online book seller sued its commercial property insurer over coverage and valuation of inventory losses from a fire. After the court previously denied the plaintiff’s first motion to compel appraisal as premature in August 2025, the plaintiff filed a second motion seeking to compel appraisal limited to 1,856,612 books damaged in the fire. The memorandum and order denied that second motion as well, without prejudice.
The policy states Hanover “will not pay on a replacement cost basis” unless the lost or damaged property is actually repaired or replaced. Actual Cash Value is defined as the amount it would cost to repair or replace covered property, at the time of loss or damage, with material of “like kind and quality.”
The plaintiff had replaced only a small fraction of its inventory and, according to the parties’ exhibits, the inventory of “dated/slow moving titles” was being replaced with “current books.” This raised a threshold question whether newer titles are of “like kind and quality” to the damaged inventory, which the court viewed as an interpretive policy dispute driving the valuation gap between the parties.
Appraisal is limited to determining the dollar value of loss through the ascertainment of facts (e.g., extent of damages, cause of harms), not resolving interpretive disputes about insurance policy meaning. The court incorporated its earlier discussion and cited authority establishing that line between factual valuation questions (suitable for appraisers) and policy-interpretation questions (for courts).
Plaintiff claimed it sought appraisal only to determine “what the RCV and ACV valuation is for the 1,856,612 books,” arguing the appraiser need not interpret policy language or address the nature of replacement purchases. Defendant argued that the core disagreement turns on whether the newly acquired, more current titles are of “like kind and quality” to the damaged, dated stock—an interpretive dispute that must be resolved before any appraisal can properly proceed and that explains the parties’ different valuation positions.
Because valuation of the book inventory would “necessarily” require deciding what constitutes “like kind and quality” under the ACV definition—and because replacement cost valuation is conditioned on actual repair/replace under the policy—the dispute is a policy-interpretation issue inappropriate for appraisal at this stage. Appraisers cannot decide this threshold interpretive question; it must be resolved before an appraisal can meaningfully assess value.
The court acknowledged that insurers cannot conjure coverage disputes to avoid appraisal, but concluded Hanover had raised a legitimate interpretive dispute rather than a pretextual one. The plaintiff had not shown otherwise and had not explained why the “like kind and quality” clause was not implicated or responsible for the valuation divergence.
The plaintiff’s attempt to proceed with appraisal in a piecemeal fashion—making a “limited demand for appraisal” while other issues remained—was noted by the court, but the propriety of that approach was not developed by the parties, and the court did not reach it. Regardless, appraisal was still premature on the limited issue presented.
12/29/25 Colony ins. Co. v Oz Solutions
United States District Court, S.D. New York
Motion for Leave to Serve a Subpoena to Google in a Fraud Case Denied as Not Limited to Records That Are Relevant and Proportional to the Needs of the Case
This matter arises in the context of a discovery dispute concerning alleged insurance fraud. The plaintiff, Colony Insurance Company asserts that the defendants—Oz Solutions and its principal Oren Ziv—made material misrepresentations when applying for insurance coverage. As part of its effort to prove fraud, Colony sought discovery from a third party, Google, Inc., targeting Ziv’s Gmail account.
Colony moved for court approval to issue a subpoena duces tecum to Google. The defendants opposed the motion. The court resolved the dispute by denying Colony’s request without prejudice, primarily due to the subpoena’s overbreadth and lack of proportionality under the Federal Rules of Civil Procedure.
The proposed subpoena sought records over three years including:
1. All google account records associated with, owned, and operated by, and or created by Oren Ziv, as identified above or in association with said email address.
2. All calendars, email, communications, chat records, posts, reviews, statements, payments, account records, or the like (associated with above email address or any of the above requested associated with Oren Ziv).
3. All account information/documentation.
4. Any and all email(s) content including email correspondence whether they be in email identified as and or categorized in the following common email folders:
a. Inbox; b. Sent; c. Snoozed; d. Important; e. Drafts; f. Spam; g. Junk; h. Composed; i. Or the like, including but not limited to deleted emails that were sent or received during the time period identified above and if deleted, when such emails were deleted.
5. All identifying/contact information regarding creation of the account associated with said email address including but not limited to personal information of creator/owner of said email account, payment information, operational use, username(s) password(s), Gmail, google drive, etc.
6. All email addresses and google accounts associated with the above person, Oren Ziv.
Defendants opposed the request, arguing that the subpoena is "not limited to the facts at issue in this action," which relates to defendants' alleged misrepresentations in insurance policy applications. Colony responded, arguing that Ziv's emails during the period are "highly relevant and proportional to the issue of whether Mr. Ziv and Oz Solutions committed fraud and made material misrepresentations when it applied for insurance."
There are assuredly materials from Ziv's Gmail account that are properly obtained by Colony, but even a cursory review of its proposed subpoena reveals its overbreadth. Accordingly, the Court denied Colony's motion without prejudice. To the extent that Colony seeks authorization to propound a streamlined subpoena, any future such request, consistent with Federal Rule of Civil Procedure 26, should seek only records that are "relevant" and "proportional to the needs of the case." Fed. R. Civ. P. 26(b)(1). The Court also reminds the parties of their obligation, under the Court's Individual Rules, to meet and confer before raising a discovery dispute with the Court, including disputes involving the scope of a proposed subpoena. The Court is mindful that the parties have brought multiple discovery disputes to it for resolution, reflecting what appears to be an uncommon inability to resolve quotidian disputes collegially.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
03/13/26 S&B Engineers & Constructors, Ltd. v. Scallon Controls, Inc.
Supreme Court of Texas
Settlement Did Not Automatically Extinguish Contractual Indemnification Rights. Parties Could Seek Proportional Indemnification From Non-Settling Defendant
Sunoco Logistics Partners Operations GP, LLC and Sunoco Logistics Partners, LP (collectively “Sunoco”) hired S&B Engineers & Constructors, Ltd. (“S&B”) to design and install a safety system in its South Texas refinery. S&B hired Scallon Controls, Inc. (“Scallon”) to supply and program a fire suppression system. Scallon installed the system, encoding a failsafe mode that would release a chemical fire suppressant if the system lost power. One morning in January 2015, the system briefly lost power while another contractor’s employees were working in the refinery. The electricity lapse triggered the chemical fire suppressant. Seven workers fell and sustained injuries while trying to escape. The injured workers sued S&B and Sunoco, who then filed a third-party suit against Scallon for breach of contract, breach of express warranty, and enforcement of the indemnity provisions into which S&B and Scallon had entered.
In May 2019, after four years of litigation, the workers settled with S&B and Sunoco. Under the settlement agreement, S&B and its insurers and Sunoco’s insurer paid the settlement amount. Sunoco nonsuited its claims against Scallon in December 2021, and Zurich American Insurance Co. (“Zurich”) intervened the next day to assert claims for subrogation.
Both the purchase agreement for the fire suppression system and the subcontract for services on the system included indemnity provisions, but S&B and Zurich focused on the proportional-indemnification provision of the purchase agreement. Scallon voluntarily accepted a contractual duty to indemnify S&B and Sunoco for Scallon’s allocable share of comparative, concurrent and/or contributing negligence. Further, Scallon agreed to broadly indemnify S&B and Sunoco for “any and all loss, damage, claim, suit, liability, [and] strict liability,” among other things, if allocable to its own negligence.
In the post-settlement litigation, S&B and Zurich claimed that Scallon owed them its proportional share of the settlement amount, which was its share of liability for the accident. Scallon contended that the voluntary settlement—to which it was not a party—extinguished any possible indemnification rights. S&B and Scallon filed cross-motions for summary judgment, and the trial court granted Scallon’s. The court of appeals affirmed, holding that the express-negligence doctrine—that a party can be indemnified for its own negligence as long as the agreement expresses that intent in specific terms—barred S&B from recovery based on indemnification, the record did not support a contribution claim, and the statute of limitations had run on Zurich’s claim.
The Texas Supreme Court held that the settlement did not automatically extinguish contractual indemnification rights. The Court distinguished compelling contribution to a settlement from a defendant who lacks a contractual relationship with another defendant from a situation where the defendant already has a contractual right to indemnification that it seeks to enforce against the other liable parties. As for the interpretation of the indemnification provision, the parties’ agreement was clear that the indemnification was proportional and did not entirely shift the burden of loss. Further, the agreement disclaimed any intent to indemnify Sunoco or S&B for their own negligence, so the express-negligence doctrine did not apply to prevent contractual indemnification. Finally, the Court held that Zurich’s claim was not untimely because the statute of limitations began to run when the settlement made Sunoco’s liability fixed and certain. Accordingly, the Court reversed and remanded the case to the trial court to resolve the merits of the parties’ indemnification dispute.
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
03/13/26 Burden v. Harrington
Superior Court of New Jersey, Appellate Division
The New Jersey Insurance Fair Conduct Act Does Not Apply Retroactively
The Burden sisters sued Harrington for a November 19, 2017, motor vehicle accident (one sister was the driver, and the other was a passenger). The Burdens settled with Harrington for the limits of his auto policy. The Burdens then commenced an underinsured motorist (“UIM”) claim against their own auto insurer, Mid-Century, on the basis that Harrington’s policy limit insufficiently compensated them for their injuries.
The UIM claim went to non-binding arbitration, which resulted in an award of $200,000. Mid-Century requested a trial de novo. Thereafter, the Burdens made a $300,000 offer of judgment, which Mid-Century countered with a $125,000 offer of judgment.
A bar panel of three attorneys also valued the case, arriving at conclusions of $250,000, $300,000, and $400,000, respectively. Mid-Century tendered a high-low settlement offer of $400,000 and $100,000. The case did not settle, and the UIM claim proceeded to trial, resulting in a jury verdict of $4,500,000 (later molded by the trial court to $517,350.44, reflective of the $400,000 UIM limit, plus costs, fees, and pre-judgment interest).
After trial, the Burdens moved to amend their pleadings to assert a bad faith claim under the New Jersey Insurance Fair Conduct Act (“IFCA”), enacted in January 2022 (after the accident, but during the pendency of the case). The IFCA authorizes a UM/UIM claimant to file a civil complaint against his, her, or its own UM/UIM insurer for “an unreasonable delay or unreasonable denial of a claim for payment of benefits under an insurance policy.” If successful in a claim under the IFCA, a claimant may recover treble (triple) damages, pre- and post-judgment interest, and attorney’s fees.
The Burdens argued that Mid-Century’s refusal to settle was improper, and that Mid-Century’s failure to settle within policy limits resulted in an excess verdict. Mid-Century opposed the Burdens’ motion to add the IFCA claim on the basis that the IFCA was enacted prospectively, and not retroactively, and thus does not apply to a 2017 accident.
The Court denied the Burdens’ motion to assert a new claim under the IFCA—that decision was affirmed on appeal. The Appellate Division looked to the language of the IFCA and paid specific attention to the fact that it provides that it is to “take effect immediately.” The Court noted the long line of New Jersey precedent that holds that where, as here, a piece of legislation is to take effect “immediately,” or to take effect on a given date in the future, it applies only prospectively. The Court also noted that nothing about the text of the IFCA suggests that the Legislature intended for it to apply to claims that occurred before it was enacted.
Editor’s Note: In other words, the Burdens did not meet their burden in showing that the IFCA applied retroactively. See what I did there? All puns aside, however, this seems to be the right decision. Most times, a new piece of legislation will either provide that it takes effect immediately upon enactment, or on some date in the future. As the Court made clear, under either of those two scenarios, the legislation is not retroactive.
03/20/26 Silipena v. Am. Pulverizer Co.
United States District Court, District of New Jersey
A Good Reminder to Us All: Evidence of Insurance Is Usually Inadmissible in Personal Injury Actions Due to Risk of Unfair Prejudice
This was a large case involving two fires in Millville, New Jersey, resulting in tens of millions of dollars of damage. The case was set down for trial, and motions in limine were filed. One motion in limine sought to keep out evidence of insurance, due to risk of unfair prejudice. The Court noted that the comments to Federal Rule of Evidence 403 generally suggest that allowing evidence that a party to a tort case was insured against damages resulting from the conduct alleged may incite a jury. Scholarly articles on the subject also submit that juries may be more likely to assign liability and greater damages against a party they know to be insured. Here, the report and recommendation to the trial court noted that, if insurance is brought up at trial, it must be done in a way that deemphasizes any party’s relationship to insurance. The report further submitted that the Court should consider a limiting instruction that the jury does not consider the possibility or availability of insurance in assessing the plaintiff’s claims, or the calculation of damages.
Editor’s Note: That is one reason why insurers should never be part of the tort lawsuit, but instead, proceed in a separate declaratory judgment action.
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
Nothing from me this week, see you in two more.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
03/19/26 Matter of Standard Fire Ins. Co. v. Jecinta Ugwu
New York State Supreme Court, Bronx County
Petition to Permanently Stay UM Arbitration Granted for Hit-and-Run Accident
The Standard Fire Insurance Company (“Petitioner”) brought an action pursuant to CPLR § 7503, seeking a permanent stay of the uninsured motorist (“UM”) arbitration demanded by Jecinta Ugwu (“Respondent”). In the alternative, the Petitioner sought a temporary stay, setting the matter down for a framed issue hearing on the issues raised regarding the exchange of pre-arbitration discovery.
The matter involves an alleged hit-and-run accident occurring on August 15, 2025, on the Bronx River Parkway. However, the Respondent did not notify the New York State DMV until September 12, 2025, nearly thirty days after the accident. Respondent sought benefits under the UM provision of the subject policy, which includes coverage for “hit-and-run” accidents. However, the hit-and-run provision requires that the insured, or someone involved in the accident, report the accident within 24 hours, or as soon as reasonably possible to “a police officer, peace or judicial officer or to the Commissioner of the Department of Motor Vehicles.”
Petitioner argued that (1) there was no proof of physical contract on the alleged date of loss; and (2) Respondent failed to timely provide notice of the accident as required by the policy.
In opposition, the Respondent submitted an attorney affirmation, her own affirmation, the affirmation of the policy holder (Chucks Ugwu), a FDNY ambulance call report, and a copy of an uncertified MV-104 report. She argues that she was struck in the rear of her vehicle, and includes photographs of the vehicle, allegedly taken after the accident, showing rear bumper damage. Respondent argued that she was rendered unconscious and was therefore unable to make a police report at the scene. However, the Respondent did not offer an excuse for the delay of nearly thirty days in reporting the accident. Notably, the FDNY report does not indicate that the accident was a hit-and-run.
A party seeking a stay of arbitration has the burden of showing the existence of evidentiary facts to establish a preliminary issue which would justify the stay. After that burden is met, it shifts to the opposing party to rebut the prima facie showing. If there is a triable issue of fact, the court must determine that issue of fact in a framed-issue hearing.
However, where a UM insurer presents undisputed evidence that the claimant failed to report the alleged hit-and-run accident to the policy or DMV within 24 hours of the accident, or as soon as reasonably possible thereafter, as required by the policy, a permanent stay of the arbitration is appropriate.
The court acknowledged that this 24-hour requirement is an important function to prevent fraudulent claims and to give the police an opportunity to investigate hit-and-run accidents.
The court found that Petitioner met its burden of proof through undisputed facts that both a police accident report was not generated, and the MV-104 report was not dated until a month after the accident. The court noted that an MV-104 report must be filed within ten (10) days of an accident.
Further, the court found that the Respondent failed to raise an issue of fact. As such, the Court found that the Petitioner has met its burden on the issue of lack of notification and granted the application to permanently stay the arbitration sought by the Respondent in connection with the motor vehicle accident on August 15, 2025.
A copy of this decision is available upon request.
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
03/27/26 New York Senate Bill S257
Act to Authorize a Study on Lithium-Ion Battery Fires and Prevention
On March 16, 2026, Bill S257 passed the Senate and was delivered to the Assembly. The legislation would authorize the department of fire prevention and control to conduct a study on lithium-ion battery fires and prevention.
The justification provides that a study would assist in supplying necessary data to help better prevent and handle fires caused by lithium-ion batteries. Further, it explains that these fires are extremely dangerous and take a substantial amount of time and effort to be extinguished. The study will also include potential recommendations to current building codes to be better protected from these fires.
The Bill provides that the study will:
- review the severity of lithium-ion battery fires, including what specific components of the battery causes severe fires;
- examine the effectiveness of lithium fireproof blankets on such fires;
- examine the current measures of safety implemented by fire departments across New York in relation to lithium-ion battery fires;
- examine measures other fire departments in different states and countries have implemented to increase safety in relation to lithium-ion battery fires;
- examine and make recommendations on measures the state of New York may take in order to increase safety related to lithium-ion battery fires;
- examine and make recommendations for establishing training requirements for proper handling of lithium-ion battery fires;
- examine and make recommendations to update current building codes for charging devices that may contain lithium-ion batteries.
VICTORIA’S VISION ON BAD FAITH
Victoria S. Heist
[email protected]
03/24/26 Richardson v. Liberty Mut. Pers. Ins. Co.
United States District Court for the District of Connecticut
Connecticut Court Declines to Dismiss Bad Faith Allegation Against Insurer Pursuant to Underlying Settlement
In this case, plaintiff and underlying claimant Richardson sought payment from Liberty Mutual for an unsatisfied judgment she obtained against Liberty Mutual's insured, Celentano, in an underlying action related to a motor vehicle accident. The judgment totaled more than $1.5 million. Celentano's policy limit with Liberty Mutual was $25,000. Richardson now brings this action against Liberty Mutual alleging breach of contract, negligence, bad faith, breach of fiduciary duty, and violations of the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act. Liberty Mutual moved to dismiss the complaint for failure to state a claim.
The underlying incident occurred when Celentano rear-ended Richardson's vehicle. Plaintiff sustained a rotator cuff tear, and her physician recommended that she undergo a reverse shoulder replacement procedure. In April 2023, Richardson commenced a lawsuit against Celentano for her injuries. Richardson's attorney made a demand for the limits of Celentano's policy, which Liberty's adjuster rejected, stating it would not accept unless Plaintiff underwent the shoulder surgery. Richardson contends that Liberty did not communicate the offer to Celentano. A few months later, Liberty offered to settle the case for the policy limits, which Richardson rejected.
Richardson then states Liberty sent an email to Richardson's counsel to "to bully the Plaintiff into accepting" Liberty's offer of the policy limit. The email stated that Libert felt Plaintiff was prolonging the lawsuit in an attempt to "posture and threaten a meritless bad faith claim."
Settlement was not reached in the underlying action, and the case went to trial resulting in a verdict in excess of $1.5M for Richardson. Liberty then mailed Richardson a check for the policy limit plus interest, which were not deposited. Richardson then brought the coverage action against Liberty to recover the full judgment against Celentano.
In its decision, the Court found Richardson's allegations of Liberty's handling of the claim sufficient to state a claim for bad faith "although this is a close question." The Plaintiff alleged Liberty failed to reasonably investigate Richard's claim, which is supported by specific examples, including the medical expenses in Richardson's medical records, the cost of shoulder surgery, and the MRI report and recommendation by her treating physician. Further, Liberty came back and offered its policy limits though it did not gain any information since it declined Plaintiff's initial demand. The Court also found the complaint plausibly alleges it "willfully refused to perform its obligation to reasonably settle, knowing it was exposing its insured to an excess verdict."
Ultimately, the Court granted the motion to dismiss in part and denied in part. The Court dismissed the allegations of Plaintiff's breach of contract claim and Connecticut Unfair Trade Practices Act and Connecticut Unfair Insurance Practices Act but did not dismiss the bad faith allegation.
SHIM’S SERIOUS INJURY SEGMENT
Stephen M. Shimshi
[email protected]
03/20/26 Wiechec v. Miller
Appellate Division, Fourth Department
Appellate Division Finds Plaintiff Did Not Sustain a “Serious Injury” Within the Meaning of Insurance Law § 5102(d)
This matter arises from personal injuries allegedly sustained by Plaintiff Wiechec ("plaintiff") in connection with a motor vehicle accident. Thereafter, plaintiff filed suit seeking damages for personal injuries in connection with the subject accident. Plaintiff alleged injuries to her cervical spine and right shoulder under the permanent consequential limitation of use, significant limitation of use, and 90/180-day categories in accordance with Insurance Law § 5102(d).Defendant filed a motion for summary judgment to dismiss the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). Plaintiff filed a cross-motion for summary judgment on the issue of serious injury. The Supreme Court, Niagara County, denied plaintiff's cross-motion, granted the defendant's motion, and dismissed the complaint. Plaintiff appealed to the Appellate Division, Fourth Department.
90/180-day category:
The Court found that the defendant met her initial burden on her motion. Zeigler v Ramadhan, 5 AD3d 1080, 1081 [4th Dept 2004]; Licari v Elliott, 57 NY2d 230, 236 [1982]). Defendant offered as evidence the plaintiff's deposition testimony, which served to establish that plaintiff's daily activities had not been impacted significantly during the statutory time period. Plaintiff testified that she did not miss any time from work due to the subject accident and that her employment was not affected by the accident (see Licari, 57 NY2d at 233-234; Kracker v O'Connor, 158 AD3d 1324, 1325 [4th Dept 2018]; Ehlers v Byrnes, 147 AD3d 1465, 1466 [4th Dept 2017]). Plaintiff failed to raise a triable issue of fact in response. (see Pastuszynski v Lofaso, 140 AD3d 1710, 1711 [4th Dept 2016]).
Significant limitation of use category:
The Appellate Division, Fourth Department, found that the Supreme Court, Niagara County, erred in granting the defendant’s motion with respect to the significant limitation of use category insofar as it pertained to the plaintiff's cervical spine and right shoulder (Toure v Avis Rent A Car Sys., 98 NY2d 345, 353 [2002], rearg denied 98 NY2d 728 [2002]; see Wright v Wilson, 211 AD3d 1621, 1623 [4th Dept 2022]). The Appellate Division concluded that defendant's expert’s opinion, proffered more than two (2) years after the accident, "fail[ed] to demonstrate that plaintiff suffered only a mild, minor or slight limitation of use" (Chaney v Malone, 5 AD3d 1062, 1063 [4th Dept 2004]; cf. Koneski, 158 AD3d at 1213). Defendant failed to establish her entitlement to summary judgment as a result of any gap in treatment regarding plaintiff's injuries (see Cook v Peterson, 137 AD3d 1594, 1597-1598 [4th Dept 2016]; see generally Pommells v Perez, 4 NY3d 566, 574 [2005]).
Plaintiff’s cross-motion:
The Appellate Division also held that plaintiff failed to meet her initial burden on her cross-motion to establish that she sustained a serious injury under the significant limitation of use category pertaining to her cervical spine and shoulder. Plaintiff proffered no evidence that her cervical spine range of motion deficits were causally related to the subject accident (see Smith v Hamasaki, 173 AD3d 1816, 1817 [4th Dept 2019]), and plaintiff’s physician failed to provide any assessment of the significance of her shoulder limitations (see Habir v Wilczak, 191 AD3d 1320, 1322 [4th Dept 2021]; cf. Casinella v Dill, 5 AD3d 1047, 1048 [4th Dept 2004]).
Based on the foregoing, the Appellate Division, Fourth Department, ordered that the Defendant’s motion was denied in part and reinstated the complaint, as with respect to the significant limitation of use category within the meaning of Insurance Law § 5102(d) pertaining to plaintiff's cervical spine and right shoulder injuries.
NEW ENGLAND ALMANACK
Barbara A. O’Donnell
[email protected]
Alexander G. Henlin
[email protected]
Iryna N. Dore
[email protected]
02/25/26 D. F. Pray, Inc. v. Nat’l Fire Ins. Co. of Hartford
United States District Court, Massachusetts
Insured’s Inadequate Showing of Irreparable Harm From Non-Payment of Defense Costs Defeats Preliminary Injunction Motion Against Insurer
By moving for preliminary injunctive relief in conjunction with the initiation of a declaratory judgment action concerning the availability of coverage under its CGL Policy for an underlying lawsuit concerning its construction management role on a residential construction project in Quincy, Massachusetts, D.F. Pray sought an expedited ruling regarding its insurer’s obligation to provide defense coverage for over $250,000 in incurred and projected legal fees for the underlying lawsuit. While not expressly stated in the decision, the DJ action concerned a priority of coverage dispute over CNA’s reliance on D.F. Pray’s entitlement to additional insured coverage under its subcontractor’s policy.
As grounds for her denial of D.F. Pray’s motion, D. Mass. Judge Talwani relied upon the irreparable harm prong of the four-part standard applied to requests for preliminary injunctive relief in the First Circuit. Starting from the premise that “[i]ncurring defense costs is not, on its own, sufficient to establish irreparable harm,” Judge Talwani concluded that D.F. Pray had not made a sufficient showing of irreparable harm given the absence of any indication that the non-payment of defense costs threatened its ongoing business survival, exposed it to a risk of losing its legal representation or jeopardizing its ability to retain experts and/or prepare for trial. To distinguish the facts before it from decisions in other jurisdictions that granted insured’s injunctive relief to obtain or maintain defense cost coverage, the court referred to the parties’ submission of summary judgments that would in all likelihood resolve their coverage dispute well in advance of the 2027 trial date in the underlying action.
The court also contrasted the dispute before it from a S.D.N.Y. decision that granted a board member preliminary injunctive relief requiring its D&O insurer to pay for his legal fees in a securities class action and numerous other related lawsuits. As Judge Talwani noted, in that matter, In Re Worldcom Securities Litigation, Inc., 354 F. Supp. 2d 455 (S.D.N.Y. 2005), movant made the required showing of irreparable harm by pointing to a near term trial date and the potentially ruinous consequences of an adverse judgment, including reputational harm, stress and potential financial ruin. In the court’s view, there was a material distinction between an individual insured’s need for D&O coverage and a corporate insured’s claimed entitlement to coverage under a CGL Policy. The court also concluded that the other cases cited by D.F. Pray were “similarly distinguishable [because] the movants there faced potential irreparable financial harm, substantial civil liability, criminal liability, or the withdrawal of counsel.”
While concluding that D.F. Pray had not satisfied the irreparable harm requirement for preliminary injunctive relief, Judge Talwani cautioned the insurer, CNA, that if it was found on “summary judgment to have a duty to defend that it has failed to meet, the failure to do so may be relevant to Plaintiff's claims of unfair and deceptive acts and practices and for treble damages under Mass. Gen. Laws ch. 93A.”
03/20/26 Selective Ins. Co. of the Se. v. Scottsdale Ins.
United States District Court, Massachusetts
Specific “Other Insurance” Provisions of the Policy Defeated “Other Valid and Collectible Insurance” in Priority of Coverage Dispute
Galaxy Management managed 26 Galaxy Pass in Sutton, Massachusetts for Galaxy Sutton LLC. It was covered by two liability insurance policies:
- Plaintiff’s policy was issued to Galaxy Management. It stated that where liability "aris[es] out of your management of property for which you are acting as real estate manager, this insurance is excess over any other valid and collectible insurance available to you, whether such insurance is primary or excess."
- Defendant’s policy was issued to Galaxy Sutton LLC and Galaxy Pass LLC. It covered any person or organization while they were “acting as [a] real estate manager” for a named insured and stated that it was "excess over any other insurance, whether primary, excess, contingent or on any other basis . . . [t]hat is valid and collectible insurance available to any insured under any other policy.”
The parties settled the underlying matter with contributions from both Plaintiff and Defendant. Following the settlement, the Plaintiff initiated the action with the request to establish priority of coverage under both Policies.
While ruling on the parties’ cross-motions for summary judgment, the Court reiterated Massachusetts case law that requires it to engage in two-step analyses for determination of priority of coverage: (i) determine the policies’ "relationship[s] with their insureds," i.e. the type of coverage (primary or excess) that each policy provides to Galaxy Management; and (ii) "turn to [the policies'] relationship with one another" to decide whether there is a "provision in either of the policies specifically making the coverage provided excess of the other policy."
Turning to the first prong of the test, the Court observed that under Massachusetts law, an other-insurance clause can indicate that a policy is excess in one of two ways. First, a policy is excess if it contains both: (i) a limitation-of-liability clause stating that its coverage is "excess of primary insurance" or "excess of the 'limits of any other insurance collectible by the insured"'; and (ii) an other-insurance clause stating that the coverage is "excess of all 'other valid and collectible insurance . . . available to the insured.'" Second, a policy can be excess under specific circumstances if its other-insurance clause states that it is excess under those particular circumstances.
The Court held that the Plaintiff's policy provided excess coverage to Galaxy Management because it specifically stated that its coverage would be excess under the circumstances when Galaxy Management was acting as a property manager.
The Court took issue with the Defendant’s policy after observing that it “lacked a separate limitation-of-liability clause making clear that its coverage was excess.” The Court noted that the policy provided that the coverage was "primary" except where there was any other "valid and collectible insurance," but such language was deemed an insufficient “catch-all other-insurance clause.” It held that, under the circumstances of the case, in the absence of other indicia that the policy provided only excess coverage, the Defendant's policy provided primary coverage to Galaxy Management.
As to the second prong of the test, the Court held that the policies’ relationship to one another was resolved by the construction of each respective policy.
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.
01/30/26 Fiera Private Debt Fund III LP v. 3306133 Nova Scotia Limited
Supreme Court of Nova Scotia
Inside the Halifax Herald’s Pension Fight: How a Fiduciary Liability Policy and a Directors’ and Officers’ Policy Were Pulled Into the Fray
Since the 1870’s, the Halifax Herald, published by the Dennis family, has been the leading print newspaper in the Halifax region. By the 1950’s, under the stewardship of William Dennis, it became known for its humanistic approach to the welfare of its employees. William Dennis was quoted as saying that one of his proudest moments was the creation of a defined benefit pension plan. Under that plan, the Herald promised a set, guaranteed monthly income for life, based on a formula considering salary and years of service. The Herald assumed the investment risk and was obligated to fund the plan, providing secure, predictable retirement income for its employees rather than relying on market performance. That plan was workable as long as the market remained predictable, readership and subscriptions continued to grow and more importantly, the advertising dollars were flowing in.
But by the late 2010’s the conditions that ensured growth and stability for the Halifax Herald were changing. North American print media in the 2010s faced a severe, structural crisis characterized by a rapid decline in readership and advertising revenue, driven primarily by the digital transition and the 2008–2009 recession. This period saw over 1,800 American newspapers disappear, with advertising revenue plummeting. To survive, The Herald had to transition to a digital platform. It needed cash. In 2018-2019, the Herald was obligated to make a payment of $2,656,656 of pension contributions into the Pension Plan. Believing that a pending regulatory change that would excuse payment of that amount, The Herald diverted that pension cash to its operations.
The Nova Scotia’s Superintendent of Pensions eventually discovered that The Herald was not making proper pension contributions. A dispute arose between the Superintendent and The Herald as to the propriety of The Herald’s actions. The dispute began with a demand letter sent by the Superintendent on May 17, 2021, and then escalated when the Superintendent issued a Notice of Intended Order on January 17, 2022, seeking to compel payment. The Labour Board and then, on appeal, the Nova Scotia Supreme Court held that the regulatory amendments that The Herald was counting on to excuse the nonpayment were not retroactive and that The Herald remained obligated to pay the unpaid pension contribution which is referred to in the judgment as the Special Payment.
But The Herald had spent the cash. The Herald sought protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36. Under the resulting CCAA order, Eckler Admin Corp Ltd. was appointed as the administrator of the Pension Fund. Eckler determined that in addition to not making the Special Payment, The Herald had also diverted $405,583.68 from the Pension Fund to fund its litigation with the Superintendent of the Pension Fund.
On August 8, 2024, Postmedia News bought the assets of The Herald under a Court approved Vesting Order that meant that it acquired The Herald free and clear of all previous liabilities. That Order discharged the Directors and Officers of The Herald of all liability, save for those liabilities that are insured.
On October 21, 2024, Eckler sued The Herald and each of the Directors and Officers of the company for breach of the Nova Scotia pension act and regulations and breach of fiduciary duties.
The Herald’s Insurance Coverage
The Herald held two insurance policies at the time the Eckler lawsuit was filed:
- A Fiduciary Liability Policy issued by AIG Insurance Company of Canada with a policy period of October 22, 2023, to October 22, 2024
- A D&O Liability Policy, issued by Newline Canada Insurance Limited with a policy period of November 30, 2023, to November 30, 2024
Eckler brought this motion in the Nova Scotia Supreme Court for various forms of declaratory relief under both policies.
Newline: Eckler Does Not Have Standing to Enforce Coverage
Newline extensively argued that Eckler did not have standing to enforce coverage. Each and every argument raised by Newline was dismissed by the Court and it reasons bear a close reading. In summary the court concluded that Eckler could pursue its coverage demand against Newline in the CCAA proceedings because: (a) the CCAA’s remedial, single proceeding model and statutory purpose justified the court taking jurisdiction; (b) s. 28(1) of the Nova Scotia Insurance Act offers a permissive, not mandatory, alternative which does not displace CCAA jurisdiction; and (c) the Vesting Order preserved claims against insurers, ensuring that insurance issues remained justiciable in the CCAA forum.
Finally, Newline argued that its policy is an indemnity policy that indemnifies against covered legal expense. In this case, that legal expense is not covered as they are not expenses that arise from the defined term “Individual Act”; rather the liability arises from the Directors and Officers acting as agents of The Herald qua administrator of the [Pension] Plan ...” — and not as Directors and Officers of the “Company” as that term is defined. In addition, there are two potentially applicable exclusions:
1. Exclusion E which reads “... based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving the actual or alleged violation of the responsibilities, duties or obligations imposed upon any Insured by...” Ontario’s pension legislation “or similar provincial ... legislation;”
2. Exclusion L which excludes Claims that are “... based upon, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving any Wrongful Act...events, circumstances, situations, transactions, facts, acts, errors, omissions, or occurrences occurring, or alleged to have occurred, prior to the Retroactive Date”. In this case the parties agree that the Retroactive Date is November 30, 2021.
The Court dismissed these arguments.
The true nature of the Eckler Claims attract coverage under the Newline D & O Policy. The critical focus of the allegations relate to the decisions made by the Directors and Officers to make available and, more importantly, to use funds that otherwise belonged in the Pension Plan for other, improper purposes. Therefore, the alleged fiduciary breach and related conflict of interest complaint primarily involve board-level decisions. Therefore, the claims are covered subject to the exclusions raised.
The Court went on to hold that Exclusion E does not apply. The true nature or substance of the claim is more distinctly targeted on the acts that are separate and distinct from the regulatory breach. Further:
- The Superintendent’s notice didn't cover the specific wrongs alleged by Eckler.
- The claims about legal expenses and misuse of pension assets are different from those made by the Superintendent.
- Any remedy for fiduciary breach would be different from a regulatory breach.
Exclusion L was held not to apply as they involve discrete acts occurring after the retroactive date.
AIG: No Duty to Defend under the Fiduciary Liability Policy
AIG's coverage position focused on asserting that its Fiduciary Liability Policy is a claims-made-and-reported policy. AIG argue that claims advanced by Eckler are "related" to earlier regulatory actions pursued by the Superintendent of Pensions in 2021 and 2022. Specifically, AIG contended that since the Eckler claims arise from the same set of facts and misconduct—namely, the non-payment of pension plan contributions and related use of pension assets—these should have been reported at the time the prior claims came to light, not at a later date. AIG maintains that the failure to promptly report these related claims, as required under the policy's claims-made-and-reported structure, defeats coverage for the new claims tendered by Eckler.
Additionally, AIG relies on a "Known Claims" exclusion, invoking the fact that the Superintendent's Notice of Intended Order (NOID) was explicitly referenced in the policy renewal questionnaire completed by the insured. This, according to AIG, bars coverage for any loss connected to the Superintendent’s NOID and associated claims.
AIG strengthens this position by drawing direct linkages between the current claims and those previously asserted by the Superintendent. All claims pertain to the same underlying misconduct (failure to fund the plan, wrongful use of assets); they involve the same parties; they occurred within the same time period and even target alleged legal expenses that trace to the regulatory dispute.
The Court disagreed with AIG's coverage position.
Firstly, the Court interpreted the Fiduciary Liability Policy as a claims-made policy, where notice during the policy period is a condition for coverage, rather than a strict "made and reported in the same period" model. According to the Court, “This weighs toward a duty to defend.” The Court’s vague reasoning on this point lacks development and therefore it is difficult to understand why AIG’s argument was rejected.
The Court went on to find that the Eckler Claims were not confined to the Superintendent’s 2021 demand letter or the 2022 NOID. These claims involved different kinds of wrongs, timing, and nature of loss, focusing on fiduciary breaches that require equitable remedies, which are distinct from the Superintendent’s monetary demands. Further Eckler’s claims included allegations of active mismanagement, conflict of interest, and misuse of funds, which created a sufficient possibility to trigger the duty to defend. The claims about legal expenses and erosion of pension assets further strengthened this duty. As a result, the Court seemed to be saying that if AIG is correct that the policy is a claims made and reported policy; then the failure to report the prior claim is not fatal to the claim of coverage asserted in this motion: Different day, different claims, no relationship, no need for prior reporting.
The Court did not find the "Known Claim" exclusion applicable. The claims were separate from the NOID and involved different corporate decisions.
In summary, the Court found that the claims were distinct and met the conditions for a duty to defend under the policy.
The Court’s Order
For these reasons, the Court ordered that under the Fiduciary Liability Policy, AIG has a duty to defend The Herald and its Directors and Officers against the covered Eckler Claims raised in the Herald Action and the D & O Action.
Under the D & O Liability Policy, Newline has a duty to advance defence costs to the Directors and Officers so that they might defend the covered Eckler Claims in the same actions.
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