Volume XXVII, No. 23 (No. 722)
Friday, April 24, 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. Welcome to our 722nd issue of Coverage Pointers, attached:
Greetings from Costa Rica, where I’m attending the Association of Defense Trial Attorneys annual meeting. It is my first time here and it is surely a paradise. Besides the great comradery and excellent educational programming, the rain forest, flora, national park, birds, wildlife (including sloths, armadillos, monkeys) and the heat and humidity, are superb.
The Second Child decision released.
The big case is this issue is the Second Child decision, reported on Thursday by the Court of Appeals. In short, the Court, on a 4-3 vote, determined that the Graves Amendment preempted Vehicle & Traffic Law §370, and overturned Elrac v. Ward insofar as it required rental car insurers to provide primary coverage to those who rented cars.
That’s a huge change for the personal auto industry, who may now be required to provide primary coverage when their insureds rent cars, rather than relying on the rental car’s insurers to provide that first $25,000/$50,000 in liability coverage. There are all kinds of secondary implications for uninsured motorists coverage, uninsured drivers, etc.
Read Ryan Maxwell’s comprehensive summary of the decision in my column in the attached issue of Coverage Pointers.
Of course, the appellate courts don’t miss opportunities to continue to render interesting decisions, and they’re included in the attached issue of Coverage Pointers.
Employment Opportunities at the Firm – At any of our offices or hybrid
Hurwitz Fine P.C. is home to one of the largest and most forward-thinking insurance coverage practice groups in New York State, with offices across New York and New England—and we’re growing. We’re looking for Insurance Coverage Attorneys who want more than just a job. Here, you’ll work side-by-side with respected, approachable mentors who are invested in your growth, your voice, and your long-term success. You’ll handle meaningful work in a fast-moving practice area, collaborate with a supportive team, and build a career with real opportunity to advance.
If you’re seeking a place where your work matters, your development is intentional, and your colleagues actually enjoy working together, we’d like to meet you. NYC/Buffalo/Albany/Rochester/New England. Hybrid's fine.
Qualified candidates should have at least two years of experience :
- Experience in policy interpretation and insurance coverage analysis
- First party property policies and/or homeowners policies
- Commercial General Liability policies
- Directors & Officers Policies
- Environment/Pollution Policies
- Construction Defect/Builders Risk Policies
- Litigation of Coverage Disputes
In office or hybrid work opportunities are available.
The successful candidate for this position will have excellent writing, communication, and analytical skills. We are committed to growing our firm with high caliber attorneys, and offer competitive benefits, a diverse environment, mentorship, and growth opportunities, and encourage community involvement.
Submit resume and writing sample to Hurwitz Fine P.C., Attn: Susan Ruhland, Director of Human Resources, The Liberty Building, 424 Main Street, Suite 1300, Buffalo, New York 14202 or fax to 716-332-7411 or email to [email protected].
We know that we have lots of lawyers who subscribe to this publication and lots of claims professionals who work with excellent attorneys through our coverage area – NY, NJ, CT, VT, MA, RI, NH and around the country. Please spread the word.
The AVOID Act and Third Party Practice – Presentation Reprised on Video
The AVOID Act is now law for lawsuits newly commenced after April 18, third party action for contribution or indemnity must be started within 90 days after the defendant files its answer, unless a court grants a motion for extension. The firm offered a presentation on this legislation last month and the video (and the PowerPoint) are available upon requests. Here was the announcement.
Interested in seeing the video of the presentation or the slide deck? Just send me a note and ask.
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 regularly called on by friends and colleagues from around the country, folks who know me and trust me, to help resolve disputes. Often, particularly in mediated matters, I know the insurers and lawyers on both (or several) sides of the dispute. Since they all trust me as a fair dealer, they feel comfortable having me try to help close the file (and avoid precedent). Just pick up the phone, 716.849.8942 or send an email to [email protected] and I’ll try to help.
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.
100 Years Ago, in Costa Rica – 100 Years Ago:
The Times-Picayune
New Orleans, Louisiana
24 Apr 1926
U.S. ENVOY URGES
TROPICAL FARM
SCHOOL IN SOUTH
Davis, Back from Costa
Rica, Sees School
Mutual Asset
A school of tropical agriculture should be established somewhere in the South, Roy Tasco Davis, American minister to Costa Rice, said last night soon after his arrival here on the United Fruit Company steam-ship Atenas.
Mr. Davis, his wife and two children are en route to their home in Columbia, Mo. On a two months’ leave of absence. Mr. Davis will be in Washington for the opening of Congress. His young daughter, Mercetica, 2 years old, saw the United States yesterday afternoon for the first time. She was born in San Jose and was given a Costa Rican name as a courtesy to the country where Mr. Davis is held in high esteem.
“The future of the Caribbean countries lies in agriculture,” Mr. Davis said. “There are hundreds of thousands of acres of undeveloped lands there as rich as the Garden of Eden, but there are no schools there to teach scientific culture of the soil.
Peiper on Property (and Potpourri):
The ice is off of the lake, the sun is shining, and the bleu martinis are sure to be flowing soon. Welcome to Spring in the Northeast. I knew we’d make it eventually. A light week again this week from the Courts but do take a moment to review the First Department’s decision slapping down a carrier’s legitimate FOIL request on the law enforcement exception. Good information to know the next time you are looking for facts which may be held up in the local police department.
These issues come up with some frequency. Suppose, for example, you are investigating the potential application of assault/battery exclusion or the intentional injury exclusion. Information related to the charge, plea colloquy, and ultimate disposition of the criminal charges may well play a major part in whether a denial is justified. Knowing what you are, and are not, entitled to disclose could prove very useful.
Lastly, for your very important information, April 23rd is National Talk Like Shakespeare Day. And, in that spirit….
That is all for now; fare thee well, till a fortnight hence.
Steve
Steven E. Peiper
[email protected]
100 Years Ago, in Iran – 100 Years Ago:
Evening Despatch
Birmingham, West Midlands, England
24 Apr 1926
CROWNING OF PERSIA’S
NEW SHAH.
Riza Khan’s Dramatic
Career.
FROM RANKS TO THRONE.
Teheran, Saturday. Tomorrow his Imperial Highness, Riza Khan Pahlevi, will be crowned as shah of Persia.
The whole nation will be en fete and Teheran is lavishly decorated.
A resplendent new crown of gold, embellished with diamonds, rubies, emeralds, and other precious stones, has specially wrought and to the historic regalia of Persia has been added a beautiful gold scepter, decorated with brilliants, a present from the Azerbaijani Province.
For three days Persia is to enjoy a holiday and after the day festivals those of the night will be heightened by multicolored illuminations.
Practically all the foreign legations are diving dinners and receptions to follow those of the Royal household. – Central News.
Lee’s Connecticut Chronicles:
Dear Nutmeggers:
I’ve just returned from the top of the mountain, well from a pyramid on top of a mountain, about 7,500 feet above sea level. Trust me, you feel the altitude. This is the Pyramid of the Moon, in Teotihuacan, Mexico.
The Pyramid of the Sun is just down the Avenue of the Dead but stands about 10 meters higher.
I was there last week with my wife and some friends who were attending an architectural historians conference, in Mexico City. I’m always pushing our construction defect practice on the architects and developers! On Monday, a gunman climbed the pyramid, proceeding to shoot and kill one Canadian tourist, plus himself, and injuring 13 others. I don’t know if any of the wounded were part of the conference. Apparently, this doesn’t just happen in the States. These events will certainly be a black mark on what otherwise was an awe-inspiring experience.
Until next time, keep keeping safe.
Lee
Lee S. Siegel
[email protected]
Why Was it so Important to Mention the Person's Race? – 100 Years Ago:
Times Herald
Washington, District of Columbia
24 Apr 1926
WOMAN GIVEN
10-YEAR TERM
Mary Anderson, 45 years old, colored, whose criminal record dates back to 1910, will spend 10 years in the penitentiary. Justice Stafford Imposed the sentence today in Criminal Court, No. 2. The woman was convicted of two cases of housebreaking and larceny. She has worked under the aliases of Mary Cole and Mary Bryant and February 24 last broke into the house and rooms of Annie L. Pitkin, stealing a quantity of jewelry. Two days before she entered the dwelling of Nine R. Huhn and stole wearing apparel.
Edward G. Hopkins, colored, was sentenced to three years in the penitentiary for stealing a car, February 23, last, belonging to the Finance Company of America in Baltimore, and George Butler, who had no previous criminal record, but was implicated with Hopkins in the crime, was placed on probation for two years.
Ryan’s Federal Reporter:
Hello Loyal Coverage Pointers’ Subscribers,
The Sabres are in the playoffs for the first time in more than a decade and the city is alight with energy that it has not had for quite some time. I had an opportunity to take in my first Sabres playoff game ever, Game One against the Bruins, and it did not disappoint. Game Two may have, but we sold those tickets beforehand (not by choice, my son had New York State testing). We will be back for Game Five, I can promise you that…
This edition, I tackle a SDNY decision involving diversity jurisdiction. What exactly is a “direct action”? Apparently, it depends on why you’re asking.
Until next time…
Ryan
Ryan P. Maxwell
[email protected]
Shoplifting and Intimacy Result in Loss of Child Custody – 100 Years Ago:
The Minneapolis Star
Minneapolis, Minnesota
24 Apr 1926
MOTHER IS DENIED
CUSTODY OF SON
Mrs. May Carey, 25 years old, 811 Eight street S., today lost her fight for custody of her four-year-old son, Donald, to her mother-in-law, Mrs. Minnie Carey of St. Paul, when Judge Hugo O. Hanft awarded custody of the child to the elder woman in Ramsey district court.
Mrs. May Carey had sought to obtain custody of the boy through habeas corpus proceedings. Mrs. Minnie Carey charged that her daughter in-law had been twice arrested for shoplifting and had served a 30-day term in the country workhouse and charged that the girl had been intimate with another man since Frank Carey, her husband, was sent to the state reformatory. The young woman admitted the shoplifting sentence but denied the latter charge.
Storm’s SIU:
Hi Team:
I’m looking forward to presenting and meeting with you at the next Coverage Pointers University on May 21st -- “SIU/Fraud Related Coverage Defenses: What Claims Professionals Must Know." I hope you will attend!
Two interesting cases for you this edition:
- Preliminary Injunction Affirmed Staying Hundreds of State Court and Arbitration Collection Proceedings While Federal RICO case proceeds.
- 5 ½ Mo. Delay in Reporting Claim Unreasonable as a Matter of Law in 1st Party Property Claim: “Prompt Notice” is Measured from When a Reasonable Insured Would Perceive a Possibility of Coverage, Not When the Insured Knows the Full Extent of Damage or Whether the Deductible is Exceeded.
Let’s Go Buffalo Bandits! Four straight championships?!
Let’s Go Sabres!
Let’s talk again in two weeks.
Scott
Scott D. Storm
[email protected]
Palestine for Jews, 22 Years Before it Happened – 100 Years Ago:
The Port Macquarie News and Hastings River Advocate
Port Macquarie, New South Wales, Australia
24 Apr 1926
Palestine for the Jews.
A lecture was given in Keena’s Hall by Mr. A. Millbourn on Sunday afternoon. The speaker clearly showed that the Jew is a living monument as to the truth of the Bible; and, also, that the Bible clearly shows that the Jew would receive favor from 1878 onwards, as was proved by physical facts. At the Berlin Conference the Jews got leave to worship in Palestine; 40 years later (1918) they received Palestine from Britain. In 1925 the Jews had their own ships on the high seas, flying their own flag. Then he referred to the Great War and pointed out that there were quite a lot of facts to show that the War had been by the monuments. Therefore, with the facts of the Jews, we had facts that the Bible is true, and that as the churches confess themselves, the present systems are a failure, as they teach a God of eternal torment, not love. In fact, they believe not in a ransom, as they say that we have descended from monkeys; they support war while it is on, and when over say it is devilish, thereby proving that they support devilish things. They have forgotten Christ’s Kingdom, as they are showing the League of Nations as the political expression of Christ’s Kingdom. The lecture was given under the auspices of the Watch Tower Bible Society, from which literature would be gladly sent to any on desiring same. – Contributed.
Fleming’s Finest:
Hi Coverage Pointers Subscribers:
The cherry blossoms have popped! Looking forward to checking out the trees in the Brooklyn Botanic Garden and the women’s half marathon in Central Park this weekend.
Nothing to report this edition. See you in a fortnight.
Kate
Katherine A. Fleming
[email protected]
100 Years Later, There's Still a Saloon at That Location – 100 Years Ago:
The Buffalo News
Buffalo, New York
24 Apr 1926
HERTEL AVE. SALOON RAIDED.
Prohibition agents Friday raided the saloon of Frank and Amelia Rudewicz, 732 Hertel avenue, and after finding alleged liquor, ordered the proprietors to appear before a United States commissioner. A sample of beer on tap in the place of Joseph Sucharski, 733 Hertel avenue, was taken for test.
Gestwick’s Garden State Gazette:
Dear Readers:
What a time to be a sports fan! Baseball in full swing (pun intended), NFL draft tonight, Bandits back in the playoffs, and, most importantly, the Sabres have started their first playoff journey in over a decade.
I wrote two cases this week, though my individual column will only reflect one. That is because I wrote a guest piece in Ryan Maxwell’s column—the Philadelphia case. There, the Southern District of New York discussed what it means to “prevail” in a coverage action, entitling an insured to recovery of Mighty Midgets fees. I was pleased to be on that case, alongside Dan Kohane.
In the case that appears in my column, we discuss the meaning of the word “surface water,” as it appears in a standard homeowners policy.
That’s it for now. Go Sabres, Go Bandits, Go Blue Jays, and hey, Go Bills too, why not.
Evan
Evan D. Gestwick
[email protected]
Was it "Spring Backwards" for Daylight Savings Time, 100 years ago? – 100 Years Ago:
Brooklyn Eagle
Brooklyn, New York
24 Apr 1926
Set Watches and Clocks
Ahead an Hour Tonight;
Daylight Saving Starts
They came together this year.
What ?
Unofficial Spring and Unofficial Summer.
Right on the heels of the first overcoat-less spell who should come tripping into our midst but daylight saving. Two days of warm weather, and now we've got to fix our watches all over again.
After midnight tonight, for those who are awake to see it, the end of wintertime is scheduled. That means that officially, at 2 a.m., Sunday, April 25, 1926, there is a new period of saving daylight. Watches and clocks must be set back an hour. Where it was 7 o'clock on Saturday, it would be 8 o'clock on Sunday and time to be thinking of church or the golf course.
Watch your time for few days! Otherwise, you are likely to be late for a lot of things.
O’Shea Rides the Circuits:
Hey Readers,
We’re back from our European Vacation. Although I typically refuse French fries, Fites Atelier makes something more than fry. It is a delicate, yet sturdy shell with perfect salt seasoning and a somehow melted interior. Unfortunately, I do not have photos to share of the fries. Nonetheless, I suggest visiting one of their establishments if you are ever in Belgium.
This week I have a brief Anti-Stacking case regarding UIM coverage from the Seventh Circuit.
Until Next Time.
Ryan
Ryan P. O’Shea
[email protected]
100 Years Ago, Average Life Span 40 Years? States Indicate Actual 57 Years for Men, 60 for Women – 100 Years Ago:
Yonkers Statesman
Yonkers, New York
24 Apr 1926
AVERAGE LENGTH OF LIFE
Four hundred years ago the average length of human life was between 18 and 20 years. One Hundred years ago the average of human life was less than 30 years.
The average human life today reaches nearly 40 years. This shows what medical science has done for human life.
LaBarbera’s Lower Court Library:
Dear Readers:
I am optimistically hoping that Monday was the last frost up in Buffalo.
This week, I am reporting on a Richmond County decision, reaffirming a prior grant of summary judgment in favor of the insurer. In relevant part, the court found that because the equipment in question was leased, and no operator was provided by the Named Insured, the equipment qualified as “Property Not Covered” at the time of loss, and the Named Insured’s carrier owed no obligation to provide coverage for a fire loss that destroyed the rig.
Until next time…
Isabelle
Isabelle H. LaBarbera
[email protected]
Not Much for the Loss of a Spouse – 100 Years Ago:
Press and Sun-Bulletin
Binghamton, New York
24 Apr 1926
JURY AWARDS $500
FOR LOSS OF WIFE
Montrose, April 24. - The jury last Saturday rendered a verdict in favor of Fred Tiffany for $500. Mr. Tiffany sued the Lackawanna Railroad Company because he claimed his wife contracted pneumonia on a trip from Hop Bottom in a cold car and died.
J. M. Kelley and W. J. Maxey, convicted for Hughes. Whoever was convicted of murder in the second degree will argue for a new trial before Judge R. B. Little on May 1.
Lexi’s Legislative Lowdown:
Dear Readers,
Looking forward to my bridal shower this weekend. The theme is “Love in Bloom”. This week I have searched high and low for light pink hydrangeas as they are directly on point with the theme. Unfortunately, I had little success, but I am looking forward to a wonderful day and the pink floral alternative that my fiancé has arranged.
This week we discuss a bill that was just introduced that seeks to prevent the increase in premiums at the time of renewal solely based on age for those 60 or older.
Thanks for reading,
Lexi
Lexi R. Horton
[email protected]
Cleaning Up the Slots – 100 Years Ago:
Buffalo Courier
Buffalo, New York
24 Apr 1926
HIGGINS ORDERS
CLEANUP OF ALL
SLOT MACHINES
Police Chief James W. Higgins yesterday ordered all lieutenants and captains to make a cleanup of slot machines in their precincts. "It has come to my attention that slot machines are being operated in many parts of the city," the police chief told his men.
Seizure of several machines in clubs, soft drinkeries and stores during last few days is believed to have prompted the chief to take action. "I will hold precinct captains responsible if the slot machines do not vanish within the next few days," the chief said.
Victoria’s Vision on Bad Faith
Dear Readers,
This weekend, we are celebrating Lexi’s bridal shower in Rochester. I am happy to share that since Lexi’s report, we have acquired one pink hydrangea plant, courtesy of Coverage Pointers columnist Isabelle.
I hope you’re all enjoying the warmer weather.
Have a great weekend,
Victoria
Victoria S. Heist
[email protected]
What's Old is New Again. High Price of Gas Encourages Electric Vehicles – 100 Years Ago:
The Boston Globe
Boston, Massachusetts
24 Apr 1926
The high price of gasoline has been a boon to electric car lines that a year ago were worrying over the competition for jitney buses. John D. and his benevolent institution have shunted the jitneys into a garage.
Shim’s Serious Injury Segment
Hi Readers,
I hope that everyone has been well since our last column. On April 22, the New York Mets are amid a 12-game losing streak and find themselves 8.5 games out of first place in the National League East. Juan Soto has not played a game since April 3, and Francisco Lindor has just two home runs while slashing .209/.301/.341 (good for a .642 OPS and 84 OPS+). It’s hard to forget that beloved Mets, Pete Alonso, Brandon Nimmo, Edwin Diaz and Jeff McNeil are gone. This is definitely the worst start to a Mets season I have ever seen. It is truly amazin' how the Mets have found countless ways to lose and disappoint the fanbase in 2026. Immediate wholesale changes are needed if they are to salvage this season. I would not hold my breath.
This week I have shared a case decided by the Supreme Court, Rockland County, which granted the defendants’ motions for summary judgment on the basis that the plaintiffs did not suffer a “serious injury” within the meaning of Insurance Law § 5102(d).
See you in the next issue!
Stephen
Stephen M. Shimshi
[email protected]
Now That Hurts – 100 Years Ago:
The Afro-American
Baltimore, Maryland
24 Apr 1926
HOWARD SURGEON
TAKES 6 INCH BLADE
FROM MAN’S SKULL
NEW YORK CITY (PNSI) - The almost miraculous operation on John Taylor Hines, of Harlem, from whose head a six-inch knife blade was taken by Drs. Walter I. Delph, James L. Wilson and M. E. Ross, physicians at the Edgecombe Sanitarium Sunday afternoon, is regarded the medical world as a little less than marvelous. The operation was performed Sunday April 11.
Hines, who was stabbed in an altercation March 15 worked with the blade dangerously near the brain cavity for nearly a month. Finally certain infections set in, and Hines went to a physician who advised immediate operation as the only means of saving his life.
The delicate surgical feat was performed by Dr. Walter I. Delph, a graduate of Howard University Medical School, assisted by Drs. Moss and Wilson. The Edgecombe Sanitarium is owned and operated by Negro physicians and surgeons. The operation is reported as a success and Hines is on the road to a rapid recovery.
New England Almanack
Hello, Readers!
I don’t know if I can quite top the news blurb above. Wow, that is a tough act to follow.
Spring has come to New England, if in fits and starts. There’s something of an intramural rivalry taking shape: as of this writing, the Bruins and the Sabres are tied 1-1 in their first-round postseason matchup in the NHL playoffs. So, let’s look at the weather and think of sunnier, happier months to come.
Today’s case from the federal district court in Massachusetts comes to you from Martha’s Vineyard. In what can, perhaps, only be described as a special type of first-world problem, a small plane fell into a pothole on the tarmac outside one of the aircraft hangars. The hangar owner was sued, and the insurer disclaimed on grounds that it did not cover property damage arising out of aircraft operations. The decision offers a good overview of current Massachusetts law on policy construction, in the face of arguments about ambiguity. It also rather neatly explains the ambiguity argument at issue.
Until next time, keep thinking about the fact that we’re about to enter an era of sunsets after 8:00 pm, the smell of charcoal grills on weekends, and all the fun of the outdoors seasons.
Alex
Alexander G. Henlin
[email protected]
Barbara
Barbara A. O’Donnell
[email protected]
Iryna
Iryna N. Dore
[email protected]
Pope's a Dreamer – 100 Years Ago:
San Francisco Bulletin
San Francisco, California
24 Apr 1926
Pope Recalls Victory
Over Mountain Peaks
Rome, April 24 (AP). – Pope Plus, though before his elevation to the pontificate was famous as an Alpinist, recalled the time he scaled some of the most difficult mountain peaks, when he received Sir Francis Bounghusband, president of the committee of the expedition to Mt. Everest.
“To think of your experiences, struggling with the highest peak in the word rejuvenates me,” the pope said.
North of the Border:
As every Canadian knows, spring doesn’t so much arrive as it negotiates. It’s the time of year when accountants are busiest (it’s tax time); rivers in Manitoba, Ontario, Quebec, and New Brunswick start climbing their banks with intent, and maple sap begins to run (along with anyone who forgot to get their tax slips in on time). Hockey bags are reluctantly retired in favour of baseball gloves, though not without the occasional detour back to the rink, and the NHL playoffs, once again, revive the national pastime of cautious optimism—this year, with the Oilers in the West and the Canadiens in the East carrying the usual mix of hope and emotional risk. In Canada, spring is less a season than a state of mind: slightly muddy, mildly chaotic, and always a bit behind schedule. But we love it.
My article this week is a lesson on running subrogation files with unresolved coverage issues.
Best,
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]
- The Graves Amendment Found to Foreclose Any Obligation on Rental Car Companies to Provide Primary Insurance to Renters. Thousands Flee
-
When a Carrier Is Considering a Duty to Defend a Potential
Additional Insured, It Must Consider Knowledge of Facts Establishing a Reasonable Possibility of Coverage - Extrinsic Evidence Should Not Impact the Duty to Defend
- Underwriting File Not Discoverable Where Coverage (or Lack of Coverage) Under the Policy Is Clear
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
- Motion Based on Vacancy Exclusion Defeated Where Question of Fact Existed on State of Property at the Time of Loss
- Ongoing Investigation in Office of Attorney General Sufficient to Stifle FOIL Request of Documents Related to the Inquiry
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
- Rental Vehicle Passengers Entitled to UIM Coverage Under Driver’s Policy
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
- SDNY Finds Direct Action Filed Against an Insurer Does Not Constitute Direct Action for Purposes of Diversity Jurisdiction. Dismissal Looms?
- Court Denies Defendant-Insured’s Application for Mighty Midgets Fees, Finding That Although the Insured Was “Cast in a Defensive Posture,” it Did Not “Prevail” in the Action
STORM’S SIU
Scott D. Storm
[email protected]
- Preliminary Injunction Affirmed Staying Hundreds of State Court and Arbitration Collection Proceedings While Federal RICO Case Proceeds
- Five and One-Half Month Delay in Reporting Claim Unreasonable as a Matter of Law in First-Party Property Claim: “Prompt Notice” Is Measured From When a Reasonable Insured Would Perceive a Possibility of Coverage, Not When the Insured Knows the Full Extent of Damage or Whether the Deductible Is Exceeded
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
- Nothing to report this edition. See you in a fortnight.
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
- Court Enforces the Plain Meaning of “Surface Water” in Holding That Damage Caused by Surface Water From Hurricane Ida Was Excluded Under Water Damage Exclusion
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
- UIM Policies’ Anti-Stacking Clause Bars Attempt to Recover More Coverage Than Afforded Under Policy With Highest UIM Limit
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
- Court Reaffirms Summary Judgment Decision Holding Rig Qualified as Property Not Covered, Because Named Insured Leased Equipment and Did Not Provide Operator, as Required by Policy
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
- Proposed Bill to Prohibit Insurers From Increasing Auto Insurance Premiums Upon Renewal for Persons 60 Years of Age or Over Solely on the Ground of Insureds’ Age
VICTORIA’S VISION ON BAD FAITH
Victoria S. Heist
[email protected]
- Insurer’s Motion to Dismiss COA for Breach of Good Faith Denied
SHIM’S SERIOUS INJURY SEGMENT
Stephen M. Shimshi
[email protected]
- Supreme Court, Rockland County, Grants the Defendants’ Motions for Summary Judgment on the Basis That the Plaintiffs Did Not Suffer a “Serious Injury” Within the Meaning of Insurance Law § 5102(d)
NEW ENGLAND ALMANACK
Barbara A. O’Donnell
Alex G. Henlin
Iryna N. Dore
- CGL Policy Found to Have Ambiguity in Connection With “Designated Ongoing Operations” Coverage, but That Coverage Dispute Was Not in Bad Faith
NORTH of the BORDER
Heather A. Sanderson, K.C.
Sanderson Law
Calgary, Alberta, Canada
[email protected]
- The Alberta Court of King’s Bench Determines That Unresolved Coverage Issues Creates a Conflict of Interest Such That Counsel Defending the Insurer in That Coverage Dispute Cannot Also Act as Counsel for That Insurer in its Capacity as a Plaintiff in a Subrogated Claim Arising From the Same Circumstance
- The Alberta Court of King’s Bench Determined That a Subrogated Claim and an Insured’s Personal Claim, That Includes the Subrogated Claim, Can Proceed Concurrently, Regulated by Procedural Orders
See you in two.
Dan
Hurwitz Fine P.C. is a full-service law firm providing legal services throughout the State of New York and providing insurance coverage advice and counsel in Connecticut and New Jersey.
In addition, Dan D. Kohane is a Foreign Legal Consultant, Permit No. 0119144, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
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
New England Almanack
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
04/23/26 Second Child v. Edge Auto
New York Court of Appeals
The Graves Amendment Found to Foreclose Any Obligation on Rental Car Companies to Provide Primary Insurance to Renters. Thousands Flee
In a majority opinion written by Judge Singas, with Judges Rivera, Garcia, and Cannataro concurring, while Chief Judge Wilson dissented, joined by Judges Troutman and Halligan, the Court of Appeals holds that the federal Graves Amendment preempts New York Vehicle and Traffic Law § 370 to the extent § 370 is read to require rental car companies to provide primary liability insurance coverage for renters. The majority concludes that any such requirement would, in effect, reimpose vicarious liability that Congress eliminated, describing it as “a vicarious liability regime masquerading as a financial responsibility statute.”
In 2019, Second Child rented a truck from Edge Auto, Inc. The rental agreement required Second Child to maintain insurance at least equal to the minimum limits required by the financial-responsibility laws of the state where any loss occurs. Edge Auto stated it would provide liability insurance only on an excess basis over any other valid insurance, and Second Child agreed to indemnify Edge Auto for liability arising from the vehicle’s use.
While the truck was being driven by Second Child’s employee, it sideswiped another car, and the owner of that damaged vehicle sued the plaintiffs for the resulting costs (the owner of the damaged car is not a party to this appeal). Second Child then brought this action against Edge Auto seeking to recover the damage costs up to the statutory minimums under Vehicle and Traffic Law § 370 and sought a declaration that Edge Auto had to provide primary, noncontributory insurance coverage.
The First Department Appellate Division affirmed the Supreme Court’s denial of Second Child’s motion, finding that the Graves Amendment does preempt § 370 to the extent it requires rental companies to provide primary insurance to renters up to the statute’s minimum liability limits. The court reasoned that holding otherwise would revive vicarious-liability claims up to the minimum amounts and render the Graves Amendment’s preemption clause a nullity. The court also rejected reverse-preemption under the McCarran–Ferguson Act, concluding the Graves Amendment does not entirely invalidate, impair, or supersede § 370. The First Department granted leave to appeal and certified the question to the Court of Appeals.
The Court of Appeals noted that Vehicle and Traffic Law § 388’s vicarious-liability regime is clearly preempted by the Graves Amendment. However, the question involved was whether Vehicle and Traffic Law § 370 was similarly preempted and to what extent. Under the Court Appeals pre-Graves decision in ELRAC, Inc. v Ward, Vehicle and Traffic Law § 370 had been previously construed to require primary, noncontributory liability coverage tied to the vicarious exposure associated with Vehicle and Traffic Law § 388.
Now, post-Graves, the majority concludes that requiring rental companies to insure against liability they no longer face falls outside the Graves Amendment’s savings clause for “financial responsibility or insurance standards” and would produce the “absurd result” of forcing coverage for preempted vicarious liability.
The court accepted a widely used definition of “financial responsibility” laws as those that require owners to show proof of liability insurance or a functionally equivalent arrangement. But it then explains that New York’s “primary, noncontributory” coverage mandate under § 370 (as construed in Ward) is not just a generic proof-of-insurance rule—it was designed to make rental companies’ insurance respond first to losses arising from § 388’s vicarious liability. Since Graves preempts § 388’s vicarious liability, the majority concludes that forcing primary coverage tied to that now-preempted exposure does not fit within the savings clause’s protection for neutral “financial responsibility or insurance standards”.
The majority emphasized that § 370’s “primary” coverage requirement is not explicit in the statute; it arose from Ward’s interpretation that harmonized § 370 with § 388’s owner-liability regime. Once Graves knocked out § 388’s vicarious liability as to rental companies, the Ward-based “primary” mandate would compel rental companies to insure against a liability “they no longer face,” which is beyond what the savings clause preserves. Thus, the majority believes that requiring rental companies to buy and provide primary liability insurance to defend and indemnify renters for renters’ own negligence would recreate vicarious liability in substance, if not in name and this is the type of “absurd result” that interpretive principles require courts to avoid, as it would force coverage for a risk Congress had eliminated and thereby nullify the core preemption Graves put in place.
Interestingly enough, the majority actually adhered to its prior interpretation of § 370’s meaning under Ward, but held that the primary-coverage requirement, as so interpreted, is federally preempted in the context of rental car companies. Hedging, the Court of Appeals described its decision as narrow because the case and appeal were predicated only on a primary liability insurance requirement, the court did not decide whether § 370 can be read to require secondary insurance or other types of coverage, or whether such requirements would be consistent with the Graves Amendment.
The majority indicates that its conclusion aligns with decisions from other jurisdictions that have deemed similar state statutes preempted when they effectively impose vicarious liability on rental companies for their renters’ negligence, regardless of label.
A seventeen page dissent was issued by Chief Judge Wilson, joined by Judges Troutman and Halligan. The dissent frames the case as a federal preemption dispute in a field (insurance) traditionally left to the states, invoking the presumption against preemption and the McCarran-Ferguson Act to require a clear statement before displacing state insurance regulation.
In the dissent’s view, VTL § 370 is precisely the kind of “financial responsibility or insurance standards” law preserved by the Graves Amendment’s savings clause. Section 370 requires rental companies to maintain minimum insurance and to have that insurance inure to permissive drivers; it is not a vicarious liability statute and operates irrespective of negligence, making it a classic financial-responsibility requirement saved from preemption.
The dissent rejects the majority’s distinction between “primary” and “secondary” coverage as a way to identify disguised vicarious liability. It notes that the operative difference under that view turns on whether a driver has other insurance—a distinction found nowhere in New York’s scheme or the Graves Amendment—and emphasizes that § 370’s mandate is unequivocally mandatory (a “shall”), not an inducement or cap on vicarious liability.
The dissent stresses that § 370 (insurance requirement) and § 388 (vicarious liability) are different statutes serving different ends. Even though Ward once harmonized them by reading § 370 to require “primary” coverage tied to § 388’s vicarious liability, the Graves Amendment’s preemption of § 388 does not collapse § 370. Rather, § 370 remains an independent insurance obligation for doing business in New York, not a vicarious liability surrogate.
From the dissent’s perspective, § 370 is not subject to conflict preemption under federal law. Rental companies can comply with both federal and state law because § 370’s capped minimum insurance requirement (e.g., $25,000 for bodily injury, $50,000 for death, and $10,000 for property damage) is “worlds apart” from the unlimited vicarious liability that Graves eliminated, and in many situations (such as no-fault benefits) § 370 applies regardless of a renter’s negligence.
Looking to legislative history, the dissent cites congressional statements acknowledging that states set minimum insurance for rental fleets, reading the savings clause and history to show Congress intended to preserve laws like § 370. It warns that the majority’s approach bypasses preemption safeguards and could raise costs or leave accident victims without remedies if companies rent to uninsured drivers or shift the insurance burden entirely to consumers.
Chief Judge Wilson also contends that the majority overreads out-of-state decisions, many of which involved statutes that truly imposed vicarious liability or merely induced coverage. He also maintained that Ward was not a preemption case and does not justify recasting § 370’s insurance mandate as vicarious liability in disguise.
Importantly, Chief Judge Wilson provides the following description of what this decision ultimately means for New York insureds and the New York insurance market:
In bypassing well-established principles of federal preemption meant to safeguard the balance of power between Congress and the states, the majority works a result that will increase costs and could leave many New Yorkers without a remedy in the case of an accident involving a rental vehicle. If all that VTL 370 now requires is that car rental companies obtain insurance for their own negligent acts, there will be no statutory backstop to prevent rental car companies from either renting to uninsured drivers or requiring each driver to obtain her own insurance policy as a condition of using a rental vehicle. In either case, it is New York consumers who will bear the financial burden of personal insurance policies and increased premiums across the board. Nothing in the Graves Amendment requires the costly result imposed today by the majority, which Congress, by including the savings provision, expressly sought to avoid. . . .
Editor’s Note: This write-up was supplied by HF Associate, Ryan Maxwell, who has been following this case closely since the First Department’s decision was handed down. If you have any questions, please feel free to contact him at [email protected].
04/16/26 Certain Underwriters at Lloyd's v. Southwest Mar. & Gen. Ins.
Appellate Division, First Department
When a Carrier Is Considering a Duty to Defend a Potential
Additional Insured, It Must Consider Knowledge of Facts Establishing a Reasonable Possibility of Coverage
Underwriters commenced this action for, among other things, a declaration that Southwest had a duty to defend Underwriters’ named insured, Arsenal, in an underlying action. In the underlying action, the plaintiffs in that action each allege that they were "caused to be seriously injured when" they fell "from an elevated height at" the construction site and subsequently claimed to have been injured while working on a scaffold.
Southwest’s named insured, JGR, contracted with Arsenal to perform work at the site, and is the only party identified that performed work there on behalf of Arsenal. In a third-party complaint, JGR is also alleged to have caused the underlying plaintiffs' injuries because of its negligence.
The court properly granted plaintiff's motion for partial summary judgment declaring that defendant had a duty to defend Arsenal in the underlying action as an additional insured. The record amply supports the court's conclusion that defendant "has actual knowledge of facts establishing a reasonable possibility of coverage," thereby requiring it to provide a defense. While Southwest’s named insured is not a defendant in the underlying action, defendant cannot simply ignore the facts known to it that create a reasonable possibility of coverage.
04/16/26 Travelers Indemnity Co. v. Southwest Marine & General Ins. Co.
Appellate Division, First Department
Extrinsic Evidence Should Not Impact the Duty to Defend
The lower court properly concluded that Southwest's duty to defend was triggered by the allegations in the underlying complaint. Extrinsic evidence offered by Southwest may not be considered, as the relevant subcontract provisions, which set forth Southwest's named insured's duty to indemnify plaintiff's insured, are not ambiguous as to the parties' roles and obligations.
The court could not decide the priority of coverage issues which must be determined by comparing the "other insurance clauses" of all policies covering the same risk and thus may depend on the interaction of multiple policies rather than a comparison of two policies in isolation. Since the other policies were not in the records, a determination could not be made.
04/15/26 Lannon v Everest National Insurance Company
Appellate Division, Second Department
Underwriting File Not Discoverable Where Coverage (or Lack of Coverage) Under the Policy Is Clear
On August 19, 2009, Lannon was injured in the course of his employment as a carpenter for McM Homes, Inc. (“McM”), a subcontractor hired by general contractor, Bay Creek Builders, LLC (“Bay Creek”). Everest issued a CGL to McM. In March 2010, Lannon commenced the underlying action) against Bay Creek, asserting causes of action to recover damages for negligence and Labor Law violations.
In February 2011, Lannon commenced an action for a judgment declaring the legal rights of several parties, including Everest, alleging that Everest failed to add Bay Creek as an additional insured under the insurance policy covering McM (the “prior DJ action”). That action was dismissed against Everest based on lack of standing. An underlying plaintiff does not have standing to challenge coverage denials until it has a judgment against an insured. In November 2018, a judgment was entered in favor of the plaintiff and against Bay Creek in the underlying action, after Bay Creek defaulted in that action.
Notwithstanding, in April 2019, the plaintiff commenced this action for a declaratory judgment, alleging, inter alia, that McM was to add Bay Creek as an additional insured. Everest moved to dismiss the complaint insofar as asserted against it, arguing, inter alia, that the action was barred by the doctrines of res judicata and collateral estoppel. Supreme Court, among other things, granted that branch of Everest's motion. The plaintiff appealed and this Court reversed, determining that Everest failed to provide a judgment on the merits that determined that Everest need not indemnify Bay Creek. That made sense, the dismissal of the first DJ was not on the merits, but on standing grounds.
Lannon then moved to compel Everest to produce the underwriting file for the policy and the full, unredacted "notes report" for any and all claims involving the plaintiff.
Here, the Everest was not required to produce the underwriting file and the full, unredacted "notes report". Where an insurance policy is unambiguous, extrinsic evidence of its meaning is not considered. The plaintiff failed to demonstrate that disclosure of the underwriting file will result in the disclosure of relevant evidence or that his demand was reasonably calculated to lead to the discovery of information bearing on his cause of action. Further, Everest demonstrated that the redacted portions of the "notes report" were privileged
PEIPER on PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property
04/21/26 120 Main Hotel LLC v. Sompo Am. Ins. Co.
Appellate Division, First Department
Motion Based on Vacancy Exclusion Defeated Where Question of Fact Existed on State of Property at the Time of Loss
Defendant, Sompo, moved to dismiss the plaintiff’s Complaint on the basis of a vacancy exclusion. Here, however, questions of fact persisted regarding the state of the property at the time of the fire and whether plaintiff was engaged in customary hotel operations at the time of the subject loss. Accordingly, Sompo’s motion was denied and returned to the trial court for further proceedings.
Potpourri
04/23/26 In re. Century Indem. Co. v. NYS Atty. General
Appellate Division, First Department
Ongoing Investigation in Office of Attorney General Sufficient to Stifle FOIL Request of Documents Related to the Inquiry
In 2018, the Office of Attorney General announced an investigation into sex abuse allegations at eight Roman Catholic Dioceses around the State. As part of its investigation, the Attorney General’s Office served civil subpoenas on various institutions, including the Diocese of Ogdensburg. Thereafter, in 2024, Century sought to discover the responses to those subpoenas through a duly prepared FOIL request. The Attorney General refused, and Century commenced an Article 78 proceeding seeking to compel production of the FOIL documentation.
The trial court dismissed Century’s Petition on the basis that the information was protected by the “law enforcement statutory exemption.” This appeal ensued.
The Appellate Division started by acknowledging that a FOIL request imposed a broad duty of disclosure upon the governmental agency from whom information is sought. There are, however, several exceptions to the general rule favoring disclosure. One of these exceptions is related to materials obtained by law enforcement.
To establish the law enforcement exception, the agency must demonstrate that the material was compiled for “law enforcement purposes” and that disclosure “would interfere with law enforcement investigations.” To meet this burden, the Attorney General’s Office proffered an attorney affidavit that swore an active investigation remained ongoing. Counsel also identified five categories that the requested documents fell under and then explained how disclosure of material in each category could impact the investigation. The proposed impacts were that disclosure would hinder interactions with the Diocese and/or its counsel, chill witnesses’ willingness to speak to investigators, and bring unwanted publicity to the investigation.
In affirming the trial court’s decision to dismiss Century’s request, the Appellate Division noted that the Attorney General’s Office had met its burden of demonstrating that the investigation remained open. Further, it has also met its burden of demonstrating specific categories of documents and articulating specific reasons why disclosure of materials within those categories would harm the investigation.
LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[email protected]
04/14/26 Toni v. Progressive Direct Ins. Co.
Appellate Court of Connecticut
Rental Vehicle Passengers Entitled to UIM Coverage Under Driver’s Policy
The plaintiffs were passengers in Keith Toni's rental vehicle insured by Progressive's and were rear-ended by an underinsured motorist while in Florida. The appellate court held that the passengers were entitled to uninsured motorist coverage under the Progressive policy despite not meeting the policy's definition of "insured person" because Connecticut law requires broader coverage than the policy provided. However, there was no coverage under a corporate policy issued by Ohio Security because it contained separate, unambiguous definitions of "insured" for individuals versus corporations, and plaintiffs were not occupying a covered auto under the corporate definition.
On October 12, 2019, plaintiffs were passengers in a rental car operated by Keith Toni. Progressive issued Toni liability coverage extending to rental vehicles with $100,000/$300,000 uninsured motorist coverage. Ohio Security insured Success, Inc., of which one of the plaintiff’s was president, with $1 million uninsured motorist coverage.
The carriers denied coverage and suit followed. In construing the claim for coverage against Progressive, the court applied the principle that insurance policies must provide coverage mandated by law even when the policy language is narrower. Since the rental vehicle had liability coverage and plaintiffs were occupants, regulation § 38a-334-6(a) mandated uninsured motorist coverage. Therefore, the Appellate Court reversed, finding that the plaintiffs were entitled to coverage.
However, the court affirmed that there was no coverage under the Ohio Security policy issued to the corporation. The policy’s named insured was a corporation, and the plaintiffs did not qualify as insureds because the rented motor vehicle was not a covered auto under the policy issued to the corporation S and it was not rented to replace any motor vehicles listed in the policy.
RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[email protected]
04/17/26 Doe v. Markel, Evanston Insurance Company
Southern District of New York
SDNY Finds Direct Action Filed Against an Insurer Does Not Constitute Direct Action for Purposes of Diversity Jurisdiction. Dismissal Looms?
On August 18, 2021, John and Mary Doe sued Chai Lifeline, Inc. and others in New York state court, alleging John Doe was sexually abused as a minor at premises owned/operated/controlled by Chai. Markel, Evanston Insurance Company insured Chai with a policy that included Sexual Acts Liability Coverage.
Evanston advised there was a total of $1,000,000 in coverage but that the applicable limit had been eroded by defense/claim expenses and a settlement in an unrelated matter, leaving about $425,000 for Plaintiffs’ claim. The Does maintained that each claimant was entitled to $1,000,000 and that there is no exclusion limiting multiple claimants.
On December 2, 2024, the Does filed this declaratory judgment action in New York Supreme Court against Evanston seeking a declaration that they are entitled to $1,000,000 as a claimant and that Evanston is in breach of the policy, even though Plaintiffs had not obtained a judgment against Chai in the underlying action. Evanston removed to federal court based on diversity, contending that the Does are New York citizens and Evanston is incorporated and has its principal place of business in Illinois. The Does moved to remand, arguing the case is a “direct action” under 28 U.S.C. § 1332(c)(1) and that Chai’s New York citizenship should be imputed to Evanston.
Before the Does filed the declaratory judgment action, Evanston’s counsel sent a letter asserting that, under New York Insurance Law § 3420 and the policy, the Does could not sue Evanston directly without first obtaining an unsatisfied judgment against Chai, and that the policy also prohibited such third-party direct claims. With that notice in hand, the Does filed anyway and later maintained the case sought only to interpret policy language.
Finding diversity, the SDNY rejected the Does’ argument that this was a “direct action” under 28 U.S.C. § 1332(c)(1) and held that Chai’s New York citizenship could not be imputed to Evanston. It reasoned that the Does were suing Evanston for its own alleged wrongdoing (denying coverage/breaching the policy), not standing in Chai’s shoes for the insured’s alleged torts and suits against an insurer for its independent conduct are not “direct actions” for purposes of §1332(c)(1). Because the Does are New York citizens, Evanston is an Illinois citizen, and the amount in controversy exceeds $75,000, the court found complete diversity and denied the motion to remand as removal was proper.
While Evanston sought sanctions for the Does pursuit of a declaratory judgment action despite the requirements of Insurance Law §3420, that motion was denied. Although Evanston had warned the Does’ counsel, the court declined to impose sanctions, noting it would be inappropriate to decide the merits of the § 3420 issue on a sanctions motion and that counsel’s position was not frivolous. The court found the Does’ reading of the Sexual Acts Liability Coverage—while possibly incorrect—was not so frivolous or legally unreasonable as to warrant sanctions because merely incorrect legal statements are not sanctionable and the Does grounded their arguments in the policy language and case law. The court also refused sanctions based on the Does’ “direct action” remand theory, finding the arguments were not made in bad faith and were supported by authority (even if ultimately unpersuasive).
Maxwell’s Minute: This case appears ripe for dismissal once Evanston moves for such relief. Unclear why that relief was not sought in conjunction with this motion (opting instead to move for Rule 11 sanctions), but it will likely do so soon enough.
04/12/26 Phila. Indem. Ins. Co. v. South Bronx Overall Econ. Dev’t Corp.
Southern District of New York
Court Denies Defendant-Insured’s Application for Mighty Midgets Fees, Finding That Although the Insured Was “Cast in a Defensive Posture,” it Did Not “Prevail” in the Action
A man was allegedly killed after falling down a flight of stairs while working as a laborer on a construction site. The man’s estate sued South Bronx, BUFNY II, and others. South Bronx and BUFNY II were insured under a commercial general liability policy issued by Philadelphia.
The insureds timely placed Philadelphia on notice of the occurrence. However, the insureds waited for over nine years—and only after their defaults were taken, culminating in a $16+ million judgment taken against them on inquest—to notify Philadelphia of the resulting tort action. Philadelphia disclaimed coverage to the insureds on the basis of late notice of the action, but agreed to provide them with a courtesy defense in the underlying action.
After assigning defense counsel, Philadelphia brought a declaratory judgment action against the insureds, seeking judicial permission to withdraw from their defense, as well as a declaration that it did not owe indemnity coverage to the insureds, as a result of late notice.
At the time this action was brought, the default judgments and resulting inquest judgments were standing against each insured. Philadelphia therefore took the position, in both its disclaimer letters and its pleadings, that it was entitled to an irrebuttable presumption that its right and duty to investigate the claim and defend its insureds in the underlying action was prejudiced. Under New York Insurance Law 3420(a)(5), an insurer may not disclaim coverage by reason of late notice on a third-party bodily injury or death claim unless the insurer was prejudiced as a result of the late notice. New York Insurance Law 3420(c)(2)(B) provides that an insurer is entitled to an irrebuttable presumption of prejudice where the insured’s liability has been determined prior to notice provided to the carrier.
With the declaratory judgment action pending, the defense counsel Philadelphia appointed ended up getting the insureds’ default vacated, which was ultimately affirmed on appeal. This took away Philadelphia’s irrebuttable presumption of prejudice and replaced it with a rebuttable presumption of prejudice. Indeed, New York Insurance Law 3420(c)(2)(A)(ii) provides that, where the insured’s liability was not already determined prior to notice provided to the insurer, but where the insured delayed for more than two years in providing such notice, the burden is with the insured to establish that the insurer was not prejudiced as a result of the late notice.
Philadelphia then had a decision to make—it could either forge on with the coverage litigation on the basis that it still lost an opportunity to investigate the claim and defend the case from inception, or it could withdraw the coverage action without prejudice and allow further facts to play out vis-à-vis the underlying action.
Philadelphia elected to do the latter. After the action was withdrawn, the insureds made a motion to recover the fees they incurred in defending the declaratory judgment action.
The seminal case on this issue is Mighty Midgets v. Centennial Insurance Company. In that case, the New York Court of Appeals laid out two elements, both of which must be met in order for an insured to be entitled to recover from their insurer the fees incurred in defending a coverage action brought by their insurer: (i) the insured must have been cast in a defensive posture; and (ii) the insured must “prevail” in that action.
Here, there was no question that Philadelphia cast its insureds in a “defensive posture,” since it named the insureds as defendants in a coverage action. The dispute centered around whether the insureds “prevailed” in the coverage action, by reason of Philadelphia’s voluntary dismissal of the action without prejudice.
The Southern District held that the insureds did not “prevail” within the meaning of Mighty Midgets, and that they were therefore not entitled to recover fees incurred in defending the coverage action. As the Southern District noted in its decision, an insured “prevails” in an action, per the Mighty Midgets rule, where a court determines that the insurer owes it a duty to defend. If that issue is never resolved, the insured does not “prevail.” In dismissing the case at Philadelphia’s request, the Court noted that because of the change in legal landscape, given the recent events occurring in the underlying action, the coverage action was no longer ripe for adjudication on the merits. At no point did the Southern District determine Philadelphia’s liability to its insureds—and without that, the insured cannot be said to have “prevailed.”
Editor’s Note: CP’s own Dan Kohane and Evan Gestwick represented Philadelphia in this one. Nice win!
STORM’S SIU
Scott D. Storm
[email protected]
02/03/26 Government Employees Insurance Co. v. Bhargav Patel
United States Court of Appeals for the Second Circuit
Preliminary Injunction Affirmed Staying Hundreds of State Court and Arbitration Collection Proceedings While Federal RICO Case Proceeds
The court affirmed a preliminary injunction entered by the Eastern District of New York that stayed hundreds of state court and arbitration collection proceedings brought by the defendants against GEICO while GEICO’s federal RICO case proceeds.
Key takeaways:
- An insurer can establish irreparable harm justifying a stay of numerous no-fault collections actions where those proceedings threaten inconsistent outcomes, preclusive effects, and fragmentation that would obscure an alleged overarching fraudulent scheme central to a federal RICO case.
- In the Second Circuit, per State Farm and applied here, RICO “expressly authorizes” injunctions that stay state collections proceedings which allegedly further the RICO violation, fitting the AIA’s “expressly authorized” exception.
- Courts may give substantial weight to the public interest in combatting no-fault insurance fraud and preserving a federal forum’s capacity to adjudicate complex fraud allegations coherently, rather than forcing insurers into hundreds of expedited, atomized proceedings with potential preclusive effects.
Background and the no-fault framework:
New York’s no-fault regime permits insureds to assign benefits (up to $50,000 of basic economic loss per claimant) to providers, who may then seek payment directly from insurers through streamlined state-court suits or arbitrations. Insurers generally have 30 days to pay or deny; failure to act within that time precludes many defenses (including fraud and lack of medical necessity) in later collection actions. The expedited nature of no-fault collection proceedings aims to ensure prompt reimbursement but does not readily accommodate later-arising, complex fraud or RICO claims. These collection outcomes can carry preclusive effect in later litigation.
Allegations and procedural history:
GEICO sued Dr. Bhargav Patel and Patel Medical Care, P.C., alleging a multi-year fraudulent scheme exploiting the no-fault system. GEICO claimed defendants submitted millions in claims for medically unnecessary, excessive, experimental, illusory, or unperformed services, sometimes falsely listing Dr. Patel as the rendering provider, using forged patient signatures, and employing unlicensed personnel. GEICO sought damages for amounts previously paid and a declaration of non-liability for pending unpaid claims.
After GEICO filed its federal suit, defendants initiated approximately 600-plus individual state collections suits and a handful of arbitrations against GEICO, seeking over $2 million. GEICO moved in federal court to stay all pending and future collections proceedings until the RICO case could be adjudicated. The district court granted a preliminary injunction, finding irreparable harm, serious questions on the merits with the balance of hardships tipping decidedly toward GEICO, and authority under the Anti-Injunction Act (AIA) to enjoin the state proceedings. Defendants appealed.
Issues on appeal:
- Whether the district court abused its discretion in granting a preliminary injunction staying defendants’ state collections proceedings and arbitrations.
- Whether the injunction violated the AIA, 28 U.S.C. 2283, which generally prohibits federal courts from enjoining state proceedings absent an applicable exception.
Standards applied:
Preliminary injunction: the movant must show irreparable harm, and either likelihood of success or serious questions plus a balance of hardships tipping decidedly in its favor, and that relief is in the public interest. The Second Circuit reviews the grant for abuse of discretion but reviews the AIA question de novo.
Anti-Injunction Act: permits injunctions against state proceedings in three narrow circumstances—when (1) expressly authorized by Congress, (2) necessary in aid of jurisdiction, or (3) necessary to protect or effectuate judgments. The court’s recent State Farm decision held that RICO “expressly authorizes” an injunction against state collection proceedings that allegedly further a RICO violation, bringing such relief within the AIA’s “expressly authorized” exception.
Holdings:
- No abuse of discretion: The district court reasonably found irreparable harm and appropriately balanced the equities and public interest. The second factor (serious questions/likelihood) and the public interest also favored GEICO.
- AIA: The injunction falls within the “expressly authorized” exception, consistent with State Farm Mutual Automobile Insurance Co. v. Tri-Borough NY Medical Practice, P.C., so the district court had authority to enjoin the state and arbitral proceedings.
Irreparable harm:
Risk of inconsistent judgments across hundreds of fast-moving, piecemeal state suits and arbitrations was imminent, and unfavorable factual findings could have preclusive effect in federal court, potentially impairing GEICO’s ability to obtain complete relief on its overarching RICO theory. Requiring GEICO to litigate fraud defenses claim-by-claim in expedited fora would also obscure the alleged integrated scheme and force significant, potentially unrecoverable expenditures of time and resources—harms not adequately remedied by money damages after the fact.
Balance of hardships:
Defendants’ primary hardship was delay in obtaining payment, a harm compensable by money if they prevail; by contrast, absent a stay, GEICO faced noncompensable harms and possible preclusion that could foreclose complete relief. The “policy exhaustion” concern raised by defendants was unsupported by specifics and did not outweigh the harms to GEICO.
Public interest:
The public has a strong interest in protecting the integrity of the no-fault system and in enabling courts to address complex fraud/RICO allegations in an appropriate forum rather than fragmenting them across hundreds of summary proceedings. Preserving GEICO’s ability to litigate the alleged scheme coherently serves that interest.
Anti-Injunction Act:
Following State Farm, the court held that an injunction staying state collections actions that allegedly further a RICO violation is “expressly authorized” by Congress for purposes of the AIA, so the district court did not run afoul of § 2283 in issuing the stay. The court underscored the preclusion risk and the mismatch between expedited no-fault collections processes and complex fraud/RICO claims as reasons the federal action needed protection.
Notable concurrence:
Judge Park concurred in the judgment but cautioned against reading State Farm too broadly. He emphasized federalism and comity concerns, referencing the New York Court of Appeals’ decision in Mayzenberg (issued after certification from the Second Circuit) describing New York’s carefully crafted administrative regime for addressing provider misconduct and insurer fraud allegations, and he urged that State Farm’s AIA rationale be read narrowly even as it controlled the outcome here.
03/24/26 Touchmark Hotel Group, LLC v. Mt. Hawley Insurance Co.
United States District Court for the Southern District of New York
Five and One-Half Delay in Reporting Claim Unreasonable as a Matter of Law in First-Party Property Claim: “Prompt Notice” Is Measured From When a Reasonable Insured Would Perceive a Possibility of Coverage, Not When the Insured Knows the Full Extent of Damage or Whether the Deductible Is Exceeded
The court granted summary judgment for Mt. Hawley on its motion for summary judgment against Touchmark’s claim for breach of contract under a commercial property policy.
A storm on January 4, 2023, allegedly damaged the hotel’s roof. On January 5, the hotel manager told Touchmark’s principal, Patel, that he observed detached shingles scattered “all over” the property, including the parking lot and an area behind the hotel. Patel decided not to report a claim then because staff had not observed interior water leaks and he believed the loss would not exceed the deductible.
After another storm on May 23, 2023, the hotel’s phone system failed, and employees noted water intrusion in the phone room. Touchmark gave its first notice of loss through its agent on June 22, 2023.
Mt. Hawley denied the claim on September 6, 2023, citing an engineer’s view that the roof damage was inconsistent with wind damage and reserving other policy defenses.
On March 8, 2024, Touchmark sent a pre‑suit demand with a sworn proof of loss claiming $805,258.91 in damage.
Touchmark filed suit on April 30, 2024, asserting breach of contract.
The Court found that Touchmark breached the policy’s prompt‑notice condition. Under New York law, compliance with a notice‑of‑occurrence provision is a condition precedent; failure to comply vitiates coverage. The trigger is when circumstances would suggest to a reasonable person the possibility of a claim; insureds need not wait for full quantification of loss or confirmation that the deductible will be exceeded.
The court found Patel knew of roof damage (detached shingles scattered across the premises) on January 5, 2023, which suggested a reasonable possibility of a claim and triggered the notice duty. Touchmark’s first notice on June 22, 2023—168 days later—was an unexcused, five‑and‑a‑half‑month delay, unreasonable as a matter of law. The court cited Second Circuit and S.D.N.Y. precedents finding much shorter unexcused delays (26–90 days) untimely and analogized to another Mt. Hawley case involving delayed reporting of windstorm roof damage.
Touchmark’s proffered excuse—that it initially believed the damage was under the deductible and waited to see if further issues emerged—was rejected as legally insufficient under New York law. The court also rejected Touchmark’s attempt to recast the factual record as involving only a “small” number of shingles, noting it was inconsistent with Patel’s own testimony.
FLEMING’S FINEST
Katherine A. Fleming
[email protected]
Nothing to report this edition. See you in a fortnight.
GESTWICK’S GARDEN STATE GAZETTE
Evan D. Gestwick
[email protected]
04/10/26 Shemen v. Cincinnati Insurance Company
Third Circuit Court of Appeals
Court Enforces the Plain Meaning of “Surface Water” in Holding That Damage Caused by Surface Water From Hurricane Ida Was Excluded Under Water Damage Exclusion
The plaintiff’s home was damaged by water from heavy rainfall during Hurricane Ida. The plaintiff made a claim for repairs under his homeowners insurance policy with the defendant.
That insurance policy excluded coverage for physical loss or damage caused by “water,” including flood, surface water, or waves, including tidal waves and tsunamis, tides, tidal water, overflow of any body of water, or spray from any of the foregoing. Cincinnati denied coverage under this exclusion, and this action followed.
The insured argued that the exclusion was ambiguous, on the basis that “surface water” was undefined. Cincinnati argued that the plain meaning of “surface water” was unambiguous in the context of this claim. Webster’s dictionary defines “surface water” as “natural water that has not penetrated much below the surface of the ground,” including rainwater.
The insured then tried to analogize the facts of this claim to those of another case, which found that water from a water main break did not constitute “surface water.”
However, in the end, the Third Circuit found that the phrase “surface water” was unambiguous in this context and should be afforded its plain and ordinary meaning. Because the plain and ordinary meaning of “surface water” suggested that the type of water that damaged the plaintiff’s home was, indeed, surface water, the Court upheld the granting of summary judgment to Cincinnati.
Editor’s Note: I also wrote up the Philadelphia case in Ryan Maxwell’s column – give that one a read, too!
O’SHEA RIDES the CIRCUITS
Ryan P. O’Shea
[email protected]
04/02/26 Polk v. Progressive N. Ins. Co.
United States Court of Appeals, Seventh Circuit
UIM Policies’ Anti-Stacking Clause Bars Attempt to Recover More Coverage Than Afforded Under Policy With Highest UIM Limit
Thomas Polk and Katarzyna Kurek-Polk were assisting another motorist on the side of the read when both were struck by an oncoming vehicle. Thomas was injured and Katarzyna tragically passed. Thomas and Katarzyna’s Estate received $100,000 from the tortfeasor. Thomas then submitted underinsured motorist (“UIM”) claims against three policies he and his wife possessed. The policies included $1,000,000 in coverage with AMCO, a $500,000 policy with Progressive, and a $500,000 policy with Secura.
Each policy contained a proportionate liability provision that stays the respective insurer’s share is pro rata of all available UIM coverage. The parties agree that the split is 50% to AMCO and 25% to both Progressive and Secura. All policies also contain an Anti-Stacking clause that limits coverage to highest amount available under a single policy, which is the AMCO $1,000,000 limit.
In addition to the $100,000 received from the tortfeasor, AMCO also paid $800,000 in settlement to Polk and the Estate (“Polks”). Thus, the Polks received a total of $900,000. Secura offered $220,000, which was rejected. Progressive did not engage in settlement with the Polks.
Mr. Polk then commenced an action against Secura and Progressive seeking UIM benefits, the District held the Secura and Progressive policies were on a per accident basis, as opposed to per person. The lower court also held that since Secura offered to settle the Polks’ claim, it was obligated to provide $100,000 in coverage to reach the maximum amount of recovery amount of $1,000,000 and reasoned Progressive owed no coverage under the terms of its policy.
The Seventh Circuit rejected the Polks’ claim that he could stack the policies despite the Anti-Stacking clause is each policy. The Progressive Policy stated:
"If this policy and any other policy providing similar insurance apply to the same accident, the maximum limit of liability under all the policies shall be the highest limit of liability under any one policy."
Meanwhile, the Secunda Policy read:
"Any recovery for damages under this policy or any other policy issued by us may equal but not exceed the highest applicable limits for any one vehicle under this or any other insurance providing coverage on either a primary or excess basis."
Indeed, the Illinois Insurance Code also authorizes insurers to include anti-stacking language. Thus, the court found that the anti-stacking provisions applied to limit the total UIM coverage to $1,000,000 and the pro rata clauses within the policies limited to Progressive and Secura’s full exposure to $250,000 each.
However, both insurers were entitled to offset the $800,000 paid by AMCO. Thus, to require both Progressive and Secunda to pair their respective $250,000 pro rata shares would allow the Polks to recover in excess of the maximum limits. Accordingly, since the Progressive and Secunda policies prohibited stacking, and both were entitled to the applicable offsets, the District Court’s decision and order was affirmed.
LABARBERA’S LOWER COURT LIBRARY
Isabelle H. LaBarbera
[email protected]
03/20/26 Slater Group, Inc. v. Great Am. Ins. Group
Supreme Court, Richmond County
Court Reaffirms Summary Judgment Decision Holding Rig Qualified as Property Not Covered, Because Named Insured Leased Equipment and Did Not Provide Operator, as Required by Policy
Slater Group Inc (“Slater”) brought an action against Great American Insurance Group (“Great American”), Cue Brokerage Group, LLC (“Cue”), RLI Insurance Company (“RLI”) and Empire Equipment Company (“Empire”).
Great American had issued an insurance policy to Slater. The policy contained a Contractor’s Equipment Scheduled Coverage Form, that provides coverage for a 2005 Junttan Oy Pile Driving Rig Model PM20L (the “rig”), up to $425,000. Under the policy, “Covered Property” is defined as contractor’s equipment and tolls that are owned by Slater or are under a “long term” lease to Slater. “Property Not Covered” is defined as property, while lease or rented to others, unless Slater provides the operator.
After purchasing the rig, Slater leased the rig to Empire Equipment on November 2, 2020. On November 9, 2020, Great American received Notice of Loss from Slater’s broker, advising that the rig was damaged by fire on November 6, 2020.
On January 25, 2021, Great American issued a reservation of rights to Slater, identifying that it did not appear that the rig constituted “Covered Property.” On March 16, 2021, a disclaimer of coverage was issued on the basis that Slater did not provide an operator for the rig, thereby qualifying it as “Property Not Covered.”
Great American was granted summary judgment, by Decision and Order dated November 5, 2025. In relevant part, the court found that because Slater was not the “operator” of the rig at the time of the loss, the rig constituted “Property Not Covered” under the Great American policy. As such, the court found that the Great American policy was not obligated to provide coverage to Slater.
Slater filed a motion to reargue. While the court granted reargument, the summary judgment decision was ultimately reaffirmed.
The court found that the evidence submitted in support of Great American’s motion, even when viewed in the light most favorable to Slater, established that Slater did not provide an operator for the rig, and therefore, the equipment constituted Property Not Covered under the subject insurance policy.
The court found that Slater failed to submit evidentiary proof in admissible form sufficient to raise a triable issue of fact.
While Slater’s principal testified that it “was going to provide an operator,” the record confirmed that no such operator was ever hired. Further, the court found that the lease agreement further supported Great American’s position – because the lease confirmed that the rental of equipment “does not include charges for an operator,” and “all persons operating, repairing, or maintaining the equipment are under the exclusive control of the lessee.” Lastly, the lease expressly states that Slater “has absolutely no control over any person operating or assisting in operating, repairing or maintaining the leased equipment.”
As such, the court found that the moment Slater leased the rig to Defendant Empire, it constituted Property Not Covered under the Great American policy.
Accordingly, upon reconsideration, the court adhered and reaffirmed the prior Decision and Order, granting Great American’s motion for summary judgment.
LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[email protected]
04/24/26 New York Senate Bill S10019
Proposed Bill to Prohibit Insurers From Increasing Auto Insurance Premiums Upon Renewal for Persons 60 Years of Age or Over Solely on the Ground of Insureds’ Age
Senate Bill S10019 introduced on April 22, 2026, seeks to prohibit insurers from increasing auto insurance premiums upon renewal of auto policies for persons 60 years of age or older if the increase would be solely based on age.
The legislation would amend subsection (1) of Insurance Law § 3425 of the Insurance Law by adding subsection (2) which would state “[w]ith respect to automobile insurance policies, no insurer shall increase the premium billed to an insured who is sixty years of age or over for the renewal of an existing policy solely on the ground of the age of the insured.
The justification states that increasing premiums solely based on age is discriminatory against the elderly, many of which are on fixed incomes and may have difficulty finding financial resources to keep up with the increase in rates.
VICTORIA’S VISION ON BAD FAITH
Victoria S. Heist
[email protected]
04/07/26 Postar v. Starr Surplus Lines Ins. Co.
New York Supreme Court, New York County
Insurer’s Motion to Dismiss COA for Breach of Good Faith Denied
In this case, Plaintiff Postar owned properties in Lubbock, Texas. The properties were insured under a policy issued by Starr Surplus Lines Insurance Company for 2022 to 2023. During the policy period, a building insured by Starr was damaged by a large hail, wind, and rainstorm. The Plaintiff filed a claim under their policy, and the premises was subsequently inspected.
During the inspection, the Plaintiff dd not receive reports or a coverage decision. Plaintiff brought this lawsuit alleging breach of the Policy and bad faith by Starr. Starr brought a pre-answer motion to dismiss, seeking dismissal of the causes of action under Texas law and dismissal of extracontractual theories under New York law.
The Court denied Starr's motion to dismiss the New York breach of good faith and fair dealing claim. In reviewing the cause of action, the Court found it is premature to rule that Plaintiff has no breach of good faith and fair dealing claim. Specifically, because the Plaintiff alleged it never received correspondence from the carrier, was never provided inspections, and retained investigative companies that favored insurance companies. The Court found the cause of action requires discovery and cannot be decided on a motion to dismiss, resulting in the Court’s denial of that portion of Defendant’s motion to dismiss.
SHIM’S SERIOUS INJURY SEGMENT
Stephen M. Shimshi
[email protected]
04/13/26 J.S.P. v. Yakov
Rockland County Supreme Court
Supreme Court, Rockland County, Grants the Defendants’ Motions for Summary Judgment on the Basis That the Plaintiffs Did Not Suffer a “Serious Injury” Within the Meaning of Insurance Law § 5102(d)
This matter arises from a motor vehicle accident that took place on November 18, 2021, on Route 45, approximately 100 feet south of Greenridge Way, Town of Ramapo, State of New York. The plaintiffs were passengers inside a vehicle owned by Defendant EXUMA and operated by Defendant BRUNEL when the sedan was struck in the front bumper by the rear end driver's side quarter panel of a yellow school bus owned by Defendant CONGREGATION and driven by Defendant SCHMELZCER. Plaintiff CHANTALE alleged injuries to her neck, shoulder, and bilateral biceps and knees, which required surgery. Infant plaintiff J.S.P. ("J.S.P.") alleged that he suffered a contusion to his lower right leg.
Defendants moved to dismiss J.S.P.’s claims on the ground that he did not sustain a “serious injury” within the meaning of Insurance Law § 5102(d). Specifically, Defendants argue that the medical records, the deposition testimony and the expert report of Dr. Barry Kraushaar, an orthopedist, show that J.S.P. suffered a minor transient contusion to his right lower leg. Further, J.S.P. received no medical treatment for said contusion, which quickly resolved and permitted that he return to school and resume his day-to-day activities without impairment or limitation of any body part, function or system.
Defendants further argued that J.S.P.’s injury does not constitute a “serious injury” within the meaning of Insurance Law § 5102(d) under any of the five categories or the under the permanent consequential limitation (the 90/180-day category). Defendants claim that J.S.P. failed to provide any objective evidence of a “medically determined and causally related injury of a non-permanent nature or that the injury prevented him from performing substantially all of his material acts of daily living for at least ninety (90) days following the instant accident.” According to the defendants, J.S.P.’s hospital records provided merely subjective complaints of right leg pain on the date of loss. Neither swelling, bruising nor tenderness was noted in J.S.P.’s hospital records. Subsequent records from J.S.P.’s pediatrician confirmed the absence of any injury and limitation during multiple appointments within the two years following the accident.
In opposition, J.S.P. argued that based on the Verified Bill of Particulars, he sustained injuries to his lower right leg which compromised performance of his normal activities. He also alleged that he was fearful of a car and unable to sleep. J.S.P. argues that his hospital and pediatrician records support that he was treated for the injuries he alleged. J.S.P. proffered the following materials in opposition to the defendants’ motion: (1) an attorney affidavit; (2) a letter that plaintiff’s counsel sent to defendants’ counsel regarding the filing of the subject motion; and (3) uncertified medical records as to J.S.P.
Defendants filed a reply addressing the deficiencies in J.S.P.’s opposition. Without prior application to the Court, or on consent of Defendants, J.S.P. filed an additional set of papers in opposition to the defendants’ motion including: (1) a "Certification of Business" records from "Golden Healthcare Chiropractic Diagnostic,"; (2) a bulk filing of medical records for Plaintiff CHANTALE which include records from Golden Healthcare Chiropractic Diagnostic, P.C., Medicaid Radiology, LLC and an unknown procedure evaluated by Sans L. Bloch, M.D. at an unknown facility; (3) a bulk filing of medical records with no individual certifications for J.S.P. which appear to be from Clarkstown Pediatrics (many records do not delineate from which provider they were provided) and the Montefiore/Nyack Hospital Emergency Department; and (4) an Affirmation of Jeffrey J. Lavelle, Senior Investigator from Northeast Crash Dynamics, LLC.
Upon review of the foregoing, the Court determined that the defendants established prima facie that both Plaintiffs did not sustain a serious injury under the categories set forth in Insurance Law § 5102(d). See Farris v. Caygan, 2025WL322968, *1 (2d Dept 2025); See also Aziz v. Friendly Transit, Inc., 220 NYS3d 354 (2d Dept 2024).The burden therefore shifted to the plaintiffs to demonstrate the existence of a material issue of fact necessitating a trial. The Court determined that the plaintiffs' submission was inadequate and failed to raise triable issues of fact. Plaintiffs’ counsel’s affirmation failed to raise any argument in support of his application for denial of Defendants’ motion. Said affirmation was supported by a letter he sent to Defendants counsel indicating that there is "absolutely zero basis" for the instant summary judgment motion. The Court found no evidentiary value in the letter.
The Court held that since the plaintiffs failed to set forth any arguments or evidence regarding each plaintiff's alleged injuries in admissible form, they failed to demonstrate the existence of triable issues of fact. See Francis v. Basic Metal, Inc., 144 AD2d 634 (2d Dept 1981). Based on the plaintiffs; bills of particulars and plaintiff CHANTALE’s testimony, the plaintiffs failed to prove that either plaintiff was disabled for the minimum statutory period necessary to support a 90/180 day injury claim. Accordingly, the defendants’ motion for summary judgment as to serious injury was granted in its entirety.
NEW ENGLAND ALMANACK
Alexander G. Henlin
[email protected]
Barbara A. O’Donnell
[email protected]
Iryna N. Dore
[email protected]
04/10/26 Vineyard Aircraft Hangers Inc. v. New Hampshire Insurance Co.
U.S. District Court, Massachusetts
CGL Policy Found to Have Ambiguity in Connection With “Designated Ongoing Operations” Coverage, but That Coverage Dispute Was Not in Bad Faith
In February 2022, while taxiing, the front wheel of a six-seat airplane dropped into a pothole on the apron of an aircraft hangar at the Martha’s Vineyard Airport in West Tisbury, Massachusetts. The aircraft owner sued Vineyard Aircraft Hangars, Inc. (“VAH”), the owner of the hangar, alleging claims of negligence in the construction and maintenance of its facility and breach of an oral agreement to provide the plane owner with storage and parking for its aircraft. VAH was served on September 13, 2024; it reported the suit to its broker the following day, who in turn reported the matter to the insurer. Three days later, on September 17, 2024, the carrier’s claim administrator acknowledged receipt of the tender and disclaimed coverage.
The carrier had issued VAH a commercial general liability policy, under which the carrier promised to pay those sums that the insured became legally obligated to pay as damages because of “property damage” to which the insurance applied – and that granted the carrier the right and duty to defend any “suit” seeking those damages.
Among the policy’s exclusions were one for “Designated Ongoing Operations.” The schedule for that exclusion described the “Designated Ongoing Operations” as “Aircraft and/or Fueling Operations.” Below the schedule, the endorsement stated: “[T]this insurance does not apply to ‘bodily injury’ or ‘property damage’ arising out of the ongoing operations described in the Schedule of this endorsement, regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others.” The policy also excluded coverage for “‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any aircraft…owned or operated by or rented or loaned to any insured.”
VAH asserted claims for declaratory relief, for breach of contract, and for breach of G.L. c. 93A – the Massachusetts Consumer Protection Act. On cross-motions for summary judgment, the Court recited the familiar standard in Massachusetts law: the insured has the initial burden of proving that the claim falls within the grant of coverage, while the carrier has the burden of proving the application of an exclusion.
The Court noted that, if the policy’s language is clear and unambiguous, Massachusetts law required a court to give effect to the language, without considering the underlying intent of the parties. Policies are to be read as a whole, and whenever possible every word in a policy should be given meaning.
Here, the parties agreed that the underlying action involved “aircraft operations.” The dispute was what the meaning of the phrase “regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others.” Citing a Maryland federal court case from 2012, the Court noted that the clause has been found to be ambiguous in isolation, and that the context here did not resolve the ambiguity. The reasoning was stated as follows:
The ambiguity is inherent in the “regardless of whether” linguistic construction. If a friend were to say, “The party will be held tomorrow, regardless of whether it rains,” one would understand that “whether” is followed by a silent, implied “or not.” The statement means that the party will go forward, rain or shine—“whether or not it rains.” But, ambiguity develops whenever a speaker states that something will occur “regardless of whether” to expressly stated alternatives occur. For example, if a friend says, “I will go to the party, regardless of whether Joe or Steve asks me,” she might mean that she will attend the party with one of two possible companions: Joe or Steve. But, she might mean, instead, that it does not matter if Joe asks her, if Steve asks her, or if neither of them asks her—she will attend the party in any event. Because two alternatives are expressly presented, it is ambiguous whether the speaker’s use of “regardless of whether” is intended to differentiate between the two expressly presented alternatives or, instead, whether the speaker intends to differentiate between two express possibilities on the one hand, and the silent, implied possibility of “neither” on the other hand.
The Court found that common canons of construction – such as the rule against superfluous terms – favored neither party because both parties proffered readings that would render other policy terms redundant. Noting that the purpose of CGL policies is to protect the insured against losses to third parties arising out of the operation of the insured’s business, and that ambiguity is to be resolved in favor of coverage, the Court declared that the policy owed VAH coverage. It was accordingly found that the carrier had breached its contract, requiring it to pay damages in the form of defense costs in the underlying action and the sums incurred by VAH in bringing the coverage suit.
On the Chapter 93A claim, though, the Court granted summary judgment to the carrier, holding that the dispute as to coverage was based on a genuine different of opinion about the policy’s scope of coverage.
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.
03/13/26 Sniper Pressure Services Ltd. v. Ken's Custom Wood Work Ltd.
Alberta Court of King’s Bench
The Alberta Court of King’s Bench Determines That Unresolved Coverage Issues Creates a Conflict of Interest Such That Counsel Defending the Insurer in That Coverage Dispute Cannot Also Act as Counsel for That Insurer in Its Capacity as a Plaintiff in a Subrogated Claim Arising From the Same Circumstance
On March 16, 2026, the case management judge appointed to oversee the Sniper Pressure Services litigation released three decisions pertaining to applications heard in February 2026. Two of those decisions are of note and are reported here.
This decision was an appeal from an applications judge decision that was reported in the March 28, 2025 edition of this newsletter. This appeal was heard ‘de novo’ (all over again) on February 13, 2026, and deals with the important issue of whether counsel for an insurer who is defending the insurer against unresolved coverage issues under a property policy is in a conflict of interest if that same counsel acts on behalf of the insured in pursuing a subrogated claim that arises from the same circumstance as the coverage dispute. This is an important issue for Canadian insurance counsel generally and therefore I have elected to detail the argument and the court’s analysis.
Sniper Pressure Services Ltd. is a private, family-owned trucking and pressure services company that has served Northern and Central Alberta since 2003. The company has branches in Whitecourt, Edson, Hinton, Grande Prairie, Fox Creek and Swan Hills. For those not familiar with the oil and gas industry, a pressure truck is equipped with high pressure hoses, pumps and tanks and is mainly used in that part of Alberta to inject fluids into pipelines and well heads – think checking for pipeline integrity or removing blockages.
The roof over Sniper’s Whitecourt location collapsed – not once, but twice. The first collapse was on March 4, 2020. The roof was replaced only to collapse again on January 17, 2022. Northbridge insured Sniper under a commercial property policy at the time of each collapse.
Northbridge exercised its subrogation rights and issued separate subrogated claims for each roof collapse against two sets of alleged tortfeasors – some were sued in both. Northbridge claimed what it paid under its property policies.
Further, following the second collapse, Northbridge sued CEP Forensics Ltd. for breach of an engineering services contract and negligence. Sniper is also named as a plaintiff in that action.
Sniper also issued two actions, one for each collapse, each of which named Northbridge and an expanded set of tortfeasors. Sniper’s second collapse action also named CEP Forensics Ltd. Both of Sniper’s actions claimed the amount received from Northbridge and its uninsured losses.
Sniper also sued Northbridge, asserting that Northbridge did not pay all that was owed under the property policies.
The various sets of tortfeasors are largely sidelined while Northbridge and Sniper jockeyed to determine “who will drive the bus” and “where it will be driven”.
In this appeal, the case management judge noted that Edmonton lawyer Ken Halushcak “… acts for Northbridge in the two subrogated claim actions and acts for Northbridge and Sniper in the subrogated action against CEP. Haluschak is also defending the action by Sniper against Northbridge for the amounts alleged owing under the insurance for the first roof collapse and the action by Sniper against Northbridge (and CEP and other alleged tortfeasors) for the second roof collapse.”
The applications judge who issued the judgment appealed from held that “…the bright line rule was not applicable in the current circumstances, because there was no retainer or solicitor-client relationship between Sniper and Haluschak.” He noted that while it might be awkward for Sniper to work with Haluschak, there was no evidence of confidential information being compromised. He emphasized that the subrogated claim is brought by Northbridge in the name of Sniper, making Sniper a "nominal" plaintiff and concluded there was no basis to remove Haluschak as counsel for Northbridge in the defense …[sic]…against Sniper's claim.”
The issue before the court on this appeal was whether Haluschak should be removed as counsel in all three subrogated claims. To be absolutely clear, throughout there was no allegation that Halushcak, or his firm, is guilty of any form of misconduct – in fact the reasons for judgment reveal that before accepting the retainer, Haluschak consulted with the Practice Advisers employed by the Law Society of Alberta as to whether the retainer is “offside” the rules of conduct applicable to members of the Law Society of Alberta. Having received the opinion that he was clear to act, and not in violation of the Code of Conduct, he accepted Northbridge’s retainer.
Sniper’s Argument: Haluschak Should be Removed
Sniper argued that Haluschak is in a conflict of interest with Sniper and cannot purport to act in any capacity as counsel for Sniper. The conflict arises as Northbridge, as the insurer, has appointed the same counsel to pursue subrogated claims in Sniper’s name and simultaneously defend Northbridge against Sniper’s coverage and negligence claims arising from the same loss. Sniper argues conflict principles are not confined to formal solicitor-client relationships, but, nonetheless continues to argue that Haluschak is in a solicitor-client relationship with Sniper. Sniper therefore relies on the bright line rule, the substantial risk test, confidentiality obligations and the duty of utmost good faith owed to an insured by their insurer to declare Haluschak in a conflict of interest.
Northbridge’s Argument: Haluschak is not in Conflict
Northbridge’s core argument on the appeal is in support of the application judge’s ruling: Sniper is not a client of Haluschak, as there was no retainer, instructions, billing, or independent advice given to Sniper, and no reasonable belief by Sniper that Haluschak represented Sniper. There is no Canadian authority that states that the exercise of an insurer’s statutory subrogation rights create a solicitor-client relationship. Although the subrogated actions are procedurally brought in Sniper’s name and Haluschak is listed as lawyer of record, this does not mean they act as Sniper’s counsel; the designation is simply a procedural requirement to identify the lawyer who prepared and filed the pleadings.
The Court’s Analysis
- No Solicitor Client Relationship between Sniper and Haluschak
The Court’s analysis began with the entrenched principle - the “bright line” rule - that a lawyer, and by extension a law firm, may not concurrently represent clients adverse in interest without obtaining their consent, regardless of whether the client matters are related or unrelated. When the bright line rule is inapplicable, the question becomes whether the concurrent representation of clients creates a “substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or by the lawyer’s duties to another current client, a former client, or a third person.” The Alberta Court of King’s Bench (and Canadian courts in general), exercise supervisory jurisdiction over the administration of justice. The courts have inherent jurisdiction to remove law firms from pending litigation: (1) to avoid the risk of improper use of confidential information; (2) to avoid the risk of impaired representation; and/or (3) to review all relevant circumstances to determine whether counsel should be removed in order to maintain “the repute of the administration of justice”.
The Court noted that the commentary to the Alberta Lawyers’ Code of Conduct, which is to assist lawyers in applying the Code of Conduct, recognizes that a solicitor-client relationship is often established without formality, e.g. an express retainer or remuneration is not required for a solicitor-client relationship to arise. That statement in the commentary seems to be premised upon a 2002 Alberta trial decision that stated that some of the indicia of a solicitor client relationship are contract or retainer; a file opened by the lawyer; meetings between the lawyer and the party; correspondence between the lawyer and the party; an account rendered by the lawyer to the party; an account paid by the party; instructions given by the party to the lawyer; the lawyer acting on the instructions given; statements made by the lawyer that the lawyer is acting for the party; a reasonable expectation by the party about the lawyer’s role; legal advice given; and legal documents created for the party. The 2002 trial decision stated that not all indicia need to be present for a solicitor client relationship to emerge.
In this case, for Haluschak to effectively conduct the subrogated actions on behalf of Northbridge, close collaboration between Haluschak and Sniper will be required. This may include engaging in meetings and correspondence with Sniper and preparing legal documents in Sniper’s name. In turn, Sniper is obliged to cooperate with Northbridge by providing disclosure and evidence required for the prosecution of the subrogated claim. These are indicia of a solicitor client relationship even though there are no formal retainer agreement and billing.
The question is whether a reasonable person in Sniper’s position with knowledge of all the facts would reasonably form the belief that Haluschak was Sniper’s lawyer (which echoes the language in the Code of Conduct). However, there was no evidence that Sniper misunderstood who retained Haluschak or that the purpose of the Haluschak’s retainer with Northbridge was to conduct the subrogated claim for Northbridge’s benefit, in Sniper’s name. Therefore, the Court concluded that no solicitor-client relationship between Haluschak and Sniper has been established.
- The Duty of Utmost Good Faith between an Insured and an Insurer Does Not Apply
Sniper argued that although the duty of utmost good faith that is the underpinning of the relationship between an insurer and its insured does not establish a solicitor-client relationship, it plays an important role in insurance litigation: That duty prevents insurers from arranging cases in a way that might put counsel in a position of divided loyalty when representing both the insurer and the insured on the same claim. The Court agreed with Northbridge that the duty of utmost good faith governs the performance of insurance contracts. It has no application to this issue.
- Bright Line Rule
Northbridge argued that it has not violated the “bright line rule” as Haluschak has one client: Northbridge and Sniper is a non-client adversary. The Court noted that this was the position adopted by the applications judge and the Court argeed that the bright line rule has not been violated in this case.
- The Substantial Risk Test
The “substantial risk” test must also be met.The Alberta Lawyers’ Code of Conduct, Rule 3.4-1, states that “A lawyer must not act or continue to act for a client where there is a conflict of interest, except as permitted under this Code”. The associated Commentary provides that a conflict of interest exists when there is a substantial risk that a lawyer’s loyalty to or representation of a client would be materially and adversely affected by the lawyer’s own interest or the lawyer’s duties to another client, a former client, or a third person.
The Court held that this test has not been met. Haluschak and his firm must therefore be removed as counsel of record in all three subrogated claims. Northbridge must appoint alternate counsel to litigate those claims. As replacement counsel will not act as counsel for Northbridge in the coverage action, the “substantial risk” test, discussed below, will no longer be an issue.
- Confidentiality
Sniper argued that there is a risk of improper use of confidential information. Sniper did not provide any evidence that this has happened; Haluschak asserted that it has not happened; the Court acknowledged these arguments and responded stating that this application is an attempt to proactively prevent that risk from materializing. The Court stated that there will be significant interaction between Haluschak and Sniper in the course of determining what documents are privileged and producible; preparation for questioning at discovery and at trial. In the course of that interaction, information will be exchanged. The intervention by the Court should not be delayed until there is evidence that confidential information has been misused. “If a sufficiently related relationship exists, as here, it can be inferred that relevant confidential information was or will be shared…” The Court went on to say that Sniper is placed in the untenable position of either treating Haluschak as their own lawyer and disclosing confidential information related to the insurance contract and the insured event, or, withholding information and failing in its responsibility to cooperate with Haluschak.
- Impaired Representation
Sniper argued that Haluschak may acquire sensitive information about Sniper through witness preparation, which could later be used against Sniper during cross-examination in the coverage disputes. Sniper submits the risk is inherent to the situation and not merely hypothetical, leading to the finding that there is a substantial risk of impaired representation and potential misuse of information. Northbridge countered that this risk is speculative and unsupported by admissible evidence.
The Court agreed with Sniper and concluded that there was a real and substantial risk of compromised representation in this situation. The fact there is no solicitor-client relationship between Sniper and Haluschak is no answer. The substantial risk test includes situations where the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or the lawyer’s duties to another current client, a former client, or a third person. Specifically, the Court stated:
In the coverage action and the recovery action related to the second roof collapse, Haluschak acts directly against Sniper, defending Northbridge by attacking Sniper. He will be cross-examining Sniper’s representative, challenging their credibility and eliciting admissions harmful to Sniper. He will be privy to the litigation positions of each party and the strengths and weaknesses of each party’s case.
Haluschak’s dual role poses a genuine and unavoidable risk of compromised representation for Sniper due to the outlined situation. Northbridge faces no risk; in fact, they benefit from it. The party at a disadvantage is Sniper, and this is the issue we are seeking to resolve.
- Maintain the Integrity and Repute of the Administration of Justice
The overall consideration for the court in this situation is whether a fair-minded and reasonably informed observer would determine that Haluschak should be removed. In that regard, the Court was emphatic that Haluschak ought to be removed. Its rather blistering basis for that conclusion requires a read by all those who could find themselves in a similar position:
Haluschak owes a fiduciary duty to Northbridge and is bound by both legal and ethical responsibilities to Sniper. He is pursuing Northbridge’s subrogated claims in Sniper’s name to optimise recovery from third-party tortfeasors, while simultaneously representing Northbridge in the coverage action against Sniper, aiming to restrict coverage. Haluschak will have unique access to Sniper’s records and representatives, while at the same time acting against Sniper in several related matters.
There is no appreciable risk to Northbridge arising from these circumstances; rather, it is Sniper that faces the real potential for prejudice. While Sniper is required to act as the nominal plaintiff in the subrogated proceedings for the benefit of Northbridge, this compulsory involvement should not entail exposing Sniper to a compromised legal position in related or concurrent actions. The necessity of Sniper’s participation in furthering Northbridge’s interests must not override the imperative to safeguard Sniper’s independent legal interests in other claims.
… In my assessment, Haluschak’s dual role unequivocally creates a readily apparent risk of unfairness or oppression toward Sniper…A fair minded and reasonably informed observer would recognize that counsel cannot fulfill obligations to both parties simultaneously if counsel was permitted to continue to represent both parties.
… I have considered whether there are any factors militating against disqualification, such as delay in bringing the motion for disqualification, significant prejudice to the Northbridge’s interest in retaining its counsel of choice or ability to retain new counsel… I am satisfied Sniper did not delay in bringing its application and the matters are all early enough on in the litigation process that Northbridge would not face significant prejudice in retaining replacement counsel… I have also considered that Haluschak accepted the conflicting retainer in good faith, relying on the advice of a … [Law Society of Alberta] … practise adviser that the concurrent representation fell beyond the scope of the bright line rule and applicable law society restrictions.
… In the circumstances, disqualification is necessary to prevent the risk of misuse of confidential information, avoid impaired representation due to divided loyalties, and to maintain public confidence in the administration of justice.
The Court’s Order and Direction
The Court ordered that Haluschak and his firm must cease to act as counsel of record on each of the three subrogated claims launched by Northbridge. Replacement counsel must be retained to fulfill that role. Haluschak can (apparently) continue as counsel for Northbridge in its capacity as a defendant in the Sniper litigation, defending its practices of retaining contractors to investigate the collapsed roofs and the rebuild process and as counsel for Northbridge in its capacity as the insurer of Sniper responding to the coverage action.
This judgment was directed at the risks of the relationship between Haluschak and Sniper should that relationship be allowed to continue. There was no evidence that Sniper has been harmed by Haluschak’s retainer as counsel of record in the subrogated action.
03/16/26 Sniper Pressure Services Ltd. v. Ken's Custom Wood Work Ltd.
Alberta Court of King’s Bench
The Alberta Court of King’s Bench Determined That a Subrogated Claim and an Insured’s Personal Claim, That Includes the Subrogated Claim, Can Proceed Concurrently, Regulated by Procedural Orders
In addition to the application to have counsel for Northbridge disqualified, in order to further protect its interests, avoid conflict, and ensure efficiency, Sniper applied to the case management judge for an order requesting carriage and control of the three subrogated actions commenced by Northbridge (the first collapse, the second collapse and the CEP Forensic actions), and requested that the Northbridge actions be consolidated with its own.
Northbridge contended that an insured does not automatically have the right to conduct and carriage of litigation. If Sniper is granted control of the litigation, dominus litis, it must act in good faith to protect Northbridge’s interests in its proceedings. If Sniper is given conduct and carriage over Northbridge’s subrogated claims, the scope of Sniper’s obligations and Northbridge’s rights must be clearly defined.
This carriage and control dispute centered on s. 546 of the Alberta Insurance Act which states (with the key phrasing bolded for emphasis):
Subrogation of insurer to rights of recovery
546(1) Subject to section 570(6), an insurer that makes any payment or assumes liability for making any payment under a contract is subrogated to all rights of recovery of the insured against any person and may bring an action in the name of the insured to enforce those rights.
…
(3) When the interest of an insured in any recovery is limited to the amount provided under a deductible or co-insurance clause, the insurer has control of the action.
(4) When the interest of an insured in any recovery exceeds that referred to in subsection (3) and the insured and the insurer cannot agree as to
- the solicitors to be instructed to bring the action in the name of the insured,
- the conduct and carriage of the action or any related matters,
- any offer of settlement or the apportionment of an offer of settlement, whether an action has been commenced or not,
- the acceptance or the apportionment of any money paid into Court,
- the apportionment of costs, or
- the launching or prosecution of an appeal,
either party may apply to the Court for the determination of the matters in question, and the Court may make any order it considers reasonable having regard to the interests of the insured and the insurer in any recovery in the action or proposed action or in any offer of settlement.
This application was argued 10 days following the argument on the disqualification issue and before judgment was rendered on that issue.
The parties were agreed that under the common law, the insured retains control of the litigation unless it has been completely indemnified for its insured and uninsured losses. However, if that common rule applied in all cases, there would be no need for s. 546. Therefore, the Case Management Judge stated “even if the default is that Sniper is dominus litis, it is still open to me to make any order I consider reasonable and necessary having regard to the interest of the parties in any recovery. Section 546(4) empowers the Court to intervene where fairness and reasonableness require a different result. And because s 546(4) includes “or any related matter”, I do not think I am limited to situations where there is a single action that includes both the subrogated and uninsured claims (although in this case Sniper’s recovery Actions do include both the insured and uninsured losses).”
In this case, as the Sniper actions included the subrogated amounts, an option would be to direct that Sniper has carriage and control of the actions for each roof collapse; and either consolidate or stay Northbridge’s subrogated Actions.
However, that direction would create conflict. Sniper would be legally obliged to protect the interests of Northbridge in Sniper’s proceedings against the alleged tortfeasors. Sniper will owe Northbridge a positive duty of good faith to pursue Northbridge’s interests as diligently and faithfully as Sniper pursues its own interests. The actions filed to date and the position taken in those actions demonstrate that it would not be possible for Sniper to give equal consideration to the interests of Northbridge:
- In the coverage action, Sniper seeks greater indemnity for its loss; Northbridge states that it paid what is owed
- In the recovery action, Northbridge has an incentive to attribute liability to Sniper as opposed to the tortfeasors.
The court inferred that this conflict cannot be controlled and therefore “I am not convinced Sniper could pursue Northbridge’s interests as diligently and faithfully as Sniper pursues its own interests.” Both Northbridge and Sniper have much to gain and lose in the litigation.
The Court therefore determined that in these circumstances, both sides ought to continue with their own counsel and pursue their own actions: “This prevents potential conflicts regarding solicitor-client communications and privilege. Lines of communication will be clear. This approach also prevents accusations that the controlling party is acting in a way that favours one side over the other.”
The court stated that management of the actions will proceed efficiently with procedural orders. Northbridge agreed that Sniper can again apply for relief under s. 546 of the Insurance Act if the need arises.
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