Coverage Pointers - Volume XXVIII No. 4

Volume XXVIII, No. 4 (No. 729)
Friday, July 31, 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.

Greetings from Lisbon, Portugal, where Jody Briandi and I are attending the Federation of Defense & Corporate Counsel Annual Meeting.

        

Congratulations to Evan Gestwick on his upcoming weekend wedding.  His wedding was blessed by a Magistrate Judge in New Jersey, but I’ll let him tell the story in the attached issue.  His wedding comes with judicial blessing.

After three weeks in Europe, Porto, a Douro River cruise, Madrid and Lisbon, I’ll be ready to return to the office on Monday.  Apologies to those who I deferred a bit until next week, but these opportunities cannot be missed.

 

Coverage Pointers University

Like the courts, CPU is taking a summer solstice.  Watch this space.

 

LinkedIn

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

 

Need a Mediator, Give a Call:

A growing percentage of my practice has been as a mediator insurance coverage, commercial, personal injury, Labor Law, risk transfer and other disputes. With a robust national client base, and with 48 years as a coverage and trial lawyer, and 40 years as an Adjunct Professor of Insurance Law,  I am regularly called on by lawyers and claims professionals 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.

 

As to inter-company disagreements over policy language, additional insurance coverage, horizontal v. vertical exhaustion, primacy and risk transfer, Insurance coverage disputes are especially well suited for mediation because they often involve substantial litigation costs, uncertain outcomes, and issues that cannot easily be resolved through a simple “winner-take-all” ruling. And, they avoid precedent.

Mediation allows the parties to:

• Control the outcome. Coverage decisions can turn on policy language, jurisdiction-specific rules, and unpredictable factual findings.
• Avoid expensive satellite litigation. Declaratory judgment actions can continue for years while the underlying lawsuit is still pending.
• Address multiple issues at once. The parties can resolve defense obligations, indemnity, allocation, additional-insured status, deductibles, retentions, contribution, and priority of coverage in a single process.
• Create solutions a court cannot order. Agreements may include defense-cost sharing, interim funding, policy-limit contributions, structured payments, or conditional settlements tied to the underlying case.
• Protect confidentiality. Mediation keeps sensitive underwriting, claims-handling, settlement, and business information out of the public record.
• Preserve relationships. Insurers, policyholders, brokers, contractors, and other carriers frequently encounter one another in future matters.
• Reduce bad-faith exposure. A negotiated resolution can limit the risks created by prolonged disagreements over defense and settlement obligations.
• Promote resolution of the underlying claim. Once coverage uncertainty is removed, the parties can focus their resources on settling the liability action.
• Bring all interested parties together. Mediation can coordinate primary, excess, additional-insured, indemnity, and risk-transfer interests that otherwise might be litigated in several proceedings.

The central advantage is simple: mediation replaces coverage uncertainty with a negotiated allocation of risk, cost, and responsibility.

.

 

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.

 

Life Suspended – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
31 July 1926

Husband’s Failing
For Suspenders Is
Cause of His Death

Chicago, Ill., July 30 – Because her husband was not a sport and wore suspenders instead of a belt, Mrs. Heilman, mother of six children, today choked him to death.

“It started over the suspenders,” she explained to the police, “I asked him why he did not wear a belt, like other men and be a real sport and he argued about this. I tried to pull off his suspenders and he struck me. Then I got a grip on his throat and before I knew it he was dead.”

She admits both she and her husband had been drinking and were, in fact, intoxicated. To prove that the rough treatment was not all of her dong she exhibited a black eye and some black and blue marks on her arms.

 

Peiper on Property (and Potpourri):

Greetings and welcome to the last month of Summer.  Before we know it, it’ll be back to school season, football season and, more importantly for some of you, fantasy football season.  On the later, after dominating the Hurwitz Fine Fantasy League, pretty much for its entire existence, Your Author has decided to “pass the torch” this year.  We leave the all-time leader in wins, playoff wins, championship appearances (5) and championships (3).  This is the seven-year history to the league, folks.  Perhaps we’ll take our talents to Vegas because it is, candidly, time to give someone else a chance to win.

Putting such weighty and important things aside, we focus on what is left of Summer.  Like any good University, CPU has elected to take its Summer Break over the month of August.  But, just like the tuition bills coming due this month (thank you Hofstra University where my daughter will be returning in September), CPU will, too, be returning with a full slate of offerings for the 2026/27 academic calendar. 

Over the past year, we have brought you a wide and varied list of courses including

• First Party Primer
• Primers on NY, NJ and CT coverage law
• A review of the MCS 90 Endorsement
• A comprehensive review of NYS SUM coverage
• Risk Transfer Challenges (f/k/a Tender Benders)
• First Party Fraud Issues

Protecting Privileged Claim File MaterialsWe have been delighted and humbled by the overwhelming response and commitment from our readership.  And, we’re delighted to keep it going for another year. 

We will start off next year with a bang. September’s course will focus on the Construction Defect Coverage Issues.  Stay tuned for a slate of additional classes that run the spectrum of issues you face every day.

Oh, one more thing, the column this edition.  We’d invite you to read more, but suffice to say, if you sign a Release it is binding, if you ask for insurance you’re entitled to receive it, and if you owe a judgment you owe it. 

See you in two weeks.

Steve
Steven E. Peiper
[email protected]

P.S. For those of us who are hockey parents, there is seemingly no off-season.  Four months ago, my son’s 16u team ended their season with gut punch in the national semifinals in Irvine, California.  Losing one step from the National Championship game was hard, but hey they had beach and palm trees to ease the disappointment. 

That loss was game 71 of his season which spanned both club hockey and high school, took us to six states and one province over the course of seven months, and included a 1-0 win in NYSAHA finals and a crushing overtime loss in the NYS Catholic High School State Semifinals. 

We’re gearing up for what might be the last run for him (and Dad).  Season starts August 1^st, and I, for one, can’t wait!  

 

Who wouldn't want one of those? – 100 Years Ago:

The Buffalo News
Buffalo, New York
31 July 1926

“PUNCH-PROOF” NOSE
IS NEWEST INVENTION

LONDON, July 30. – A “punch proof” nose for pugilists was reported today from Vienna to have been devised by a Dr. Peoria, a nose specialist. The nose consists for pieces of ivory, silver and wire. The inventor was said to be anxious to provide Jack Dempsey with a nose, explaining that Dempsey’s paraffine nose would be a serious handicap in his forthcoming fight with Gene Tunney.

 

Lee’s Connecticut Chronicles:

Dear Nutmeggers,

Another fortnight is upon us, and summer is slipping away. By the time you're reading this, it will be August — the Sunday night of months. I've dreaded Sunday night for as long as I can remember: the palpable end of freedom and fun, dusk settling in while Monday looms just past the horizon. August feels the same way. The days are noticeably shorter, the sun’s warmth seems less vital, and the excited planning for summer trips gives way to back-to-school shopping and packing, while thoughts drift toward the inevitable return to normalcy that September always brings.

But just as Sunday night always gives way to a productive Monday, August has its own work to do — and so do we. The courts didn't take the summer off, and neither did our coverage cast of characters. So, before you head back out to squeeze the last drops out of the season, take a few minutes with this issue. There's plenty here worth your Sunday-night attention.

This edition we address something I’ve not thought about since, well, probably ever – the Eleventh Amendment. This case is useful next time you have a coverage dispute involving a state or state agency.

Until next time, keep keeping safe.

Lee
Lee S. Siegel
[email protected]

 

Love won out - they were married in 1929 and remained so until his passing in 1970 – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
31 July 1926

Ma Turns Trip
To Altar Into
Walk to Rail

Julius Kozlowski, eighteen years old, 60 Coit Street, who was charged by his mother, Rose, with obtaining a marriage license to wed Lottie Kulawiak, twenty-one years old, by swearing he was of age, was arraigned before Judge Woltz in city court, charged with being a wayward minor. He was placed on probation.

The mother objected to him marrying the girl because she was older than her son. She procured a warrant for her son's arrest.

 

Ryan’s Federal Reporter:

Hello Loyal Coverage Pointers Subscribers:

My oldest son had his first opportunity to showcase is karate moves as part of his dojo’s demonstration team. His team looked crisp and he will do it again as part of today’s graduation ceremony. We’ve come a long way since white belt. My how time flies?

This edition, I have summarized a Second Circuit summary order remanding a case to the district court for further assessment of jurisdictional issues. An interesting twist on a classic diversity of citizenship question.

Until next time…

Ryan
Ryan P. Maxwell
[email protected]

 

Never Insult the Bishop. – 100 Years Ago:

The Buffalo News
Buffalo, New York
31 July 1926

WOMAN INSULTS BISHOP,
LYNCHING THREATENED

PUEBLA, Mexico, July 30. – A Puebla woman came near to being lynched by a crowd of faithful here late Wednesday when she started to insult a bishop in the act of blessing and baptizing children in the cathedral.

The woman attempted to reach the prelate and strike him, but the crowd withheld her, whereupon the worshipers began to beat her. Police rushed into the cathedral, rescuing the woman with difficulty, although not before she had been severely beaten and cut about the face.

 

Storm’s SIU:

Vacation.  More cases in two weeks.  

Scott
Scott D. Storm
[email protected]

 

Meet George Jetson – 100 Years Ago:

Times Union
Brooklyn, New York
31 July 1926

FAMILY AIR FLIWER
MAY REPLACE AUTO

LONDON, July 31. – British aeronautical experts who have witnessed the performance of the new autogiro or “windmill” airplane designed by Senor de la Cierva, the Spanish inventor, are looking forward to the approaching day of the flying automobile.

Cierva himself and A.V. Roe, head of the airplane concern which has just completed one new auto-gyro to the order of the British Air Ministry and is at work on two others are both optimistic that airplane design is at last on the right track for the development of a machine that can land safely on a country road or a tennis court. The question of vertical ascent, however, has yet to be solved.

From the point of view of the development of a flying automobile in the near future, much depends upon experiments which will be conducted at Southhampton shortly with a 25-35 horsepower auto-gyro now in course of construction.

 

Fleming’s Finest:

Hi Coverage Pointers Subscribers:

This edition’s case from the Supreme Court of California considered whether an insured may state a viable cause of action for declaratory relief regarding coverage and liability under an excess insurance policy even if all of the underlying insurance coverage has not yet been exhausted. The court also held that an insured suing an excess insurer for tortious breach of the implied covenant of good faith and fair dealing does not have to allege the prior exhaustion of all underlying insurance. It is sufficient to allege facts that show coverage will attach and that the misconduct has impaired the recovery of benefits under the policy.

See you in a fortnight,

Kate
Katherine A. Fleming
[email protected]

 

Hair Raising Costs. – 100 Years Ago:

Finger Lakes Times
Geneva, New York
31 July 1926

HAIRCUTS GO
TO 60 CENTS

Bobbed Hair Men Will
Be Common Sight is
Doleful Prediction

Haircuts, sixty cents.

An excitement comparable only to war days or election time stirred the city today. Men gathered on street corners to discuss the momentousness of the event. Everywhere there was an air of gloom. The reason – haircuts, sixty cents.

The news was rapidly broadcasted by word of mouth today when the barbers of the city announced their new schedule of prices, to go Into effect on Monday, August 2. The revised price list was given out in full by the master barbers today.

Bob-haired men will be a common sight on the streets of Geneva within a week or so, was the doleful prediction made by a street corner group this morning after the news had got around. Most of the men will have to carry violins and wear flowing neckties in order to give an appearance of naturalness to their gated head dressing, another observed.

The first indications of what might be expected came this afternoon when it was rumored that man entered a Linden street barber shop and in reply to the question "Haircut?" stated, "Yes, shave it all off so I won't have to worry about it until next year."

It is understood that local banks are anticipating a large business next month due to the fact that there will be an increased demand for loans and mortgages on houses by men who wish, to raise enough money to haircut and shave.

 

Gestwick’s Garden State Gazette:

Please see my column in the issue attached.  I’m getting married….

Evan
Evan D. Gestwick
[email protected]

 

U.S. Grant's Name Wasn't Ulysses – 100 Years Ago:

Brooklyn Eagle
Brooklyn, New York
31 July 1926

Union General’s Name
Hiram U., Not U.S. Grant

Washington, July 31 (AP) – The man known to history as “Ulysses Simpson Grant,” General of the Union Armies and President of the United States, had been christened Hiram Ulysses Grant, his grandson, Maj. U.S. grant 3d, disclosed here in a luncheon talk.

“History’s error,” Major Grant said, “was caused by confusion on the part of the Congressman who recommended Hiram Ulysses Grant for West Point, The Representative mixed his name with that of his brother, Simpson Grant, and the erroneous name became fixed.”

 

O’Shea Rides the Circuits:

Readers,

It is going to be a long four days. Tonight we have rehearsal dinner, followed by a wedding on Friday. Another wedding on Saturday, a large congrats to Mr. Gestwick. Then we wrap up Sunday with a nephew’s birthday party at noon. As Jackson Browne stated I will be running on empty, if running at all by Sunday. But it will all be in good fun.

This week I have a quick read from the Third Circuit concerning an online application process and whether coverage selection forms were readily available as required under New Jersey law.

Until Next Time,

Ryan
Ryan P. O’Shea
[email protected]

 

Nah, Keep it A Secret – 100 Years Ago:

Rochester Journal and the Post Express
Rochester, New York
31 July 1926

Tell Her the Truth

DEAR MISS FAIFAX:

I am a young man of twenty-three, and for almost four years have been going about, although not steadily. With a young woman of twenty-one.

She is good natured, good looking, and everything one could expect a girl to be. She tells me she loves me more than anyone else in the world, and I am convinced that she does.

All this time I have been taking her out more of less as a friend, and have also gone about with other girls. She expects me very soon to ask her to be my wife. Although I like her very much I cannot love her enough to marry her. She would have a fit if I told her this.

Shall I tell her that I do not love her enough to marry her? Or shall I keep on going about with other girls and gradually drop her? AL.

Since your friend has swallowed her pride to the extent of telling you that she loves you more than anyone else, in face of the fact that you and she have been going about only as friends and you have gone also with other girls, I think she is not so sensitive but that she will survive you’re telling her the truth frankly.

Let her know in plain words that while you value her friendship you are not in love with her and do not care to devote yourself to her more than to any other of several girls in your circle of friends. If this plain talk offends her all you can do is to cease going about with her altogether. A girl who takes the initiative in making love to a man must be prepared or frank, direct truth from him.

 

LaBarbera’s Lower Court Library:

Dear Readers:

I blinked and August came knocking. Looking forward to another weekend of fun activities including a spelling bee, wedding, and my men’s league playoff game!

Reporting on a Rockland County decision where the court dismissed all claims against the primary insurance carrier, after previously doing the same for the claims made against the broker. The court found that the subject endorsement adequately advised the insured of available SUM/UM coverage, and the remaining claims were barred by the statute of limitations.

Until next time…

Isabelle
Isabelle H. LaBarbera
[email protected]

 

True Love? – 100 Years Ago:

New Orleans States
New Orleans, Louisiana
31 July 1926

He Is Doubtful

DEAR MISS FAIRFAX:

I am 16 and love a boy 20. I am considered very good looking and have lots of boyfriends. One of them is very good looking and I love him better than any of my other friends. All the girls lake him. He told me he loved me but his manners do not show it. When he sees me on the street he has nothing to say and never asks me for a date. I met him about three weeks ago. Do you think he loves me? Don’t tell me to forget him, I love him too much. LOVESICK

How can you love a boy you’ve known only three weeks, never had a date with and doesn’t even have much to say to you? When a boy really cares for a girl, he makes as many opportunities as possible to see her. Don’t be silly and run after the boy, because he very obviously is not in love with you now and running after him will make him dislike you.

 

Lexi’s Legislative Lowdown:

Dear Readers,

This weekend we are seeing Ella Langley. I can’t decide what my favorite song of hers is, but I love her music and always have her song “Choosin’ Texas” stuck in my head. Can’t wait!

This week we discuss federal legislation recently introduced to address staged collisions involving commercial motor vehicles. Although the Bill is still in its early stages, it is one to watch given the impact staged accident schemes can have on commercial automobile claims and insurance costs.

Thanks for reading,

Lexi
Lexi R. Horton
[email protected]

 

Here's a Prediction That Came True – 100 Years Ago:

The Lewiston Daily Sun
Lewiston, Maine
31 July 1926

PRES. OPTIMISTIC ON
AVIATION FUTURE

Feels Exact Prediction
Impossible – Air Mail
Returns Good

Coolidges May Leave for
Plymouth In Week – Vacation of
Officials Delays Departure

Paul Smiths, N. Y., July 80. – (AP) - President Coolidge believes that commercial- aviation will be developed to the point that it will be conveniently possible to carry merchandise as well as passengers in the air.

Although prediction for any Industry so new as aviation is looked upon by Mr. Coolidge as uncertain, he feels that with Improvements and inventions that can be looked for in aviation a useful and practical commercial field will be opened by the airplane.

 

Victoria’s Vision on Bad Faith

Dear Readers,

This past weekend my husband won a kayak (yes, a kayak) as part of a bachelor/stag party. One thing led to another and now I have a kayaking trip planned with my husband, his brother and his brother's wife for next weekend. This seemingly free kayak has turned into a serious investment seeing that for the next week I'll be acquiring my own kayak, oars, lifejackets, etc. So far, we have purchased a roof rack that is en route to our house. Notwithstanding, I'm looking forward to next week's adventure as the summer begins to wind down.

This week, New York courts are quiet on bad faith, so this week's column includes a Pennsylvania federal court case granting an insurer's motion to dismiss the plaintiff's bad faith allegation against it pertaining to valuation of the loss.

Have a good weekend,

Victoria
Victoria S. Heist
[email protected]

 

New Inventions – 100 Years Ago:

Beaumont Journal
Beaumont, Texas
31 July 1926

New Inventions

A SELF-FEEDING shaving brush injects sufficient cream into the bristles for a shave. The container, made of hard rubber and resembling an oil can in shape, holds enough shaving cream for two months’ use. The bristles are set in rubber and the brush is ornamented with a nickel-plated cap.

When working on your car at night, you often wish you had an extra hand to told your pocket flashlight. Such a device is now made to clamp the lamp on your head so that the beam of light is kept automatically on the spot when you are working. The flashlight is held in a clip made from strong wire fastened with four rivets to a small piece of sole leather. This in turn is riveted to a skate strap. When some inaccessible spot is to be reached with a screwdriver, the lamp may be strapped on the wrist.

 

Shim’s Serious Injury Segment

Hi Readers,

Hope everyone has been well since our last column.

As we approach the August 3^rd MLB trade deadline, perhaps the biggest headline has been whether the Detroit Tigers will trade free-agent-to-be, Tarik Skubal (7-5, 2.70 ERA, 2.68 FIP, 3.0 bWAR, 2.6 fWAR, 11 K/9, 0.922 WHIP). The Tigers find themselves in fourth place in the AL Central, 5 games behind the first place Chicago White Sox, and 3.5 games behind the third wild card spot. At 5-5 in their last 10 games, the Tigers have not strung together consecutive wins or shown signs of being a World Series caliber team. While they can certainly make up seemingly surmountable deficits in the standings, but they nevertheless have a franchise-altering decision to make by next Monday. If the Tigers decide to trade Skubal, who has won back-to-back AL Cy Young awards, they can demand a return featuring multiple near-MLB-ready top prospects and draft picks. Should they decide not to trade him, the Tigers will likely have to settle for a compensatory draft pick as they watch their franchise player and generational talent sign with the highest bidder in free agency.

The objective and intelligent baseball decision is to trade Skubal and seek a significant return (think of what the Washington Nationals received for Juan Soto, i.e., CJ Abrams, James Wood and McKenzie Gore). But can the Tigers justify to their clubhouse and fans alike, trading their clear best player while only 3.5 games out of a playoff spot, and coming off a 2025 season which ended with a dramatic extra-innings ALDS Game 5 elimination?

We will soon find out.

Today I have shared an appeal decided by the Supreme Court of New York, Appellate Division, Fourth Department, which upheld the Supreme Court, County of Erie’s, decision denying plaintiff-appellant’s cross-motion for summary judgment on the issue of serious injury in accordance with CPLR 5102(d) due to conflicting expert opinions.

See you in the next issue!

Stephen
Stephen M. Shimshi
[email protected]

 

Adam and Eve's Tree Located – 100 Years Ago:

Gnowangerup Star
Gnowangerup, Western Australia, Australia
31 July 1926

EVE’S APPLE TREE.

Among the many botanical curiosities of Ceylan is a fruit supposed to bear the marks of Eve’s teeth!

The tree on which it grows is known by the significant name of “Forbidden Fruit,” or “Eve’s Apple Tree.” The blossom is pleasantly scented, and the fruit is orange in colour outside and a deep crimson within. Each fruit has the peculiar appearance of having a piece bitten out of it.

This fact, together with its poisonous quality, led to the belief that it was the forbidden fruit of the Garden of Eden, and serves the useful purpose of warning such as might be tempted by its lovely appearance to imitate Eve and take a bite. 

 

New England Almanack

Dear Readers:

For this issue we bring you a New Hampshire Supreme Court decision that rejected an insurer’s reliance upon the insured’s UIM coverage waiver in her application for an umbrella policy with a $1 million limit to deny coverage for an injured passenger’s claim for UIM benefits under a renewal policy with an increased $5 million limit and a Rhode Island Supreme Court decision that upheld the CGL insurer’s coverage denial based upon its auto use exclusion and the auto insurer’s coverage denial based upon the no-direct action statute and settlement reached with the at-fault driver.

How is it almost August?

Barbara
Barbara A. O’Donnell
[email protected]

Alex
Alexander G. Henlin
[email protected]

Iryna
Iryna N. Dore
[email protected]

 

Don't Fall Asleep on the Mayor. – 100 Years Ago:

The Buffalo News
Buffalo, New York
31 July 1926

SCHWAB BECOMES ROILED
WHEN MAN FALLS ASLEEP

While Mayor Schwab and Commissioner Perkins were engaged in erudite debate at the meeting of that honorable body, the city council, Friday afternoon, a spectator, close to the front, slumped in his seat and went sound asleep. The mayor was outraged.

"Where's the cop,” he asked, as he looked about for the sergeant at at-arms. The sarge responded and roused the soporific spectator and warned him never, never, never to do anything like that again.

 

North of the Border:

We were at the Calgary Folk Festival on Saturday afternoon. My husband’s phone rang. It was his brother. “Dad had another heart attack. He was taken to hospital by ambulance. He called his own ambulance.” Of course he did. Dad was 3,000 miles away. Monday morning we were there. My husband and I found my 97 year old father-in-law sitting up in bed, hooked up to monitors reading the Montreal Gazette.  This was his second heart attack in two years. He has been told that he is nearing the end of his road. He said – “I’m 97 – what else is new?” He’s an inspiration.

What is the meaning of “fully secure” in a commercial insurance policy? Read on for the fight to define those two words.

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]

• Recission Achieved on Policy Application Misrepresentation.
• Court Finds Conflicting Terms in Policy May Alter Definition of “Bodily Injury”.
• Under Pennsylvania Law, which Permits Recission of an Auto Policy for Fraud or Misrepresentation, Uninsured Motorist Arbitration Will Proceed because the Offending Tortfeasor’s Policy was Timely Rescinded.
• On a Motion for Summary Judgment, Carrier Failed to Eliminate All Interpretations that would Justify a Determination of No Coverage.

 

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

• Judgment Modified/Reduced for Certain Payments Made Before a Formal Claim was Submitted.

• Questions of Fact on What Coverage Was Requested, and the Ongoing Relationship Between Broker and Insured, Preclude Summary Judgment.
• Release of Claims Stood Even Though Injuries Progressively Worsened After Early Settlement Acceptance.

 

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

• Eleventh Amendment Bars Insurance Action Against the State.

 

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

• Declaratory Judgment Action Lacking Diversity Jurisdiction Remanded To Assess Potential Dispensability of Jurisdictional Spoilers.

 

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

• Gone fishing.

 

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

• Claims for Declaratory Relief and Bad Faith Not Precluded by Lack of Exhaustion of Underlying Insurance.

 

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

• Federal Court Orders Counsel to Have a Fantastic Day and Exercise Diligence in the Pursuit of a Long and Happy Marriage. Thousands Cheer.

 

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

• Electronic Signature And Website Link to Coverage Selection Form Complied New Jersey Statute Requiring Coverage Selection Forms To Be Readily Available.

 

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

• Court Finds Insurer Had No Duty to Advise Insureds to Purchase Additional SUM/UM Coverage and Dismisses Breach of Contract and Negligence Claims.

 

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

• Proposed Federal Legislation to Prohibit Staged Collisions with Commercial Motor Vehicles.

 

 

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

• Pennsylvania Federal Court Dismisses Plaintiff's Bad Faith Allegation Regarding Valuation.

 

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

• The Appellate Division, Fourth Department, Upholds the Supreme Court, County of Erie’s, Decision Denying Plaintiff-Appellant’s Cross-motion for Summary Judgment on the Issue of Serious Injury in Accordance with CPLR 5102(d) Due to Conflicting Expert Opinions.

 

NEW ENGLAND ALMANACK
Barbara A. O’Donnell
[email protected]

Alex G. Henlin
[email protected]

Iryna N. Dore
[email protected]

• UIM Rejection in Umbrella Policy Application Did Not Apply to Insured’s Purchase of Increased Liability Limit in Subsequent Renewals.
• Summary Judgment for Insurers Affirmed Regarding Pro Se Plaintiffs’ Effort to Avoid Auto Use Exclusion in CGL Policy and No Direct Action Provision in Auto Policy.

 

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

• Ontario Motions Court Nixes Fire Coverage Over Vacant-Building Warranty:  Fully Secured” Means Every Entry Point.

 

That’s all she wrote.  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, New Jersey, and across New England.

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

Barbara A. O’Donnell

Brian F. Mark

Scott D. Storm

Alexander G. Henlin

Iryna N. Dore

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
Jessica L. Deren

Ryan P. O’Shea
[email protected]

 

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

 

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri

Lee’s Connecticut Chronicles

Ryan’s Federal Reporter

Storm’s SIU

Fleming’s Finest

Gestwick’s Garden State Gazette

O’Shea Rides the Circuits

LaBarbera’s Lower Court Library

Lexi’s Legislative Lowdown

Victoria’s Vision on Bad Faith

Shim’s Serious Injury Segment

New England Almanack

North of the Border

 

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

 

07/29/26         Union Mutual Fire Ins. Co. v. 844 Knickerbocker, LLC, et al.,
Appellate Division, Second Department
Recission Achieved on Policy Application Misrepresentation.

In 2020 and 2021, the plaintiff Union Mutual issued commercial insurance policies to the defendants 844 Knickerbocker, LLC, and Sanjaya Mallick (hereinafter together the defendants) based on applications they submitted. After a personal injury action was commenced against the insureds, Union Mutual rescinded the policies based on its determination that the defendants' property contained three apartment units as opposed to two apartment units, which is what had been listed on the insurance applications.

Union Mutual then commenced this action for a judgment declaring, inter alia, that the insurance policies were void ab initio due to material misrepresentations made by the defendants during the application process, and that it was not obligated to defend or indemnify the defendants in the underlying action.

An insurance company has a right to rescind an insurance policy if the applicant makes a material misrepresentation on the insurance. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application

Here, the Union Mutual demonstrated its prima facie entitlement to judgment as a matter of law on the complaint. The plaintiff established that the defendants made a misrepresentation in the applications for the subject insurance policies that were material by submitting an affidavit of its underwriter, as well as certain guidelines showing that a higher premium would have been charged if the correct information had been disclosed.

Editor’s Note:  Kudos to our coverage team, Agnes Wilewicz, Kate Fleming, and Isabelle LaBabera for this victory.

 

07/24/26         The Buffalo City Cemetery v. Netherlands Ins. Co.
Appellate Division, Fourth Department
Court Finds Conflicting Terms in Policy May Alter Definition of “Bodily Injury”.

Buffalo City Cemetery (“BCC”), commenced this action seeking a declaration that defendant, Netherlands Insurance Company (“Netherlands”), is obligated to defend and indemnify BCC in an underlying lawsuit, Robinson v Buffalo City Cemetery, Inc.

BCC owns and operates a cemetery in West Seneca, bordered by Cayuga Creek. When part of the bank near the creek collapsed due to ground subsidence, BCC disinterred and reburied the remains of 215 buried individuals without notice to or permission from the next of kin of the deceased.

The Robinson action seeks damages for emotional distress, mental suffering, and mental anguish, among other causes of action. In a separate proceeding, BCC obtained a court decision granting its request for a judgment approving the relocation, nunc pro.

During all relevant time periods, BCC was covered by general liability policies issued by Netherlands. Following commencement of the Robinson action, Netherlands agreed to "provide a defense to BCC" in the Robinson action "subject to a partial disclaimer and complete reservation of rights." Subsequently, Netherlands disclaimed "any duty to defend or indemnify BCC" with respect to the Robinson action.

At the same time, Netherlands stated that "nothwithstanding [the] disclaimer of coverage, [it] agree[d] to continue to provide a courtesy defense to BCC, without admitting coverage, until further written notice to or from BCC." According to Netherlands, the plaintiffs in the Robinson action did not sustain any bodily injury or property damage, as those terms are defined in the coverage sections of the policies, inasmuch as the Robinson plaintiffs alleged only emotional distress, mental suffering, and mental anguish. Netherlands relied on the provision in the policies that defines bodily injury as "physical injury, sickness or disease sustained by a person [including] mental anguish, mental injury, shock, fright or death that results from such physical injury, sickness or disease" (emphasis added). The pre-answer motion to dismiss relied on the same provision.

BCC opposed the motion, asserting that an applicable endorsement, i.e., the Funeral Homes or Cemeteries endorsement, provided that "'Bodily injury,' including mental anguish, or 'property damage' arising out of the rendering or failure to render professional services as a funeral director, embalmer, intern or while you are doing business as a cemetery shall be deemed to be caused by an 'occurrence.' All acts or omissions in the furnishing of these services to the human remains or cremains of any one person will be considered one 'occurrence' " (emphasis added). BCC further asserted that the endorsement would cover damages BCC was required to pay due to "injury to or destruction of . . . [t]ombstones, urns, caskets, linings or fittings, casket cases, crypts[,] mausoleum[s] or other facilities for the care or burial of a deceased human body, belonging to others and in the care, custody or control of the insured for the purposes of burying or caring for a deceased human body."

Netherlands initially contends that its disclaimer of coverage does not give rise to a justiciable controversy. We reject that contention. CPLR 3001 permits the court to "render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed.

Netherlands further contends that the court should have granted its motion to dismiss in its entirety because the policies at issue do not cover "mental anguish" that does not "result from" a concomitant bodily injury, i.e., "physical injury, sickness or disease sustained by a person." We disagree. The question whether the Funeral Homes or Cemeteries endorsement expanded the definition of bodily injury so as to encompass "mental anguish" cannot properly be resolved on a pre-answer motion to dismiss inasmuch as the endorsement is susceptible to more than one reasonable interpretation.

Netherlands contends, and we agree, that the court erred in denying that part of its motion seeking dismissal of BCC's claims for punitive damages and attorneys' fees. There are simply no claims by BCC in this action that would permit the recovery of punitive damages, such as egregious conduct or "an independent tort . . . of the egregious nature set forth in [case law][,] . . . directed to [the] plaintiff[,] . . . and . . . part of a pattern directed at the public generally"

BCC's claim for attorneys' fees "is governed by the general rule that attorneys' fees and other litigation expenses are 'incidents of litigation' that the prevailing party may not collect 'from the loser unless an award is authorized by agreement between the parties or by statute or court rule' " Although parties to a contract, such as an insurance policy, can contract for such fees or expenses, the parties here did not do so.

 

07/22/26        Metropolitan Group P&C Insurance Company v. Newkirk
Appellate Division, Second Department
Under Pennsylvania Law, which Permits Recission of an Auto Policy for Fraud or Misrepresentation, Uninsured Motorist Arbitration Will Proceed because the Offending Tortfeasor’s Policy was Timely Rescinded.

Metropolitan Group Property & Casualty Co. (“Metlife”), commenced this proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim by Newkirk for uninsured motorist benefits in connection with a motor vehicle collision between Newkirk's vehicle and a vehicle driven by the proposed additional respondent John C. Chogllo. Embark General Insurance Adjusters, LLC (“Embark”), issued a policy inuring Chogllo's vehicle, opposed the amended petition.

Under Pennsylvania law, which governs this action, The Pennsylvania Supreme Court has held, however, that while an automobile insurance policy may be retroactively rescinded as to an insured who has made a misrepresentation material to the acceptance of risk by the insurer, the policy may not be retroactively rescinded with respect to third parties "who are innocent of trickery and injured through no fault of their own. Rescission of an insurance policy, as to third parties, has been precluded in instances beyond the 60-day period following the issuance of the policy.

Here, Embark's submissions rebutted Metlife's prima facie showing of a preliminary issue that would justify a stay. Embark established that it properly rescinded the policy at issue under Pennsylvania law with respect to Chogllo, based upon the material misrepresentations that Chogllo made in his application for insurance. Embark also established that such rescission was ab initio and occurred within the 60-day period after the issuance of the policy. As a result of that rescission, Newkirk was precluded from receiving protection under Embark's policy.

Accordingly, the UM arbitration will not be stayed.

Editor’s Note – In NY, an Auto Liability policy cannot be retroactively rescinded so as to deny coverage to an innocent claimant.

 

07/22/26         2186 Atlantic, LLC  v. Associated Industries Insurance Co.,
Appellate Division, Second Department
On a Motion for Summary Judgment, Carrier Failed to Eliminate All Interpretations that would Justify a Determination of No Coverage.

In May 2023, 2186 Atlantic, LLC (“Atlantic”) sued  Associated Industries Insurance Co., Inc. (“Associated” ), and AmTrust E & S Insurances, Inc. “AmTrust”), for a judgment declaring that Associated is obligated to defend and indemnify the plaintiffs in a personal injury action entitled Murati v 2186 Atlantic, LLC, (“underlying action”), and to recover damages for breach of contract. The defendants thereafter moved for summary judgment dismissing the complaint and declaring that Associated is not obligated to defend or indemnify the plaintiffs in the underlying action. Atlantic opposed.

To be relieved of its duty to defend on the basis of a policy exclusion, the insurer bears the heavy burden of demonstrating that the allegations of the complaint [in the underlying action] cast the pleadings wholly within that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision. An insurer relying on an exclusion must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case. Any ambiguity in an exclusionary clause must be construed against the insurer.

Contrary to the defendants' contention, they failed to establish entitlement to summary judgment dismissing the breach of contract cause of action because they did not eliminate all triable issues of fact as to the applicability of an exclusion in the subject insurance policy.

 

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

Potpourri

07/24/26         Carrier Corp. v. Allstate Ins. Co.
Appellate Division, Fourth Department
Judgment Modified/Reduced for Certain Payments Made Before a Formal Claim was Submitted.

Firemans Fund (“FFIC”)served as an excess carrier to Carrier, and was engaged in litigation over payment of certain asbestos exposures.  At the lower court, Carrier was awarded a substantial judgment against FFIC. FFIC, now challenges that award and judgment.

The Fourth Department summarily rejected, and declined to revisit, FFIC’s claims that the injury-in-fact fell outside of its policy terms.  The Court also rejected FFIC’s claims that the underlying insurance should not have been able to erode its limits for payment of defense costs related to claims that were dismissed. 
Not all was lost, however, as the Court also found that Carrier breached a condition precedent by noting making a “definitive claim” until, apparently, 2017.  As such, those payments from May of 2014 through December of 2016 were not recoverable and the judgement modified accordingly.

 

07/24/26         Adams v. Blodgett
Appellate Division, Fourth Department
Questions of Fact on What Coverage Was Requested, and the Ongoing Relationship Between Broker and Insured, Preclude Summary Judgment.

Plaintiff commenced the proceeding after she fell in the parking lot of a building owned by defendant Blodgett.  Upon tender to his insurer, Blodgett claim was denied when it was determined that he, in fact, was not an insured under the policy covering the property.  Blodgett, in turn, commenced a third-party action against his broker, Cesar, asserting that the broker should have secured coverage for him personally.  As part of the lawsuit, Blodgett specifically alleged that he requested Cesar to ensure liability coverage for him, personally, for the building in question.

The Fourth Department recited the current standard for broker liability.  As an initial threshold, a typical insured/broker relationship only requires the broker to obtain the insurance requested by his or her principal/client.  And, if that insurance is not available, the broker has a duty to advise of the unavailability of coverage.  If there is not a specific request, however, negligence claims against the broker will generally fail.

A corollary rule exists where there is a special relationship created between the insured and broker.  The hallmarks of which are (1) agent compensation beyond premium percentage, (2) there is an interaction where insured justifiable relies on the expertise of his or her retained broker and/or (3) there is a history of the parties relationship which creates the expectation that the insured may rely upon the broker to ensure his or her insurance needs. Absent a special relationship, however, the test reverts back to the general negligence analysis discussed in the earlier paragraph.

Upon motion for summary judgment, Cesar raised a number of defenses.  The first of which was that Cesar was retained by Blodgett’s business, and was not in privity with Blodgett personally.  Blodgett attempted to overcome this argument by noting Cesar did not raise this position as an Affirmative Defense in its Answer.  The Appellate Division rejected Blodgett’s argument when it noted that the duty, if any, Cesar owed was a fundamental issue of Blodgett’s own claim. Thus, a denial of that duty in the Cesar Answer was sufficient to preserve the issue.  An affirmative defense is not required when, as here, the defense speaks to the burden that is squarely within plaintiffs’ case in chief. 

On the merits, however, the Appellate Division was persuaded that a relationship between Blodgett and Cesar did exist.  Blodgett was, too, a client of Cesar and made a specific request for coverage of Cesar.  The Record suggested that Blodgett and an associate both met with Cesar and specifically requested the coverage at issue.  Cesar was unable to sufficiently refute Blodgett’s testimony, although it is clear that Cesar disputed being requested to procure the coverage.  Accordingly, the Court found a question of fact that precluded both parties requests for summary judgment.

In addition, the Court also addressed Cesar’s contention that there was no special relationship formed between itself and Blodgett.  In finding a question of fact on this issue, the Appellate Division noted that it was unclear on the Record whether the previous dealings “would have put objectively reasonable insurance agents on notice that their advice was being sought and specifically relied upon.” 

 

Peiper’s Point – With each decision, the protections for brokers seemingly get smaller and smaller.  We are a long way away from the initial decision of Murphy v. Kuhn from thirty years ago. 

 

07/24/26        Edwards v. Singer
Appellate Division, Fourth Department
Release of Claims Stood Even Though Injuries Progressively Worsened After Early Settlement Acceptance.

Plaintiff was injured in rear-end collision with a vehicle operated by Singer.  Plaintiff, thereafter, entered into a binding settlement agreement, with Release, as part of a negotiated settlement.  Plaintiff brings this action now, seeking damages for injuries related to the aforementioned collision. Singer immediately moved to dismiss based upon the clear language of the Release which barred any future litigation. 

The Appellate Division began its analysis of this matter by noting that a Release generally creates a complete bar to litigation, but notes it may be vacated if it was procured through duress, illegality or mutual mistake.  Here, the Release was sufficiently broad so as to encompass any potential claims against Singer.  At that time, the burden shifted to plaintiff to show why the Release was invalid.,

Plaintiff began his argument by focusing on mutual mistake.  In essence, plaintiff argued that he was unaware of the severity of his injuries when the settlement was executed.  And, when the injuries progressed to the point that surgery was needed, it became clear that legal action should be taken.  The Court rejected this argument by noting that plaintiff was treated at the emergency room for neck/shoulder injuries on the date of the incident.  He was, thereafter, treated for those injures by his chiropractor in the weeks/months that followed.  The court noted that progressive worsening of those injuries, leading to surgery, was a “consequence or sequelae of known injuries.” As such, the Release was valid and enforceable as to those injuries.

Plaintiff also argued that the Release was fraudulently obtained.  The Court summarily rejected this claim where it was shown that plaintiff was unable to come forward with any evidence that Singer, or his insurance company, made any false statements. Or, further, that plaintiff relied on anything said to him by the insurance company in deciding to accept settlement and sign the Release.

As a final matter, plaintiff also attached Singer’s motion on procedural grounds.  Plaintiff argued that despite being classified as a Motion to Dismiss, the application should have been characterized as a Motion for Summary Judgment (and, thus, presumably, permitting plaintiff to seek discovery). The Appellate Division noted that the motion was specifically identified as a Motion to Dismiss, and there was nothing in the Record suggesting that Singer ever sought to convert the application to one for summary judgment.

There was a two Justice dissent which found that the worsening of plaintiff’s injuries did constitute a mutual mistake and, thereby, the Release should have been vacated.

 

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

07/17/26        Strathmore Ins. Co. v. Meriden Homestead II LLC
United States District Court, D. Connecticut
Eleventh Amendment Bars Insurance Action Against the State.

The district court dismissed the carriers’ declaratory judgment action against various state agencies, holding that the agencies were immune from suit in federal court under the Eleventh Amendment.

The case involves claims that the insured property owner encroached on state park lands, in violation of an easement agreement. The state alleged that the owner placed padlocks on a gate, installed a paved basketball court with embedded basketball hoops, and posted “No Trespassing” signs in the park, among other things. The state demanded that the owner remedy the encroachments.

Strathmore and GNY provided successive CGL policies to the insured property owner. The carriers claimed they owed no coverage to the insured for the State’s claims in state court regarding alleged violations of the easement. They commenced this suit against the insured and various state agencies.

Ultimately, the court dismissed the suit, finding that the state agencies were protected from having to defend themselves in federal court under the Eleventh Amendment. The Eleventh Amendment of the Constitution bars suits against a state in federal court unless the state has waived its immunity. That immunity extends beyond the states themselves to state agents and state instrumentalities that are, effectively, arms of a state.

The court agreed that the state had not waived its immunity and, because the suit did not allege a violation of federal law, it dismissed the suit. The court also found that it lacked diversity jurisdiction over the state agencies because they are not a “citizen” under the diversity statute. “There is no question that a State is not a 'citizen' for purposes of the diversity jurisdiction.”

 

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

 

07/29/26          Burlington Ins. Co. v. American Empire Surplus Lines Ins. Co.
Second Circuit Court of Appeals
Declaratory Judgment Action Lacking Diversity Jurisdiction Remanded To Assess Potential Dispensability of Jurisdictional Spoilers.

In March 2010, Dayton Beach Park No. 1 Corp. hired Skyline Restoration Inc. to replace five apartment-complex roofs in Rockaway Beach; Skyline used PCGNY Corp. as a subcontractor. Nearly two years after completion, Superstorm Sandy struck and four of the five roofs failed (the fifth was damaged). Affiliated FM Insurance Company paid $4,665,905 for roof repair/replacement and $284,095 for underlying property damage.

Affiliated, as Dayton Beach’s subrogee, sued Skyline in New York Supreme Court to recoup what it paid (the “Underlying Action”). Skyline sought indemnification from PCGNY and both tendered claims to their insurer, The Burlington Insurance Company. Burlington then filed a declaratory judgment action seeking rulings that it owed no duty to defend Skyline or PCGNY in the Underlying Action, owed no reimbursement to Affiliated, could withdraw its courtesy defense of PCGNY, and that American Empire Surplus Lines Insurance Company and Navigators Insurance Company provided primary coverage ahead of Burlington.

The district court granted Burlington summary judgment on the first three requests and deemed the “priority of coverage” issue moot on the ground that damage to an insured’s own work is not a covered “occurrence” under New York CGL law, prompting this appeal.

The Second Circuit did not get very far, for want of jurisdiction. Specifically, before addressing any merits, the Second Circuit confirmed it must have subject matter jurisdiction and focused on diversity under 28 U.S.C. 1332, which requires complete diversity is required among adverse parties. The panel recited the parties’ citizenships and observed there would be no problem if the parties were only Burlington (IL/CT), American Empire (DE/OH), Affiliated (RI), Skyline (NY), and PCGNY (NY). The “fly in the ointment” (a direct quote) was Navigators, which, upon further briefing, notified that court that its principal place of business was Connecticut, rendering Navigators non-diverse from Burlington. The court further held that realignment would not cure the defect because, even aligning parties by their “actual collision of interests,” Navigators, Skyline, and PCGNY would still share New York citizenship, destroying complete diversity.

Still, however, the Second Circuit soldiered on. The court considered dismissing Navigators as a nondiverse, dispensable party under Newman‑Green and related precedent, but emphasized that it must first evaluate prejudice to the remaining parties. However, the parties’ submissions conflicted.

Specifically, Skyline urged dismissal, asserting minimal prejudice given other carriers’ limits, while American Empire and Burlington argued Navigators is indispensable because Burlington alleges Navigators must “first fund” any covered damages. Because this was a fact‑dependent prejudice inquiry, the Second Circuit remanded for the district court to decide whether dismissing Navigators would prejudice any party—for example, by affecting the priority or sufficiency of coverage. The panel vacated the judgment and directed that, after the district court rules, any party may restore the appeal by letter, and the same panel will retain jurisdiction.

 

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

Vacation.  More cases in two weeks. 

 

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

07/27/26         Fox Paine & Co, LLC v. Twin City Fire Ins Co.
Supreme Court of California
Claims for Declaratory Relief and Bad Faith Not Precluded by Lack of Exhaustion of Underlying Insurance.

Fox and Paine are the cofounders of investment firm Fox Paine & Company, LLC (FPC). Paine established a third fund, Fox Paine Management III, LLC, in which Fox had an investment stake. The relationship deteriorated, leading to litigation in Delaware. FPC, Fox, and related parties (Fox Parties) sued Paine, FPM III, FPC, and Paine’s family trust (Paine parties) after Paine and others poached employees from FPC for FPM III, arranged lucrative compensation packages for defecting employees, and fraudulently represented that Fox had authorized various actions. The Paine Parties filed counterclaims, and the Delaware litigation was resolved through settlement. Then, follow-on litigation continued for several years.

The extensive litigation led to the presentation of claims under the insurance policies for FPC, related entities, and affiliated individuals. There was a $10million primary policy and four follow-form excess policies issued by three other insurers that adopted the substantive terms of the primary policy (combined $50million coverage tower). The plaintiffs, representing one faction of the feud, asserted that the primary policy provided coverage for investigation and defense costs incurred in litigation, such as the Delaware litigation and continuing Paine claims. The excess policies conditioned the issuing insurer’s liability on the exhaustion of all underlying insurance.

The complaint alleged four causes of action, for breach of contract, declaratory relief, breach of the implied covenant of good faith and fair dealing, and aiding and abetting breaches of fiduciary duties. The plaintiffs sought a declaration regarding the interpretation of the excess policies and the defendants’ obligations to insure and reimburse the plaintiffs for loss incurred in connection with the Delaware and continuing Paine litigation and as to whether the primary policy was exhausted. For each excess insurer, the plaintiffs alleged that there were actual controversies regarding whether the policies were triggered by the exhaustion of all underlying insurance, and the insurers should be held liable to pay the plaintiffs under the policies. For the breach of the implied covenant of good faith and fair dealing, plaintiffs alleged that all of the excess insurers knew or should have known that the plaintiffs had the only valid and legitimate claim to insurance under the excess policies and that the payment of policy proceeds to the Paine Parties (who were not legitimate insureds) could not and did not reduce the limits available to the plaintiffs under the excess policies. Further, the plaintiffs alleged that the excess insurers did not provide reasonably prompt notice of any legitimate representative of FPC of the Paine Parties’ notice, subsequent coverage determinations, plaintiffs’ rights and benefits under the excess insurance policies, coverage decisions regarding the Paine Parties, and the declaratory judgment actions. As a result of the alleged misconduct, the plaintiffs were unable to receive the proceeds and benefits of the excess policies.

The excess insurers demurred to the complaint, arguing that the plaintiffs’ claims concerning the higher layer excess policies failed due to lack of exhaustion of the underlying insurance. The trial court concluded that the plaintiffs had sufficiently alleged exhaustion of the primary policy, and it allowed plaintiffs’ claims to proceed to the extent they involved the first excess layer policy. The trial court reasoned that as the first excess layer insurer had only paid $6million of its $10million limit in the settlement with the Paine Parties, exhaustion had not yet occurred for the second, third, and fourth excess layers.

The plaintiffs appealed the dismissal of their claims against two of the excess insurers. The Court of Appeal affirmed, reasoning that the misconduct could not constitute a breach of contract as the alleged wrongs were not within the coverage of the excess policies, and the relevant policies had not yet attached upon exhaustion of all underlying insurance. The appellate court also determined that the plaintiffs had not adequately alleged an actual controversy between the parties. For the tortious breach of the implied covenant of good faith and fair dealing, the Court of Appeal reasoned that plaintiffs’ inability to allege exhaustion of the underlying insurance coverage was fatal to the claims because the plaintiffs could not show coverage under the excess policies.

The California Supreme Court determined that actual controversies regarding coverage and liability under the excess policies might exist for the declaratory relief sought even though coverage had not been fully exhausted. However, the plaintiffs had the burden of adequately pleading a covered loss sufficient to create an actual controversy regarding each excess policy in light of its attachment point. The Court reasoned that a lack of exhaustion does not categorically make a coverage dispute involving an excess policy unduly abstract or hypothetical, and a blanket exhaustion prerequisite would place too much emphasis on the fact that a contingency exists with too little emphasis on the likelihood that it will occur. If exhaustion were required, then it would result in unnecessary piecemeal litigation up the tower of excess insurance and potentially inconsistent outcomes. Despite the contingencies associated with each policy’s exhaustion requirement, the trial court could have determined matters of coverage common to all policies, ruled on defenses to coverage, and ascertained each excess insurer’s liability, if any, before issuing appropriately tailored declarations enforceable as final judgments. Finally, the Court agreed with the plaintiffs that the inability to plead exhaustion of all underlying insurance was not fatal to the bad faith claims alone. At the pleading stage, the proper focus is whether the alleged facts, taken as true, are sufficient to show that coverage under a defendant insurer’s excess policy will attach — or that it would attach, if not for the excess insurer’s bad-faith conduct — and that the insurer’s misconduct has impaired the insured’s recovery of benefits owed to it under the policy. Accordingly, the Court reversed and remanded to the Court of Appeal.

 

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

07/28/26         American Inter-Fidelity Ins. Co. v. Berkley Ins. Co.
District Court of New Jersey
Federal Court Orders Counsel to Have a Fantastic Day and Exercise Diligence in the Pursuit of a Long and Happy Marriage. Thousands Cheer.

A standard initial scheduling conference was scheduled for July 29, 2026, the day before the rehearsal dinner of one of the involved attorneys in connection with his upcoming wedding. That attorney requested, with the consent of his adversary, an adjournment of the conference, on the basis that he was going to be out of the office, preparing for his nuptials. The Court granted the adjournment, and ordered counsel to “have a fantastic day and to exercise diligence in the pursuit of a long and happy marriage.”

Editor’s Note: It is me that is subject to this order! This is a real order that was entered in one of my active cases, and I thought I would share it as a lighthearted farewell as I head off to my wedding. Back next edition!

 

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

07/23/26         McMillan v. GEICO Indem. Co.
United States Court of Appeals, Third Circuit
Electronic Signature And Website Link to Coverage Selection Form Complied New Jersey Statute Requiring Coverage Selection Forms To Be Readily Available.

McMillan completed on an online insurance application with GEICO to secure auto coverage. In doing so, McMillan had to select the amount of mandatory personal injury protection coverage (“PIP”) that she wanted. New Jersey’s default PIP coverage is $250,000, but applicants can select lower limits with at least a minimum of $15,000.

McMillan selected the $15,000 option. GEICO provided a link to the coverage selection form, which if clicked produced the form that included a range of premium rate credits regarding PIP coverage. After she completed the online quote process, McMillan provided an electronic signature. McMillan then renewed her policy over the next six years and received a declarations page that listed the PIP limit of $15,000 on each renewal date.

After an accident, McMillan filed a suit against GEICO alleging violations of N.J. Stat. Ann. § 39:6A-23(a) which requires notice and signature receipt of coverage selection forms; and violations of N.J.A.C. 11:3-15.4(a)2 which requires the forms to be readily available on the insurer’s website. To succeed, McMillan was required to show the coverage selection form with rate credits were not readily available on GEICO’s website and that she did not electronically sign the coverage selection form.

McMillan submitted an affidavit that only after the accident did she see the coverage selection form. However, GEICO’s Senior Underwriter provided deposition testimony that the online link to the coverage selection form provided a range of percentage reductions in PIP premium. McMillan failed to raise an issue of fact and rebut the testimony. Notably, McMillan admitted that she clicked the signature box and GEICO produced a copy of McMillan’s signature on the relevant form.

As McMillan presented no contradictory evidence, the grant of summary judgment in GEICO’s favor was affirmed.

 

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

07/09/26          Rahman v. Allstate Ins. Servs., Inc.
New York State Supreme Court, Rockland County
Court Finds Insurer Had No Duty to Advise Insureds to Purchase Additional SUM/UM Coverage and Dismisses Breach of Contract and Negligence Claims.

Plaintiffs Shama Rahman and Fazal Rahman brought suit against Allstate Insurance Services, Inc. (“Allstate”), Steven P. Vitiello Insurance Agency, Inc., Steven P. Vitiello, and Hudson Insurance Agency, alleging that they were not properly advised regarding the availability of additional supplemental uninsured/underinsured motorist (“SUM/UM”) coverage.

Plaintiffs alleged that they purchased an automobile liability policy from Allstate in 2012 with liability limits of $250,000/$500,000 and SUM/UM limits of $100,000/$300,000. They also purchased an umbrella policy providing $5 million in excess liability coverage and $25,000 in excess SUM/UM coverage. Plaintiff Shama Rahman was later struck by a vehicle while crossing West 29th Street in New York City and sustained serious injuries. The tortfeasor tendered $25,000, and Allstate paid an additional $25,000 under the policy, but Plaintiffs claimed their damages exceeded the available coverage.

In a prior decision, the Court dismissed the claims against the Vitiello defendants. The Court found that the breach of contract claim was time-barred by the six-year statute of limitations and that the negligence claim failed because insurance agents generally have no duty to advise, guide, or direct an insured to obtain additional coverage in the absence of a special relationship. Plaintiffs had not alleged facts showing that they requested additional coverage or otherwise created a special relationship with the agents.

Allstate moved for summary judgment, arguing that the prior dismissal constituted the law of the case and that Plaintiffs’ breach of contract claim was similarly time-barred. Allstate further asserted that it owed no legal duty to educate or advise Plaintiffs regarding a specific level of SUM/UM or excess umbrella coverage. Plaintiffs opposed, arguing that Allstate, as the insurer, had a separate statutory duty under Insurance Law § 3420(f)(2)(A) to advise them each year that additional SUM/UM coverage was available.

The Court first dismissed the breach of contract claim against Allstate, finding it was barred by the statute of limitations. Because the claim arose from the same insurance contract at issue in the earlier motion practice, and Plaintiffs did not dispute that the statute of limitations applied to Allstate, the Court found no basis to depart from the prior statute of limitations analysis.

The Court then considered whether Allstate owed a separate duty as the insurer, distinct from the duties of the insurance agents. The Court found that the “law of the case” doctrine did not preclude that analysis because the prior decision addressed the relationship between the insureds and the agents, not the relationship between the insureds and the insurer.

However, the Court rejected Plaintiffs’ argument that Insurance Law § 3420(f)(2)(A) imposed a duty on Allstate to advertise, recommend, or affirmatively advise Plaintiffs to purchase higher SUM/UM limits. The Court noted that the statute requires annual notice that SUM coverage is available, an explanation of the coverage, and the coverage limits that can be purchased from the insurer. Allstate’s policy endorsement and declaration pages satisfied those statutory notice requirements.

The Court emphasized that Plaintiffs’ policy placed the responsibility on the insureds to contact an agent if they wanted to adjust or increase coverage. Because Allstate established that it provided the required statutory notice and because the statute did not create a broader duty to advise insureds to purchase additional coverage, Plaintiffs failed to raise a triable issue of fact.

Accordingly, the Court granted the motion for summary judgment in its entirety and dismissed the action as against Allstate.

 

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

07/31/26        United States Senate Bill S5058
Proposed Federal Legislation to Prohibit Staged Collisions with Commercial Motor Vehicles.

Senate Bill S5058, titled the Staged Accident Fraud Prevention Act of 2026, was introduced on July 21, 2026, and referred to the Senate Committee on Commerce, Science, and Transportation.

The Bill seeks to amend Title 49 of the United States Code to prohibit staged collisions with commercial motor vehicles. The legislation is aimed at addressing staged accident schemes involving commercial motor vehicles, which can lead to fraudulent claims, increased litigation costs, and increased insurance exposure for motor carriers and commercial automobile insurers.

As introduced, the Bill has only been referred to committee and has not yet advanced through either chamber. We will continue to monitor whether the Bill moves forward and whether Congress publishes additional amendments or committee materials.

 

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

07/22/26        Margabandhu v. State Farm Fire & Cas. Co.
United States District Court, Pennsylvania Western District
Pennsylvania Federal Court Dismisses Plaintiff's Bad Faith Allegation Regarding Valuation.

On December 26, 2024, the Plaintiffs' roof sustained wind damage. Their insurer, State Farm, accepted the claim but allegedly failed to provide sufficient coverage to allow Plaintiffs to repair the roof. Accordingly, Plaintiffs brought an action against State Farm asserting claims for breach of contract and statutory bad faith, alleging State Farm lacked a reasonable basis for its valuation of Plaintiffs' claim. State Farm brought a motion to dismiss Plaintiffs' bad faith allegation.

State Farm argues Plaintiffs' bad faith claim must be dismissed because they fail to plead facts which plausibly state a claim for relief because thew Complaint relies on conclusory statements. Plaintiffs contend they have sufficient allegations related to the history of the claim, estimates, and the reason State Farm knew the valuation of the loss was unreasonably low. The Plaintiffs' also cite to their public adjuster's estimate of the loss which State Farm argues is insufficient to show unreasonableness.

To succeed on a bad faith claim in Pennsylvania, the insured must prove by clear and convincing evidence that the insurer did not have a reasonable basis for denying benefits under the policy and that the insurer knew of or recklessly disregarded its lack of a reasonable basis in denying the claim. Courts have found a frivolous or unfounded refusal to pay, lack of investigation into the facts, or a failure to communicate with the insured may constitute bad faith. However, Pennsylvania does not an insurer's low but reasonable estimate of the insured's loss as bad faith.

The Court found Plaintiffs' bad faith claim was based upon the difference of Plaintiffs' and State Farm's subjective valuation and the Amended Complaint was insufficient to plausibly support a bad faith claim. Accordingly, the Court granted State Farm's motion to dismiss the bad faith allegation, but granted Plaintiffs leave to file an amended complaint.

 

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

07/24/26         Kessler v. Carr
Supreme Court of New York, Appellate Division, Fourth Department
The Appellate Division, Fourth Department, Upholds the Supreme Court, County of Erie’s, Decision Denying Plaintiff-Appellant’s Cross-motion for Summary Judgment on the Issue of Serious Injury in Accordance with CPLR 5102(d) Due to Conflicting Expert Opinions.

Plaintiff-appellant Emily A. Kessler ("Plaintiff-appellant") commenced an action against defendants-respondents Spencer Martin Carr, Kristen H. Martin, Hayley Jean Kessler and Christopher W. Kessler ("defendants-respondents") in Supreme Court of New York, County of Erie, alleging personal injuries in connection with a motor vehicle accident. Defendants-appellants’ vehicle was operated by Spencer Martin Carr and owned by Kristen H. Martin. On or about June 11, 2025, the Supreme Court entered an Order denying Plaintiff-appellant’s cross-motion for summary judgement on the issue of serious injury to her cervical spine under the significant limitation of use category in accordance with Insurance Law § 5102(d). Plaintiff-appellant now appealed.

Plaintiff-appellant submitted the affirmation of her medical expert, who concluded that Plaintiff-appellant had sustained a serious injury resulting in a significant limitation of use of her cervical spine that was causally related to the accident including, herniated discs. Plaintiff-appellant also relied on a report, initially submitted by defendants in support of their motion for summary judgment, of another physician. After performing a medical examination of Plaintiff-appellant and reviewing her medical records, that physician opined that Plaintiff-appellant “had sustained only a minor [and temporary] cervical strain in the accident, that the injury had resolved, that the limitations he measured in Plaintiff-appellant's range of motion were evidenced solely by subjective complaints of pain, and that [Plaintiff-appellant's post-accident MRI showed] no objective evidence of any [traumatic] injury causally related to the accident” (Bleier v Mulvey, 126 AD3d 1323, 1324, 5 N.Y.S.3d 749 [4th Dept 2015]; see Savilo, 170 AD3d at 1570-1571; Griffo v Colby, 118 AD3d 1421, 1422, 988 N.Y.S.2d 763 [4th Dept 2014]).The experts proffered contradictory opinions regarding: (1) whether Plaintiff-appellant's post-accident MRI revealed cervical disc herniations that were causally related to the accident; (2) whether Plaintiff-appellant's pain and range of motion deficits were caused by unrelated degenerative changes rather than the accident; and (3) whether the accident aggravated or exacerbated any preexisting, asymptomatic degenerative disease of Plaintiff-appellant's cervical spine (see Savilo, 170 AD3d at 1570-1571; see also Fonseca v Cronk, 104 AD3d 1154, 1155, 960 N.Y.S.2d 775 [4th Dept 2013]).

As “[c]onflicting expert opinions may not be resolved on a motion for summary judgment" (see, Savilo, 170 AD3d at 1571), the Appellate Division, Fourth Department, concluded that Plaintiff-appellant was not entitled to summary judgment on the significant limitation of use category of serious injury. Furthermore, the Appellate Division, Fourth Department, found that the Plaintiff-appellant failed to meet her initial burden on her cross-motion of establishing that she sustained a serious injury under the significant limitation of use category that was causally related to the accident inasmuch as her own submissions raise triable issues of fact. Id.

 

NEW ENGLAND ALMANACK
Barbara A. O’Donnell
[email protected]

Alexander G. Henlin
[email protected]

Iryna N. Dore
[email protected]

07/24/26        Royce v. State Farm Fire & Cas. Co.
New Hampshire Supreme Court
UIM Rejection in Umbrella Policy Application Did Not Apply to Insured’s Purchase of Increased Liability Limit in Subsequent Renewals.

On appeal, the New Hampshire Supreme Court reversed the entry of summary judgment in State Farm’s favor concerning its right to rely upon the insured’s rejection of uninsured/underinsured motorists (UIM) coverage in her application for an umbrella policy with a $1 million liability limit to deny an injured passenger’s demand for $5 million in UIM coverage under the renewal policy in effect on the accident date. A month following the issuance of the first of several renewal policies, the insured requested an increase in the policy’s liability limit to $5 million. The insured did not submit another UIM rejection when she purchased the increased limit. 

Two decades later, a passenger in the insured’s vehicle sustained significant injuries in a motor vehicle accident. When the passenger requested UIM coverage up to the umbrella policy’s limit after settling her claim against the uninsured at-fault driver, State Farm denied the request based upon the UIM rejection in the initial policy application. To support its denial, State Farm pointed to the insured’s written acknowledgment that the rejection applied to “all future renewals of the policy, and on all replacement policies until I make a written request to add this coverage.”

As grounds for rejecting State Farm’s right to rely upon application language that required the insured to revoke her initial UIM waiver in writing, the court relied upon prior decisions that held that the statutory mandate in RSA 264:15 that requires insurers to provide insureds with UIM coverage equal to the policy’s liability limit unless the insured rejects the coverage in writing cannot be overridden by a written agreement.

While the rejection in the application for the initial umbrella policy remained operative concerning $1 million of the renewal policy’s $5 million limit, it did not apply to the $4 million differential because the insured’s request for an increased $5 million limit represented a new purchase of liability insurance “in an amount greater than the minimum” compulsory coverage limits New Hampshire motorists are required to carry that obligated State Farm to obtain a separate written rejection from the insured concerning her automatic entitlement to obtain UIM coverage equal to the liability limit under the version of RSA 264:15 in effect on the accident date. Several years after the insured purchased the increased limit in the first of several renewal policies, the statute was amended to expressly provide that UIM coverage rejections “shall remain effective upon policy amendment or renewal.” State Farm could not rely upon the amended statutory language because it postdated the purchase of the increased limits prior to the accident.

As a precursor to its examination of the parties’ respective positions concerning the UIM coverage dispute, the court noted that in a “declaratory judgment action to determine the coverage of … [a liability] insurance policy [under RSA 491:22-a], the burden of proof is always on the insurer, regardless of which party brings the petition.”

 

07/01/26        Menge v. GEICO Gen. Ins. Co.
Rhode Island Supreme Court
Summary Judgment for Insurers Affirmed Regarding Pro Se Plaintiffs’ Effort to Avoid Auto Use Exclusion in CGL Policy and No Direct Action Provision in Auto Policy.

In a declaratory judgment action filed against Main Street America Assurance Company (MSAA) and GEICO General Insurance Company a decade after a 2013 motor vehicle accident, the Rhode Island Supreme Court affirmed the entry of summary judgment against the pro se plaintiff, a construction company manager who allegedly suffered from various "musculoskeletal maladies” when his vehicle was rear-ended by GEICO’s insureds.

In an unsuccessful effort to avoid the application of the auto use exclusion in the businessowners policy issued to his construction company by MSAA, the plaintiff disputed the authenticity of the unsigned policy attached to MSAA’s summary judgment motion.  To overcome that hurdle, MSAA submitted an affidavit with a signed renewal policy and accompanying letter sent to the insured concerning the renewal of his prior policy with the same “coverage and limits are the same as the expiring policy."

To establish its entitlement to summary judgment, GEICO relied upon the absence of any direct contractual relationship with the plaintiff and/or any assignment of rights from its insureds that would allow the plaintiff to circumvent the prohibition in the Rhode Island direct action statute, G.L. 1956 § 27-7-2, against the pursuit of any action against an insured prior to the entry of a judgment against the insured. The plaintiff could not satisfy the direct action statute’s requirements because he settled his claims against GEICO’s insureds for the payment of  $100,000 in exchange for a broadly written release that extinguished his claims against “other persons, firms and corporations” arising out of the accident. 

The plaintiff’s inability to establish any actionable contract based claims against MSAA and GEICO also entitled them to obtain summary judgment on his claims for breach of the implied covenant of good faith and fair dealing and statutory bad faith.

 

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.

06/10/26        2749978 Ontario Ltd. v. United States Liability Insurance Company
Ontario Superior Court (trial level)
Ontario Motions Court Nixes Fire Coverage Over Vacant-Building Warranty:  Fully Secured” Means Every Entry Point

The Ontario Superior Court’s decision in 2749978 Ontario Ltd. v. United States Liability Insurance Company is a cautionary tale for vacant-property risks: when a policy requires premises to remain “fully secured,” partial measures will not do.

The Ontario Superior Court granted summary judgment to the insurer, finding no duty to indemnify for a September 17, 2022 total fire loss where open wall sections and incomplete fencing left the site accessible.

 

Background

Reporting in the local Sault Ste. Marie newspaper, “SOOToday” contains several articles regarding the developments started by the Ontario property developer Italo Ferrari through a company that he owns and controls, 2749978 Ontario Ltd. Lawsuits seemed to follow him from one unrealized development to another.

Once such development involved the site of the former St. Veronica Elementary School in Sault Ste. Marie that the company purchased in April 2020. Within weeks of the purchase, the SOOToday reported that a sign went up advertising that it would soon be the site of “The East Balfour Residences”. However, two years later, the property was still vacant with no sign of activity.

 

The Coverage

United States Liability Insurance Company (USLIC) issued a commercial property policy that covered the property from October 16, 2021 to October 16, 2022. The property was listed as “Vacant without Renovation” and had a limit of $600,000. The policy was subject to a warranty that All windows, doors and passageways for ingress an egress to a building or portion of a building covered by this policy of insurance that is vacant or partially vacant are and shall remain fully secured and protected from all forms of unauthorized entry.  The Protective Devices or Services Provisions Schedule (the “PSP) provides that as a condition of the insurance the Plaintiff was required to maintain certain protective devices or services. One such requirement was that the “Premises [be] Fully Secured and Locked”. The PSP also excluded coverage for any fire loss if the insured knew of a suspension or impairment in those safeguards and failed to notify USLI, or if the insured failed to maintain them.

 

The City’s Escalating Concerns

City records show a pattern of escalating concern over safety at the vacant former St. Veronica school building in the months before the September 2022 fire. On July 5, 2022, a municipal inspection found the structure accessible to the public, with collapsing plywood barriers, incomplete boarding, and orange safety fencing that was partially down and no longer properly attached, including one photo capturing a person inside the building and exposed wall sections. The next day, July 6, the City issued a formal Order to Remedy, citing several maintenance and occupancy by‑law violations such as failing to secure the building against unauthorized entry, failing to conduct and document monthly inspections, and setting an August 8 deadline for remedial work.

A follow‑up inspection on August 9 revealed that the required work had not been done and that the building was even more accessible than before, with further wall collapse, missing boarding on the south‑east wall, openings elsewhere in the exterior, and fencing that did not cover the full perimeter, leaving unobstructed entry points into the interior. On August 11, the by‑law officer asked the municipal prosecutor to prepare an information and summons, and on September 15 returned to post a copy of the July Order on the front door, again photographing extensive openings where there was no boarding and noting that a previously collapsing wall had fully collapsed to the ground. The orange fencing remained limited to the same area and still did not encircle the building, leaving large sections of wall exposed and easily accessible.

 

The Fire

Just after 11:30 p.m. on September 17, 2022, a major fire broke out at the site of the derelict school. The stubborn blaze burned well into the following day and substantially destroyed the building.

The fire was reported to USLIC and upon investigation the claim was denied on the basis that the warranty had been violated.

 

The Insured’s Evidence

In the days leading up to the fire, the insured maintains that its representatives attended the former school property on September 16, 2022, and repaired outstanding safety deficiencies, including boarding and fencing, so that by September 17 the building was properly secured.

Mr. Ferrari did not live in the area. He delegated inspection and maintenance to staff, acknowledging that he kept no logs of visits, had no cameras or on‑site security, and relied on employees to address issues as they arose. He testified that the front door was locked, windows were boarded, and a section of wall removed for construction access was guarded by orange fencing, which he said was promptly repaired when damaged. Contractor Paul Guindon, retained to prepare the property for redevelopment, and employee Willie Greco both recalled being on site September 16, finding the orange construction fence broken, and Greco fixing it before they left, with the front door locked behind them.

Their evidence emphasizes that while the front entrance was locked and some openings were sheeted and fenced, the orange fencing did not surround the entire building and Guindon’s inspections were brief drive‑bys without photographs or a full perimeter walk‑around. Greco, whose duties included tending to Ferrari’s investment properties in Sault Ste. Marie, said he regularly attended the site, dealt with repeated break‑ins, and performed minor repairs to window coverings, boarding and the side‑wall orange fence, which he described as six‑to‑seven feet high, tied to posts every ten feet and anchored in the ground. He acknowledged that the fence covered only the side opening used by construction personnel and did not encircle the property.

 

The Insured’s Argument

On behalf of the insured it was argued that USLIC did not defined “fully secured” and contended that “USLI is now seeking to capitalize on the ambiguity of this requirement in order to exclude the Plaintiff’s insurance claim.”  The front door was locked. (USLIC agreed.) There was construction fence all around the property.

 

The Insurer’s Argument

USLIC argued that the plain meaning of “fully secured” controls. Sault Ste. Marie’s  property standards by-law is said to directly address the need to protect against unauthorized entry, which USLIC states is equivalent to the obligations of the Policy. Proof of failure to comply with the bylaw proves the policy breach.

The insured countered by saying that the bylaw is not referenced in the policy. The policy should have expressly referenced the bylaw if that was the intent.

 

The Court’s Analysis

The lack of specific criteria does not mean that the language is ambiguous. “The plain meaning of these words is that all potential access to the building is to be secured to prevent unauthorized entry into the building… On the facts of this matter, the issue is narrow and really turns on a finding of whether there was a fence and/or boarding “where the walls were open.”

The insured’s own photos taken August 27, 2022, showed a section of boarding was missing revealing an open wall. The City bylaw officers took photos of the building into September and the same area was still exposed.  In particular, a photo taken two days before the fire showed the area was still exposed. There was no evidence that the breach was repaired.  “Consequently, I find that the Property was not “fully secured” as required by the Policy, resulting in a breach of the warranty…There was no dispute that finding a breach of the warranty contained in the Policy would result in the defendant having no obligation to indemnify under that said Policy.”

The parties had agreed to costs at $17,500 which were ordered to be payable by the insured to USCLIC.

 

Comment

Vacant-building warranties mean what they say. Where walls are open and fencing is incomplete, “fully secured” the property is not fully secured—and coverage can evaporate. This decision underscores the value of precise policy wording, rigorous site controls, and meticulous documentation to withstand, or avoid, a denial.

 

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