Coverage Pointers - Volume XVII, No. 4

Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Jennifer A. Ehman
[email protected]

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]

Michael F. Perley
Elizabeth A. Fitzpatrick
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Taylor F. Gabryel
Agnieszka A. Wilewicz
Diane F. Bosse
Joel R. Appelbaum

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

Elizabeth A. Fitzpatrick
Cassandra Kazukenus

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Taylor F. Gabryel

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
 Elizabeth A. Fitzpatrick, you
Diane F. Bosse

Topical Index

Kohane’s Coverage Corner
Hewitt’s Highlights on Serious Injury
Margo’s Musings on No Fault
Peiper on Property and Potpourri
Fitz’ Bits
Wilewicz’s Wide World of Coverage
Cassie’s Capital Connection
Keeping the Faith with Jen’s Gems
Earl’s Pearls

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

08/11/15       The Burlington Insurance Company v. NYC Transit Authority
Appellate Division, First Department      
First Department Continues to Expand AI Coverage:  If Additional Insured Endorsement Provides Coverage for Acts or Omissions” of Named Insured, Coverage is Extended Even if Named Insured is Free from Negligence. Thousands (More) Flee the First Department
The facts here are important.

The underlying personal injury action arose from a subway construction project in Brooklyn, for which the New York City Transit Authority (NYCTA) and Metropolitan Transit Authority (MTA) NYCTA and MTA engaged Breaking Solutions to supply concrete-breaking excavation machines and personnel to operate the machines under NYCTA's direction. Pursuant to the insurance requirements of its contract, Breaking Solutions obtained a commercial general liability policy from Burlington, which included endorsements designating NYCTA, MTA and the City as additional insureds, with such additional insured coverage restricted to, in pertinent part, liability for bodily injury "caused, in whole or in part," by "acts or omissions" of Breaking Solutions.

"On February 14, 2009, an explosion occurred in the Brooklyn subway tunnel that was being excavated by a Breaking Solutions machine. The explosion occurred when the excavator came into contact with an energized electrical cable buried below the concrete. It is undisputed that it had been NYCTA's responsibility to identify and mark or protect hazards in advance, so as to enable the excavator operator to avoid them, and to shut off power to electrical cables in the work area. Thomas Kenny, an employee of NYCTA, was injured when he fell from an elevated work platform as a result of the explosion.

Kenny sued the City and Breaking Solutions. The City was sued as owner of the subway property for alleged violations of its nondelegable duties under Labor Law § 240(1) and § 241(6). NYCTA was not named in the Kenny action, because Kenny, as an employee of NYCTA, was barred from suing it under the Workers' Compensation Law.

It was undisputed that the named insured, Breaking Solutions, was not negligent. 

The question before the court was whether NYCTA and MTA were entitled to additional insured protection from coverage from Burlington in the absence of (a) Kenney being an employee of the Burlington named insured, Breaking Solutions and (b) in the absence of any negligence on the part of the Burlington named insured, Breaking Solutions.

There was also no doubt that the non-negligent “act” of the named insured, Breaking Solutions (hitting the unmarked cable with the excavator) led to the explosion.

The First Department found that coverage extended to NYCTA and MTA, nevertheless.

This First Department reviewed its most recent precedents have construed additional insured endorsements containing substantially the same "acts and omissions" language as do the endorsements at issue here as providing additional insured coverage where there is a causal link between the named insured's conduct and the injury, regardless of whether the named insured was negligent or otherwise at fault for causing the accident.

The court cited four cases, to justify its decision, three of which were not on point and one was dicta:

• In W & W Glass Sys., Inc. v Admiral Ins. Co. (91 AD3d 530 [1st Dept 2012]), where the relevant endorsement provided that a general contractor was covered under its subcontractor's policy " only with respect to liability caused by [the subcontractor's] ongoing operations performed for that [additional] insured'" (id. at 530 [emphasis added]), we held that "[t]he language in the additional insured endorsement granting coverage does not require a negligence trigger" (id. at 531 [emphasis added])

Editor’s Note:  That decision involved an earlier form of endorsement, and did not contain “acts or omissions” language.

• In National Union Fire Ins. Co. of Pittsburgh, PA v Greenwich Ins. Co. (103 AD3d 473 [1st Dept 2013]), where the additional insured endorsement applied to "bodily injury caused, in whole or in part, by [the named insured's] acts or omissions or the acts or omissions of those acting on the [named insured's] behalf" (id. at 474), in holding the additional insured covered for the loss in question, we expressed the view that the phrase "caused by" "does not materially differ" from the phrase, arising out of'"

Editor’s Note: That issue was not before the court in this case.

• In Strauss Painting, Inc. v Mt. Hawley Ins. Co. (105 AD3d 512 [1st Dept 2013], mod on other grounds 24 NY3d 578 [2014]), we expressly held that a finding of negligence against the named insured was not required to support additional insured coverage where "[t]he additional insured endorsement speaks in terms of acts or omissions,' not negligence. Thus, in the unlikely event that it would be found that some non-negligent act by plaintiff [the named insured] caused the accident, the Met [the additional insured] would still be entitled to coverage under the additional insured endorsement".

Editor’s Note:  That was dicta, and the injured plaintiff was an employee of the named insured.

• In Liberty Mut. Ins. Co. v Zurich Am. Ins. Co. (2014 WL 1303595, 2014 US Dist LEXIS 42471 [SD NY, March 28, 2014, No. 11-Civ-9357 (ALC) (KNF)]), the federal district court expressly relying on our above-cited decisions in W & W Glass, National Union and Strauss Painting — that "[i]t is not necessary to determine that Schindler [the named insured] was somehow negligent as any act or omission by Schindler or someone acting on its behalf will suffice [to trigger additional insured coverage] if it was in the performance of [Schindler's] ongoing operations for the additional insured . . .'
• Editor’s Note:  Yes it did, following only the First Department precedent.

The First Department concluded  that NYCTA and MTA are additional insureds under the subject policy for purposes of a loss that was "caused, in whole or in part," by an "act or omission" of the named insured, even though the named insured's causal "act]" was not negligent. It is undisputed that the plaintiff’s injury was causally connected to an "act" of the named insured, specifically, its disturbance of the buried electrical cable, which triggered the explosion that led to the accident. While it is true that, because NYCTA had not warned the Breaking Solutions' operator of the cable's presence, the named insured’s act" did not constitute negligence, this does not change the fact that the act of triggering the explosion, faultless though it was on the named insured was a cause of Kenny's injury.

The language of the relevant endorsement, on its face, defines the additional insured coverage afforded in terms of whether the loss was "caused by" the named insured's "acts or omissions," without regard to whether those "acts or omissions" constituted negligence or were otherwise actionable.

Finally, because NYC, NYCTA and MTA were all insureds under the same Burlington Policy, anti-subrogation principles precluded cross-claims for indemnity to the extent of policy coverage.

08/06/15       State Farm v. Banyan
Appellate Division, Third Department
Carrier Waives Right to Contest Determination of UM Hearing by Proceeding to Arbitration without Seeking Stay Pending Appeal
Banyan filed a demand for uninsured (“UM”) arbitration based on allegations that the vehicle he was in was struck by an unidentified vehicle that left the scene of the accident. State Farm brought a demand to stay arbitration, claiming that there was no physical contact between the vehicles, a condition precedent to UM coverage.

After a hearing, the lower court determined that physical contact had occurred and denied State Farm’s request for a permanent stay of arbitration. State Farm appealed but neither sought a stay pending the appeal nor did it perfect the appeal with the time required to do so.

Meanwhile, the parties proceeded to arbitration and Banyan was awarded the full value of the policy. Only thereafter did petitioner move for an extension of time to perfect the appeal from Supreme Court's order finding physical contact. We granted the motion, but now dismiss the appeal.

By proceeding to arbitration without seeking a stay pending determination of its appeal, State Farm waived its right to contest the determination.

08/05/15       Encompass Indemnity Company v. Rich
Appellate Division, Second Department
Injury to Firefighter While Rescuing Auto Accident Victim Can Lead to Underinsured Motorist (SUM) Recovery – This Time – Thousands Flee
On January 11, 2010, Kenneth Goodman was driving his vehicle in Queens and speeding when he lost control of his vehicle and crashed it into a utility pole. When firefighter Kevin Rich's Engine Company responded to the scene of the accident, Goodman was trapped inside his vehicle, bleeding, drifting in and out of consciousness, and, when awake, moaning in pain. In order to extract Goodman from the vehicle, the firefighters used the "jaws of life" to cut the vehicle's roof, and Rich and three other firefighters lifted the roof off of the vehicle. In the process thereof, Rich sustained injuries to his right shoulder.

Rich commenced an action against Goodman, whose insurer later offered to settle in the sum of $25,000, which constituted the limits of Goodman's automobile insurance policy. Rich also sought coverage under the supplementary uninsured/underinsured motorists (“SUM”) endorsement contained in his own automobile insurance policy issued by the petitioner, Encompass.  Encompass denied coverage, concluding that Goodman's use of his vehicle was not the proximate cause of Rich's injuries.

Rich filed a demand for arbitration and Encompass brought this proceeding to permanently stay arbitration or, alternatively, to temporarily stay arbitration and to direct Rich to provide discovery.

SUM endorsements provide coverage only when the injuries are "caused by an accident arising out of such underinsured motor vehicle's ownership, maintenance or use". Factors to be considered in determining whether an accident arose out of the use of a motor vehicle include whether the accident arose out of the inherent nature of the vehicle and whether the vehicle itself produces the injury rather than merely contributes to cause the condition which produces the injury. The vehicle itself need not be the proximate cause of the injury,' but negligence in the use of the vehicle must be shown, and that negligence must be a cause of the injury'

Here, Encompass failed to establish that Rich was not entitled to coverage under the SUM endorsement. The evidence in the record establishes that Goodman's negligent use of his vehicle directly caused the accident that led to him being trapped and in obvious need of medical attention, which, in turn, led to Rich's intervention and resulting injuries (see Kesick v New York Cent. Mut. Fire Ins. Co., 106 AD3d at 1221-1222). It cannot be said, as a matter of law, that Goodman's negligent use of his vehicle was not a proximate cause of Rich's injuries under the doctrine of danger invites rescue.

But (our loyal readers are asking) what about Zaccari, a Second Department decision, we summarized back in Volume VIII, No. 13 in December of 2006:

12/12/06          Zaccari v. Progressive Northwestern Insurance Co. 
Appellate Division, Second Department
Injuries Sustained Rescuing Auto Accident Victim Do Not Arise Out of Use and Operation of Car
Plaintiff, was traveling on Interstate 87 when he observed a speeding automobile lose control, leave the highway, and crash. After the automobile crashed, he saw it burst into flames. He ran to the scene and pulled the driver from the burning car. Allegedly as a result of the rescue, the plaintiff injured his back

In the context of automobile liability insurance coverage, "whether an accident has resulted from the use or operation of a covered automobile requires consideration of a three-part test: 1. The accident must have arisen out of the inherent nature of the automobile, as such; 2. The accident must have arisen within the natural territorial limits of an automobile, and the actual use, loading, or unloading must not have terminated; 3. The automobile must not merely contribute to cause the condition which produces the injury, but must, itself, produce the injury'" Negligence in the use of the vehicle must be shown, and that negligence must be a cause of the injury'. Since the automobile was stationary for some undetermined period of time before the plaintiff arrived on the crash scene and the vehicle itself did not caused the plaintiff to injure his back, but, use of the vehicle was not a substantial factor in bringing about the injury.

The Second Department had to distinguish it, and not particularly well:

This Court's decision and order in Zaccari v Progressive Northwestern Ins. Co. (35 AD3d at 597), does not warrant a contrary result. In Zaccari, the plaintiff's proof that he sustained an injury during the rescue was insufficient to establish a causal connection between the driver's negligent use of the vehicle and the plaintiff's consequent intervention. In fact, this Court stated in Zaccari that the plaintiff's "four-paragraph affidavit failed to set forth exactly what caused his injury, other than the rescue,' or when during the rescue the injury actually occurred" (id. at 600). In contrast, in the instant case, the proof proffered by Rich, which included, inter alia, Rich's affidavit, described, in detail, the scene of Goodman's accident, Goodman's physical condition following the accident, Rich's actions at the accident scene, and the exact cause of Rich's injury.

Furthermore, Encompass was not entitled to a temporary stay of arbitration and an order directing Rich to provide pre-arbitration discovery. Encompass had ample time to seek discovery before commencing this proceeding and unjustifiably failed to do.

HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
[email protected]

08/11/15                 Smith v. Roberts
Appellate Division, First Department
Plaintiff Could Not Establish A Serious Injury Pursuant to the 90/180-day Category Where He initially Only Missed Three Days of Work Following the Accident Even Though He Later Missed A Year of Work Following Surgery Conducted Months Later
The Appellate Division unanimously affirmed the order of the Bronx County Supreme Court which in an action for personal injuries sustained in a motor vehicle accident, granted defendants' motions for summary judgment dismissing the complaint. The Appellate division held that Defendants established their entitlement to judgment as a matter of law by submitting evidence showing that plaintiff did not sustain a serious injury to his spine and right knee. In opposition, plaintiff failed to offer evidence of permanent consequential limitations in his knee or spine.

Defendants also met their burden on the 90/180-day category via plaintiff's testimony that he missed three days of work following the accident. That plaintiff subsequently missed approximately a year of work following surgery that was conducted several months after the accident is not determinative of a 90/180-day injury. There was no evidence that her absence from work was medically determined as a result of the accident Therefore, summary judgment was appropriate.

08/05/15                 Lee v. All City Van Lines
Appellate Division, Second Department
Plaintiff Was Not Entitled To Jury Charge Regarding Exacerbation of A Preexisting Injury or The Increased Susceptibility To Injury As He Failed To Plead Such Claims of Damages In His Complaint or Bill of Particulars.
The Appellate Division affirmed a jury verdict on the issue of damages that plaintiff had appealed.  Following a motor vehicle accident between plaintiff and defendant’s vehicles, the plaintiff's expert orthopedic surgeon testified that the instant accident exacerbated an injury to the lumbar region of the plaintiff's spine that he sustained in a prior accident. He further testified that the plaintiff had a "downsloping acromion" in his left shoulder, which can put a patient at increased risk for injury. He testified that the "downsloping acromion" did not change his opinion that the accident was the cause of the injury to the plaintiff's left shoulder. At the conclusion of the trial, the jury unanimously found that the plaintiff did not sustain a serious injury under either the permanent consequential limitation of use or the significant limitation of use categories of Insurance Law § 5102(d) as a result of the subject accident.

The Appellate Division found that the Supreme Court properly denied both the plaintiff's request to charge the jury regarding the exacerbation of a preexisting injury to his lumbar spine pursuant to PJI 2:282, and regarding his left shoulder's increased susceptibility to injury pursuant to PJI 2:283. The court noted it is settled that damages may be recovered if such theories are "specially pleaded and proved.” However, plaintiff neither asserted an aggravation of a preexisting injury or an increased susceptibility to injury in her complaint or bill of particulars Plaintiff also argued that the Supreme Court erred in allowing the defendant's expert witness to testify as to unidentified reports and studies, but the Appellate Division ruled that these contentions were unpreserved for appellate review.

08/05/15                 Garbutt v. United Parcel Service
Appellate Division, Second Department
Defendants Established a Prima Facie Case That Plaintiff Did Not Suffer a Serious Injury to the Cervical and Lumbar Regions of His Spine but Plaintiff Demonstrated an Issue of Fact in Opposition
This is one of those appellate division decision in which they do not set forth much reasoning. It was an action to recover damages for personal injuries. The Appellate Division reversed the grant of the defendants’ motion for summary judgment which had been granted by the Kings County Supreme Court on the grounds that  neither plaintiff sustained a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.  The Appellate Division held that defendants failed to meet their prima facie burden of showing that the plaintiff Sakhiya Garbutt did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The documents submitted by the defendants failed to establish, prima facie, that the plaintiff did not sustain serious injuries to the cervical and lumbar regions of her spine, to her right shoulder, and to her left knee under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102 and failed to establish, prima facie, that she did not sustain a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the defendants did not sustain their prima facie burden in this regard, it was unnecessary to address the sufficiency of the submissions by the plaintiff in opposition. Therefore, the Supreme Court should have denied that branch of the defendants' motion which was for summary judgment dismissing the complaint insofar as asserted by the plaintiff Sakhiya Garbutt.

As to plaintiff Vince Garbutt, the defendants established prima facie that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.  The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of his spine did not constitute serious injuries under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d). In opposition, however, the plaintiffs raised triable issues of fact as to whether Vince Garbutt sustained serious injuries to the cervical and lumbar regions of his spine. Thus, the Appellate Division held that summary judgment should not have Supreme Court also should have denied that branch of the defendants' motion which was for summary judgment dismissing the complaint insofar as asserted by the plaintiff Vince Garbutt.


MARGO’S MUSINGS ON NO FAULT

Margo M. Lagueras
[email protected]

On temporary hiatus.

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

08/06/15                 Heath v Normile
Appellate Division, Third Department
Benevolent Appellate Division Saves Attorney from Hot Water in Bollixed Summons with Notice Case
Counsel to plaintiff served a Summons with Notice on the last day before the statute of limitations expired.  Unfortunately, it was “bare” in that it failed to assert the various items enumerated as part of the CPLR section creating the Summons with Notice.  Nonetheless, defendants, rather than moving against the pleading, requested a copy of the Complaint.  When the Complaint was not provided within 30 days, defendant moved for dismissal.

Plaintiff’s counsel appeared at oral argument, and presented an “oral motion” seeking an extension of time to serve the Complaint.  Counsel also opposed the dismissal motion, and requested additional time to submit papers for the Court’s perusal.  Thereafter, the Court denied the application for dismissal, and exercised its discretion to permit plaintiff time to serve the Complaint upon defendants.

The Appellate Division affirmed denial of the motion to dismiss on the basis that the Summons with Notice was a “nullity” due to is failure to properly plead all required information.  As such, where there was no actual Summons, it follows that defendant’s request for a Complaint was premature.  The result of which meant that plaintiff did not fail to timely serve the Complaint.

The Court also affirmed the trial court’s decision to extend plaintiff’s time for service.  Although counsel could not be said to have been diligent, nevertheless the Court noted no perceivable prejudice to defendants.  Plaintiff’s counsel also sufficiently pleaded what appeared to possibly be a meritorious claim.  On balance, the Court concluded it was not an abuse of discretion to extend plaintiff’s time.

Finally, the Court noted that the trial court’s acceptance of plaintiff’s late legal briefing was not an abuse of discretion where the defendant was permitted an opportunity to submit documentation in reply.

FITZ’S BITS

Elizabeth A. Fitzpatrick
[email protected]
Not this week.

WILEWICZ’S WIDE WORLD OF COVERAGE

Agnes A. Wilewicz
[email protected]

On vacation.

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

The legislative and executive branches are on summer recess.  

KEEPING THE FAITH WITH JEN’S GEMS

Jennifer A. Ehman
[email protected]

07/28/15       Navigators Ins. Co. v. Sterling Infosystems, Inc.
New York County, Supreme Court
Coverage Found for Claims Alleging Violation of the Fair Credit Reporting Act
In the underlying litigation, certain plaintiffs alleged that they were employees of Superior Satellite Services, Inc., a contractor for Dish Network LLC.  They alleged that Sterling Infosystems, Inc. (“Sterling”) violated the Fair Credit Reporting Act (“FCRA”) by providing Dish with outdated information that Superior then relied upon in its decision to terminate their employment.

Sterling is insured under an errors and omissions policy issued by Navigators.  The policy applies to all sums in excess of the deductible that the insured becomes legally obligated to pay as damages.  The policy defines “damages” as “any compensatory sum” including “a judgment, award or settlement, provided any settlement is negotiated with the company’s written consent…”  Notably, the policy excludes from coverage “Fines, penalties, forfeitures or sanctions.”

The issue addressed by the court was whether the underlying actions were based solely on penalties, and in turn excluded from coverage.

The court began its analysis by examining the relevant portion of the FCRA.  15 USC § 1681n, provided in relevant part:

(a)      In general.  Any person who willfully fails to comply with any requirement imposed under this title with respect to any consumer is liable to that consumer in an amount equal to the sum of -- 
(1)(A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and no more than $1,000;
(2)      such amount of punitive damages as the court may allow…

The court then reviewed the definition of “compensatory damages” and “penalty” as defined in Black’s Law Dictionary.  There, compensatory damages are defined as “[d]amages sufficient in amount to indemnify the injured person for the loss suffered” while penalties are defined as “punishment imposed on a wrongdoer…”

The court, in turn, concluded that the statutory damages functioned primarily as compensation.  It based this decision on the finding that as actual damages are compensatory, statutory damages that substitute only for those actual damages are also compensatory.  Further, FCRA statutory damages serve to facilitate litigation in instances in which actual damages are difficult or impossible to calculate.   And, lastly, the FCRA separately provides for punitive damages. Thus, interpreting the statutory damages as punitive would result in an illogical result in which punitive damages may be added to the punitive statutory damages.

Accordingly, the court determined that Navigators had an obligation to defend and indemnify Sterling.

EARL’S PEARLS
Earl K. Cantwell
[email protected]

 03/05/15          Dubeck v. California Physicians’ Service
California Court of Appeals
Policy Rescission Requires Clear and Prompt Action
A recent case in California emphasizes the importance of acting clearly and promptly if an insurance company elects to rescind a policy.  Dubeck v. California Physicians’ Service, 2015 WL 970699 (Cal. Ct. App. March 5, 2015).

The insurance company claimed that the policyholder made material misrepresentations on her policy application and, for example, failed to disclose that she had undergone treatment for a lump in her breast just a few days before the policy application.  Eventually, the insurance company informed the claimant it was canceling coverage, but that claims for covered services incurred before cancelation would be paid.  The insured sued for breach of contract for failure to pay covered claims while the policy was in effect.  The insurance company then alleged it had a right to rescind the policy “from the beginning”.  A trial court granted summary judgment to the insurance company, but this decision was reversed on appeal.

The appellate court held that the insurance company waived and forfeited its right to rescind the policy.  It initially decided to cancel, rather than rescind, the policy upon learning of the alleged misrepresentations.  The carrier had affirmed policy coverage up to the date of cancelation, and provided the insured assurances that it would pay for medical services prior to cancelation.  The insurance company also retained the insured’s premiums, and failed to assert the rescission theory until two years after it knew of the alleged misrepresentations.

The appellate court stressed that the insurance company had all the information it needed to rescind the policy based on the misrepresentations, but did not do so until more than two years later when the policyholder filed suit.  As a result, the insurance company allowed the insured to incur substantial medical expenses, and dissuaded her from obtaining government assistance for medical procedures such as Medicare or Medicaid.

The first lesson of this case is to move quickly and clearly in the event material misrepresentations on a policy application come to light.  In first canceling and then purporting to rescind the policy, the insurance company here took inconsistent and even contrary actions.  Rescinding a policy is a serious action, especially if done with claims pending, and it must be done clearly, cleanly, and as soon as the grounds exist and are known, or else courts will exercise their “equitable discretion” in favor of the policyholder.

The second lesson, therefore, is to make a consistent response to the material misrepresentations and either deny particular claims, cancel the policy going forward, or rescind the policy and treat it as a nullity from the beginning and act accordingly, such as by returning premiums.

In these situations, care should be taken at the outset to determine the legal strategy since actions taken and statements made at the beginning such as cancelation may be inconsistent with or contrary to later legal remedies such as rescission of the policy.