Coverage Pointers

Volume XVII, No. 4
Friday, August 14, 2015

A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202

Phone: 716-849-8900
Fax: 716-855-0874
www.hurwitzfine.com

© Hurwitz & Fine, P. C.
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As a public service, Hurwitz & Fine, is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts. The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise our editor Dan D. Kohane at [email protected] or call 716-849-8900. You will find back issues of Coverage Pointers here.

 

Dear Coverage Pointers Subscribers:

“I have a situation,” the call begins.  Love those calls, because we love situations.

We’re in the dog days of summer.  We can feel the days beginning to shrivel, the nights sliding in more quickly.  Not happy about that.  Those of us in Western New York love our summers and early falls but it signals the advance of cooler and colder weather.

I take a personal moment to wish my wife Chris, who reviews and helps proofread this scrawl and scribble, a happy anniversary.  We’ve been together for 23 years, married for six.  Ask her to explain those numbers, not my fault.

The courts are quiet; they always are between August 1 and September 15 or so.  Most of the decisions argued before summer recesses started have been decided.  The Court of Appeals is shut down tight.  The Appellate Departments (but for one day of arguments scheduled in the Second Department in August) have no oral arguments scheduled until September.

So, for the most part, you’re stuck with us.  I feel for you.  OK, I’ll make some of you happy by TWO baseball stories in this issue.

New Cases and Tweets -- @kohane :

Earlier this week, I tweeted about a First Department case that I report on in this week’s issue, the Burlington decision.  The First Department, the most expansive Appellate Department on additional insurance coverage had talked about this topic in dicta in a previous case.  It has now held that a blanket “acts or omissions” additional insured endorsement is triggered to provide coverage even if the named insured was not negligent.  In the reported decision, the City of New York was negligent in failing to tell an excavator of the location of a buried power line.  The excavator, not negligent when it struck the line, caused an explosion and injured a worker who was not a co-employee of the excavator.  The First Department found that the insurer for the named insured excavator was nevertheless required to provide AI coverage to the City agencies because the accident arose out of the “act” of the excavator.

You can follow me on Twitter: @kohane

Hewitt’s Highlights:

Dear Subscribers:

There are only a few serious injury cases to highlight in this edition, perhaps the Courts have slowed down as we enter the late period of the summer.  In one of the cases I highlight, 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 and regarding his left shoulder's increased susceptibility to injury because such theories of damages, while recoverable, must be specifically pled in the complaint or bill of particulars.  Plaintiff failed to plead such theories in that case and therefore, was not entitled to a jury charge under those theories. In another case, plaintiff attempted to establish a 90/180-day category of serious injury by alleging that he had missed a year of work following surgery. However, the Appellate Division held that since he had only missed three days of work following the accident, the fact that he missed a year of work months later after surgery was not determinative of such a claim of injury and therefore, the case was properly dismissed.

I hope that you all are enjoying the summer as it begins to wind down.   Soon enough we will be talking about cooler weather, falling leaves, and football.
           
Until next time,

Rob
Robert Hewitt

[email protected]

Publications and Speaking:

Just wanted to highlight two recent publications, both co-authored with Audrey Seeley:

  • Insurance Law - 2013 - 2014 Survey of New York Law, Syracuse Law Review, Volume 65, No. 4 (2015).
  • Attorney Client Privilege – Slip Sliding Away – Three Decisions to Instill Fear, Your New York Connection Magazine. (Winter 2015).

 

Speaking of Privilege:

DRI is planning an Insurance Law and Claims Conference which will be held at the Hilton Hartford on October 28, 2015.  I’ll be speaking on the diminishing attorney client and work product privileges for insurance companies and their coverage counsel and will offer some practical suggestions on how to improve the chances of keeping confidential that which ought to be kept confidential.  Watch this column for the brochure and registration information, likely in the next issue.  In Audrey’s note below, she fills in some of the details.

Audrey’s Angles:

In my capacity as Chair of DRI’s Insurance Law Committee, our committee has been working on a lot of great programs which are an excellent source of education for industry and counsel at any experience level.  Some of these programs can be enjoyed from the comfort of your office via computer while others are one day out of the office for education and networking.

There is an excellent three part, on demand, Insurance 101 Series for new and seasoned insurance professionals and practitioners, presented by the best insurance law attorneys in the country:

The Duty to Defend -- Brenda Wallrichs, Lederer Weston Craig PLC and Chuck Browning, Plunkett & Cooney present on issues such as when independent counsel is required; when a reservation of rights is required and how the duty to defend differs from the duty to indemnify.

Insurance Policies -- Shaun McParland Baldwin, Tressler LLP and our own, Dan Kohane, Hurwitz Fine PC present on the various types of insurance policies; the methodology used to interpret insurance policies and how courts interpret and construe types of policies and policy language.

Coverage and Bad Faith Litigation -- Kevin Willging from Travelers and Michael Marick, Hinshaw & Culbertson LLP present on how to best posture an insurance coverage lawsuit for successful motions practice or trial on the merits; how to defend an insurer in a breach of contract or bad faith action and how to appropriately handle the filing of declaratory judgment actions on behalf of insurers.

You can access these webcasts on demand by going to the following link http://dri.inreachce.com/ and typing into the program search box “insurance 101.”  You need not be a DRI member to access and purchase these webcasts.

For those who are in the Hartford, CT area and are interested in a high-level one day educational course and networking event geared toward insurance professionals, the Insurance Law and Claims Conference, Current Issues Impacting the Insurance Industry is one that you should attend.  This one-day program that is open to insurance professionals and outside counsel is scheduled for October 28, 2015, from 8:15am – 6:00pm at the Hilton Hartford.  This program will cover topics on protecting the attorney-client privilege, which is quickly being eroded, defending under a reservation of rights, emerging institutional bad faith risks, and best practices in responding to a policy limits demand.  The program will have a sit down lunch with various table moderated discussions on topics such as firm succession planning and how it impacts insurers, use of drones to adjust claims, and contracting out claims and legal work.  If you would like more information as to how to register for this program please send me an email at [email protected].

Finally, DRI’s Annual Meeting will be held in Washington, D.C. this year from October 7-10.  This year’s Annual Meeting has an incredible line-up of keynote speakers including United States Secretary of State, 2001-2005, General Colin L. Powell, USA (Ret.), United States Secretary of State, 1997-2001, Madeleine K. Albright, Legal Affairs Correspondent for National Public Radio, Nina Totenberg, and Former United States Navy SEAL, Robert O'Neill.  The Insurance Law Committee is holding a one hour program, Game of Drones: Legal and Insurance Implications of Unmanned Aerial Vehicles, presented by Kate Browne of SwissRe.  We will also have a drone present during the presentation with an experienced user to answer questions.  Furthermore, our committee has created and pledged baskets to the silent auction to benefit the National Foundation for Judicial Excellence (NFJE) which contain drones.  So you can attend our committee’s program about drones, speak to an experienced drone user, and then go bid on one or two drones to benefit the NFJE, which provides top education to the judiciary, to take home with you.  Again, if you need any additional information on this program please send me an email.

I hope that the remainder of your summer goes well and do hope to see you at one of these programs in October.

Audrey
Audrey A. Seeley
[email protected]

Harding's Love Child and Presidential “Stuff”:

Those who know me well, know that I am US Presidential historian by hobby. Here's a little bit of Presidential history to add to Monika, Marilyn and Mercer and, perhaps, Summersby.

Most people remember Warren Harding as a populist President whose reputation was marred by the "Teapot Dome Scandal” Thursday's New York Times carries a story describing genetic testing that confirmed that Warren Harding indeed had a "love child", a daughter with Nan Britton.  Ms. Britton wrote a book about the assignations with the President (they "make love" in a West Wing closet), after Harding died in office leaving nothing for his daughter.  The Harding and Britton families have struggled with this issue since the 29th President died in office.  DNA has answered the questions you were asking.

On a Related Note, Presidential History, Revisited:

Regular readers will remember that in 2013-2014, I decided to read, and did read presidential biographies/autobiographies in order, and in some cases, have read more than one volume on particularly interesting presidents.  I have been asked by a score or more for the reading list, so I included it here.  For those who haven’t read The Presidents Club by Nancy Gibbs and Michael Duffyit was that book that inspired me to begin this effort. Anyway, here’s the list, requested by several. I’ve added one more to the list, a book on TR’s trip to South America after his loss to Woodrow Wilson in 1912, highlighted below:

  • His Excellency, George Washington (Ellis)
  • John Adams (McCullough)
  • Thomas Jefferson, the Art of Power (Meachem)
  • James Madison: A Biography (Ketcham)
  • The Last Founding Father: James Monroe and a Nation's Call to Greatness (Unger)
  • John Quincy Adams (Unger)
  • Andrew Jackson-- American Lion (Meacham)
  • Martin Van Burn (Widmer)
  • William Henry Harrison (Collins)
  • John Tyler (May)
  • A Country of Vast Designs – James Polk (Merry)
  • Zachary Taylor (John S.D. Eisenhower)
  • Millard Fillmore (Finkelman)
  • The Expatriation of Franklin Pierce (Boulard)
  • James Buchanan (Baker)
  • Team of Rivals (Goodwin) and The Impeachment of Abraham Lincoln (Carter) and Killing Lincoln (O'Reilly)
  • History of the Impeachment of Andrew Johnson (Ross)
  • Ulysses S. Grant in War and Peace (Brands)
  • Fraud of the Century: Rutherford B. Hayes, Samuel Tilden, and the Stolen Election of 1876 (Morris)
  • Destiny of the Republic: A Tale of Madness, Medicine and the Murder of a President -- Garfield (Millard)
  • Chester Alan Arthur (Karabell)
  • Grover Cleveland (Graff)
  • A Compilation of Messages and Papers of the President - Benjamin Harrison
  • The President and the Assassin: McKinley, Terror, and Empire at the Dawn of the American Century (Miller)
  • Theodore Rex (Morris), Theodore Roosevelt (Autobiography) and The Bully Pulpit (Goodwin), Bully Pulpit (Goodwin),  The River of Doubt: Theodore Roosevelt's Darkest Journey (Millard)
  • The Tea Party President by William Howard Taft and Charles Stanfield Davis
  • Woodrow Wilson (Brands)
  • Warren Harding (John Dean)
  • Calvin Coolidge, Man from Vermont (Fuess)
  • Herbert Hoover (Leuchtenburg)
  • Traitor to His Class -- FDR (Brands)
  • Citizen Soldier -- Harry Truman (Donald)
  • Eisenhower (Soldier and President (Ambrose) and Eisenhower, In War and Peace (Smith)
  • Kennedy (Sorensen)
  • The Path to Power -- LBJ (Caro), The Passage of Power (Caro)
  • The Conviction of Richard Nixon (Reston), Nixon, the Triumph of a Politician (Ambrose) Nixon, the Education of a Politician (Ambrose)
  • Write It When I'm Gone -- Ford  (DeFrank)
  • Jimmy Carter (Zelizer)
  • Dutch - Reagan (Morris) and Ronald Reagan (Sutherland)
  • George Herbert Walker Bush (Wicker)
  • First in His Class (Bill Clinton) and My Life (Autobiography)
  • Decision Points -- George W. Bush (Autobiography)
  • The Bridge – Barach Obama – Remnick

 

Cassandra’s Capital Connection:

Greetings from Albany where the summer slump is in full effect.  I searched high and low for something of interest on the regulatory front to write about.  Unfortunately, all I heard was crickets.  Thus, I have no column for this issue.  While I was unable to find anything to write about in my column, I was reminded by our friends at NYIA that there was news of a possible permanent successor for the position of DFS Superintendent.  Per a report from Capital New York, Sean Coffey is being considered for the position.  Mr. Coffey had previously run for New York State Attorney General in the Democrat primary in 2010.  Mr. Coffey previously served with distinction in the US Navy, and thereafter, he worked as an Assistant US Attorney and in private practice as a corporate defense attorney handling corporate criminal, civil and regulatory matters.  Mr. Coffey also worked as a very successful private sector civil litigator who went after corporate bad actors.

I hope that you are enjoying your summer, and hopefully I will have something interesting to report on next week.

Cassie
Cassandra A. Kazukenus
[email protected]

 

Baseball Debut -- August 14, 1915:

Homer Howard Haworth (August 27, 1893 – January 28, 1953) was a Major League baseball catcher who played for one season. His first major league game was 100 years ago today.  He played seven games for the Cleveland Indians during the 1915 Cleveland Indians season. While playing in the minors for the Fort Worth Panthers, Homer Haworth was the victim of a pair of unfortunate accidents. In1921, he was shot as a bystander in a street duel. The next season, while sitting on the bench during batting practice, he was struck in the face by a batted ball which broke his jaw

Following the completion of his career in the Majors, he drove a beer truck.  I know you want to see his pictures on a baseball card:

http://www.starsofthediamond.com/14zeehaworth.jpg
http://www.starsofthediamond.com/14zeehaworthbat.jpg

Baseball had so many characters in those days.

Ollie Chill was the home plate umpire in Howard’s first game, where he came in after Madison County New York’s own Arthur Augustus “Ben” Egan was pulled for a pinch runner. Ollie Chill was attacked after a game at the Polo Grounds by New York Yankees fans that were upset by calls that Chill had made in a May 1914 game. Chill was eventually ushered to the umpires' room by police.

In January 1923, Chill was one of several men questioned in the death of Edward J. McGregor, a man found shot in his apartment in Cleveland after a drunken party. When police broke into the apartment after reports of a shooting, they found Chill under a bed, with the other men each in separate rooms. He was acquitted of the murder later that month, when another man admitted to shooting McGregor after attempting to intervene in a fight between McGregor and Chill only for McGregor to fire twice at him. Nevertheless, Chill was dismissed from the American League by league president Ban Johnson following the incident.

Billy Evans was the second base umpire, the only other umpire on the field. When he entered the ranks as a ML umpire, he was the youngest ever to serve in that position (22) and the youngest ever to umpire a World Series game (25).  He is in the Baseball Hall of Fame, elected in 1973, only the third umpire admitted up to that time.  I knew you wanted to know – there are now 10.

Homer’s death was reported in 1953:

The Eugene Guard
Eugene, Oregon
31 Jan 1953

Rites Slated Monday for Homer Haworth

PORTLAND (AP)—Funeral services will be held here Monday for Homer Haworth, veteran Portland baseball player.  Haworth died this week in a local sanitarium following a long illness.

Haworth, considered one of the best catchers ever produced in Oregon, was in professional baseball for 17 years and played on seven pennant-winning teams.  After a season with Portland Beavers, he went up to Cleveland but a broken leg suffered in spring training stymied his major league career.

Peiper’s Ponderings:

First things, first.  There is no truth the rumor that Jet’s QB Geno Smith’s jaw was broken by another famously errant EJ Manuel pass.  Football camps have opened which means football is only, say, three more months away!  At least it feels that way; in actuality, for those not named Tom Brady the season starts the second weekend of September.    Hooray.

Today, for those southpaws out there, is National Lefthanders Day.  Seriously.  It’s a real thing, apparently.  There is a “National Day” for just about everything.  This realization inspired me to look for other odd days that are “celebrated” in August.  My search did not take long, as I soon noticed that August 10th was National Lazy Day.

It seemed apropos given the relative lack of movement from the courts which always happen around this time.  This year is no exception.  In what is traditionally our leanest issue of the year, the Potpourri column only reviews the Third Department’s exceptionally patient decision to save a plaintiff’s counsel from a sure-fire malpractice claim.  Counsel won the battle, but we’d be surprised if he did not lose a client.

That’s it for now.  We will return in two weeks, hopefully with more to say.   Enjoy summer until then.

Steve
Steven E. Peiper
[email protected]

What Do You Do If It Rains?  Get Married, It Might Last a Lifetime -- August 14, 1915:

Chicago Tribune
August 14, 1915

WEDDING BELLS
CHEER UP CUBS: AS RAIN FALLS
Polly McLarry Takes Bride
When Downpour Prevents
Game at St. Louis.

St. Louis, Mo. Rain prevented the scheduled contest between the Cubs and Cardinals today, but Howard McLarry took the leading part in a romantic adventure so there would be something to write about, besides the rain. Regardless of the fact that it was Friday the thirteenth, the Cubs' utility infielder took unto himself a wife when he hastened from the ballpark and married Miss Grace Merna Dean who had come all the way from Leonard, Tex., to meet her hero.
Miss Dean, accompanied by her sister, arrived last night and the wedding was to have taken place this morning, so it wouldn't Interfere with the ball game. No one was supposed to know of it until it was all over, but Polly pulled a boner, which delayed things and also exposed the secret.

Editor’s Note: The marriage lasted 55 years, by the way. Howard Zell “Polly” McLarry played two games for the Chicago White Sox in 1913 and then 68 games for the Cubs in 1915, with a life time batting average of .224.  After baseball, he became a real estate and insurance salesman and the McLarry’s had a son, Danny.  Howard died in Leonard, Texas on November 4, 1971 of a heart attack, just a year after Grace died of the same condition.  Dannie (now known as Danny) is a plumber in Caddo Mills, TX, about 27 miles south of Leonard.

Editor’s Final Note: I had the pleasure of exchanging correspondence with Polly’s nephew, Dr. Pat Taylor, Ph.D. who is the Program Director for Landscape Architecture at the University of Texas, Arlington.  He wrote:

Dear Mr. Kohane:

Your email is one of those nice surprises that one looks forward-to during a busy work day.   Certainly, I had never seen this write-up from the Chicago Tribune and it was a delight to read it.

***
I remember Uncle Polly as a quiet, taciturn man with a dry wit and a rare but ear-to-ear grin when something struck him as funny.  Unfortunately, I was too young and too unappreciative of my elders’ accomplishments to probe deeply into his baseball career.  Oh, the questions I would love to ask him now!

Dr. Taylor gave the introduction he offered on his uncle’s behalf when Polly was inducted into the Fannin County (Texas) Sports Hall of Fame back in February 2012.  He sent me his script, which included the following:

In 1911, Polly signed with his first team, the Beeville Texas Orange Growers of the Southwest Texas League.  The next year he made it to the Majors signing with the American League Chicago White Sox.  In 1915 he signed with the cross-town Chicago Cubs of the National League.

Polly became a fan hero in the mid-south during his playing days with the Memphis Chicks.

So, how did he get the name “Polly”?  Images of a solemn-faced Polly McLarry notwithstanding, had you asked his teammates, they would have told you that it was because of his incessant chatter at first base, earning him the name, “Polly the Parrot”.

Had you asked him, he would have dryly said, “Aww, it came from a pet duck I used to have named ‘Polly’”.  Both answers sound like “baseball” to me.

With your permission, I’d be happy to forward your letter to his son, Danny McLarry, who lives in Austin.   His memories of his Dad are clear and vigorous, as are those of his Mother.

Thank you again for contacting me, and let me know if I may be of further service.

Kindest regards,

Pat

Jen’s Gems:

Greetings!  Hope all is well.  I am currently settling into life with two kids or “the new normal.”  All I can say is that I thought I didn’t get a lot of sleep before.  Now, I get less.  Ella continues to relish her role as the big sister.  She regularly tells Charlotte what she can and cannot do.  I now hear her say things like “baby, don’t put that in your mouth” or “baby, it’s okay.  Ella is here.”  I also got my first taste of what it is going to be like when they get a little older.  Ella advised me yesterday that Charlotte pulled her hair.  This will likely only be the first of many complaints I will hear.   
                                                                                                                                                                                                                                                        
In terms of my column this week, I report on an interesting decision from New York County that is worth a read.  The case involves a claim for coverage relative to claims for violation of the Fair Credit Reporting Act.  The Errors and Omissions policy at issue contained an exclusion for, among other things, fines and penalties.  The decision does a nice job of discussing the difference between compensatory damages, which would be covered, and punitive type damages, which would be excluded. 

Well, I hope everyone enjoys the last few weeks of summer.  Until next issue…

Jen
Jennifer A. Ehman
[email protected]

A Century Ago – Dirty Dancing:
                       
Dunkirk Evening Observer
Dunkirk, New York
14 Aug 1915

SAW ENOUGH

New York, Aug. 14.—Miss Primrose Trainer, 22, was haled before Magistrate McGuire, charged with giving an immoral dance on the street corner.  Primrose said it was the “Perpendicular Two-Step.:”

“Let’s see it” said the court.

Primrose began.

“Stop!” cried the court, “six months,” he added.

 

PARAPROSDOKIANS:

…are figures of speech in which the latter part of a sentence is unexpected.  Winston Churchill loved them.

  • Where there's a will, I want to be in it.
  • Since light travels faster than sound, some people appear bright until you hear them speak.
  • If I agreed with you, we'd both be wrong.
  • War does not determine who is right - only who is left.
  • Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
  • They begin the evening news with 'Good Evening,' then proceed to tell you why it isn't.
  • To steal ideas from someone is plagiarism. To steal from many is called research.
  • In filling in an application, where it says, 'In case of emergency, notify:' I put 'DOCTOR.'
  • I didn't say it was your fault, I said I was blaming you.
  • A clear conscience is the sign of a bad memory.
  • I used to be indecisive. Now I'm not so sure.
  • Nostalgia isn't what it used to be. Nor is there any future in it.
  • Change is inevitable, except from a vending machine.
  • Going to church doesn't make you a Christian any more than standing in your garage makes you a car.
  • I'm supposed to respect my elders, but it’s getting harder and harder for me to find one now
  • I asked God for a bike, but I know God doesn't work that way. So I stole a bike and asked for forgiveness.
  • Do not argue with an idiot. He will drag you down to his level and beat you with experience.
  • I want to die peacefully in my sleep, like my grandfather, not screaming and yelling like the passengers in his car.
  • The last thing I want to do is hurt you. But it's still on the list.
  • Dolphins are so smart that within a few weeks of captivity, they can train people to stand on the very edge of the pool and throw them fish.

 

Highlights of this week’s summer shortened issue (attached):

KOHANE’S COVERAGE CORNER
Dan D. Kohane

[email protected]

  • 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
  • Carrier Waives Right to Contest Determination of UM Hearing By Proceeding to Arbitration Without Seeking Stay Pending Appeal
  • Injury to Firefighter While Rescuing Auto Accident Victim Can Lead to Underinsured Motorist (SUM) Recovery – This Time – Thousands Flee

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

  • 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
  • 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.
  • 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

MARGO’S MUSINGS ON NO FAULT
Margo M. Lagueras
[email protected]

  • On temporary hiatus.

 

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

  • Benevolent Appellate Division Saves Attorney from Hot Water in Bollixed Summons with Notice Case

 

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]

  • Coverage Found for Claims Alleging Violation of the Fair Credit Reporting Act

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

  • Policy Rescission Requires Clear and Prompt Action

That’s all the news from Lake Erie.  We do love hearing from you. 
Dan
Dan D. Kohane
Hurwitz & Fine, P.C
.
1300 Liberty Building
Buffalo, NY 14202    

Office:      716.849.8942
Mobile:     716.445.2258
Fax:          716.855.0874
E-Mail:     [email protected]
Website:   www.hurwitzfine.com
LinkedIn: www.linkedin.com/in/kohane

 


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 GlassNational 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.