Volume XVIII, No. 16 (No. 472)
Friday, January 27, 2017
A Biweekly Electronic Newsletter
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202
Phone: 716-849-8900
Fax: 716-855-0874
Long Island Office:
535 Broad Hollow
Melville, New York 11747
Phone: 631-465-0700
Fax: 631-465-0313
www.hurwitzfine.com
© Hurwitz & Fine, P. C. 2017
All rights reserved
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 State 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 and situations breed opportunities for creativity and resolution.
This issue comes to you from Westchester County where I spent a delightful day with good clients and fine lawyers.
Congratulations to Jennifer Ehman – Sheldon Hurwitz Outstanding Young Lawyer Award
On Wednesday night, I was in NYC and honored to attend, with nine other H&F lawyers, a New York State Bar Association dinner jointly sponsored by the Torts, Insurance & Compensation Law (TICL) Section and the Trial Lawyers Section. At that event, the TICL Section awarded our own “gem” – Jennifer Ehman, the Sheldon Hurwitz Young Lawyers Award for her outstanding contributions to the profession. We are so very proud of her being the recipient of the award named after our co-founder, and it is so well-deserved.
Welcome Brian Mark – Metro Office Continues to Expand:
We welcome Brian Mark, a very experienced coverage and trial lawyer, as resident in our Long Island office, joining Rob Hewitt and Howard Altman (and our great paralegal, Tom Runco). I asked Brian to provide us with some biographic information:
I am excited to be part of the coverage and litigation team at Hurwitz & Fine. I come from a well-known New York City insurance defense firm, where I worked for 15 years gaining valuable experience in both insurance coverage and general litigation defense.
My practice focuses on insurance law, premises liability, Labor Law and general liability defense. I regularly provide coverage analysis and handle all aspects of litigation from inception through trial. I have successfully represented insurance companies, insureds, owners, contractors and municipalities before state and federal courts and have extensive experience in litigating insurance coverage disputes, premises liability cases and cases involving Labor Law §§ 200, 240(1) and 241(6). I majored in History at SUNY at Oswego and earned my J.D. from Touro Law Center.
I own a VW camper van (Westfalia), which my children love. My wife, not so much, as it always needs some sort of maintenance or repair. However, the constant tinkering is well worth it to be able to take a road trip at a moment’s notice. I also enjoy cooking, which by default, allows me to eat only what I like.
Brian
Brian F. Mark
Lots of travel over the past few weeks, but all is well. Spring is nearby, once we get past February (such an optimist, I am). In the meantime, we thank you for subscribing.
Phillips Federal Philosophies
Hello, All:
Rumor has it that snow will soon be making its return to Buffalo (seriously, these 50 degree days have just been weird), and in preparation last night I headed to the grocery store for the express purpose of making sure I was well stocked with healthy dinner options for the next few days. The unintended consequence of this trip was that, by the time I got home, the late hour dictated chocolate cake for dinner. (It was also chocolate cake for breakfast, but that was totally intentional.)
Such intentional and unintentional consequences also plagued the Eastern District of New York in Harleysville Worcester Ins. Co. v. Sharma, where the issue of the insured mental capacity adds an additional factual wrinkle into the court’s consideration of the insurer’s summary judgment motion.
Finally, let me join my colleagues in congratulating our own Jen Ehman on her well-deserved receipt of the NYSBA award for Outstanding Contribution to the Practice of Law in the Field of Insurance. I couldn’t make it to the awards dinner, but I hope there was plenty of celebratory chocolate cake!
As always, thanks for reading.
J.
Jennifer J. Phillips
Staying Healthy – a Century Ago:
The Morning News
Wilmington, Delaware
27 Jan 1917
AN INSIDE BATH
MAKES YOU LOOK
AND FEEL FRESH
_________________________
Says a glass of hot water with
Phosphate before breakfast
keeps illness away
_________________________
This excellent, common-sense
Health measure being
Adopted by millions
______________________
Physicians the world over recommend the inside bath, claiming this is of vastly more importance than outside cleanliness, because the skin pores do no absorb impurities into the blood, causing ill health, while the pores in the ten yards of bowels do.
Men and women are urged to drink each morning, before breakfast, a glass of hot water with a teaspoonful of limestone phosphate in it, as a harmless means of helping to wash from the stomach, liver, kidneys and bowels the previous day’s indigestible material, poisons, sour bile and toxins; thus cleansing, sweetening and purifying the entire alimentary canal before putting more food into the stomach.
Just as soap and hot water cleanse and freshen the skin, so hot water and limestone phosphate act on the eliminative organs.
Those who wake up with bad breath, coated tongue, nasty taste or have dull, aching head, sallow complexion, acid stomach; other who are subject to bilious attacks or constipation, should obtain a quarter pound of limestone phosphate at the drug store.
This will cost very little but is sufficient to demonstrate the value of inside bathing. Those who continue it each morning are assured of pronounced results, both in regard to heath and appearance.
Wilewicz’ Wide World of Coverage
Dear Readers,
I never thought that I would say this, but where’s the snow?? Seriously, one of the actual reasons we expatriated from the fair Isle of Long to the cold snowy north of Buff, was in part because we wanted to give our daughter the full experience of actual seasons. Granted, Buffalo historically has had a disproportionately long winter, but at least it was a couple of months of white, which made you appreciate the rest of the seasons all that much more.
Anyway, enough about the weather. This week’s focus in the Wild World of Coverage is our own Circuit Court, which appears to have been busy with the New Year.
First, in Takemoto v. National Mutual (plus Every Carrier Ever), we have a fun one from the Second Circuit. There, Dr. Kent Takemoto sued what looks like nearly every major insurance carrier in America (and Walmart and Marriott for good measure). He asserted claims under the False Claims Act and accused them of failing to comply with repayment of obligations under the Medicare Secondary Payer Act. Long story (read: long caption) short, Dr. Takemoto did not sufficiently plead these claims. He lumped all of the defendant insurers together and asserted broad, general allegations against them all. Then, rather than breaking things out, he presumed that the court would read the purported veracity of his claims into the pleadings. Well, it didn’t. Since he couldn’t properly state those claims, the court dismissed them all.
Second, we bring you Minasian v. IDS Property Casualty, which may be an aberration of sorts. There, in a policy that appears to have been post-2009 (court doesn’t say), and does not appear to have been claims-made (again, no word), the Second Circuit had a late notice case where they actually ruled in favor of the carrier. The delay in reporting the burglary/property damage was a ‘mere’ 86-days, and yet the court said nothing about prejudice and held instead that the delay was unreasonable as a matter of law. I like it, but we may have to do some more digging to get to the root of it. Or maybe we’ll just run with it as binding precedent?
In any event, finally, a hearty and happy welcome to our newest colleague, Brian Mark. As mentioned above, B-Mark comes to us from a venerable New York firm, incidentally from whence I myself first cut my coverage teeth. He and I worked together for years there, and I’m super excited to have him aboard. Here’s to many more years of fun!
Until next time then,
Agnes
Agnes A. Wilewicz
Election Fraud Isn’t New:
Dunkirk Evening Observer
Dunkirk, New York
27 Jan 1917
SOLD THEIR VOTES
FOR ONE DOLLAR EACH
Cincinnati, O., Jan 27 – Fifteen men, eight of them Negroes, pleaded guilty before federal Judge Howard Hollister this afternoon to a charge that they sold their votes at the recent presidential election. They told the Judge they were paid $1 each.
Barnas on Bad Faith:
Hello again:
I usually save my baseball hot takes for the summer months, but I am going to make an exception this week to comment on my Blue Jays resigning Jose Bautista. Bautista is my second favorite Blue Jays player of my lifetime, behind only the best pitcher in franchise history and deserving Hall of Famer Roy Halladay. He has been the face of our franchise for more than half a decade, and I’m glad Rogers and management made the right decision to bring him back. After having the highest attendance in the American League last year, I don’t think it would have sat well with the fans, including this one, to not bring back both Jose Bautista and Edwin Encarnacion. Plus, the guy is still an on-base machine with good power even in his mid-thirties. Hopefully Jose can stay on the field this year and lead us back to the postseason for the third year in a row.
This week it is a bad week for carriers in my column, as three bad faith claims survived motions by insurers. In Hoffman and Wood, bad faith claims by the insureds in first party property cases survived carrier motions for summary judgment. In Bankaitis, the court concludes that the plaintiffs commenced their lawsuit outside the three year suit limitation in their North Carolina fire policy. Despite this, the court concludes that the plaintiffs plead sufficient facts relative to equitable estoppel. Thus, the bad faith and breach of contract actions were allowed to go forward.
This week’s issue also features bad faith content in Jen Ehman’s column. The Elite Catering decision reminds us of a few extra-contractual rules in New York. First, punitive damages for bad faith are only available where the insurer’s conduct is so egregious that it would be actionable as an independent tort and is directed at the public generally. Second, attorneys’ fees are not available as consequential damages of a breach of contract absent a policy or contractual provision to the contrary. Third, a private contractual dispute between a carrier and its insured is insufficient to state a claim for violation of General Business Law § 349. Finally, New York does not recognize a private cause of action for a carrier’s alleged violation of New York Insurance Law § 2601. The court applied all of these rules in Elite Catering to dismiss the extra-contractual claims made by the insured.
I hope everyone enjoys the Super Bowl. I personally will only enjoy it if the Patriots lose.
See you next time.
Signing off,
Brian
Brian D. Barnas
Baseball Foolishness – Seeking Raises 100 Years Ago:
The Fort Wayne News
Fort Wayne, Indiana
27 Jan 1917
NO BLUFFING
___________________
Haughton will not stand for baseball Foolishness
___________________
Boston, Jan. 27. –President Haughton is on the war path and all Boston Nationals who have an idea that the management of the Braves is going to be affected by sob stories and soft music as a means to salary increases are due to be sadly disappointed.
“Rabbit” Maranville asked for an increase in salary and indicated that if he didn’t get it he would act rough, to which President Haughton replied: “Maranville will sign at the salary I offered or he will get out of baseball, that’s final.” It is understood that Maranville was offered $6,500 per year on a two year contact. He stated later that his action had nothing to do with the player’s fraternity, but he felt he was worth more money and was going to try and get it.
Eddie Collins, however, feels that a signed contract in the pocket is at least worthy of cigar money, so he sat right down and signed his little John Hancock to the long piece of paper that Haughton sent him.
Tessa’s Tutelage:
Dear Readers:
It is now entering the part of winter that is a real drag. Luckily in Buffalo we are all celebrating Jack Eichel the 20 year old center for the Sabres. Eichel seems to be our magic weapon this season, when he is healthy and playing our team hits the ice with energy and skill. It goes to show you that you can be a leader at any age. If we can’t have a winning football team it is nice to see Buffalo winning a few hockey games here and there. Admittedly, I wish they didn’t let it get to overtime before they got the win like they did on Tuesday.
There hasn’t been much action in the courts as far as No-Fault is concerned, thus we have an arbitration case this week. We haven’t talked about lack of medical necessity in a while so I figured it was time for a refresher. Arbitrator Brown clearly establishes the things a peer review report needs in order to establish that a particular treatment is not medically necessary. Lack of medical necessity is at issue in many No-Fault arbitrations and knowing what an arbitrator is looking for is an incredible tool.
Hope you all have a wonderful weekend!
My best,
Tessa
Tessa R. Scott
Birth Control Supporter Collapses:
The Kingston Daily Freeman
Kingston, New York
27 Jan 1917
FORCIBLE FEEDING
FOR MRS. BYRNE
By Telegraph to the Freeman.
New York, Jan. 27.—Mrs. Ethel Byrne, birth control propagandist collapsed in her cell at Blackwell’s Island Hospital early today and was forcibly fed by the medical attendants. Weakened by her five and half days of fasting, she was unable to resist.
Mrs. Byrne collapsed before daybreak after a sleepless night and Dr. James P. Hunt was hurriedly summoned. Under his direction, a tube was inserted in Mrs. Byrne’s mouth and nourishing liquid food was administered. She was then put to bed.
Artificial feeding will be continued, according to Commissioner of Correction Lewis, until Mrs. Byrne consents to take nourishment voluntarily. The first effort to feed her forcibly followed a warning by Dr. Irma Howard, Mrs. Bryne’s attendant.
HEWITT’S HIGHLIGHTS:
Dear Subscribers:
As we approach the end of January and near Super Bowl Sunday, another edition of Coverage Pointers. We have several cases of interest this edition. In one case, the Appellate Division reminds us, although it seems obvious, that conflicting deposition testimony always leads to an issue of fact on liability. A couple of cases also make clear that if there is evidence of prior injury and/or degeneration, plaintiff’s expert must address it and explain that there is new trauma and exacerbation of injury, and cannot just make conclusory statements of injury or ignore the degeneration. Defendants must remember, as always, to address all claims of serious injury listed in the bill of particulars.
Whether you are a New England fan or anybody but Brady, I wish you well until the next edition.
Until next time,
Rob
Robert Hewitt
[email protected]
Spouse Wanted:
The Age
Melbourne, Victoria, Australia
27 Jan 1917
SPINSTER, 40 Scotch, first class dress maker, milliner, splendid credentials, wishes introduction to respectable county storekeeper, farmer, other, view matrimony.
Altman’s Administrative (and Legislative) Agenda
Greetings, Dear Readers.
Sunday is my birthday (41), and I will celebrate by eating like I’m 30. Tasting menu in NYC, here I come! May I indulge, and have the weight go to my ex’s waist, like a fat Dorian Gray.
Today, I bring news of DFS’s new Circular Letter pushing for compliance for Federal and State mandates requiring certain health plans to afford coverage for contraceptives.
Howard
Howard B. Altman
Immigration Debate Isn’t New Either:
Dunkirk Evening Observer
Dunkirk, New York
27 Jan 1917
MONSTER PETITION
TO BE SENT PRESIDENT
_________________________
Urgently Requesting Him to take
Further steps to stop Deportations of Poles and
Belgians
_____________________
The world has been appalled by the report of deportations into involuntary servitude of thousands of non-combatant people of Belgian and Poland, both men and woman.
The conscience of the world recognizes that such acts are in vloation [sic] of solemn treaties and of direct promises made to those very people. They are an outrage on Christian civilization.
Whereas, the people of the United Sates are committed to the principle that liberty is the greatest of human blessings and an infringement of liberty is the greatest of crimes.
Resolved, that we American Citizens, respectfully, but urgently request that the President of United States take such further measures as may be most effective to stop additional deportations of Poles and Belgians by the German authorities occupying those countries and the return of all thus far deported. We assure the President of our support in such further actions as he may take.
These resolutions will be read in most of our city churches tomorrow morning, members of the congregation who are in sympathy with such a protest and petition, being asked to sign them.
Peiper’s Payback:
I come to you this week as the not-so-proud owner of a cold, sneezy, sinusy ailment and general malaise that is now entering its third week. Me, and everyone else it seems, in the eastern part of the country. To those of you enjoying relatively good health this January, congratulations. To those of you not so fortunate, I feel your pain.
As you surely know from Dan's earlier comments, we had the distinct pleasure of watching our own Jennifer Ehman receive the Torts Insurance and Compensation Law Section's Young Lawyer Award last night. It obviously has special meaning to the firm, and to those of us who have been fortunate enough to have received the recognition previously. She is a much deserving recipient, and fine addition to a distinguished list of previous winners.
We also welcome Brian Mark to our team. Actually, we welcomed him on Monday, but have been anxiously awaiting his arrival for the past few weeks. For those of you who know Brian, or have worked with him, you undoubtedly know him is a smart, pragmatic lawyer. For those of you who don't know him, we are no doubt sure you will soon feel the same way. Welcome aboard, Brian.
As for the column this week, we report on two notable indemnity decisions. The first revisits a Coverage Pointers favorite, GOL 5-321. As we have said in the past, we say it again, 5-321 does not preclude a landlord from being indemnified for its own negligence where insurance is also in play. This issue presents another case reaffirming one of the most misunderstood sections in NY law.
The second indemnity case addresses cross-claims where the movant was awarded dismissal of the plaintiff's action. While, as discussed by the court, the indemnity claim becomes moot, so long as the contract contemplates attorneys' fees, the indemnitee is entitled to recovery her or his costs of defense.
That's it for now. So long January. Here's hoping for better weather and better health in February.
Steve
Steven E. Peiper
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
-
Court Struggled with “Insured Contract” Terms
-
A Landlord Can Pass on its Liability to Tenants Carrier, but to Prove It Did, Landlord Needs to Present the Policy to the Court
-
Contractual Indemnity in Construction Case Limited by General Obligations Law
-
Allegations All Assert Claim Prior to Retro Date and Therefore Excluded
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
-
Plaintiff’s Experts Did Not Explain Evidence of Prior Injuries and Degeneration
-
Plaintiff’s Expert Failed to Reconcile His Findings of Limited Range of Motion With Earlier Findings of Near Normal Range of Motion by Another Physician
-
Defendant’s Expert’s Finding of a Chronic Condition Was Not Rebutted by Plaintiff’s Expert’s Conclusory and Unsupported Finding of Trauma
-
Plaintiff Provided Adequate Explanation for Treatment Gap as Insurer Would Not Pay for Treatment and She Could Not Afford It Herself
-
Defendant Failed to Address All Claims in Plaintiff’s Bill of Particulars
-
Conflicting Deposition Testimony as to Liability Causes an Issue of Fact
TESSA’S TUTELAGE
Tessa R. Scott
Arbitration
-
The Opinion of an Insurer’s Peer Review Doctor Is Not Enough, On Its Own, To Establish Lack of Medical Necessity
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
Property
-
Ambiguity in Coverage Grant Precludes Carrier’s Motion for Summary Judgment
-
Where Prior Action was Not Decided “on the Merits,” Motion to Dismiss under Collateral Estoppel Principles Fails
Potpourri
-
Transportation Broker is Not Vicariously Liable for Negligent Acts of the Carrier; While Indemnity Cross-Claims are Rendered Moot due to Dismissal of Main-Party Complaint, Broker is still entitled to Recovery of Fees and Costs.
-
Question of Fact over Whether Owner Retained Duty for Maintenance; GOL 5-321 does not Preclude Indemnity Where Evidence that Parties Transferred the Risk via Insurance
-
Third Department Allows Workers' Compensation Board's Action to Proceed against Workers' Compensation Trust for Alleged $188 Million Deficit
-
Action Allowed to Proceed Where Certain Employers Seek $188 Million from Administrators of Depleted Workers' Compensation Trust
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
-
Second Circuit Dismisses Doctor’s Complaint against Numerous Carriers for Failure to State Claims under False Claims Act
-
Second Circuit Holds Insured’s 86-Day Delay in Notifying Carrier of Burglary Claim Precludes Coverage Due to Preliminary Notice Requirement in Policy (New York law)
JEN’S GEMS
Jennifer A. Ehman
-
Whether the Insured’s Damages were Caused by a Covered Sewer Backup or an Uncovered Flood could not be Determined on Summary Judgment
BARNAS ON BAD FAITH
Brian D. Barnas
-
Insurer Could have Acted in Bad Faith even if it Ultimately Made the Correct Coverage Decision
-
Insurer’s Failure to Make any Payment to Insureds when their Home was Destroyed by a Fire with no Coverage Defenses Created an Issue of Fact regarding Bad Faith
-
Insured’s Bad Faith Claim was Time-Barred by Suit Limitation Provision in the Policy and North Carolina Law but Allowed to go Forward based on Equitable Estoppel
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
-
Unintentionally Intentional
ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA
Howard B. Altman
-
Contraception Coverage
EARL’S PEARLS
Earl K. Cantwell
[email protected]
-
Lead Paint Claims Not Covered Due To “Pollution Exclusion”
That’s all for now. See you just before Valentine’s Day, where I might be compelled to retell the story of the curious history of that holiday.
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
Twitter: @kohane
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
Agnes A. Wilewicz
ASSISTANT EDITOR
Jennifer A. Ehman
INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[email protected]
Steven E. Peiper, Co-Chair
Michael F. Perley
Jennifer A. Ehman
Patricia A. Fay
Agnieszka A. Wilewicz
Jennifer J. Phillips
Brian D. Barnas
Howard B. Altman
Brian F. Mark
John R. Ewell
Diane F. Bosse
Joel R. Appelbaum
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[email protected]
Michael F. Perley
Robert E. Hewitt, III
Jennifer J. Phillips
Brian D. Barnas
NO-FAULT/UM/SUM TEAM
Jennifer A. Ehman, Team Leader
[email protected]
Patricia A. Fay
APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Jennifer J. Phillips
Diane F. Bosse
Topical Index
Hewitt’s Highlights on Serious Injury
Tessa’s Tutelage
Peiper on Property and Potpourri
Wilewicz’s Wide World of Coverage
Barnas on Bad Faith
Phillips’ Federal Philosophies
Altman’s Administrative (and Legislative) Agenda
Earl’s Pearls
KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]
01/25/17 Concordia Gen. Contracting Co., v. Preferred Mutual Ins. Co.
Appellate Division, Second Department
Court Struggled with “Insured Contract” Terms
Concordia commenced this action seeking a determination that Preferred owed it defense and indemnity in an underlying action under a policy issued to Zygy Kosinsky d/b/a Zygy Renovation as named insured. The policy excluded contractual liability except where it was assumed under an “insured contract”. An insured contract is one "under which [the named insured] assume[s] the tort liability of another party to pay for bodily injury' or property damage' to a third person or organization."
It is undisputed that "Zygy Renovations" (also sometimes referred to as "Zygy Renovation") is not a separate legal entity but merely the name under which the defendant Zbigniew Kosinski, at all relevant times, carried on his home renovation business.
Concordia sought defense and indemnification from Preferred after Kosinski commenced a personal injury action against Concordia and others in connection with injuries he allegedly sustained while working as a subcontractor of Concordia on a construction project. Prior to the date of the accident, Concordia, as contractor, and "Zygy Renovations," as subcontractor, had entered into a hold harmless agreement pursuant to which the subcontractor agreed to indemnify and hold harmless Concordia from any claims for bodily injury resulting from the performance of the subcontractor's work.
Preferred rejected Concordia's request for defense and indemnification on the ground, inter alia, that the hold harmless agreement was not an "insured contract" as defined in the policy, since the bodily injury occurred to Kosinski himself, who was a party to the contract and, therefore, could not be deemed a "third person." Concordia contends that the term "third person," as used in the definition of an "insured contract," is ambiguous, and that Kosinski was a third person under the definition of insured contract.
Frankly, this was an unnecessary exercise.
Here, the ordinary meaning of "third person," when read in the context of the definition of "insured contract," plainly refers to someone who is not a party to the "insured contract." This would necessarily exclude Kosinski, who cannot claim to have a "distinct existence" from the unincorporated home renovation business he operated under the name of Zygy Renovations.
Even if the term "third person" could alternatively be interpreted to refer to someone who is not a party to the insurance policy (as opposed to the underlying "insured contract"), such ambiguity would not benefit Concordia, as Kosinski is also the named insured under the subject policy.
In sum, there is no reasonable interpretation of the term "third person" that would include Kosinski.
Editor’s Note: Sorry, I’m confused. Even if this were an insured contract, Concordia would not have become an additional insured and would not be entitled to defense and indemnity under the policy issued to Zygy. Concordia is not claimed to be an additional insured. Zygy would have coverage for the contractual claims but Concordia would not be owned any duties by Concordia’s carrier. Are we missing something?
01/19/17 Rubinstein v. 115 Spring Street Owners Corp.
Appellate Division, First Department
A Landlord Can Pass on its Liability to Tenants Carrier, but to Prove It Did, Landlord Needs to Present the Policy to the Court
The owners sought contractual indemnity against Opera Gallery, the tenant. Generally speaking, a landlord is not liable for negligence with respect to the condition of the property after the transfer of possession and control to a tenant unless the landlord is either contractually obligated to make repairs or maintain the premises, or has a contractual right to reenter, inspect and make needed repairs at the tenant's expense, and liability is based on a significant structural or design defect that is contrary to a specific statutory safety provision.
Here, the steps upon which the plaintiff fell were in the exclusive control of the tenant according to the lease but in "actual practice," the owner may have retained the duty to make inspections and periodic repairs.
An agreement to indemnify another through insurance is enforceable as an appropriate loss allocation device, which is perfectly permissible but here there was insufficient proof (since the policy was not part of the record) to establish additional insured status.
01/19/17 Fidanza v. Bravo Brio Restaurant Group, Inc.
Appellate Division, First Department
Contractual Indemnity in Construction Case Limited by General Obligations Law
Fidenza was an employee of Spectrum, a painting subcontractor, was injured while working on a project for which RCC was the general contractor. RCC moved for summary judgment seeking contractual indemnification. It is unclear whether the work Fidanza was performing at the time of his accident was within the scope of Spectrum's work, so as to render the contract's indemnification provision applicable. If he were, the contract's indemnification provision is enforceable under General Obligations Law § 5-322.1(1) only to the extent that RCC is found to have been free of negligence itself.
RCC is not entitled to summary judgment on its third-party claim for failure to procure insurance because it failed to demonstrate prima facie that Spectrum did not obtain insurance coverage naming it as an insured party.
01/17/17 Lifelock, Inc. v. Certain Underwriters at Lloyds
Appellate Division, First Department
Allegations All Assert Claim Prior to Retro Date and Therefore Excluded
The insurance policy issued to plaintiff by defendant excludes from coverage claims "arising out of any related or continuing acts, ... where the first such act ... was committed ... prior to the Retroactive Date" (The retro date was January 8, 2008. Inasmuch as the six of the claims in the underlying action, for which defense and indemnity were sought expressly based on allegations of acts performed before 2008, and the remaining two specifically incorporate those allegations, the underlying complaint in its entirety falls within exclusion.
HEWITT’s HIGHLIGHTS ON SERIOUS INJURY UNDER NO-FAULT LAW
Robert E.B. Hewitt III
01/26/17 Cattouse v. Smith
Appellate Division, First Department
Plaintiff’s Experts Did Not Explain Evidence of Prior Injuries and Degeneration
Plaintiffs, Marilyn Cattouse and Michael Cattouse, and their daughter Laurie Cattouse, allege that they sustained serious injuries to their cervical and lumbar spines as the result of a motor vehicle accident. Defendant established, prima facie, that plaintiffs did not sustain serious injuries by submitting the affirmed report of an orthopedist, who found normal ranges of motion, negative test results, and resolved strains/sprains/ Defendant also submitted the report of a radiologist who opined that the MRI films of Marilyn's lumbar spine and of Laurie's cervical spine showed preexisting degenerative conditions, not causally related to the accident. Marilyn's medical records reflect that she had preexisting arthritis in her back, and Michael acknowledged at his deposition that he suffered prior neck injuries in another motor vehicle accident. Defendant also relied on Laurie's hospital and medical records showing that she had positive neck range of motion and her back complaints resolved without intervention at the hospital.
In opposition, plaintiffs failed to raise an issue of fact as to whether any of them suffered a serious injury causally related to the accident. They submitted reports from an orthopedist, who examined Marilyn and Michael shortly after the accident and about two years later, and found limited ranges of motion, and opined that the bulging and herniated discs found in MRI reports were causally related to the accident. The MRI reports reflected findings of degenerative joint disease, and however, the orthopedist did not explain why that joint disease could not be ruled out as the cause of Marilyn's or Michael's injuries or provide any objective basis to support a finding of aggravation of such preexisting injury. Absent objective evidence of injury, plaintiffs cannot demonstrate a serious injury. As for Laurie, plaintiffs submitted the affidavit of a chiropractor who noted that she had undergone a brief period of treatment after the accident and found that she had relatively minor limitations in range of motion, which is insufficient to sustain a serious injury claim.
01/24/17 Booth v. Milstein
Appellate Division, First Department
Plaintiff’s Expert Failed to Reconcile His Findings of Limited Range of Motion With Earlier Findings of Near Normal Range of Motion by Another Physician
Defendant established entitlement to judgment as a matter of law by showing that plaintiff did not sustain a serious injury to his lumbar spine. Defendant submitted, inter alia, the affirmed report of a neurologist, who found full range of motion and normal test results, and opined that plaintiff's injuries had resolved. In opposition, plaintiff failed to raise a triable issue of fact. Plaintiff did not submit recent evidence of limitations in his lumbar spine and although plaintiff's chiropractor found limitations upon examination approximately two years after the accident, he did not reconcile those findings with earlier findings of normal or near normal range of motion made by another treating physician.
01/24/17 De La Rosa v. Okwan
Appellate Division, First Department
Defendant’s Expert’s Finding of a Chronic Condition Was Not Rebutted by Plaintiff’s Expert’s Conclusory and Unsupported Finding of Trauma
Defendants established prima facie that plaintiff did not sustain a serious injury involving a "permanent consequential" or "significant" limitation of use of her cervical or lumbar spine or right shoulder. Their orthopedist concluded, based on physical examination and review of plaintiff's medical records, that plaintiff sustained no injuries as a result of the low-speed accident. Their orthopedic expert opined, based on plaintiff's own MRI report finding bony impingement and her surgeon's operative report finding hypertrophic synovitis in the shoulder, that plaintiff did not suffer any traumatic shoulder injury, but had a chronic condition. Defendants' expert in emergency medicine opined that the records of plaintiff's emergency room visits demonstrated that plaintiff sustained no significant injury as a result of the accident. Moreover, plaintiff's deposition testimony demonstrated that she walked home after the accident and did not seek any treatment for the following three days.
In opposition, plaintiff failed to raise an issue of fact as to any permanent consequential limitation in use of her spine, since she provided no proof of any recent findings of limitation. Nor did her medical evidence raise an issue of fact as to any significant limitation in use. Plaintiff's experts' conclusory statements that her shoulder injury was caused by the accident failed to address the findings of bony impingement and large anterior spur found in her own physicians' MRI and operative reports and to explain why those conditions were not the cause of her shoulder condition. Plaintiff's 90/180-day claim is refuted by the allegations in her bill of particulars Moreover, plaintiff failed to substantiate her claimed loss of work with proof that her absences from work were medically determined.
01/19/17 Encarnacion v. Castillo
Appellate Division, First Department
Plaintiff Provided Adequate Explanation for Treatment Gap as Insurer Would Not Pay for Treatment and She Could Not Afford It Herself
Defendant established prima facie that plaintiff did not sustain a serious injury involving significant or permanent consequential limitations of use of her cervical and lumbar spine through the affirmed report of an orthopedist who found normal ranges of motion, negative test results, and resolved strains/sprains in those parts. Defendant's expert did not dispute that MRI studies of plaintiff's spine revealed disc herniations impinging on the thecal sac at multiple levels, and that her spinal injuries were causally related to the motor vehicle accident, which involved a head-on collision on a highway. In opposition, plaintiff raised an issue of fact through the affirmed report of a physician who found continuing limitations in range of motion and objective indications of injury to her cervical and lumbar spine, and opined that the injuries were causally related to the accident and permanent in nature. Plaintiff provided an adequate explanation by averring that her insurance carrier ceased to pay for her treatment, which she could not cover out of her own pocket.
01/18/17 Marte v. Gregory
Appellate Division, Second Department
Defendant Failed to Address All Claims in Plaintiff’s Bill of Particulars
The defendant failed to meet his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The papers submitted by the defendant failed to adequately address the plaintiff's claim, set forth in the bill of particulars, that he sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the defendant failed to meet his prima facie burden, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact. No facts were given.
01/18/17 Weisburg v. James
Appellate Division, Second Department
Conflicting Deposition Testimony as to Liability Causes an Issue of Fact
The defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident. The defendants' motion papers failed to adequately address the injured plaintiff's claim, set forth in the bill of particulars, that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). Since the defendants failed to meet their prima facie burden, it was unnecessary to determine whether the papers submitted by the plaintiffs in opposition were sufficient to raise a triable issue of fact.
Plaintiffs’ motion on liability was also denied. In support of their motion, the plaintiffs' evidentiary submissions, which included the transcripts of the deposition testimony of the injured plaintiff and each defendant, presented conflicting factual versions as to the happening of the accident. In particular, the injured plaintiff testified that her vehicle was stopped at the exit of a parking lot waiting to make a right turn when it was struck in the rear by the defendants' vehicle, while the defendants' deposition testimony indicated that the injured plaintiff's vehicle began to make a right turn, then stopped suddenly and rolled backwards into their vehicle. Since the plaintiffs' submissions revealed the existence of a triable issue of fact, they failed to demonstrate their prima facie entitlement to judgment as a matter of law.
Tessa R. Scott
Arbitration
01/25/17 Ambulatory Center of Western NY v Allstate
Arbitrator Brown
The Opinion of an Insurer’s Peer Review Doctor Is Not Enough, On Its Own, To Establish Lack of Medical Necessity
The eligible injured person (“EIP”) was involved in a motor vehicle and received an epidural steroid injection with fluoroscopic guidance which was administered by the claimant.
Reimbursement for the services was denied by respondent based on a peer review performed by Dr. Peter Chiu, MD. On 2/9/14, the EIP’s vehicle was struck from behind by another vehicle. He did not lose consciousness and no head injury was reported. He was seen at an urgent care facility the next day, complaining of neck and back pain. X-rays did not reveal any fractures. On 6/23/14, he was given an epidural steroid injection with fluoroscopic guidance. Respondent's peer reviewer recommended denial of the claim, based on his conclusion that the injection was not medically necessary. Once a claimant has established a prima facie case of entitlement to No-Fault benefits - as the claimant herein has done - the burden then shifts to the insurer to prove that the disputed services were not medically necessary. To meet this burden, the insurer's denial(s) of the applicant's claim(s) must be based on a peer review, IME report, or other competent medical evidence that sets forth a clear factual basis and a medical rationale for the denial(s). The opinion of an insurer's peer review expert, standing alone, is insufficient to carry the insurer's burden of proving that the disputed services were not medically necessary.
Arbitrator Brown reviewed Dr. Chiu’s report and concluded that respondent's peer review was sufficient to shift the burden of proving medical necessity to the claimant. Arbitrator Brown noted that Dr. Chiu's peer review had a factual basis for his opinions; referred to the EIP's specific conditions and symptoms, stated a generally accepted standard of care for the EIP's injuries, and referenced authoritative sources which explained why the injection diverged from the accepted standard of care.
Once Respondent meets this burden of proof then the burden shifts back to Applicant to present competent medical proof as to the medical necessity for the disputed billing by a preponderance of the credible evidence. Claimant submitted records which “seem to indicate that the EIP had some sensory changes in his left thigh,” however, Arbitrator Brown concluded this was not enough to rebut the peer review report. “Dr. Chiu's report makes it clear that the EIP was continuing to take medication and pursue conservative chiropractic care, and that his injuries were consistent with a strain/sprain.” Arbitrator Brown denied Applicant’s claim.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
Property
01/26/17 EL-AD 250 West, LLC v Zurich Am. Ins. Co.
Appellate Division, First Department
Ambiguity in Coverage Grant Precludes Carrier’s Motion for Summary Judgment
This dispute stems from of a manuscript endorsement providing an additional coverage grant for damages arising from a “Delay in Completion.” In a short opinion, the Court noted that the policy was endorsed to only provide coverage to EL-AD 250 West. The loss, however, appears to involve El Ad IDB Las Vegas, LLC. Accordingly, we surmise that Zurich argued that it did not insure IDB, and EL-AD 250 West was separate and independent.
In finding a question of fact, the Appellate Division noted that extrinsic evidence submitted by plaintiff demonstrated that Zurich was aware of the IDB entity, and that it intended to cover risks associated with this particular project.
01/25/17 FC Notes SVC, LLC v United General Title Ins. Co.
Appellate Division, Second Department
Where Prior Action was Not Decided “on the Merits,” Motion to Dismiss under Collateral Estoppel Principles Fails
Plaintiff commenced a prior action against an unnamed, unrelated entity seeking to establish its rights and interests in the subject property. That action, apparently, was dismissed when the Trial Court determined that plaintiff was unable to demonstrate, nor even plead, that it was a valid holder of the note.
Subsequently, plaintiff commenced the instant action against the title insurer. United General moved to dismiss on the basis that plaintiff should be collaterally estopped from re-litigating whether it enjoyed standing to even assert a claim to the subject property. The Trial Court granted the application, but the Appellate Division reversed. In so holding, the Court referenced a four part test for collateral estoppel. In order to dismiss a claim, the movant must establish (1) the issues in both proceedings were identical, (2) the prior action must have been litigated and decided, (3) the non-movant must have had a full and fair opportunity to litigate the previous matter and (4) the point at issue must have been necessary to support a final judgment on the merits.
Here, because the prior matter was dismissed on a pleading defect, the Court ruled that it was not “decided on the merits.” As such, point two of the “test” was not satisfied.
Potpourri
01/25/17 Ciaravino v Bulldog National Logistics, LLC
Appellate Division, Second Department
Transportation Broker is Not Vicariously Liable for Negligent Acts of the Carrier; While Indemnity Cross-Claims are Rendered Moot due to Dismissal of Main-Party Complaint, Broker is still entitled to Recovery of Fees and Costs.
Plaintiff was injured when he was struck by metal decking that fell from a tractor-trailer deliver truck owned/operated by Gotta Run Trucking, LLC. Plaintiff sued Gotta Run, as well as the “broker” Imperial. Imperial moved for summary judgment on the basis that it’s only involvement was that of “transportation broker" and that it had no involvement with the actual shipment. In the alternative, Imperial moved for contractual indemnification against Gotta Run.
With regard to its motion for summary judgment, the Court agreed that Imperial established that Gotta Run was an independent contractor. As such, with no actual negligence, it was also absolved from any vicarious negligence in light of the fact that it exercised no control over Gotta Run’s work. As such, plaintiff’s claims against Imperial were dismissed.
With regard to the indemnity claim, the Court denied the request as moot. However, as the contract contemplated costs and damages, the Court ruled that Imperial was entitled to recover from Gotta Run the costs of the defense of the case.
01/19/17 Rubinstein v 115 Spring Street Owners Corp.
Appellate Division, First Department
Question of Fact over Whether Owner Retained Duty for Maintenance; GOL 5-321 does not Preclude Indemnity Where Evidence that Parties Transferred the Risk via Insurance
Plaintiff slipped and fell in a building owned by defendant Spring Street. While, as noted by the Court here, “[a] landlord is generally not liable for negligence…after the transfer of the possession and control to a tenant,” liability may attach where the landlord either is obligated by lease to make the repairs and/or has a right to make repairs at the tenant’s expense.
Here, the lease seems to squarely place maintenance and repair of the premises in the province of the tenant. However, deposition testimony revealed that Spring Street had replaced portions of the stairs in the past. As such, the Court noted Spring Street may have retained some of the obligation for maintenance of the building – and therefore was not entitled to summary judgment.
Nevertheless, even if negligent, the Court notated that Spring Street may be entitled to contractual indemnification from the tenant. This was because the parties showed an intent to shift liability exposure to the tenant through indemnity and insurance. Such arrangements, when reached at arm’s length between sophisticated parties, are not afoul of the General Obligations 5-321. That said, Spring Street’s motion could not be granted at this time because (a) there was no finding of its liability and (b) there was no evidence that the tenant actually procured insurance to cover the risk.
01/05/17 State of N.Y. Workers' Compensation Bd. v. Wang
Appellate Division, Third Department
Third Department Allows Workers' Compensation Board's Action to Proceed against Workers' Compensation Trust for Alleged $188 Million Deficit
On this appeal, the Appellate Division, Third Department, reviewed certain trust administrator defendants' motions to dismiss certain causes of actions allegedly barred by the statute of limitations or insufficiently pleaded by the Workers' Compensation Board.
In 2009, the Workers Compensation Board (the "Board") determined that a particular group self-insured trust (the "Trust") was insolvent and assumed its administration. A forensic audit obtained by the Board allegedly revealed that the Trust had accumulated a $188 million deficit. In 2011, the Board commenced this action against the Trust's program administrator, several of the program administrator's employees in their individual capacities, the claims administrator, and several trustees of the claims administrator in their individual capacities. The Board alleged 32 causes of action sounding in, among other things, breach of contract, breach of good faith and fair dealing, breach of fiduciary duty, fraud, and fraud in the inducement, negligent misrepresentation, gross negligence, alter ego liability, and indemnification. The complaint asserts that the Board incurred liability for the deficit of the Trust as well as the "significant additional administrative expenses" of the Trust as a result of defendants' failures and wrongdoings.
Certain defendants moved to dismiss the complaint on the basis of statute of limitations, failure to state a cause of action, documentary evidence, and lack of legal capacity to sue. The Third Department reviewed the challenges to the pertinent causes of action, holding that certain causes of action were time-barred. In addition, the Third Department reinstated certain causes of action that the trial court dismissed. Where does all the money go? The Workers Compensation Board can proceed with its action and its search.
01/05/17 Accredited Aides Plus, Inc. v. Program Risk Mgt., Inc.
Appellate Division, Third Department
Action Allowed to Proceed Where Certain Employers Seek $188 Million from Administrators of Depleted Workers' Compensation Trust
In a related action to State of N.Y. Workers' Compensation Bd. v. Wang, supra, the Appellate Division, Third Department, reviewed causes of action asserted by certain employers, and the Workers' Compensation Board as a successor-in-interest, to determine whether action can proceed against administrators of a Workers' Compensation trust for $188 million debt.
As discussed above, the Workers Compensation Board (the "Board") determined that a particular group self-insured trust (the "Trust") was insolvent and assumed its administration. Following the Board's discovery of the Trust's alleged $188 million deficit, the Board assessed certain employer members for the Trust's deficiencies. The employers consisted of two groups, various health care providers ("health care provider plaintiffs") as well as certain other employer members of the Trust who ultimately assigned their interests to the Board (the "assignor plaintiffs"). The health care provider plaintiffs entered into a monthly payment agreement with the Board in exchange for a temporary standstill of demands for the full $188 million debt.
In 2011, the health care provider plaintiffs and the assignor plaintiffs commenced this action alleging 35 causes of action sounding in, among other things, breach of contract, breach of the duty of good faith and fair dealing, breach of fiduciary duty, fraud, fraud in the inducement, conversion, unjust enrichment, negligent misrepresentation, violations of General Business Law §§ 349 and 350, negligence, gross negligence, alter ego liability, an accounting and indemnification.
In 2012, the health care provider plaintiffs, the assignor plaintiffs and the Board entered into a joint stipulation recognizing that the Board, as a successor-in-interest of the Trust and in its governmental capacity, had commenced a separate action against many of the same defendants, arising out of common questions of fact and law and raising similar claims (State of N.Y. Workers' Compensation Bd. v. Wang, supra). The parties stipulated that that discovery and trial would be conducted jointly in the two actions. They further agreed that the Board would have sole standing to pursue claims on behalf of the Trust in its action, while the causes of action in the instant action would be limited to "only non-derivative or non-associational direct or third-party beneficiary claims." Thereafter, the health care provider plaintiffs continued to pursue their claims in the instant action, while the assignor plaintiffs entered into settlement agreements and transferred their interests to the Board, which was later substituted as a plaintiff in the instant action as a successor-in-interest to the assignor plaintiffs.
In the current action, the Board proceeds as successor-in-interest to the assignor plaintiffs. By stipulation, the Board's claims are limited to direct claims only, and the Board will not pursue any derivative claims. The Third Department reviewed the complaint to determine whether certain causes of action constituted direct or derivative claims, as well as whether challenged causes of action were timely and sufficiently pleaded. The Third Department allowed direct claims to proceed, and in accordance with the parties' stipulation, dismissed causes of action alleging derivative claims. In addition, several causes of action were dismissed as time-barred. Finally, the trial court reinstated certain causes of action dismissed by the trial court.
WILEWICZ’S WIDE WORLD OF COVERAGE
Agnes A. Wilewicz
01/20/17 United States and Dr. Kent Takemoto v. Nationwide Mutual
United States District Court, Second Circuit
Second Circuit Dismisses Doctor’s Complaint against Numerous Carriers for Failure to State Claims under False Claims Act
Kent Takemoto is a doctor who owns a Medicare Secondary Payer compliance company. He brought a complaint against a few dozen insurance carriers pursuant to the False Claims Act (“FCA”, 31 U.S.C. 3729), and accused them of failing to comply with repayment obligations under the Medicare Secondary Payer Act (“MSPA”, 42 U.S.C. 1395). His complaint was initially dismissed for failure to state a cause of action, but he appealed.
Here, Takemoto sued many different insurers and industry participants, and yet grouped them all together in his complaint, alleging broad general allegations. He failed to plead facts as to each specific defendant, an essential element of an FCA claim. Rather than repleading, he faulted “the district court for failing to assume the veracity of facts alleged in the complaint, viewing allegations in isolation rather than in their totality, and incorrectly finding group pleading impermissible given defendants’ participation in the same relevant conduct.” In no uncertain terms, the Second Circuit said: “We are not persuaded.”
Even looking at the pleadings as a whole and assuming the truthfulness thereof, there were no plead plausible claims for relief. Takemoto did not allege any facts admitting an interference of a reimbursement obligation on the part of any defendant. He merely speculated that the defendants had some such obligations, without much more. Such insufficiency and hyperbole do not a valid claim make. As such, dismissal is warranted if no further detailed allegations were asserted. Moreover, since Takemoto’s request to amend his complaint gave “no clue as to how the complaint’s defects would be cured”, denying such request was not an abuse of discretion. Full dismissal was thus warranted.
01/19/17 Nikolai Minasian v. IDS Property Casualty Insurance Company
United States District Court, Second Circuit
Second Circuit Holds Insured’s 86-Day Delay in Notifying Carrier of Burglary Claim Precludes Coverage Due to Preliminary Notice Requirement in Policy (New York law)
The insureds here sued their carrier for breach of the insurance contract for failure to pay for losses resulting from an alleged burglary of property. While the Second Circuit provides scant details beyond that, it appears that the insureds did not advise their alleged January 1, 2014 losses until they reported them to the carriers on March 28, 2014. It was clear that the insureds knew of the burglary on the day that it happened, and reported it to the police that day. Those policies, however, required notice of a loss “as soon as reasonably possible”, “immediately”, and “as soon as practicable”.
“The circumstances as of January 1, 2014, would thus have suggested to a reasonable person the possibility of a claim in light of the policies’ theft coverage, and the 86-day delay that followed was unreasonable as a matter of law. As the district court concluded, these related determinations find support in the language of the policies. The same sections of the policies providing for notice to the insurer require notice to the police in case of theft—which plaintiffs did on the day of the burglary—suggesting that the insured is expected to contact both the insurer and the police in short order after discovering the loss of insured property. Moreover, the State Farm policies also require the insured to submit a formal proof of loss within 60 or 90 days after loss. The preliminary notice requirement that is the subject of this action can only reasonably be construed to require notice sooner than these formal notice requirements. Any different construction would render the preliminary notice requirement a nullity.”
The court went on to state that a reasonable person would have provided notice, as they would have suspected the “possibility of a claim”. Without a reasonable belief that there might not be a claim (not an issue here), the delay could not be excused. Further, the court rejected the attempt to read in an ambiguity into the policy. The term “covered loss” means just that – a loss that is covered. This is unambiguous and no reasonable person could have concluded that it meant anything else. As such, the carriers were entitled to summary judgment.
Jennifer A. Ehman
01/23/17 Elite Catering Co., Inc. v. National Specialty Ins. Co.
Supreme Court, Richmond County
Hon. Philip Minardo
Whether the Insured’s Damages were Caused by a Covered Sewer Backup or an Uncovered Flood could not be Determined on Summary Judgment
Elite Catering had a general liability and commercial property policy with National Specialty Insurance Co. (“NSI”). Elite claimed that it suffered extensive property damage, food spoilage and loss of business income following Superstorm Sandy, which struck Staten Island on October 29, 2012. Elite declined to purchase a separate flood insurance policy from NSI. However, it did purchase an additional and costly rider from NSI providing enhanced coverage for damages caused by sewer and drain back-ups, food spoilage, loss of business income, and power outages.
According to plaintiff, when its principals returned to the subject premises on the day after the storm, they found the restaurant to be filled with refuse, including grease, sewage, fecal matter and toilet paper. On November 1, 2012, plaintiff filed a claim with NSI for damages resulting from an apparent sewer back-up. However, six months later, plaintiff received a certified letter from NSI dated April 8, 2013, indicating that its claim had been denied on the ground that all of the alleged damages were the result of “flooding”, a circumstance specifically excluded under their policy. Elite filed a lawsuit alleging breach of contract, breach of the covenant of good faith and fair dealing, and violation of General Business Law § 349, among other things.
All of Elite’s causes of action were dismissed except the cause of action for breach of contract, which survived the combined motion for dismissal and summary judgment. Plaintiff’s failed to state a claim for breach of the covenant of good faith and fair dealing or fraud. Likewise, plaintiff’s demand for consequential damages, including attorneys’ fees, was dismissed because there was no contract or policy provision permitting the insured to recover the expenses incurred in bringing an affirmative action against its insurer.
The cause of action for violation of General Business Law § 349 was dismissed because plaintiff failed to allege that NSI’s acts or practices were consumer oriented or misleading. Private contractual disputes between parties do not fall within the statute. Plaintiff also could not bring an action based on NSI’s alleged breach of Insurance Law § 2601 because New York does not recognize a private cause of action for violation of that statute.
However, the court found an issue of fact on the breach of contract claim. The policy excluded coverage for flood damage. It also had anti-concurrent causation language, which NSI maintained excluded coverage for covered losses if those losses were occasioned, even in part, by uncovered events. Elite had purchased special sewer backup coverage that nearly doubled the original premium. It remained to be proved whether the damages sustained by Elite were caused by (1) the failure of the sewer system or the power outage initiated by Con Edison in advance of the storm, (2) the storm itself, or (3) a combination of both. To resolve the issue, the court stated the testimony of experts would be more valuable than the opinions of the parties’ adjusters.
Brian D. Barnas
01/23/17 Hoffman v. State Farm Fire and Casualty Company
United States District Court, Western District of Washington
Insurer could have Acted in Bad Faith even if it Ultimately Made the Correct Coverage Decision
The Hoffmans were insured by State Farm. They filed a lawsuit against State Farm alleging breach of contract and extra-contractual claims.
The Hoffmans submitted the following in support of their claim that State Farm acted in bad faith:
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At every step, State Farm handled the claim from the perspective of minimizing the amount it had to pay.
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State Farm discouraged the Hoffmans from claiming all their damage, ignored their concerns, tried to settle the claim for $5,000 after a cursory investigation, and invoked a coverage exclusion that Washington courts and their own company had long deemed inapplicable.
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State Farm conceded that the exclusion did not apply—but only because the Hoffmans had threatened litigation.
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State Farm relied on a nonexistent limitation in the policy to minimize their repair cost exposure.
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When the Hoffmans refused to accept a repair that would leave their home full of toxic residue, State Farm demanded an appraisal.The appraisers ordered State Farm to pay more than twice what it had offered, but the Hoffmans had paid tens of thousands of dollars in fees.
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State Farm refused to compensate the Hoffmans for their expenses, and it refused to extend the suit limitation deadline, which forced the Hoffmans to either commit to litigation against both State Farm and Windermere, or walk away from their six-figure losses.
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State Farm continued its pattern of using litigation costs to drive its away by removing the case to this Court seven weeks before trial, delaying the trial date for six months, re-opening discovery, and now forcing the Hoffmans to defend a motion they already defeated in state court.
State Farm moved for summary judgment arguing that its denial of coverage was correct. Thus, it argued that it could not be held liable for bad faith or other extra-contractual claims if the initial denial of coverage was ultimately the correct decision. The court rejected this argument as unsupported by Washington law. An insurance company will not be liable for bad faith in Washington as long as it acts with honesty, bases its decision on adequate information, and does not overemphasize its own interests.
Here, the court concluded that the Hoffmans demonstrated that a material issue of fact existed on the issue of whether State Farm acted in bad faith in handling their claim.
1/18/17 Wood v. Allstate Insurance Company
United States District Court, Western District of Louisiana
Insurer’s Failure to Make any Payment to Insureds when their Home was Destroyed by a Fire with no Coverage Defenses Created an Issue of Fact regarding Bad Faith
Plaintiffs' home burned down on December 8, 2014. During that time, Plaintiffs had a homeowner's insurance policy issued by Allstate. The value of the home under the policy was $187, 458, and the contents coverage was $131,221. Allstate had not paid the insureds the value of the home, and it had paid the Woods a total of $5,000 for contents lost in the fire. In July of 2015 the Woods filed a lawsuit against Allstate alleging that the policy provided coverage for the fire loss and that Allstate had breached its duty of good faith and fair dealing by failing to reach a prompt, fair, and equitable resolution of the claim.
The court denied Allstate’s motion for summary judgment on the bad faith claim based regarding its failure to pay the Woods the value of the home. At one point, Allstate has suspicions that Mr. Wood committed arson. Apparently, in the beginning of the investigation, an anonymous caller told the sheriff of a nearby county that Mr. Wood burned his own house down, but this claim was never substantiated. The caller was never located and the cause of the fire was undetermined. During discovery, Allstate testified that it does not have any evidence that the Woods were attempting to commit fraud, and that it was not currently pursuing a “cause and origin of the fire” as a defense to coverage. The court concluded that delaying payment on the house for two years when there is no evidence to support arson or any other viable defense suggested that Allstate was acting in bad faith.
There was also a question of material fact regarding whether Allstate tendered a reasonable amount for undisputed portions of the Woods’ contents list. The Woods submitted a list of 480 items totaling in excess of $100,000. Allstate only tendered two payments of $2,500 to the Woods for contents lost since their home burned down over two years ago. $5,000 appeared to be a low estimate, considering the Woods lost their entire home in the fire, including all kitchen appliances and bedroom and living room furniture. Moreover, the $5,000 payment was not made to cover any specific contents. The $5,000 payment was made “in good faith and to prevent undue hardship,” as part of an advance payment agreement. Therefore, there was no way of telling which portions of the contents list were undisputed and disputed. Furthermore, the Woods provided receipts totaling in excess of $5,000 for replacement items for their home—such as a dishwasher, stove, refrigerator, water heater, oven, bed frame, mattress, and other necessary items. Allstate’s citation to general errors in the insureds’ list as a basis for failing to pay more than $5,000 was insufficient.
1/17/17 Bankaitis v. Allstate Insurance Company
United States District Court, Middle District of North Carolina
Insured’s Bad Faith Claim was Time-Barred by Suit Limitation Provision in the Policy and North Carolina Law but Allowed to go Forward based on Equitable Estoppel
Plaintiffs' home burned down on January 29, 2012. After the fire, there was a dispute between the plaintiffs and Allstate regarding whether the fire damaged the foundation of the house. Allstate refused to provide funding to repair the foundation. Plaintiffs involved the appraisal process under the policy and a final appraisal award was reached on August 4, 2015.
Thereafter, on January 27, 2016, Plaintiffs initiated an action against Allstate alleging breach of contract and bad faith, among other things. Allstate moved to dismiss the breach of contract and bad faith claims as untimely.
In North Carolina, a fire policy must provide a minimum limitations period of three years to file suit, which the Allstate policy at issue did. Plaintiffs’ claims accrued in 2012, over three years from the date the action was filed. Plaintiffs argued that the claim accrued in 2015 when the appraisal process was complete. However, the issuance of an appraisal award was not a condition precedent to file suit, and there was no provision in the policy or North Carolina law for tolling the limitations period. Accordingly, both Plaintiffs’ breach of contract and bad faith claims were time barred.
However, the court allowed the claims to stand based on equitable estoppel. Plaintiffs asserted that Allstate's concealment of its intent to deny coverage absent submission of a separate claim for the foundation was intended to induce Plaintiffs to delay immediately invoking the appraisal process, filing a separate claim, or commencing suit. They further asserted that Allstate was aware of its actions and its intent to deny coverage, that Plaintiffs lacked such knowledge, and that they could not have discovered such information. Finally, Plaintiffs contended that they relied on Allstate's concealment to their detriment in that they did not file suit or take other action until after the statute of limitations had passed.
PHILLIPS’ FEDERAL PHILOSOPHIES
Jennifer J. Phillips
01/18/17 Harleysville Worcester Ins. Co. v. Sharma
United States District Court, Eastern District of New York
Unintentionally Intentional
In this action, the plaintiff-insurer Harleysville seeks declaratory relief regarding its obligations to defendant and indemnify an insured physician and related medical practice in an underlying action against the physician for sexual misconduct against a patient. The complaint in the underlying action consisted of: (1) medical negligence and malpractice, (2) sexual assault, (3) civil battery, (4) negligent infliction of emotional distress, (5) intentional infliction of emotional distress, (6) negligent hiring, supervision, and retention, and (7) fraudulent conveyance (related to the sale of the medical practice).
Harleysville had issued a business owners policy to the medical practice that covered “sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ to which this insurance applies.” It applied to “bodily injury” only if the injury “is caused by an ‘occurrence’ that takes place in the ‘coverage territory.’ ” “Occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” As relevant, the policy also excluded coverage for bodily injury “expected or intended from the standpoint of the insured.” Harleysville, among other things, disclaimed coverage for all causes of action alleging intentional conduct.
In resolving Harleysville’s summary judgment motion, the district court considered the threshold question whether the sexual misconduct alleged in the underlying action was an “occurrence” within the meaning of the policy. Harleysville argued that sexual misconduct is an intentional action, and therefore cannot constitute an “accident” within the meaning of the policy. Harleysville further argued that coverage is also properly excluded under the “expected or intended” exclusion.
However, the complicating factor in this case is that fact that, subsequent to the incident involved in the suit, the physician has been found mentally incapacitated and, indeed, the underlying action stayed as a result. The district court noted that there was no dispute about the physician’s current lack of capacity, but that there was no medical evidence with respect to the physician’s capacity at the time of the underlying incident. As such, the district court denied Harleysville’s motion for summary judgment.
Despite finding an issue of fact, the district court did discuss the ‘expected or intended’ exclusion further, noting that “[u]nder New York law, … intent to cause injury is inferred from certain acts, including sexual assaults.” Although the district court noted that the primary case in support of that proposition, Allstate Ins. Co. v. Mugavero, did not involve an issue of mental capacity, it nonetheless stated that “if it is ultimately determined that [the physician] did act intentionally [the date of the underlying incident], the harm from that act will be inferred pursuant to Mugavero and the expected and intended exclusion will likely apply.”
ALTMAN’S ADMINSTRATIVE (AND LEGISLATIVE) AGENDA
Howard B. Altman
DFS issued a Circular Letter on January 21, 2017 to “remind article 43 corporations (non-profit medical, dental and hospital corporations governed by Article 43 of the Insurance Law) health maintenance organizations, student health plans certified pursuant to Insurance Law § 1124, and municipal cooperative insurers” of the state and federal requirements regarding health insurance coverage for contraceptive services. The letter cautions that “strict compliance with all existing statutory and regulatory requirements for coverage and disclosure of information, including providing accurate information to insureds and prospective insureds, is mandated.”
New York Insurance Law §§ 3221(l)(16) and 4303(cc) require issuers that provide prescription drug coverage to provide coverage for all contraceptive drugs and devices approved by the Food and Drug Administration (FDA) or generic equivalents when prescribed by a health care provider. In addition, Insurance Law §§ 3216(i)(17)(E), 3221(l)(8)(E) and (F) and 4303(j)(3) require all issuers, except for grandfathered plans, to include coverage for preventive care and screenings, including contraceptive drugs and devices, at no cost-sharing.
Under New York law, carriers must include coverage of all FDA-approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity, including covering contraceptive services related to follow-up and management of side effects, counseling for continued adherence, and device removal. Individual and group non-grandfathered plans must cover, without cost sharing, at least one form of contraception within each of the methods of contraception that the FDA has identified for women. The contraceptive methods for women listed by the FDA include: (1) sterilization surgery for women; (2) surgical sterilization implant for women; (3) implantable rod; (4) IUD copper; (5) IUD with progestin; (6) shot/injection; (7) oral contraceptives (combined pill); (8) oral contraceptives (progestin only); (9) oral contraceptives extended/continuous use; (10) patch; (11) vaginal contraceptive ring; (12) diaphragm; (13) sponge; (14) cervical cap; (15) female condom; (16) spermicide; (17) emergency contraception (Plan B, One Step/Next Choice/My Way); and (18) emergency contraception (Ella). These services must be covered under New York law with no cost-sharing, subject to reasonable medical management.
Therefore, in accordance with Insurance Law §§ 3216(i)(17)(E), 3221(l)(8)(E) and (F), 3221(l)(16), 4303(j)(3) and 4303(cc), all issuers in New York must provide coverage for all contraceptive drugs and devices. In addition, issuers must provide coverage with no cost-sharing for at least one form of contraception within each of the methods of contraception that the FDA has identified for women. These requirements in the Insurance Law are independent of the requirements in federal law, 42 U.S.C. § 300gg-13.
New York Insurance Law §§ 3217-a(a)(5) and 4324(a)(5) and Public Health Law § 4408(1)(e) require an issuer to supply an insured and, upon request, a prospective insured, with full and accurate information relevant to coverage, including an explanation of an insured’s financial responsibility for payment of premiums, coinsurance, copayments, deductibles and any other charges, annual limits on an insured’s financial responsibility, caps on payments for covered services, and financial responsibility for non-covered health care procedures, treatments or services. This requirement includes information regarding coverage and cost-sharing of contraceptive services. Additionally, pursuant to Insurance Law §§ 3217-a(b)(6) and 4324(b)(6) and Public Health Law § 4408(2)(f), an issuer must allow insureds and prospective insureds to inspect drug formularies used by the issuer, and must further disclose whether individual drugs are included or excluded from coverage to an insured or prospective insured who requests this information. Carriers must have an exceptions process for a woman to use to gain access to a contraceptive service at no cost-sharing that is easily accessible, transparent, and sufficiently expedient and that is not unduly burdensome for a woman. Further, issuers must provide complete and accurate information regarding contraceptive coverage to insureds and prospective insureds.
DFS ends it letter by advising that “contraceptive coverage is an essential feature of primary care in New York.” And that “DFS will continue to ensure full compliance with these important consumer health protections.” Thus, New York’s requirements are unlikely to change regardless of any change in Federal Law, including any repeal of or changes to the Affordable Care Act. DFS directs that any questions regarding this circular letter be directed to Kimberly Luke, Associate Insurance Attorney, by mail at New York State Department of Financial Services, Health Bureau, One Commerce Plaza, 19th Floor, Albany, New York 12210, or by email at [email protected].
Earl K. Cantwell
[email protected]
03/21/16 Georgia Farm Bureau Mutual Insurance Company v. Smith
Supreme Court of Georgia
Lead Paint Claims Not Covered Due To “Pollution Exclusion”
The Supreme Court of Georgia recently held that a landlord’s commercial general liability policy did not cover allegations of lead paint ingestion due to the pollution exclusion in the policy. The Trial Court ruled in favor of the insurance company, but an Appellate Court reversed noting that this was an issue of “first impression” in Georgia. The Supreme Court reversed again and ruled that personal injury claims arising from lead poisoning due to lead-based paint ingestion were excluded from coverage pursuant to the “pollution exclusion” in the CGL policy covering the residential real property.
Pollution was defined in the policy (generally) as actual, alleged or threatened discharge, etc., of “pollutants”. A “pollutant” was defined as any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.
The Court first noted a prior decision in George which held that a claim for carbon monoxide poisoning was excluded from coverage as “pollution”, although carbon monoxide was not a specifically defined “pollutant”.
The Supreme Court stated that words used in an insurance policy are to be given their usual and common meaning, and that the policy should be read as a layperson would read it, not as it would be read by an insurance expert. The Court also noted, in an unusually candid statement, that an insurance company may fix the terms of its coverage as it sees fit, as long as it is not contrary to law, and thus insure certain risks but exclude others.
The Supreme Court essentially adopted the analysis of the prior case and held that the contractual pollution exclusion language in the CGL policy governed the situation, and that lead present in paint qualifies as a pollutant, and the plain language of the pollution exclusion clause excluded the claims from coverage.
Although, the Court held that an insurance policy should be read in terms of its “plain language”, it did note that the definition of “pollutant” in the policy was broad enough to include lead in paint just as it had included carbon monoxide in the prior case. In this case, it was also helpful that the prior decision of the Court had ruled that carbon monoxide qualified as being a “pollutant” and hence excluded from coverage.
It is interesting that, in light of the significance of this case, several parties filed amicus briefs since this was an issue of “first impression” in Georgia. This decision was brief, clear, and unanimous so the issue is settled, at least in Georgia.
