Source: https://www.hurwitzfine.com/news/coverage-pointers-volume-xix-no-20
Timestamp: 2020-05-25 10:24:33
Document Index: 457219691

Matched Legal Cases: ['§ 33', '§ 349', '§ 349', '§ 5102', '§ 5102', '§ 5102', '§ 5102', '§ 370', '§ 33', '§ 33', '§ 33', '§ 524', '§ 10', '§ 5', '§ 349', '§ 349']

Coverage Pointers - Volume XIX, No. 20 | Hurwitz & Fine, P.C.
Coverage Pointers - Volume XIX, No. 20
Volume XIX, No. 20 (No. 504)
Do you have a situation? We love situations. I even get calls – received one today – where a client/friend seemed disappointed when she said, “I don’t have a situation, just a question”. Of course, it was a situation, just differently named.
Spring has arrived. The first day of spring is my favorite date of the year. Rebirth, warmth ahead, a long summer and my move back to the Canadian property – just around the corner. The Nest Cam on our beach will reveal that there is no snow there, we escaped the harsh weather that struck our Long Island office and affected so many of you on the east coast. We commute to work from Fort Erie, Ontario, starting in mid-April, an international journey of about 16 minutes, including clearing customs.
I do hope I will see some of you at the PLRB Claims Conference in Orlando, April 15 – 18. Along with my friend John Hanlon from Selective, we will be presenting on my favorite topic – Contractual Indemnification and Additional Insured status. It will be a practical program helping the attendees to develop an approach to making and responding to tenders. Hope to see you there and please introduce yourself to me if you are attending.
Second Department Understands It, This Time:
Unlike the peculiar February 14th decision in the Yonkers case which we discussed in our February 23rd issue, the Second Department understood the difference between an insurer’s obligations owed to an additional insured (defense and perhaps indemnity) and that owed to a trade contract indemnitee (generally, none) in a decision reported in my column this week.
100 Years Ago Stories:
Several years ago, I began including stories from newspapers that were published exactly 100 years before the current issue. Many had to do with insurance, others not quite as relevant. We’ve continued that tradition and often, we received more feedback on those stories than we have on the substantive law discussions. We intersperse those stories in this cover note. For those who crave baseball stories, and a good number do, April 15, 1918 was opening day, so stay tuned.
By the way, the banner headline in the New York Times, 100 years ago, on March 23, 1918, spoke of the horrors of World War I, still raging in Europe:
Germans Claim 16,000 Prisoners and 200 Guns in Big Drive
Haig Reports Foe Gaining Some Points but at Heavy Cost
500,000 Germans Opened Attack; More Divisions Thrown In
The Buffalo Evening News offered:
German Artillery Bombards Paris
In the attached issue, we have a special column entitled: Perley’s Paint & Repair. Here’s Mike Perley’s cover note:
Since the last issue of Coverage Pointers, we have entered Daylight Savings Time and, according to astronomers, spring has arrived. This triggers Buffalonians’ non-traditional annual rite of spring. While others await the blooming of daffodils and blossoms on the trees, Buffalonians (Dan Kohane primary among them) monitor the ice cover on Lake Erie and the removal of the boom at the headwaters of the Niagara River that prevents ice from clogging the water intakes for the Niagara Falls power stations. Thankfully, the ice cover on the lake is receding, and we look forward to an early spring. At the same time, we are mindful of the difficulties encountered by our friends on the east coast and pray that you have safe travels and warm houses.
While I am not a regular contributor, certain cases provide me an opportunity to comment on cases affecting the insurance industry that do not fall comfortably into our normal topics. This week the Appellate Division, Fourth Department, reinstated two lawsuits brought by automobile repair shops seeking additional payment for repairs on vehicles by way of assignment from their owners. In what is an unusual procedural twist, the Fourth Department relied upon a decision of the Second Circuit. The full story follows within.
Air Mail? Who would have Believed It?
BIRD POSTMEN SOON TO
SOAR OVER COUNTRY
U.S. Government Is Taking Bids on
Airships for Mail Service Between
New York and Texas—Will Bring
Increased Use of Tires
Uncle Sam, already the largest consumer of rubber tires, is now entering a new filed that will augment his tire bill to even greater proportions. A new demand will arise from the adoption of the airplane as a carrier of United States mail. Last week an announcement was made at Washington, that the post office department is accepting bids from airplane concerns for air mail service between New York and Texas. Already committees in several cities along the route are busy seeking suitable tracts of 500 acres or over for use as landing stations for the “bird postmen.”
The B. F. Goodrich Rubber company has manufactured airplane tires for over 10 years. Glenn H. Curtis was the first airplane manufacturer to adopt the pneumatic tire on a substantial scale. Wright brothers used skids in their first experiments, and were slow to see the practicability of rubber tires. The plane in which Curtiss made his first long flight, the one over Lake Erie, was equipped with Goodrich airplane tires. Tires used in aviation evolved from the bicycle tire. The first tires used by Curtiss at Hammondsport were bicycle tires.
I am in Chicago this week attending DRI’s Insurance Coverage and Claims Institute. Thus far, the program has been fantastic. I just finished attending a presentation by Melanie Lockett, Esq. of Lowe Stein in New Orleans about defending depositions of claim professionals. One point which I thought was really well made was the importance of timely reviewing demands for Rule 31(b)(6) witnesses and making sure that the proposed areas of questioning are appropriate and if they are not, being proactive. Don’t wait until the deposition to iron out its scope.
In terms of my column this week, I report on an interesting case from New York Supreme Court involving additional insured status following a construction site accident. The piece of the decision which I think really stands out is the discussion about whether the carrier was obligated to defend the owner and contractor despite the absence of any allegations against its named insured in the complaint (preview: the named insured was not the employer). A good read.
Empowering Women Getting Started in a Profession:
One of our litigators, Anastasia Stumpf, recently published an article about her experiences as a young female attorney getting started in the profession. I thought it has wisdom beyond its years, not only for the target audience, women attorneys, but also for the insurance industry and men alike. With her permission, and with my thanks to her, I offer it to you and suggest that you might know individuals who can benefit from her words. She can be reached by a click on her name, below. For our firm, empowerment, diversity and inclusion are in our bloodstream. We all grow from what we learn from others.
By Anastasia Stumpf
Mentorship—Learning to navigate legal practice sometimes puts you in the uncomfortable position of needing to betray your old training in feminine politeness. Find a mentor who will help you grow, develop, and overcome your instincts to nicely comply with those unwilling to do the same. Once you’re comfortable, become a mentor for someone else.
I am a mere WEEKS away from moving into my house. You may recall that I bought a fixer-upper several years ago and have been slowly turning it into something habitable. At this point, we spend every weekend painting molding, repainting molding after I drip wall paint on it, installing doors, and grouting tile. In effect, I am so busy putting the finishing touches on my house that I don’t even notice the abysmal season our hockey team is having. I mean, someone recently offered me free Sabres tickets with free parking and I turned it down … it’s too painful to watch. In fact, not only were the Sabres declared “unwatchable” by the Buffalo News, but just this Wednesday they lost to one of the worst teams in the league … 4-1. (No, they weren’t playing themselves).
Hopefully once the drywall dust settles in my house there is some quality hockey to watch.
Employees Wanted, 100 Years Ago:
WANTED—Eight or ten white boys or men to make corn and grain crop for wages on our place at Transylvania, La., on the Iron Mountain Road, just below Lake Providence; will pay $30 per month and board. Apply to P. W. Wilson, Mgr., Transylvania, La.
If you regularly follow my column, you know that I recently got engaged. Wedding planning is a lot of work. I am learning that it takes time to retain a photographer, disc jockey, florist, and cake maker. I’ll admit my fiancé does most of this. So I can’t complain (and I’m not). I am having a lot of fun with it, and cake tasting has quickly become my favorite part of the process.
For those who may be newer subscribers or unfamiliar with my column, I report on coverage decisions from high courts from the other 49 states to keep you in the loop on developments around the country. These cases often address the applicability and enforceability of a common exclusion, subrogation issues, fee shifting, interpretations of commonly defined words in policies, and duty to defend issues. Sometimes bad faith claims reach a court of last resort.
In today’s column, we have a bad faith cause from the Supreme Court of Montana. The court addressed a motion to dismiss, ruling on whether the claimant stated a claim against two insurers. The court reviewed the pleading and the pertinent state law and concluded that the claimant had sufficiently pleaded her claims. The claim can go forward. The decision is covered in the attached issue.
We hope you continue to enjoy our reporting on coverage decisions from across the country.
YOUNGEST MAN IN 57TH
To Charles Warner Murray, son of Mr. and Mrs. D. L. Murray of Rockaway Beach belongs the distinction of being the youngest member of Battery D. Fifty-seventh Artillery, now stationed at Fort Hancock. He is but 18 years old. Murray enlisted in the former Twenty-First Company, Ninth C.A.C., now Battery D of the Fifty-seventh, in December 1917. At present he is serving as a wagoner. He is of sturdy physique and of mechanical bent and aspires to operate a tank against the forces of the Hun. For several months, he was assigned as special driver for Fort Commander Severe, but was transferred to a field where he might better equip himself as a tank operator. He expresses great enthusiasm for army life and feels sure that he will soon be called to play his part “over there.” His father is publisher of the Wave, Rockaway Beach.
Editor’s Note: Charles survived the war, serving overseas for a year and coming home without injury. Sadly, he succumbed to illness, unrelated to his war service, a month after he came home:
Charles Warner Murray.
Charles Warner Murray, youngest son of Mr. and Mrs. D. W. Murray of Rockaway Beach, L. I., and grandson of Mrs. Mary L. Murray of Eddy Street in this city, died of pneumonia at his home on Sunday morning, Feb. 16th, aged nineteen years.
The deceased was born in Van Etten, Jan 2nd, 1900. He attended the public schools of New York, and had a year’s naval training previous to his enlistment in the army in November 1917. He was in training at Fort Hancock, N. Y., leaving with his company, Battery D, 57th Art. C.A.A. on May 9th, 1918, for France. He returned home Jan. 14th, 1919. He is survived by his parents, his brother, Hubert D., and his sister Gertrude.
Peiper’s Predictions:
Science (and the internet) tells us that 93% of human behavior is predictable. The supposition, which is apparently proved by scientific theory, is that 93% of the time we can predict where someone is going by looking at where they’ve been. Spontaneous individuals, it is said, “are largely absent from the population.”
For some behaviors, like for instance buying my wife a birthday card on the actual day --- hours before giving it to her --- are far more than 93% predictable. Nevertheless, I’d like to think that we, as a population in general, are a bit more random.
The internet also tells me that 93% of people say you should not clip your finger nails at your desk. We don’t want to meet the 7% who think that’s ok.
Oh, and one more thing, despite ample warning, 93% of bracket filler-outers picked the University of Arizona to eliminate the University AT Buffalo Bulls. If only you had some forewarning, you all could have avoided an embarrassing situation last Friday morning. We’re not usually one to say I told you so, but…who am I kidding, of course we are! WE TOLD YOU SO. Shame on you, the 93-percenters, for not listening!
If it is law you’re looking for, we have a few offerings for you to enjoy in the column that follows. Apparently, it was the week for the Appellate Division to clean out all appeals filed on a full moon. I dare anyone of you to read my column, and then, immediately, review our cannons of civility. You can be, we’d propose, an excellent lawyer...without being a sharp practitioner.
P.S. As an outgoing tip this week, we would not be surprised if the Lady Bulls lost to USC this weekend in the Women’s Sweet Sixteen, but we also wouldn’t be surprised if they won.
The Metric System – Controversial a Century Ago:
A Word from One Not Convinced of Its Necessity
TO THE EDITOR: —Sir: The article entitled “The Metric System and Its International Advantages” which appeared in THE SUN was very interesting, but it is to be hoped that we shall before long be favored with a similar presentation of the other side of the question.
While the opinions and desires of the scientists are worthy of all attention and consideration, those of the manufacturers are equally important and are in a sense more closely associated with the industrial progress of the country.
The writer possesses voluminous data which to say the least demonstrate that the necessity for the compulsory adoption of the metric system is far from being acute. The arguments of the metric system advocates could be read with considerably more interest and greater liberality of mind if they would at the time of making the general statements present the facts in support thereof.
To cite just one example, the official organ of this propaganda for September 10 contains the following statement: “The United States Government is using the metric system almost exclusively in the manufacture of its planes.” This is one general statement, which cannot be supported by facts because the facts of the case are that the English system of measurements is being used except in isolated cases such as spark plug threads, where the metric system is desirable in order to affect interchangeability with some well-established standard.
H.D. MURPHY.
JERSEY CITY N. J., March 22.
I spoke too soon in the last edition about getting our last blast of winter. The groundhog was incorrect and we got another 8-11 inches last night depending where you were on Long Island. But rain, nor sleet, nor snow, etc., will stop my column from coming through.
On the serious injury front, there were only two cases, one perfunctory. However, in the second case, the court did not find an issue of fact as to serious injury when defendants’ experts found no limitations in range of motion and plaintiff’s doctors only found a slight limitation in one plane of range of motion. Cases in general have held in the past a slight limitation isn’t enough for a serious injury.
I hope everyone who celebrates has a Happy Easter and Passover.
Pitcher and Catchers have Reported:
NOW IT’S BROOKLYN.
Nap LaJoie, It Is Reported, Will Go
New York, March 22.—Napoleon Lajoie, veteran infielder, who managed the pennant-winning Toronto team in the International League last year, has been purchased from Toronto by the Brooklyn National League Club, it was announced here to-day.
Charles H. Ebbets, President of the Brooklyns, said he had talked over the telephone with Lajoie at Cleveland and that the player said he had no objection to playing with Brooklyn, but that before signing a contract he would like to confer with the officials of the Toronto Club. Lajoie said he probably would report at the Brooklyn training quarters at Hot Springs within a few days.
The purchase of Lajoie disarranges the plans of President McGill, of the Indianapolis, American Association Club. McGill and Lajoie came to terms recently for the latter to manage the Indians on condition that he would get a release from Toronto. McGill is trying to get in touch with Lajoie. It is uncertain who will manage Indianapolis. Jack Dunn, Baltimore, has applied for the job.
--------------------
HERE’S A TANGLE.
McGill Says Lajoie Is Ready To
Sign with Indianapolis
Indianapolis, Ind., March 22.—In a telephone conversation with Owner James C. McGill, of the Indianapolis Club, tonight Napoleon Lajoie, who to-day was reported sold to the Brooklyn National League Club, stated that he was ready to report at Indianapolis immediately, Mr. McGill said to-night. The latter, however, advised, he said, that Lajoie’s status with the Toronto Club be straightened up before reporting as manager of the Indianapolis Club.
In a statement issued to-night Mr. McGill expressed the opinion that the Toronto Club had no right to sell Lajoie to another club unless it was to manage that club, as the Frenchman had a contract to manage the Canadian club during the coming season if the International League operates. McGill, however, takes the view that Lajoie should be considered a free agent because the International League thus far has not adopted a schedule for the coming season and has not even employed its umpires.
Spring is here, though you would not have guessed it by looking out the window (particularly downstate). I was just in Brooklyn on Tuesday and, though it was rather crisp and clear, preparations for yet another storm were well underway. I managed to jet out that afternoon just as the first flakes were falling – literally one of the last flights to get out that day. Back upstate, it’s cold but sunny and no snow is anticipated any time soon. Quite a reversal of fortunes for once.
Now, this week the Wild World of Coverage brings you another Second Circuit case hot off the presses. In Principal Life v. Coassin, the court addressed whether a carrier had met its burden for rescinding a life insurance policy, under Connecticut law. In short, an insured had indisputably made a misrepresentation on his policy about whether he had been experiencing vertigo. It turned out that not only had he been dizzy, but also he had seen a doctor about it. He did not report these facts correctly to the carrier when asked. As a carrier is within its rights to disclaim and rescind if an insured makes material misrepresentations on a policy application, the carrier did not pay on the claim when the insured later died of a brain tumor. However, that carrier’s underwriting guidelines indicated that it would have issued the same policy had the truth of the vertigo been known, and at the same premium rates. Thus, the misrepresentation was not actually “material” under the law, and the carrier could not rightfully rescind. Interesting stuff, as always.
Until next time... Happy upcoming holidays!
Boys Will be (and were) Boys:
BOYS’ “DEVILTRY” USUALLY
Boy education was the theme of an address delivered at the last session of the Scout leaders’ training school in the Chamber of Commerce building last night by Dr. E. K. Fretwell, Professor of Scouting at Teachers’ College, Columbia University. This talk was one of the most interesting of the week’s school. Dr. Fretwell has spent the greater part of his life in finding out the motives and inspiration behind the things that boys do.
Some things that boys do seem to be pure “deviltry.” Dr. Fretwell said, when viewed unthinkingly from an adult standpoint. But most of these acts resulted from natural causes in which the big feature was usually misdirected energy. What scouting had done to a great extent, the speaker said, was to find the inspiration and then seek to substitute some other inspiration, which would take the place of it and be just as acceptable to the boy but would produce more desired results in a line leading toward better citizenship.
I bring you this note from Chicago where I am in attendance at DRI’s Annual Insurance Coverage and Claims Institute program. So far, the speakers have been excellent and the topics have been interesting and highly relevant. I’m looking forward to day two of the program tomorrow, which is set to include some great first and third party coverage topics, including bad faith.
Being in Chicago has helped take my mind off my bracket, which currently resembles a dumpster fire. Thanks for playing Virginia, Michigan State, and UNC. On the bright side, Western/Central New York basketball has represented itself quite well in both the Men’s and Women’s NCAA Tournaments, with Buffalo knocking off 4th seeded Arizona, and the Syracuse Men and Buffalo Women advancing to the Sweet 16. It’s great to see my favorite team and my alma mater playing so well on the big stage in March.
No New York bad faith cases to report on this issue. Instead, we go right across the border to Pennsylvania, where Levine teaches us that the statute of limitations for a bad faith claim under Section 8371 is two years and commences when the insurer first provides definite notice of its denial of coverage. Thompson is a Georgia appellate case evaluating a bad faith claim under Georgia Code § 33-4-6. To prove a claim under that section, the insured must show that a demand for payment was made at least 60 days prior to filing suit. Thompson could not do so and thus her bad faith claim failed.
Enjoy your weekend and these first few days of spring.
This Spud’s For You:
DRIVE FOR LOWLY POTATO
TO BE STARTED NEXT WEEK
Next week in Buffalo as everywhere else in the country a drive will be made to win for the potato more generous use. The plan behind the drive is to save wheat for the fighting men of this and other nations opposing the Huns.
Potatoes are first rate substitutes for wheat and they make good soup not to mention pies and cakes of quality. In all-round food usefulness, the potato belongs in first place.
Recipes for the many dishes to which the potato lends itself may be had at the Thrift kitchen, 33 East Chippewa street, or at the home economics office of the Erie county farm bureau, 57 Coal & Iron exchange.
Well, it’s officially spring, and here on Long Island, we just had another nor’easter – 15 inches of snow – but baseball starts this week, so play ball!
In administrative news, the US Supreme Court heard arguments in Sveen v. Melin (Case No. No. 16-1432), which involves a Minnesota law that automatically revoked beneficiary designations naming one’s spouse upon the dissolution of the marriage. The issue for the Supreme Court is whether the law can be applied retroactively to designations that were made before the statute was enacted.
Jail for Non-Support:
GALLOWAY MUST SUPPORT FAMILY
Directed to Pay Wife $8 Per Week
On complaint of his wife, Ethel M. Galloway, of his city, Elmer V. Galloway, of Waterbury, Conn., formerly of Middletown, was arrested this afternoon and arraigned before Recorder Howard M. Starr in police court at 2:20 o’clock on a charge of non-support of his wife, Ethel M. Galloway, and his year and a half old child. Galloway made a plea of guilty to the charge and Recorder Starr directed that he pay Mrs. Galloway $8 each week, and in default of this, he must serve four months in the Orange county jail at Goshen.
Mrs. Galloway was recently granted an interlocutory judgment of divorce by Justice A. H. F. Seeger, in a Special term of Supreme Court in Newburgh. Galloway was charged in the complaint in the divorce action with acts of adultery alleged to have been committed in this city last year on Canal Street with a woman named Johnson. Galloway made no appearance in the Supreme Court action.
Although the nor’easters continue on Long Island, I’m still looking forward to spring. Just wondering when it will finally arrive. My oldest just participated in his first science fair. He learned a lot working on his project and seemed to enjoy looking at all the other projects at the fair. My wife and I were very impressed with the projects.
This edition discusses a recent construction defect case from the Nebraska Court of Appeals. In Grinnell Mut. Reinsurance Co. v. Fisher, the Nebraska Court of Appeals examined a standard CGL policy relative to underlying claims of breach of contract for failing to complete construction of a house and negligence for faulty workmanship. After reviewing the facts alleged and the policy language at issue, the Court reversed and vacated the district court's findings of no “occurrence” and that the insured was not entitled to coverage. The Court of Appeals determined that some of the underlying plaintiff’s claims against the insured regarding damage to property owned by the underlying plaintiff or others may represent an unintended and unexpected consequence of the insured’s alleged faulty workmanship and go beyond damages to the insured’s own work product. Since some of the underlying claims against the insured properly alleged an occurrence within the meaning of the CGL policy, coverage was found to exist. The Court agreed that the claims for breach of contract were not covered by the CGL policy. The Court also held that any underlying claims related to faulty workmanship by Fisher were not covered.
I hope all of you have had a wonderful week. Welcome to another issue of Wandering Waters. This week we have two cases, one from the Eastern District and one from the Western District. I hope you enjoy.
Headlines from This Week’s Issue (and the full issue is attached) :
Submission of Police Report Including Statement of Claimant, in Support of an Application to Stay an Uninsured Motorist Arbitration, was Sufficient to Raise an Issue of Fact as to Physical Contact
A Trade Contract Indemnitee is NOT by Virtue of that Status, an Additional Insured and Not Entitled to a Defense from the Insurer
Medical Malpractice Carrier’s Settlement Did Not Give Rise to Extra-contractual Claims
Settlement with Property Insurer that Denied Coverage Does Not Necessarily Mean that Action Against Retail and Wholesale Brokers for Failure to Procure Must be Dismissed
Claims that School District Officials Permitted Anti-Semitic Harassment of Students May or May Not Constitute “Occurrences” under Policies. Questions of Fact Preclude Judgment on the Pleadings
Issue of Fact as to Whether Lumbar Spine Injury Was a Serious Injury
Minor Limitation In One Plane of Motion Insufficient to Establish Serious Injury
Letter Sent By Defendant Did Not Render Policy Cancellation Ineffective
At Trial it is Not Plaintiff’s Burden to Prove Whether it has Fully Complied with Defendant’s Verification Request
Plaintiff’s Repeated Disregard for Discovery Orders Results in her Pleading being Stricken
Stipulation to Change Counsel ONLY Provides New Counsel with Fees Incurred Prospectively
Strategic Delay in Motion to Amend, Results in Prejudice to Plaintiff
Answer, with Affirmative Defense, Does Not Waive Personal Jurisdiction Defense
Second Circuit Affirms that Rescission of Life Insurance Policy was Inappropriate, Where Misrepresentations in Application were not Material (Conn. Law)
Additional Insured Endorsement Triggered, but Coverage Subsequently Removed Based Upon Professional Liability Exclusion
Statutory Bad Faith Claim Barred by Two Year Statute of Limitations
Insured could not Maintain a Claim for Bad Faith where She did not Alert the Insurer that it was Facing a Bad Faith Claim for a Specific Refusal to Pay
Montana Supreme Court Allows Bad Faith Claim to Proceed Where Insurers Applied $15,000 Collateral Source Reduction In Reaching Settlement with Claimant
SCOTUS and Life Insurance
Nebraska Court of Appeals Finds a Covered “Occurrence” Where Faulty Workmanship Damaged Property Beyond that of the Insured’s Own Work Product
Insurer’s Not Required to Produce Four Documents When Such Documents were Deemed Privileged Attorney-Client Communication
Insurers’ Entitled to Relevant Requests But Not Entitled To An Admission by an Insured When Such Admission Would Compel the Insured to Abandon its own Legal Theory
PERLEY’S PAINT AND REPAIR
Appellate Division, Fourth Department Reinstates Auto Body Repair Shop Cases
Perley’s Paint & Repair
03/21/18 Allstate Insurance Company v. Deleon
On April 6, 2013, Deleon was operating a vehicle in Hempstead when he was involved in a multivehicle accident. In addition to the subject car, there were three other vehicles known to have been involved in the accident. According to Deleon, there was another vehicle, which he described as a "pick-up truck with a landscaping trailer attached," that initially struck his vehicle and then left the scene.
He filed for uninsured motorists arbitration for the injuries he sustained in the accident. Allstate brought an action to permanently stay arbitration and submitted an uncertified police accident report containing a statement by the appellant that "an unknown vehicle with a red trailer cut him off causing him to change lanes" and strike another vehicle.
There was a framed-issue hearing to determine whether there was physical contact between the unidentified vehicle and Deleon’s. After the framed-issue hearing, the lower court decided there was no physical contact and the court entered a judgment granting that branch of the petition which was to permanently stay arbitration.
Deleon argued on appeal that Allstate was not entitled to a framed-issue hearing because it did not submit evidentiary proof in its application that would have justified the hearing.
Physical contact is a condition precedent to an arbitration based upon a hit-and-run accident involving an unidentified vehicle. The insured has the burden of establishing that the loss sustained was caused by an uninsured vehicle, namely, that physical contact occurred, that the identity of the owner and operator of the offending vehicle could not be ascertained, and that the insured's efforts to ascertain such identity were reasonable.
Here, Allstate, by submitting the police accident report containing the appellant's statement that his vehicle was cut off by an unknown vehicle with a red trailer, raised a triable issue of fact as to whether physical contact occurred between the appellant's vehicle and the alleged unidentified hit-and-run vehicle. The submission of the police report was enough to raise an issue of fact justifying the hearing.
03/21/18 Brooklyn View v. PRP, LLC
The tenant's insurer was New York Central Mutual Fire Insurance Co. (“NY Central”). NY Central refused to defend and indemnify the landlord in the underlying action on the ground that the tenants' insurance policy did not list the landlord as an additional insured.
The landlord commenced this declaratory judgment action against the insurer, contending that the tenants' policy provided coverage for liabilities assumed by the tenants under their lease with the landlord, and therefore the insurer must defend and indemnify the landlord in the underlying action. The landlord also asserted a cause of action against the tenants for contractual indemnification pursuant to their lease.
All well and good, but there was STILL no AI coverage available for the landlord.
The landlord moved for summary judgment on its cause of action for contractual indemnification against the tenants and declaration that the NY Central is obligated to defend and indemnify it in the underlying action.
First, the landlord failed to establish, prima facie, that the lease obligates the tenants to indemnify the landlord in the underlying action. Resolution of the issue should await the determination of liability in the underlying action.
Secondly, coverage extends only to named entities and/or individuals defined as insured parties under the terms of an insurance policy, so that if the policy does not name, describe, or otherwise refer to the landlord, there is no obligation to defend or indemnify. Status as an indemnitee does not operate to confer status as an additional insured entitled to coverage.
03/16/18 Ullman v. Medical Liability Mutual Insurance Company
Ullman, a licensed physician, commenced this action against Medical Liability Mutual Insurance Company (“MLMIC”), her medical malpractice insurer, seeking to recover damages that allegedly resulted when defendant settled a malpractice claim on her behalf. She asserted two causes of action seeking declarations voiding her written consent to settle and vacating the settlement, respectively.
The doctor claimed that MLMIC employees fraudulently misrepresented the effect of her refusal to consent to settle, thereby inducing her to consent. The court below should have dismissed the cause of action.
Also, the court below should have dismissed the General Business Law § 349 claim. The allegations in the complaint demonstrate that this is merely a private contract dispute over [insurance] policy coverage, which does not affect the consuming public at large, and therefore falls outside the purview of General Business Law § 349.
The court below should have dismissed the cause of action for breach of contract. Plaintiff did not identify the provisions that defendant allegedly breached, and thus she failed to state a cause of action for breach of contract.
While every contract contains an implied covenant of good faith and fair dealing encompassing any promise that a reasonable party would understand to be included, the plaintiff likewise failed to state a cause of action for breach of the implied covenant of good faith and fair dealing.
In the context of an insurance contract, "a reasonable insured would understand that the insurer promises to investigate in good faith and pay covered claims" ."An insured may also bargain for the peace of mind, or comfort, of knowing that it will be protected in the event of a catastrophe". Here, it is undisputed that plaintiff received the benefit of the defendant investigating the claim, negotiating the settlement, paying the settlement in full, and securing a general release.
Finally, the court below erred in denying that part of its motion seeking to dismiss the causes of action for fraudulent misrepresentation, negligent misrepresentation, and fraudulent inducement. Actual pecuniary damage is an element of any cause of action asserting fraud or negligent misrepresentation. Here, the medical malpractice claim was settled with no admission of wrongdoing by plaintiff, no monetary payment by her, and no liability attributed to her.
Any loss of staff privileges at a hospital, we conclude that the loss of those privileges did not result from the settlement itself, but from plaintiff's own actions in failing to disclose it.
The doctor sought to contest the enforceability of the settlement agreement with the underlying plaintiff but did not join them in the action. Without them, the court could not make a determination of the validity of the agreement; they were necessary parties.
03/14/18 Prime Alliance Group, Ltd. v. Affiliated FM Insurance Company
Prime commenced this action against, among others, Affiliated FM Insurance Company (“Affiliated”), asserting that Affiliated breached an insurance policy that it had issued to the plaintiffs by denying coverage of a property damage claim for the plaintiffs' property located at 40 Rector Street in Manhattan. The plaintiffs asserted additional causes of action alleging that their retail insurance broker, Praxis International Corporation (“Praxis”), and their wholesale insurance brokers, HUB International Northeast Limited (“HUB”) failed to procure the insurance coverage that the plaintiffs had requested. The plaintiffs settled with Affiliated. Praxis thereafter moved to dismiss the complaint insofar as asserted against it on the ground that the plaintiffs' settlement with Affiliated precluded the plaintiffs from pursuing their causes of action to recover damages for failure to procure insurance. Below, that motion was granted.
HUB moved for summary judgment dismissing the complaint insofar as asserted against them relying on the same ground cited by Praxis in support of its motion, that the plaintiffs' settlement with Affiliated precluded the plaintiffs from pursuing their causes of action to recover damages for failure to procure insurance. The HUB defendants also argued that summary judgment was warranted because the plaintiff was not in privity of contract with them.
The lower court granted that motion as well.
The Second Department reversed, holding that the validity of Affiliated's denial of the plaintiffs' claim for property damage remains undecided, notwithstanding the fact that the plaintiffs settled this action with respect to Affiliated. The complaint alleges that the denial was based on actions taken by Praxis and the HUB defendants. Should the plaintiffs prevail on their causes of action against Praxis and the HUB defendants, any damages they recover must necessarily be reduced by the amount of the settlement from Affiliated, in order to avoid a double recovery.
The appellate court held similarly with respect to HUB.
03/09/18 Graphic Arts Mut. Ins. Co. v. Pine Bush Central School District
Graphic Arts issued four consecutive Commercial General Liability (“CGL”) and School District and Educators Legal Liability (“SDELL”) primary policies, as well as CGL umbrella policies, to the defendant Pine Bush Central School District (“District”) covering each academic year from July 1, 2008, to July 1, 2012. In an action entitled T.E. v Pine Bush Central School Dist., commenced in the United States District Court for the Southern District of New York, five students alleged that the District and named employees, violated their civil rights by being deliberately indifferent to anti-Semitic harassment and discrimination perpetrated by other students against them. In April 2012, Graphic Arts was notified and agreed to pay the costs of defense, reserving its right to disclaim coverage upon further investigation of the allegations. Graphic Arts eventually disclaimed any duty to indemnify the defendants in the underlying action. However, it continued to provide a defense through the resolution of the underlying action.
During mediation, the parties to the underlying action agreed to settle that action for a total of $3,000,000 in compensatory damages and $1,480,000 in attorneys' fees. A representative of the Graphic Arts attended the mediation but the insurer did not contribute toward the settlement.
Thereafter, Graphic Arts brought a declaratory judgment action seeking a determination that it is not obligated to indemnify the defendants in the underlying action. It was claimed the plaintiffs in the underlying action, in their first amended complaint, based their claims against the defendants on intentional discriminatory conduct related to disparate treatment. The plaintiff in this action alleged, inter alia, that exclusions to the policies issued to the School District precluded coverage for claims seeking damages stemming from intentional discriminatory conduct, and that those claims did not fall under the definition of either a covered "occurrence" or "loss" as those terms were defined by the policies.
The fifth cause of action sought a declaration that, in the event the plaintiff was found to have a duty to indemnify the defendants in the underlying action, the duty to indemnify would be limited to that part of the settlement that was found to be reasonable, since Graphic Arts claimed that the settlement amount in the underlying action was excessive.
The insureds brought a motion to dismiss the lawsuit, on the pleadings.
"Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties have used, and if they are clear and unambiguous the terms are to be taken and understood in their plain, ordinary and proper sense". Here, according to the language employed in the CGL coverage part of the plaintiff's primary policies, coverage was provided for bodily injury caused by an "occurrence," which was defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
The SDELL coverage part of the policies afforded coverage for a "loss," which excluded matters that may be deemed uninsurable under the law. Whether a loss is the result of an accident must be determined from the point of view of the insured.
The allegations set forth in the first amended complaint filed in the underlying action averred that the defendants deliberately ignored complaints and their own observations of student-on-student anti-Semitic harassment and discrimination or responded in an unreasonable or inadequate manner to such complaints and observations. The plaintiffs in the underlying action further alleged that repeated and frequent incidents of anti-Semitic harassment and discrimination against them by other students, which were reported to school officials on numerous occasions and directly observed on other occasions by school personnel, gave rise to an inference that the defendants "intended for the harassment to occur" based upon the defendants' practices, policies, and customs in dealing with reports and observations of anti-Semitic harassment and discrimination, that the defendants "intentionally discriminated" against the plaintiffs, that the defendants' conduct "aided and incited" unlawful discrimination, and that the defendants' acts and omissions were "undertaken recklessly and with the intent to engage in wrongful conduct."
While "it is not legally impossible to find accidental results flowing from intentional causes, i.e., that the resulting damage was unintended although the original act or acts leading to the damage were intentional", the insurance policies do not conclusively establish that the plaintiff is obligated to indemnify the defendants in the underlying action, and the other evidence submitted by the defendants did not utterly refute the factual allegations set forth in the plaintiff's complaint. Whether the incidents set forth in the amended complaint in the underlying action were accidents presents questions of fact which cannot be determined on a motion to
In a companion appeal, the Second Department found it was premature to determine whether the settlement was reasonable and that question would not be resolved until the lower court resolves the issue of indemnity.
03/21/18 Meyer v. Panagiotidis
The defendants met 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 submitted competent medical evidence establishing, prima facie, that the alleged injury to the lumbar region of the injured plaintiff's spine did not constitute a serious injury under either the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d).
In opposition, however, the plaintiffs raised a triable issue of fact as to whether the injured plaintiff sustained a serious injury to the lumbar region of his spine under the permanent consequential limitation of use and significant limitation of use categories of Insurance Law § 5102(d). No facts were given.
03/13/18 M.P. v. The N.Y. Transit Authority
Defendants established entitlement to judgment as a matter of law by submitting evidence showing that infant plaintiff did not sustain a serious injury to her lumbar spine. Defendants offered the affirmations of an orthopedic surgeon and neurologists, who found normal ranges of motion and normal test results. Furthermore, their radiologist found that a CT scan showed only bulges of no significance and degenerative in nature.
In opposition, infant plaintiff offered objective evidence of injury and her initial treating physician opined that the injury was causally related to the accident, particularly given the absence of prior. However, upon recent examination, infant plaintiff was found only to have a minor limitation in one plane of range of motion, which was insufficient to raise a triable of fact as to whether she sustained a serious injury under Insurance Law § 5102(d).
03/08/18 Acupuncture Now, P.C. v. Hereford Ins. Co
Defendant moved for summary judgment dismissing Plaintiff’s complaint on the ground that the insurance policy covering the vehicle allegedly involved in a June 10, 2011 motor vehicle accident had been cancelled prior to the accident. The Civil Court agreed, and Plaintiff appealed.
The Civil Court held that defendant had demonstrated, as a matter of law, that the vehicle involved in the accident was a "for hire" vehicle and that, prior to the accident, the policy insuring the vehicle had been properly and validly cancelled in compliance with Vehicle and Traffic Law. While the cancellation of the policy is governed by Vehicle and Traffic Law § 370, which requires the insurer to file a certificate of cancellation with the Commissioner of Motor Vehicles, the record reflects that defendant also sent its own cancellation notice in addition to complying with the statute.
Plaintiff's sole contention on appeal is that the sending of this additional notice "rendered the purported cancellation ineffective". However, the second Department contrary to plaintiff's argument, the May 10, 2011 notice at issue, informing the policyholder that it intended to cancel the policy effective June 6, 2011, did not render the cancellation of the policy ineffective.
02/22/18 TAM Med. Supply Corp. v. Travelers Ins. Co.
Defendant moved for summary judgment dismissing the complaint on the ground that plaintiff had failed to provide verification which defendant had requested. Plaintiff opposed the motion and annexed its verification responses to its opposition papers. Plaintiff appealed the portion of the decision that found that plaintiff had timely submitted its bills to defendant and stated, "At trial [plaintiff] has the burden to prove its prima facie case and whether it fully complied with [defendant's] verification requests."
The Second Department determined that, contrary to plaintiff's assertion, the Civil Court improperly determined that, at trial, plaintiff must prove "whether it fully complied with [defendant's] verification requests." As such, the second department stuck that portion of the decision.
03/21/18 Honghui Kuang v. MetLife
Decedent Hong Guang Yang procured a life insurance policy with MetLife, and therein named his girlfriend as a 50% beneficiary. The other beneficiaries were plaintiff’s siblings (25% each). At some point during the term of the policy, defendant received forms which purportedly changed the policy to make the girlfriend the sole beneficiary. Nevertheless, after decedent became ill, but before he passed, he participated in an examination under oath where he specifically stated that the siblings were to be sole beneficiaries of the policy.
Not surprisingly, both the siblings and the girlfriend made claims for benefits under the policy. Faced with uncertainty over who was entitled to proceeds, MetLife denied plaintiff’s (girlfriend) claim. She then commenced the instant action, pro se. In response, MetLife commenced a counter-claim, and also named the siblings as counter-claim defendants. The siblings, and the girlfriend, then proceeded to litigate who was entitled to policy benefits.
Plaintiff initially failed to provide an Answer to the MetLife counter-claim, and thereafter refused to respond to the siblings discovery demand. That resulted in the siblings moving to strike plaintiff’s Complaint. In a subsequent Order, plaintiff was required to appear at a deposition. While she appeared, she refused to answer questions, tore up exhibits, and threatened the siblings’ counsel. Thereafter, by way of another Order, she was again required to appear and participate in a deposition. This time, plaintiff refused to answer questions until she saw proof that counsel questing her was, in fact, counsel to the siblings. At that point, plaintiff again left the deposition.
Nevertheless, by way of a third Order, plaintiff was again directed to appear at a deposition. Plaintiff failed to appear at the third attempt, and the siblings again moved to strike plaintiff’s Complaint. The trial court refused to strike the pleading, but did preclude plaintiff from offering testimony at trial.
On appeal, the Appellate Division noted that the trial court is vested with great discretion in managing discovery disputes. Nevertheless, where, as here, plaintiff had exhibited a willful and contumacious obstruction of the discovery process, a more severe sanction was appropriate. In reaching its conclusion, the Court noted “willful and contumacious conduct may be inferred from a party’s repeated failure to comply with court-ordered discovery, coupled with inadequate explanations for the failure to comply, or a failure to comply with court ordered discovery over an extended period of time.”
In addition, the Court also addressed the initial self-executing conditional discovery order. That Order provided that plaintiff had to respond to discovery on or before a date certain. Failure to do so would result in an automatic preclusion sanction. The Court noted that failure to timely satisfy a conditional discovery order results in the condition become “absolute.” Thus, in this case, preclusion was “absolute” upon her failure to respond to paper discovery. The added abuses during the deposition process supported the Court’s decision to strike plaintiff’s pleading.
03/21/18 Krimendahl v. Hurley
This case arises out of a bodily injury action filed against Mr. Hurley. At the outset of that case, Mr. Hurley was represented by counsel appointed by his carrier, MAPFRE. However, as Mr. Hurley faced possible excess exposure, he also retained John Mulvehill to represent him personally. At some point in the litigation, Mr. Hurley filed a motion seeking to have Mr. Mulvehill substituted in as counsel of record, and to have MAPFRE assume the costs of his defense moving forward.
At that time, apparently, Mr. Mulvehill agreed that he would not seek fees accrued during his personal, joint, representation of Mr. Hurley. In addition, he also agreed to charge within the rates and guidelines established by MAPFRE. On this basis, the motion to change legal counsel was withdrawn, and Mr. Mulvehill assumed primary defense of Mr. Hurley.
Nevertheless, despite the agreement and withdraw of the earlier motion, the trial court still issued an Order which provided directing Mulvehill’s assumption of the defense and directing that MAPFE “pay reasonable value of all legal services actually rendered by Mulvehill…”
Armed with this language, Mr. Mulvehill argued he was now entitled to reimbursement of both fees incurred during his primary representation of Mr. Hurley, but also those fees accrued during the time he spent as personal counsel. This, of course, was not what was agreed to at the time of the original Stipulation which substituted Mr. Mulvehill as MAPFRE’s counsel of record. Referencing the prior discussions, Stipulation and Motion, the Appellate Division noted that the trial court clearly only meant to provide Mr. Mulvehill payment from MAPFRE for costs incurred after the Stipulation.
03/08/18 Federal Ins. Co. v. Lakeville Pace Mech. Inc.
Plaintiff commenced the instant subrogation action under a construction negligence theory. A negligence claim, of course, is governed by a 3 year statute of limitations. It is apparently conceded that plaintiff could have also stylized, and perhaps more appropriately so stylized, its action as a breach of contract which would have been entitled to the longer 6 year statute of limitations.
Apparently, defendant recognized the negligence cause of action (the only one asserted) was untimely. Nevertheless, defendant did not move to dismiss for more than two years. Rather, defendant’s motion to amend its answer to assert statute of limitations was not filed until immediately after the six year statute of limitations on the breach of contract also expired.
The Appellate Division was not impressed by defendant’s strategy, and ruled that defendant’s decision to wait the expiration of the breach of contract statute of limitations prejudiced plaintiff. As such, it denied defendant’s motion to amend and thereby effectively waived all statute of limitation defenses defendant may have otherwise been entitled to raise.
03/08/18 Steuhl v. CRD Metalworks, Inc.
Plaintiff commenced the instant product liability action after partially amputating two of his fingers on an allegedly defective log splitting machine manufactured by defendant. Upon answering, defendant asserted the affirmative defense that plaintiff lacked personal jurisdiction due to improper service. Thereafter, defendant moved to dismiss the Complaint on the same grounds.
In opposition, plaintiff argued that appearing (rather than pre-Answer motion to dismiss) resulted in the waiver of any personal jurisdiction defenses. A fact belied, of course, by the explicit Affirmative Defense pled in defendant’s Answer. Needless to say, the Court summarily rejected plaintiff’s “waiver” argument.
On a traverse hearing to determine the merits of the defense, defendant adduced proof that it only received a bare summons with no notice or affixed Complaint. That, alone, was insufficient to invoke the Court’s jurisdiction. Plaintiff submitted proof that the Summons and Complaint was sent to the process server, but was unable to establish that the Complaint was actually served along with the Summons. On this Record, the appellate court deferred to the Trial Court’s holding that proper service was not effectuated, and, as such, personal jurisdiction was not achieved.
03/05/18 Principal National Life Insurance v. Emily C. Coassin
On April 9, 2012, Lawrence Coassin submitted an insurance application to his carrier, Principal National Life (“Principal”), for a $10 million life insurance policy to replace one that he had had with another carrier. That application contained the following language: “I represent that all statements in this application are true and complete to the best of my knowledge and belief and were correctly recorded before I signed my name below. I understand and agree that the statements in the application, including statements by the Proposed Insured in any medical questionnaire that becomes a part of this application, shall be the basis of any insurance issued. I also understand that misrepresentations can mean denial of an otherwise valid claim and rescission of the policy during the contestable period.” One of the questions in that application stated “In the last ten years, have you had, been treated for or been diagnosed as having ... any disease or disorder of the eyes, ears, nose, throat or skin?”. Coassin answered “no”.
On April 17, 2012, the carrier issued the requested life insurance policy, on the condition that he complete an Amendment to that Application and Supplemental Statement of Health. He completed that document on April 25, 2012, and in response to the above question answered “[Y]es, earache with dizziness, lightheadedness and vertigo 12/11. Resolved completely without recurrence. No further MD visits needed.” The Amendment provided that “amendments to the Application listed above are part of the Application, and the Application and amendments are to be taken as a whole.” That same day, Coassin also completed the Supplemental Statement. He checked “no” for the box next to the question, “Have you had any illness or injury or consulted a member of the medical profession since the date of the application?”
In filling out these forms, Coassin knowingly made misrepresentations to Principal. Indeed, on April 17, 2012, Coassin had seen an ear, nose, and throat specialist to investigate his vertigo. The doctor arranged for further visits and future appointments. Unaware of these falsehoods, the carrier issued the policy at its standard rates. Coassin followed up with three appointments, including a standard hearing test, an auditory brainstem response evaluation, and a videonystagmography. Those tests revealed that a problem relating to the brain, rather than inner ear, “could not be ruled out”, and there was a sign of a central nervous system lesion. Due to the abnormal results, Coassin had an MRI done, which revealed an abnormality. He was sent to a neurologist, who told him that there was no suggestion of brain tumor and the vertigo was likely benign, and he recommended no further testing.
In point of fact, Coassin had developed a brain tumor. By November 2012, he underwent an MRI with contrast, which confirmed that. In July 2013, Coassin died. Later that year, his wife filed a claim under the policy. Since he had died within two years of the issuance of the policy, however, the carrier performed a contestability review to “provide an underwriting opinion as to what we would have done had all the true facts been known”. They concluded that they would not have issued that policy had the known all of the true facts at the time of the application. The carrier then brought suit to uphold its decision to rescind the policy and declare it void.
The issue, however, was whether the misrepresentations were actually material. In Connecticut, like many states, a carrier can rescind a policy if: 1) there was a misrepresentation; 2) it was knowingly made; and 3) it was material to the insurer’s decision whether to insure. [Assoc. Editor’s Note: In New York, intent is not an element. It suffices if a material misrepresentation was made and it was false. It need not have been knowingly or intentionally made.] To determine “materiality”, in Connecticut a question on an application is presumptively material, and the insured has to rebut that presumption in order to overcome it. Here, the carrier also submitted written guidelines about its underwriting practices. However, those guidelines indicated “even if a person has vertigo and the cause is unknown, if the vertigo has been fully investigated and the symptoms continued for more than six months”, they still would have issued a policy at their standard rates.
As such, the presumption of materiality was rebutted by the carrier’s own guidelines. In the end, they still would have issued the policy to Coassin, had he fully disclosed all of the information he had in his possession. “Under Connecticut law, a misrepresentation is material when, in the judgment of reasonably careful and intelligent persons, it would so increase the degree or character of the risk of the insurance as to substantially influence its issuance, or substantially affect the rate of the premium.” Here, they could not establish that either. As such, they could not rescind the policy and the claim had to be paid.
03/13/18 New York Mar. & Gen. Ins. Co. v. American Empire Ins. Co.
Judge Carol R. Edmead
The underlying inured plaintiff was working in the course of his employment with non-party Parkside Construction Builders Corp. performing foundation and/or excavation work at a construction site when a large section of foundation wall collapsed onto him. He died as a result of his injuries.
The underlying complaint alleged that, at the time of the accident, the plaintiff was working in an area that required its “foundations, walls, supports or utility facilities to be properly secured so as to prevent their collapse; that such protections were missing and/or insufficient; and that, as a result, a part of a foundation wall fell and killed the plaintiff.”
At the time of the incident, the property was owned by SNRP. SNRP had hired Cava to construct a hotel.
Prior to the incident, Cava entered into a consulting services agreement with a company called Bronzino. The scope of the work detailed in the agreement indicated that Bronzino would “[p]erform all necessary site inspections as required to develop a comprehensive plan package for proposed Foundation underpinning & Support of Excavation work to facilitate new building construction at the site.” It also indicated that Bronzino would prepare drawings, and sign on as Engineer of Record for the project. In addition, the agreement required that the owner and contractor be named as additional insureds on a policy of insurance obtained by Bronzino.
In compliance with this agreement, Bronzino purchased a policy from Continental Casualty, which contained additional insured coverage. That coverage included in “Who is an Insured” “any person or organization whom you are required to add as an additional insured on this policy under a written contract or agreement.” But, it limited any coverage to “liability due to your [Bronzino’s] negligence specifically resulting from your work for the additional insured which is the subject of the written contract or written agreement…” And, coverage was barred for “‘bodily injury’ …arising out of the rendering or failure to render any professional services.”
Following the loss, the defense of Cava and SNRP was tendered to Continental who denied. They took the position that neither Cava nor SNRP were entitled to coverage because absent from the underlying complaint was any allegation of negligence on the part of Bronzino. In response, plaintiff submitted that Bronzino’s design work and plans included the use of underpinning and other devices to support the foundation work at the project. The Court agreed finding that as the accident was allegedly caused when the subject wall collapsed due to insufficient underpinning and support, at least a question of fact existed as to whether the accident was due to Bronzino’s negligence.
However, the court went on to explain that such a determination was essentially academic since the policy explicitly excluded injury arising out of the rendering or failure to render any professional services. And, there was no dispute the Bronzino’s consulting work at the project constituted professional services. Thus, the Court concluded that Continental was under no obligation to defend or indemnify Cava and SNRP, and noted that the denial issued by Continental was timely issued and enforceable.
03/16/18 Levine v. Washington National Insurance Company
Levine was a police officer with the Swatara Township Police Department. Levine obtained an Accidental Death and Dismemberment Policy with Disability Individual from Washington National. The Policy provided certain cash benefits to the policyholder in the event of a covered accident and also provided short term disability benefits.
On December 21, 2012, Levine claims he was injured while lifting a heavy patrol bag. He felt a pop or pull in his back and neck area accompanied by immediate and severe pain in his shoulder and upper back area. Levine submitted the claim along with treatment records to Washington National. On February 23, 2013, the claim was denied based upon a finding that there was no accident. Levine sent additional treatment records to Washington National, who again denied based upon a lack of accident on March 22, 2013.
Levine returned to work on light duty, but he was then out of work on doctor’s orders between April 22, 2013 and September 29, 2013. He underwent disc replacement surgery on July 8, 2013.
On November 20, 2013, Washington Nation received an “appeal of claim denial” letter from Levine’s attorney. On January 28, 2014, Washington National responded and upheld its denial of benefits. On November 9, 2015, Levine filed a lawsuit alleging breach of contract and a statutory bad faith claim pursuant to Section 8371.
Washington National argued that the bad faith claim was barred by the statute of limitations. Pennsylvania’s bad faith statute does not include a limitations period and the Supreme Court of Pennsylvania has not yet addressed the issue. However, Pennsylvania federal courts have previously held that the applicable statute of limitations is two years. The limitations period for a statutory bad faith claim commences when the insurer first provides definite notice of its denial of coverage.
The Court concluded that the bad faith claim was barred. Washington National’s February 23, 2013, letter unambiguously informed Levine of its denial of coverage. Thus, Levine’s right to institute a bad faith lawsuit accrued upon receipt of the February 23, 2013, letter. As it was clear that Levine received the letter on or before March 21, 2013, and he did not file suit until November 9, 2015, Levine’s bad faith action was barred by the two year statute of limitations.
03/14/18 Thompson v. Homesite Insurance Company of Georgia
Thompson’s home was damaged in April 2011 when a tree fell on it during the storm. She incurred expenses for the removal of tree and other debris from her property in addition to the damage to her home requiring repair.
Thompson had a home insurance policy with Homesite, which included coverage for tree and debris removal. Thompson submitted a claim and an adjuster reviewed the damage and completed an estimate. Homesite issued an initial payment to Thompson based upon the adjuster’s report of $1,812.33.
Homesite and Thompson were unable to agree on the amount of reimbursement for the tree and debris removal. Through the claim process, Thompson made a number of complaints to Homesite regarding its handling of her claims. She sent a number of messages criticizing the handling of her claims, and she filed a formal complaint with the Georgia insurance commissioner.
Thompson then provided Homesite with documentation regarding the cost of the tree and debris removal in June 2011. Homesite made payment on the reimbursement claim in the amount of $1,800 on October 6, 2011.
On October 12, 2011, Thompson’s counsel demanded payment of the reimbursement for tree and removal expenses, which had already been issued. In that letter, counsel threatened to file a bad faith claim against Homesite if it did not reimburse her for the tree and debris expenses.
Still unable to agree on the total value of the damage to Thompson’s home, the appraisal process was invoked. The umpire awarded Thompson a net amount of $49,713.69. Homesite issued payment for $47,101.36, which was the total award minus the two payments already made. Thompson then filed suit alleging breach of contract, bad faith, and seeking attorney’s fees. She claimed that Homesite unreasonably delayed reimbursing her for the tree and debris removal expenses and that it had underpaid the umpire’s award.
To maintain a claim for bad faith under Georgia Code § 33-4-6, an insured must prove that her claim is covered by the relevant insurance policy, that a demand for payment was made by the insured at least 60 days prior to filing suit, and that the insurer’s failure to pay was motivated by bad faith. The statute requires an insured to alert the insurer that it is facing a bad faith claim for a specific refusal to pay.
Thompson’s communications with Homesite clearly indicated she was unhappy with the claims handling process, but there was no language specifically actually alerting Homesite that she was planning to bring a legal action for bad faith if the claim was not paid. The only pre-suit communication in which potential litigation was threatened was the October 12, 2011 letter sent by her counsel. However, that threat of litigation pertained only to Homesite’s alleged failure to reimburse Thompson for tree and debris removal expenses. Such payment had already been made at the time of the letter.
Accordingly, summary judgment was granted in favor of Homesite on the bad faith claim.
The Court also concluded that the trial court improperly denied Homesite’s motion for summary judgment on Thompson’s claim for attorney’s fees. Georgia Code § 33-4-6 is the exclusive remedy for an insurer’s bad faith refusal to pay insurance proceeds, even when other theories distinct from bad faith are alleged, absent a special relationship beyond that of insured and insurer. Thompson had sought attorney’s fees under a separate provision of the Georgia Code. The court concluded this was improper on appeal and that her only potential remedy for attorney’s fees was under § 33-4-6.
03/13/18 Marshall v. Safeco Ins. Co. and Mid-Century Ins. Co.
This case arises from a motor vehicle accident in Park County, Montana. Marshall was riding as a passenger in a car driven by Kevin Gallivan. Another individual, Peter Kirwan, owned the vehicle driven by Gallivan. Marshall suffered injuries resulting from the accident. Marshall sued Gallivan and Kirwan. Safeco insured Kirwan. Mid-Century insured Gallivan. The insurers provided liability coverage under each separate policy. The insurers and Marshall entered into a settlement agreement prior to trial resolving the underlying claim.
Marshall sued the insurers, alleging that the insurers took a $15,000 collateral source reduction against her underlying settlement. Marshall brought claims seeking declaratory judgment and violations under the Unfair Trade Practices Act (UTPA). Marshall alleged the insurers have utilized and relied upon the collateral source statute or its principles to take a reduction against damages sustained and owed to their insureds or claimants in violation of Montana law. Specifically, Marshall alleged the insurers used the collateral source statute to justify reduction in her damages notwithstanding the collateral source statute was inapplicable.
The insurers filed a joint motion to dismiss. The District Court granted the insurers’ motion to dismiss, holding that an insurer’s consideration of a potential future offset under the collateral source doctrine during settlement negotiations does not create a justiciable controversy. The District Court dismissed both of Marshall’s claims.
Marshall argues the District Court erred in dismissing her declaratory judgment claim. Marshall asserts the District Court incorrectly concluded she did not allege a justiciable controversy. In Montana, the Uniform Declaratory Judgments Act provides a district court with the “power to declare rights, status, and other legal relations whether or not further relief is or could be claimed.” A justiciable controversy must exist before a court may exercise jurisdiction under the Declaratory Judgments Act. The court determined that there was a justiciable controversy. Settlement was agreed upon by the parties and Marshall received the settlement. Had settlement discussions been ongoing, any opinion by the court would merely be advisory.
However, in this case, since the case had settled, a judgment would determine the parties’ rights, status, or legal relationship by deciding whether the insurers reduced Marshall’s damages by applying the collateral source statute.
Marshall also argued that the District Court erred in dismissing her UTPA claim. Marshall alleged that the insurers’ settlement practices violated the UTPA. Specifically, Marshall alleged the insurers failed to conduct an investigation into whether the collateral source statute applied and whether Marshall would be fully compensated. The court found that she sufficiently pled her UTPA claim.
However, an insurer may not be held liable under the UTPA if the insurer had a reasonable basis in law or in fact for their actions with regard to settlement. Accordingly, the District Court could not make a determination on whether the insurers had a reasonable basis in law or fact on a motion to dismiss. Such determination would be more appropriate on a motion for summary judgment. The Montana Supreme Court reversed the District Court’s judgment dismissing the complaint and remanded the case for further proceedings.
This week, the U.S. Supreme Court heard oral arguments in Sveen v. Melin (Case No. No. 16-1432). The case involved a dispute over life insurance proceeds between a decedent's former spouse and his children by a former relationship. The decedent designated his former spouse as the beneficiary of the policy while they were still married. Thereafter, Minnesota enacted a statute providing "the dissolution or annulment of a marriage revokes any revocable … beneficiary designation…made by an individual to the individual’s former spouse.” Minn. Stat. § 524.2-804, subd. 1. After enactment of the statute, the decedent and his spouse divorced, but he did not change his beneficiary designation. One issue for the Supreme Court is whether Minnesota's revocation-on-divorce statute violates the "Impairment of Contracts" clause of the United States Constitution. Art. I, § 10, cl. 1, but the main issue before the Court, and the one it will likely decide the case upon is whether Minnesota’s law can be applied retroactively to designations that were made before the statute was enacted.
The Court’s decision could impact states with similar laws, including New York, Florida and many others. New York EPTL 5-1.4(a)(1), entitled “Revocatory effect of divorce, annulment or declaration of nullity”, provides “(a) Except as provided by the express terms of a governing instrument, a divorce (including a judicial separation as defined in subparagraph (f)(2)) or annulment of a marriage revokes any revocable (1) disposition or appointment of property made by a divorced individual to, or for the benefit of, the former spouse…by beneficiary designation in a life insurance policy or (to the extent permitted by law) in a pension or retirement benefits plan.” N.Y. Est. Powers & Trusts Law § 5-1.4 (McKinney).
If the USSC holds that Minnesota’s automatic revocation law is invalid or otherwise inapplicable, other States laws may impacted. It should be noted, however, that the Sveeen Court is addressing only beneficiary designations made before the statute was enacted: The decision thus may have only limited impact. If one names his/her spouse after the statute had been in place, it could be argued that the parties were aware that the designation would cease upon dissolution of the marriage. But, many statutes were enacted over the past decade. FL’s law was enacted in 2012, and New York’s ETPL 5-1.4 was enacted in 2008, for example. If a beneficiary designation preceded the subject statute, the Sveen decision could impact the applicability of the revocation.
03/13/18 Grinnell Mut. Reinsurance Co. v. Fisher
This declaratory-judgment action arises out of an underlying action asserting claims of breach of contract and negligence related to the construction of a house. The underlying plaintiff, Roberta F. Smith (“Smith”), hired the underlying defendant, Robert D. Fisher (“Fisher”), to rebuild her home following a fire. Smith’s complaint against Fisher asserts claims for breach of contract for failing to complete construction of the house; fraudulent misrepresentation by Fisher for representing that he had the education, skills, and tools to complete the construction; quantum meruit for unjust enrichment from the payments to Fisher for work that was never completed; and negligence for failing to perform the work in a good, workmanship-like manner.
Smith claimed damages for the cost to complete the construction and correct the work, the cost of non-delivery and installation of building materials performed by other contractors, the loss of materials that Smith paid Fisher for but which were not delivered, the total sum Smith paid to Fisher to build the house, the cost to repair damage to portions of the home that were uninhabitable due to the unfinished work, and any amount Fisher had overcharged Smith.
Fisher had a CGL policy through Grinnell Mutual Reinsurance Company (“GMR”). He provided GMR notice of Smith's claims against him. GMR, under a reservation of rights, agreed to provide a defense to Fisher against Smith's claims. GMR subsequently filed a declaratory judgment action to determine its duty, if any, under the CGL policy.
The declaratory judgment complaint sought declarations against Fisher and Smith finding that the damages in the underlying action were not for "personal and advertising injury," not for "bodily injury," not for "property damage," and not the result of an "occurrence." The complaint also asked the court to declare that even if there were "property damages" caused by an "occurrence," they were not covered by the policy because of the exclusions contained in the policy, and therefore GMR had no duty to indemnify or defend Fisher in the underlying action.
The GMR policy is a standard CGL policy, which provides coverage for "property damage" if the "property damage" is caused by an "occurrence" that takes place in the "coverage territory" and occurs during the policy period. “Occurrence” was defined to mean an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
Both GMR and Fisher filed motions for summary judgment. During the course of the motion practice, Smith filed an affidavit claiming that Fisher improperly constructed the roof on her house, and as a result there was water damage to the interior of the structure. Smith further claimed that the water damaged certain property which was installed by Fisher and said water damaged certain property which was installed by certain subcontractors and said water damaged certain property which was property owned by Smith herself. Smith claimed the water damage to her property was due to faulty installation of the roof by Fisher. Smith claimed in her deposition that the fireplace was damaged, as well as the sheetrock, and potentially some insulation. Smith said the chimney was made of plywood, which resulted in water damage. Although Smith's affidavit asserted damage to her own property, as well as to subcontractor property, she did not state what specific property was damaged.
The district court entered an order finding that GMR was entitled to judgment as a matter of law. The district court found that the policy clearly denies coverage relative to the claims of breach of contract and business risk of unworkmanlike conduct in the building of homes. The district court held that the policy does cover Fisher's tort liability for physical injury or property damages. The court further held that Smith's case against Fisher may involve property damage, but noted that to be covered by the policy, the property damage must be caused by an "occurrence". The court found no occurrence as defined by the policy relative to the claims of Smith and noted that the damage to property exclusion clearly denies any coverage of any negligence in workmanship performance by Fisher. Additionally, the "personal and advertising injury" liability coverage was not applicable to Fisher relative to Smith's claims.
The Court of Appeals relied on a Nebraska Supreme Court decision holding that faulty workmanship, standing alone, does not constitute an “occurrence” because it is not a fortuitous event. However, an accident caused by faulty workmanship is a covered occurrence. In other words, although a standard CGL policy does not provide coverage for faulty workmanship that damages only the resulting work product, if faulty workmanship causes bodily injury or property damage to something other than the insured's work product, an unintended and unexpected event has occurred, and coverage exists.
Following this line of reasoning, the Court of Appeals held that because Smith alleged damages to property owned by herself as well as to subcontractor property and water damage to the home due to Fisher's alleged faulty workmanship, an “occurrence” within the meaning of the GMR policy was sufficiently alleged. The Court held that Smith's allegations of property damage represent unintended and unexpected consequences of Fisher's alleged faulty workmanship and go beyond damages related to Fisher's own work product. As such, the Court reversed and vacated that portion of the district court's order concluding otherwise.
After determining that there was an “occurrence”, the Court examined the policy exclusions. GMR argued that the policy exclusions for contractual liability, damage to property, impaired property, expected or intended injury, and property damage to "your product" and property damage to "your work" preclude coverage.
The Court noted that property is not impaired unless it is capable of being restored by the repair, replacement, adjustment or removal of "your work," or by fulfilling the terms of the contract or agreement. As the damages to property belonging to Smith or others could not be repaired or restored by simply fixing the faulty workmanship, the Court concluded that the damages were not “impaired property” within the meaning of the exclusion.
Relying on case law from the Nebraska Supreme Court, the Court noted that in general, the "your work" exclusions operate to prevent liability policies from insuring against an insured's own faulty workmanship, which is a normal risk associated with operating a business. These exclusions apply to the faulty workmanship or faulty products of the insured. Property damage to property of others does not constitute damage to "your product" (goods manufactured, sold, handled, distributed or disposed of by insured) or "your work" (work or operations performed by the insured or on his behalf, and the materials furnished in connection with his work). The Court concluded that the "your product" and "your work" exclusions are not applicable when the property damage is to the property of others.
The Court next looked at the contractual liability exclusion, which excludes coverage for "property damage" "for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement." However, "[t]his exclusion does not apply to liability for damages . . . [t]hat the insured would have in the absence of the contract or agreement[.]" The Court noted that Fisher did not challenge the district court’s determination that the policy excluded coverage with respect to Smith's claims for breach of contract, and held that this exclusion precludes such coverage.
The damage to property exclusions states that the policy excludes coverage for "[p]roperty damage" to: . . . (4) Personal property in the care, custody or control
of the insured; (5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the property damage arises out of those operations; or (6) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it. Notably, the policy contains an endorsement that modifies subsection j.(4); and provides coverage for: destruction of property of others (including the loss of use thereof), while in the care, custody or control of an insured or property as to which an insured for any purpose is exercising physical control, caused by an accident and arising out of the installation, repair, alteration or other operations of your business described by and covered by the CGL policy. The endorsement has an exclusion, which excludes the cost of repairing or replacing any work defectively or incorrectly performed or completed by an insured or subcontractor.
The policy also contains an endorsement that modifies subsections j.(5) and j.(6) of the "Damage to Property" exclusion, which states that we agree with you to pay at your request for "property damage" to property of others in the care, custody or control of an insured caused by an "occurrence" and arising out of your operations away from your insured premises. Notably, this endorsement states that the insurer "shall have no duty whatsoever to defend claims and/or lawsuits for which the only coverage provided is under this endorsement."
Relying on these endorsements, the Court found that some of the "damage to property" owned by Smith or others alleged to be at issue in Smith's action may fall under these endorsements. As such, the Court found that GMR's argument that the "Damage to Property" exclusion applied and excluded coverage was not consistent with the plain reading of the language contained in the endorsements to this exclusion.
The expected or intended injury exclusion excludes coverage for "property damage" "expected or intended from the standpoint of the insured." GMR claimed that Fisher could expect there would be a claim against him for damages if he stopped construction and abandoned the property, or if he did not construct the house in a workmanlike manner, or if he did not perform under the terms of the construction contract. However, according to Fisher, the house was 90-percent complete and what was complete was done properly. Further, Fisher claimed the leak occurred after he had stopped working on the house. The Court determined that the damage to personal property from water leakage into the house was not something Fisher expected or intended. Accordingly, the exclusion was found not to apply.
In light of the above, the Court of Appeals determined that some of Smith's claims against Fisher regarding damage to property owned by Smith or others may represent an unintended and unexpected consequence of Fisher's alleged faulty workmanship and go beyond damages to Fisher's own work product. Therefore, since some of Smith's claims against Fisher properly alleged an occurrence within the meaning of the CGL policy, coverage was found to exist.
The Court agreed that Smith's claims against Fisher for a breach of contract were not covered by the CGL policy. The Court also held that any of Smith's claims related to faulty workmanship by Fisher were not covered. However, none of the other exclusions asserted by GMR applied to exclude Smith's allegations of damage to property owned by her or others. The Court did note that the endorsements may limit the amount of coverage available.
The Court held that since it determined that Smith's claims of damage to property owned by her or others as a result of Fisher's alleged faulty workmanship sufficiently established an occurrence under the policy, the facts related to such damages were material and could not be determined on the record before it. Issues of fact remained as to what property was actually damaged and whether or not the damage was the result of faulty workmanship by Fisher. Therefore, the Court held that summary judgment should not have been granted as to GMR's request for a declaration that the damages in Smith's case against Fisher were not the result of an occurrence and were not for property damage. Accordingly, the Court reversed and vacated those portions of the district court's order holding there was no occurrence, holding that Fisher has no coverage under the policy "for paying or defending the Smith suit," and dismissing Fisher's counterclaim. The case was then remanded to the district court for further proceedings.
03/16/18 Harding v. State Farm and Casualty Company
Insurers Not Required to Produce Documents When Such Documents were Deemed Privileged Attorney-Client Communication
State Farm Fire and Casualty Company (“Defendant”) issued a policy of insurance to Dyrol and Ayanna Parker Harding (“Plaintiffs”). Plaintiffs commenced this action contending that defendant improperly denied them coverage for their homeowner’s insurance claim. On February 16, 2018, the parties requested an in camera review of four documents. Plaintiffs contended that defendants had improperly withheld these four documents.
In its analysis, the court noted that since all four of the disputed documents were on their face communications from Defendant’s outside counsel to Defendant, New York law would determine whether the disputed documents were privileged attorney-client communications. Under New York law, attorney-client privilege requires: (1) the existence of an attorney-client relationship, (2) a communication made within the context of that relationship for the purpose of obtaining legal advice, and (3) the intended and actual confidentiality of that communication. In addition, the court noted that “[t]he critical inquiry is whether, viewing the lawyer’s communication in its full content and context, it was made in order to render legal advice or services to the client.”
First, the court reviewed documents labeled 88 and 89. Documents labeled 88 and 89 were two emails, dated September 13, 2016, and October 14, 2016, from outside counsel to Defendant’s claim specialist. Defendants argued that the emails were protected attorney client communications. Plaintiff argued that the privilege did not apply because the current matter was a first-party action commenced by the carrier’s insured. Analyzing documents labeled 88 and 89, the court confirmed that these documents constituted communications by Defendant’s outside counsel made for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship and appeared intended to be confidential. In support of this finding, the court noted that documents 88 and 89 were intended to be confidential as only defendant and counsel were copied on the communications.
Second, the court reviewed labeled as 82 and 85. Documents labeled as 82 and 85 were two letters, dated December 2, 2016, and February 16, 2017, from Defendant’s outside counsel to defendant’s claims specialist. Plaintiff argued that since that firm was retained by Defendant to conduct an examination under oath of Plaintiff as required under the policy, the firm was therefore conducting an investigative function, to which the privilege did not apply. In opposition, Defendant argued that the “mere fact than an insurer involves an attorney in its investigation does not automatically deprive the insurer of its right to enjoy the privilege of attorney-client communication.” Further, Defendant asserted that it had retained counsel for broader purpose than just conducting an examination.
In ruling that the documents labeled 82 and 85 were privileged, the court noted that both letters were primarily of a legal character. In support of this conclusion, the court noted that the letters “do much more than simply report the statements made in the course of the examination under oath.” Rather, the letters provided Defendant with extensive legal analysis, advice, and recommendations regarding the issues at the heart of the claim.
In sum, the court found all four of the disputed documents were privileged attorney-client communications.
03/08/18 American Precision Industries v. Federal Ins. Co.
Federal Insurance Company (“Federal”) sold American Precision Industries, Inc., (“API”) five annual comprehensive general liability insurance policies with coverage from April 1, 1992, through April 1, 1997. It is alleged that Fireman’s Fund Insurance (“Fireman’s”) sold API consecutive primary comprehensive general liability insurance policies, with coverage from April 1, 1985, through April 1, 1989. Further, it is alleged that North River Insurance Company (“North River”) issued a primary comprehensive general liability insurance policy with coverage from December 31, 1974, through December 31, 1977.
In 1997, API formed three subsidiary companies, API AirTech, Inc. (AirTech), API Basco, Inc. (“Basco”), and API Heat Transfer, Inc. (“Heat Transfer”). Although, API transferred shares, it never transferred any asbestos liabilities to Heath Transfer, AirTech and Basco. Since 2002, API had been named as a defendant in hundreds of asbestos claims in numerous states. In these suits, the allege third-party bodily injuries occurred during one or more of the periods covered by the policies. API commenced this declaratory action on December 16, 2014.
Federal alleged that of the 753 underlying asbestos suits identified in the claims report only one lawsuit named API as a defendant. Federal requested among other things that API admit that it is named as a defendant in only one of the 753 underlying asbestos suits identified in the claims report. API objected to these request on ground that it sought information with no relevance to this action because the liabilities for the Underlying Asbestos Suits belong to API, rather than the improperly named defendants.
In addition, Federal requested that API admit that it was seeking reimbursement for amounts it spent for the defense of non-API entities in 752 Underlying Asbestos suits. API objected on the ground that that the phrase non-API entities was vague and ambiguous.
In its analysis, the court noted that the purpose of the Federal Rule of Civil Procedure 36 is to expedite trial by removing uncontested issues of fact. The court found that the Defendant insurers have demonstrated that the many of its specific request were relevant in that they directly bear on the issue of whether the parties named in the underlying claims were covered under the insurance policies issued to API. In support of its finding, the court noted that under New York law the policyholder bears the burden of showing that the insurance contract covers the loss. As such, the burden was on API to prove that the past, present, and future asbestos-related claims for which it seeks reimbursement, defense, and /or indemnification are covered under the defendant Insurers’ policies. Accordingly, API was directed to answer Federal’s Request Nos. 32, 40-42, 50, 57-59, 67, 74-76, 84 and the analogous Requests from Fireman’s and North River within 45 days of the Decision and Order.
Nevertheless, the court ruled that Federal’s Request No. 33 for an admission that API is seeking reimbursement for amounts it spent for the defense of non-API entities in 752 Underlying Asbestos Suits was denied. The court noted that API cannot be forced to admit this matter. The court reasoned that API cannot be compelled to abandon its legal theory that the liabilities of Basco, Heat Transfer, and AirTech are in fact API’s own liabilities.
In sum, the court granted in part and denied in part Federal’s Motions for relief under Federal Rule of Civil Procedure 36 and API directed to answer Federal’s Request and the analogous Requests from Fireman’s and North River within 45 days of the Decision and Order.
03/16/18 Jeffrey’s Auto Body, Inc. v. Allstate Insurance Company, et al
http://www.nycourts.gov/reporter/3dseries/2018/2018_01834.htm
03/16/18 Nick’s Garage, Inc. v. Allstate Insurance Company, et al
http://www.nycourts.gov/reporter/3dseries/2018/2018_01835.htm
Jeffrey’s Auto Body, Inc. (“Jeffrey’s”) and Nick’s Garage, Inc. (“Nick’s”) are two vehicle repair shops located in the City of Syracuse. In these two actions, combined on appeal, both shops sought additional payment from several Allstate insurance companies for repairs they performed on damaged vehicles. In both cases, (The “Allstate Cases”) the claims arose under automobile collision coverage as well as third party liability claims. The garages were paid by the insurance companies based upon their adjusted damage. Thereafter, Jeffrey’s and Nick’s released the vehicles to their owners upon receipt of an assignment of the claim for additional amounts that both garages claimed they were owed. The cases were then bundled so that numerous claims were listed in each lawsuit. The suits originally contained three main causes of action: breach of contract, quantum meruit, and a violation of General Business Law § 349 (deceptive business practices). Early on in both lawsuits, the quantum meruit claim was dismissed.
It was at that point that the procedural wrinkle arose. Both Nick’s and Jeffrey’s had brought suit against other carriers in the Northern District of New York. Those complaints were dismissed by the District Court, which prompted the Supreme Court, Onondaga County to dismiss the Allstate Cases on collateral estoppel grounds. The plaintiffs appealed both the Northern District case and the Allstate Cases. While the state appeal as pending, the Second Circuit issued a decision reinstating the complaint in the Northern District of New York (Nick’s Garage, Inc. v. Progressive Casualty Insurance Company, 875 F.3d 107)
Realizing that the basis of the dismissal of the Allstate Cases on collateral estoppel grounds had been removed, counsel for all parties agreed to argue the merits of the dismissal in the Fourth Department. The Fourth Department, noting that the collateral estoppel grounds had been removed, proceeded to determine that there were questions of fact on the breach of contract action and the General Business Law § 349 action and reinstated the complaint in both cases. As a result, Nick’s and Jeffery’s have several cases pending both in the Northern District and in Onondaga County on the repair shop issues. To fully appreciate the issues that are relevant to the ultimate determination and the merits of these cases, a review of the Nick’s Garage opinion in the Second Circuit is helpful.
08/24/17 Selective Ins. Co. of the Southeast v RLI Insurance Company
In 2014, the City of Barberton, Ohio, paid $5.25 Million to settle malicious prosecution and due process claims arising out of the wrongful conviction of a man named Clarence Elkins. The City’s excess insurance companies, Selective and RLI, then disputed which of them was responsible for the $3.25 Million in excess insurance coverage paid as part of the settlement. The District Court assigned this liability to RLI, but on appeal this decision was reversed.
In June 1998, a brutal crime occurred and Elkins was arrested for the crime. However, Barberton detectives failed to follow up on information that may have cleared Elkins, and then two pivotal events occurred. First, in June 1998, the City of Barberton switched insurance carriers, including excess carriers from RLI to Selective. The second key date occurred six months later on January 5, 1999 when another man was arrested for two aggravated robberies under circumstances indicating that this second man, who was actually named Mann, might have been the person who actually committed the crimes. A Memorandum was prepared which should have been submitted to the City detective bureau. However, Elkins’ criminal defense attorneys were never given a copy of this exculpatory internal report / memorandum.
Despite the many questions regarding Elkins’ guilt, he was convicted in June 1999 and sentenced to life with no parole until 2054. After his conviction, the case against him continued to break down, and Elkins even managed to get some of Mann’s DNA tested which matched DNA found at the crime scene. On the basis of this DNA and other evidence, Elkins was eventually exonerated and released in 2005.
Elkins and his family then sued in Federal Court against the City of Barberton and several individual police detectives and officers for malicious prosecution and deprivation of due process. It was only during discovery that Elkins learned, for the first time, that City detectives had failed to turn over the exculpatory “Mann memorandum” to his attorneys. This case was eventually settled for $5.25 Million with Selective paying $3.25 Million in excess coverage but also receiving an assignment of rights against and with respect to the RLI policy. In 2012, Selective then brought this action against RLI seeking declaratory judgment and monetary relief for the $3.25 Million in excess coverage Selective paid under the settlement agreement with Elkins.
RLI’s position was that it was not responsible for the malicious prosecution or deprivation of due process claims because the essential basis for both claims was the withholding of the Mann memorandum, which was an alleged constitutional “Brady” violation strong enough to overcome any qualified immunity and privilege, which occurred in January 1999, six months after the RLI policy expired. RLI argued that the occurrence which gave rise to the claims sounding in malicious prosecution / deprivation due process did not in fact occur until January 1999, even though Elkins had previously been arrested and charged with the crime.
The District Court however disagreed with RLI and ruled that RLI’s argument assigned undue significance to the alleged “Brady” violation surrounding the failure to give Elkins’ attorneys the Mann memorandum. The Court also cited many cases holding that coverage for malicious prosecution is triggered at the time the underlying criminal charges are filed. Accordingly, the District Court held that RLI’s policy was triggered when Elkins was first arrested, thus rendering RLI liable for the excess coverage.
This decision and outcome was reversed on appeal. RLI was held not liable for the excess liability claim because no tort or wrongful occurrence “occurred” prior to the expiration date of RLI’s policy. Because there was probable cause to prosecute and detain Elkins until the Mann memorandum came into existence, actions or non-actions prior to that Mann memorandum could not have caused a covered loss or “occurrence” under the RLI policy. It was only when the Mann memorandum came into existence in January 1999 that probable cause for his arrest and detainer ceased to exist thereby triggering any claim for malicious prosecution or deprivation of due process. In short, the City of Barberton defendants had probable cause to arrest and detain Elkins until the alleged “Brady” violation occurred, and it was only when that violation occurred in January 1999, after RLI’s policy period, that any insured “occurrence” arose.
Selective argued that there is a general rule for insurance coverage purposes that coverage for malicious prosecution is triggered at the time the underlying criminal charges are filed. However, the Appellate Court distinguished these cases since they really go to a different question of whether a party is acquitted or exonerated for purposes of a malicious prosecution case. These cases were not applicable here where the injury, i.e. Elkins’ arrest, occurred before any tortious injury or occurrence arose. The judgment of the District Court was therefore reversed and Selective was held to retain liability for the excess insurance coverage.
This was undoubtedly an unfortunate case for Mr. Elkins, and a complicated case for the lawyers. As indicated, the District Court ruled in favor of Selective, holding the RLI policy accountable, but the Appellate Court reversed and ruled in favor of RLI rendering the Selective policy accountable.
However, despite the complications, the analysis still turned on basic policy definitions such as what was a covered accident or accidental occurrence and when did it arise. The Appellate Court held that there was no covered “occurrence” subject to indemnity under the policy because no accidental or tortious occurrence occurred until the Mann memorandum was prepared but not disclosed to Elkins’ attorneys in January 1999, which did not take place until after the RLI policy had expired and the Selective policy period had commenced.
This case supports the notion and proposition that one key event and period of time can make or unmake coverage. Here, the Appellate Court deemed it dispositive that the tortious event or occurrence did not occur until January 1999, and probable cause for Elkins’ arrest and detention existed up to that time, so that any liability and covered concurrence arose only during the later Selective policy period.