Coverage Pointers - Volume XXVI No. 6 (2024)

Volume XXVI, No. 6 (No. 679)
Friday, August 30, 2024
A Biweekly Electronic Newsletter

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

In some jurisdictions, newsletters such as this may be considered Attorney Advertising.

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [emailprotected] or call 716-849-8900.

You will find back issues of Coverage Pointers on the firm website listed above.

Dear Coverage Pointers Subscribers:

Do you have a situation? We love situations. It’s not just a tag line. We do. We try to turn the complex into simple and take the knots out of the tangles.

Happy Labor Day. I dread sending out this edition because of the hundreds of bounce backs from folks taking the long weekend, but I will survive!

A special welcome to those who attended the Risk Transfer presentation on August20^th. We had two groups totaling just under 1,000 in attendance. The SurveyMonkey reviews were really kind and rewarding and thanks to those who took the time to respond. For those who missed the presentation and are interested in watching a recorded session or viewing the slide deck, do let me know. I can provide both.

So many of you have reached out, after the program, with kind words. Thank you. If you have a question or we can help you, just pick up the phone or drop an email.

The Old Professor ….

Along with Steve Peiper (who has joined me for more than a decade), I started my 39^th year as an Adjunct Professor of Insurance Law at the University at Buffalo School of Law. The semester, two classes old, is in full swing. History, risk, regulation, solvency, the business of insurance, McCarren-Ferguson, all part of the first couple of classes. When we discuss liability insurance, we role play with students taking the roles (for the semester) of being (a) the plaintiff, (b) the plaintiff’s lawyer, (c) the defendant, (d) the defendant’s personal counsel, (e) the insurer, (f) insurance defense counsel, (g) coverage counsel, and (h) policyholder counsel. We’ll sometimes get a play to be the reinsurer, sometimes the judge, and so it goes. Teaching my immersion. I have found it a great way for students to distinguish between the underlying disputes and the coverage determination. And it’s fun.

A number of you are receiving Coverage Pointers for the first time, and we welcome you to the HF family. So you know, you are reading the cover letter which includes a note from each of our 13authors and a little bit of historical trivia. Attached, in pdf format, is the actual newsletter, with each summary providing a link to the case discussed. For the most part, we try to include only the most recent decision (usually opinions announced over the two weeks since the previous issue).

We wish our US and Canadian subscribers the happiest of Labor (Labour) Day weekends. Labor Day marks the unofficial end of the summer and the beginning of the end of the quiet season in the appellate courts. You’ll see that a few of our authors were unable to post summaries because the courts gave us very little over the past two weeks. The court calendars for oral arguments reopen after Labor Day and within a few weeks thereafter, the courts will begin churning out decisions. But you’ll see the headlines at the bottom of this note and the full summaries and links to the decisions in the issue attached.

It’s only our 679^th issue in 26 years, but who’s counting?

Need a mediator for an insurance dispute? Coverage mediation is a thing! Subject matter expertise may be useful.

Hey coverage lawyers. Hey professionals. Have you and a friend, adversary, or lawyer for whom who have respect reached a stalemate on a coverage dispute? Look, we know each other. We know that. We don’t want to litigate every coverage disagreement. Why? Because the position we oppose today may be the one we advocate tomorrow. Face it. We all understand that.

Let me help mediate your disagreement to see if there is some mutual agreement, we can reach that will not box us into a corner. Reach out to me. I will be pleased to mediate your dispute.

My partners, Mike Perley and Ann Evanko, are also available to help resolve other challenges.

You don’t want adverse precedent that will bite you next time you might have a slightly different view on coverage issues. You don’t want to spend tens of thousands of dollars to litigate a coverage issue before a motion judge or appellate justice that knows as much about insurance coverage as you do about nuclear physics. For those in the Western District of New York, I am certified by the Court and on the WDNY Mediation Panel as are Mike and Ann.

Try mediation.

Newsletters:

We have other firm newsletters to which you can subscribe by simply letting the editor (or me) know, including a new publication, which was created to advise on business and employment law questions:

• Premises Pointers:This monthly electronic newsletter covers current cases, trends and developments involving premises liability and general litigation. Our attorneys must stay abreast of new cases and trends across New York in both State and Federal Court and will now share their insight and analysis with you. This publication covers a wide range of topics including retail, restaurant and hospitality liability, slip and fall accidents, snow and ice claims, storm in progress, inadequate/negligent security, inadequate maintenance and negligent repair, service contracts, elevator and escalator accidents, swimming pool and recreational accidents, negligent supervision, assumption of risk, tavern owner and dram shop liability, homeowner liability and toxic exposures (just to name a few!). Please drop a note to Jody Briandi at[emailprotected]to be added to the mailing list.

• Labor Law Pointers: Hurwitz Fine P.C.’s Labor Law Pointers offers a monthly review and analysis of every New York State Labor Law case decided during the month by the Court of Appeals and all four Departments. This e-mail direct newsletter is published the first Wednesday of each month on four distinct areas – New York Labor Law Sections 240(1), 241(6), 200 and indemnity/risk transfer. Contact Dave Adams at[emailprotected]to subscribe.

• Products Liability Pointers: Whether the claim is based on a defective design, flawed manufacturing process, or inadequate instructions/warnings, product liability litigation is constantly evolving. Products Liability Pointers examines recent New York State and Federal cases as well as high court decisions from other jurisdictions, keeping our readers up to date with the latest developments and trends, and providing useful practice tips and litigation strategies. This monthly newsletter covers all areas of product liability litigation, including negligence, strict products liability, breach of warranty claims, medical device litigation, toxic and mass torts, regulatory framework and governmental agencies. Contact V. Christopher Potenza at[emailprotected]to subscribe.

• Medical & Nursing Home Liability Pointers. Medical & Nursing Home Liability Pointers provides the latest news, developments, and analysis of recent court decisions impacting the medical and long-term care communities. Contact Elizabeth Midgley at [emailprotected] to subscribe.

Klansmen Membership Cards Retained – 100 Years Ago:

The Buffalo News
Buffalo, New York
30 Aug 1924

SCHWAB WON’T
RETURN CARDS
OF KLANSMEN

Mayors Says He Will Not Allow Alleged Members to Reclaim Membership Slips – Killeen Says It Would Be a Crime

Mayor Schwab announced this afternoon he will not allow alleged Klansmen to reclaim their membership cards by signing for them at police headquarters. This action followed a visit of Henry W. Killeen, attorney for Charles S. Desmond, Democratic candidate for the assembly from the school district, in his fight for the public inspection of the alleged list of Klansmen, to the mayor’s office this noon. Mr. Killeen served notice on Mayor Schwab that he would be committing a crime by permitting the police to return to the Klansmen the membership cards now held by the police property clerk.

Mr. Killeen pointed out that the Walker act, recently passed, provides that any secret organization which takes an oath from its members must file a membership list at Albany. The Ku Klux Klan has not complied with this law and can be prosecuted under it, he said.

Peiper on Property (and Potpourri):

The editors of P & P are here to hit the hard issues. We don’t shy away from difficult arguments; often times festooned by wrong-headed precedent and blind tradition. Rather, we try to be at the vanguard of independent reason.

Thought leaders, as it were.

True to our principles, we address the most pressing issue of the day. Yes. You can wear white after Labor Day. And, yes, despite the misgivings and misunderstandings of some of my law partners (looking at you, Mike Perley), you can wear white before Memorial Day, too. The reality is you should wear what you want, when you want. White, blue or red. And, if someone makes a comment about your sartorial choices, take a moment to reflect on the selections of some of your colleagues. When did office hoodies become a thing, anyway?

So, there you have it, dear readers … be emboldened. Wear your Josh Allen jersey, white of course, with daring boldness. It looks just as good in January, as it did in August (as long as the Chiefs aren’t involved).

Go Bills!

P.S. – no law this week, maybe next issue. In the meantime, do enjoy your three-day respite.

Steve
Steven E. Peiper
[emailprotected]

Pierce Arrow Plant Humming Along – 100 Years Ago:

The Buffalo News
Buffalo, New York
30 Aug 1924

“Listening In” on Buffalo Business
By WILLIAM GRANT BARNEY

Pierce-Arrow Motor Car Company’s new light car is proving to be a very real success. It has met a demand and found an eager buying market which already is taxing the full machine equipment of the big Elmwood avenue plant to meet. In fact, the plant is not able to keep up with the actual inflow of orders and these are now a long way ahead of production, even when increased as it will be in September.

When the plans were made for the putting out of the new light car the management prepared manufacturing equipment on what it considered a liberal scale for possible requirements. It was anticipated that this preparation would take care of developments of the business over some months.

But with the new car on sale only since August first, the entire capacity of the plant for the manufacture of the light model has been utilized almost from the first. Orders have been materially in excess of production and an increase of production schedule for next month has been provided for.

“About the only problem we have to face in the new light model is that of output,” said General Manager Forbes yesterday. “We are turning out the machines to our full capacity with the maintenance of our standard quality – which we will not lower – and the demand for the cars, alike from our former dealers and from new agents who want to handle it, has been a gratifying surprise.

“On September first we expect to be ready to increase our production schedule, and with that we will not be able to keep up with the present month’s rate of order booking. Another gratifying feature of the situation is that, notwithstanding the urgent demand for the new light models, the orders for our standard, heavy-model cars have increased rather than diminished. Our truck and bus business are also increasing.”

This is pleasing information to Buffalo’s business community, as well as to Buffalo citizens generally. The success of the Pierce-Arrow company and the activity of its great plant means much to the general business condition of this city. The busier it is, the more of its class of intelligent and highly paid workers are employed, the more individuals and homes there will be for the business houses of the city to supply. It means more trade for Buffalo.

Editor’s Note: Buffalonians know that the Pierce Arrow building remains in active use on Elmwood Avenue in Buffalo, but, of course, no longer produces autos.

Barnas on Bad Faith

Hello again:

The end of summer is here as the calendar turns to September and Labor Day. This weekend we have the first full Saturday of college football games, and the NFL is only one week behind that. For NASCAR fans, my favorite race of the season, the Southern 500, is also coming up this Sunday as the last race of the regular season this year. We also have the stretch run in baseball, and hockey and basketball training camps are not far off. September and October really are two of the best sports months of the year.

Unfortunately, the Hurwitz Fine softball team suffered another disappointing first round exit in the playoffs. No word yet from management if I will be returning as manager for another season. If I do, I expect the only reason will be that nobody else wants the job.

I have a good bad faith case from the Southern District of New York today. The court dismissed a bad faith claim brought by the underlying plaintiff who had commenced a direct action against the insurer after obtaining a judgment against the insured. The court found that a bad faith claim belongs to the insured and cannot be brought by the plaintiff absent an assignment.

Brian
Brian D. Barnas

[emailprotected]

I Guess He Didn’t Want to Pay the Rent – 100 Years Ago:

The Buffalo News
Buffalo, New York
30 Aug 1924

ACID ON RENT COLLECTOR

NEW YORK- John Cross threw acid on J. W. Jones when the latter came to collect rent. He was fined $150.

Lee’s Connecticut Chronicles:

See you in two weeks. Happy Labor Day!

Lee
Lee S. Siegel

[emailprotected]

Dismiss My Ticket – It Wasn’t Me – 100 Years Ago:

The Buffalo Enquirer
Buffalo, New York
30 Aug 1924

SPEED COP GOT
WRONG WOMEN

For That Reason, City Court Judge Discharged Mrs. Horatio N. Ness.

Five of the six speeders arraigned before Judge McLaughlin in city court yesterday each paid a $20 fine, the other being taxed $25. Mrs. Horatio N Ness, No. 237 Voorhees Avenue, also arraigned on a charge of speeding, was discharged when she informed the court she was arrested by mistake for another motorist.

Charged with failing to heed parking tickets, these were fined:

John R. Lamb, No 390 Longnecker street, $2.

James N. Dean, No. 56 Stratford road, $1

Kyle's Noteworthy No-Fault:

Dear Readers,

Hard to believe it is the end of August already. It is sad to see summer wind down, with softball season coming to a close with a first-round playoff loss and golf league ending with a semi-final loss. On the bright side, can’t wait for college and NFL football to start up in the next couple of weeks… hopefully I’ll draft some better fantasy teams for this year.

I have two no fault cases to report this week. The first involves Liberty Mutual’s declaratory judgment action against the defendants based on the claimant’s failure to cooperate with its investigation by failing to respond to document demands made after her examination under oath. In the second case, Country-Wide brought a petition to vacate an arbitration award based on a policy exhaustion defense. The petition was unsuccessful, as the court found the insurer violated the priority of payment regulation by processing and paying later submitted claims without denying or paying the claim at issue.

Until next time,

Kyle
Kyle A. Ruffner
[emailprotected]

Teddy Roosevelt to Run for Governor – 100 Years Ago:

Times Union
Brooklyn, New York
30 Aug 1924

SEC. ROOSEVELT,
AS KLAN FOE, MAY
RUN FOR GOVERNOR

Announcement of Colonel’s
Candidacy Is Expected
Early Next Week.

Assistant Secretary of the Navy Roosevelt will formally announce his candidacy for the Republican nomination for Governor next week, and in doing so will come out with a scathing denunciation of the Ku Klux Klan, it was reported in reliable sources today.

Just what plan he will adopt in doing so has not as yet been learned, but Joseph Levinson the G.O.P leader of the First Assembly District in Manhattan and an avowed enemy of County Leader Sam Koenig, came out strong for the colonel yesterday as his choice for the gubernatorial prize.

It will be recalled that Levinson went to the Cleveland convention with a set of resolutions denouncing the Ku Klux Klan by name and insisted that they be made a part of the Republican platform. At a dinner tendered to the Colonel Roosevelt on Thursday night at the Hotel Pennsylvania by the Travelers Association, Aaron Loeb, who made a speech assailing the Klan, declared himself out and out for Roosevelt also spoke at the dinner, he did not mention the Ku Klux Klan by name but during the course of his talk said:

“I am for Americans, and this is the reason I am opposed to any group or organization that attempts to prescribe for our people.”

Editor’s Note: Of course, this was Theodore Roosevelt, Jr., the eldest son of President Theodore Roosevelt and cousin of FDR.

Ryan’s Federal Reporter:

Hello Loyal Coverage Pointers Subscribers:

Where did the summer go? School starts up for my kids next week and we are far from ready for that. Or is it precisely what we need? The jury is still out…

This edition, my column includes a medical malpractice case involving claimed coverage under the Federal Tort Claims Act. Not your average insurance coverage action…dare I say not really a coverage action at all? Its adjacent, at least, and I wrote about it for you, the viewers.

Until next time,

Ryan
Ryan P. Maxwell
[emailprotected]

Seven Weeks of Marriage is Quite Enough – 100 Years Ago:

Yonkers Statesman
Yonkers, New York
30 Aug 1924

Seven Weeks of Married Life
Enough, Says Mrs. W. Kirwin

Claims hubby Took Half of Her “Hope” Chest So She Takes Her Troubles To Court – Engagement Ring Not Paid For, She Says

Married seven weeks ago after a whirlwind courtship of two months, Mr. and Mrs. William Kirwin of 11 Garfield Street “sick of each other,” brought their troubles to Acting City judge Gorfinkel in the Court of Special Sessions this morning.

Mrs. Kirwin charges “hubby” with taking half the contents of her hope chest and keeping them. Kirwin was instructed to return his wife’s property.

Seven weeks on the stormy sea of matrimony was enough for her, Mrs. Kirwin told the Judge. She tired of her husband. Threw his wedding ring at him, returned his engagement ring, and “called it off” Hubby split the hope chest “50-50” with her, but she objected. When he refused to return what he had taken, she went to court.

According to Judge Gorfinkel, Mrs. Kirwin told him that her husband hadn’t even had the engagement ring paid for, and that she had given up hope of ever getting that back because hubby had returned it to the jeweler.

Storm’s SIU:

Hey Team:

Sad to see summer coming to a close but baseball continues, and the Bills’ season starts!

Two interesting cases this edition:

• Issue of Fact as to Whether Omitting Uncle as an Additional Driver on the Policy was a Material Misrepresentation Where Defendant's Factual Averments Require a Credibility Determination; and Plaintiffs Point to No Proof to Establish how Often One Must Operate the Vehicle to be Considered an Additional Operator Under the Subject Policy.

• Here is What You Need to Prove to Overturn an Arbitration Forums Decision; and the Law of Chain Reaction Accidents.

Have an awesome two weeks!

Scott
Scott D. Storm
[emailprotected]

I Will Protect my Battering Spouse – 100 Years Ago:

Daily News
New York, New York
30 Aug 1924

JURY’S VERDICT
MARRIAGE AND 2
TAKE NO APPEAL

The love which she bore William Montessi, 18, of 548 Knickerbocker Ave Brooklyn, whom she had had indicted for attacking her, became so apparent to the jury in Brooklyn yesterday that it resulted in the marriage of Florence Bennett, 17, of 718 East 99^th St., to the man she had accused.

When the case was called the jury filed in and took their seats. Miss Bennett was the first witness. She took the stand reluctantly and answered the questions most unwillingly, especially when they pointed against Montessi.

The Jury, mostly married men, took in the situation at a glance. They asked Assistant District Attorney Frederick Kopff to bring in Montessi to the jury room. There the young couple made up. They were married in Borough Hall and as a wedding present from the jury they received Montessi’s release on the charges and a purse of $25.

Fleming’s Finest:

Hi Coverage Pointers Subscribers:

As the Summer holidays draw to a close, Halloween decorations and autumnal décor are already creeping onto the shelves. A nearby derelict store has become a seasonal retailer. Very spooky indeed.

This week’s case comes from the North Carolina Supreme Court. The court considered whether an insurance company effectively cancelled the insureds’ fire insurance policy before their house burned down. The insureds did not receive the mailed notice of cancellation, but other evidence showed actual notice of the cancellation.

Hope you had a nice summer. See you in a fortnight.

Kate
Katherine A. Fleming
[emailprotected]

Anti-Semitism is Not New – 100 Years Ago:

Poughkeepsie Eagle-News
Poughkeepsie, New York
30 Aug 1924

Synagogue Destroyed
By Bomb Before Service

Bucharest, Aug. 29. – The Jewish synagogue in the village of Zapesti, near Arat recently was destroyed by the explosion of what authorities said was an infernal machine. Owing to the fact that the explosion occurred an hour before the time for service there were no casualties, none of the worshippers having entered the place.

From an investigation made it was assumed that the bomb went off prematurely.

There is a large Jewish population in Zapesti and Art, and the placing of the bomb in the synagogue is believed to have been an act of anti-Jewish agitation.

Gestwick’s Garden State Gazette:

Dear Readers:

With summer waning, I very much look forward to the start of Bills and Sabres season (and to the end of this miserable Blue Jays season). My girlfriend, a kindergarten teacher, is in the throes of setting up her classroom, printing out all the hand-outs, and gearing up for the first day and parent-teacher night. At least one of us is crafty.

The message in the case I have for you this week is a simple one—want to make a motion against a carrier? Make sure the carrier is a party to your case first! After obtaining a $250,000 judgment against an insured at trial, which went unsatisfied due to the insured’s subsequent bankruptcy, a claimant moved to enforce the judgment against the insured’s carrier, only to be denied on the ground that there was no judgment against the carrier to be enforced, and in fact, the carrier was not even a party to the case.

Evan
Evan D. Gestwick
[emailprotected]

Smoking Filled Flappers – 100 Years Ago:

Times Herald
Olean, New York
20 Aug 1924

FLAPPERS PARK
CARS, SMOKE fa*gS
ON FRONT STREET

The Shrouded darkness of Front Street, long known as “lover’ lane” at night is being used for a different purpose. It is now termed “the flapper’s smoke room.”

Young girls drive to Front Street, without male escort, park their cars and light a fa*g.

Two flappers in a small runabout with the top down, sat smoking in the car as a motorist approached last night. As the auto passed, the girls in the glare of the headlights somewhat brazenly, yet with a touch of nonchalance, puffed at their cigarettes and blew out a cloud of smoke.

O’Shea Rides the Circuits:

Hey Readers,

Not much going on in my neck of the woods heading into Labor Day weekend. I will be celebrating with friends on Lake Ontario and hopefully enjoying a sunny day.

This week I have a rescission action involving a familial dispute over the commercial use of the family name. Let’s just say someone did not disclose that fact, among another, in an initial policy application.

Until Next Time.

Ryan
Ryan P. O’Shea
[emailprotected]

Booze Missing – 100 Years Ago:

The Standard Union
Brooklyn, New York
30 Aug 1924

WHO STOLE THE HOOCH
FROM OSSINING POLICE?

OSSINING, Aug. 30. – Along with the age of Ann and why of an egg, the whereabouts of a case of whiskey that disappeared from police headquarters here seems destined to go down into the limbo of unfathomable mysteries.

The case is one of the 75 that had been seized in a raid and according to some authorities, had reposed in the office of Chief Frank Minnerly. Whence it vanished while the chief was off duty, three different persons have keys to the room.

Coming on top of the disappearance of a considerable quantity of alcohol from the same office three years ago, when water was substituted for the stolen spirits, the affair has created a scandal which the village trustees are going to investigate, according to an announcement by William H. Jackson, village president.

Rob Reaches the Threshold:

Dear Readers,

We are in the midst of Fantasy Football draft season, as the 2024 NFL season kicks off next week. Therefore, before this column is consumed with all things football until October, we will check in with the New York Yankees – Aaron Judge? (amazing) Juan Soto? (pay him a billion dollars) starting pitching? (hmmm...) bullpen? (…starting to worry) defense? (…in shambles). Coming off a recent series loss to the Nationals, the vibes are low. Luckily, Baltimore has cooled off so hopefully we head into September still atop the AL East.

As usual, the end of the summer is devoid of any notable decisions on Serious Injury to discuss. So, we will take an early Labor Day weekend and be back in two weeks!

Please enjoy the articles from my colleagues. Everyone enjoy the long holiday weekend.

Rob
Robert J. Caggiano
[emailprotected]

Drunk at the Station House – 100 Years Ago:

Times Union
Brooklyn, New York
30 Aug 1924

ALLEGED DRUNK SEIZED
AT STATION HOUSE DOOR

As a policeman Robert Smallman came out of the Bedford Avenue Station this morning he was accosted by Ignatz Rieber, 32, of 136 Bushwick avenue, who seemed to be under the influence of liquor, and wanted to know if the officer was a real cop.

Smallman, whose size belies his name, tolerantly told the fellow to go about his business. But then says the officer, Rieber became pugnacious, launching a hail of fisticuffs in the general direction of Smallman’s head, according to the policeman’s head, according to the policeman’s testimony, after he had arrested Rieber. He will be arraigned later in the Bridge Plaza Court.

LaBarbera’s Lower Court Library:

Dear Readers:

I spent last weekend celebrating a wedding between two dear law school friends. I had the pleasure of watching their love grow over the last three years and can’t wait to see where life takes them. Congratulations to Ady and Andrew … one of the best things to come from Zoom School of Law!

This week I am reporting on a New York County decision which highlights the importance of timely answering a declaratory judgment action, regardless of whether one may have a meritorious defense.

Until next time…

Isabelle
Isabelle H. LaBarbera
[emailprotected]

Wash and Wear – 100 Years Ago:

Times Herald
Olean, New York
30 Aug 1924

ARE YOU TIRED OF
WASHING THE OLD WAY

If you are – Come to us and let us demonstrate the Hurlet THOR washer. You cannot imagine how much easier it will make your weekly washings, and the best part about our plan is – that only a small payment down, and the balance in

easy monthly payments.

Lexi’s Legislative Lowdown:

Dear Readers,

I hope everyone is enjoying every last bit of summer! I know I am looking forward to the warm weather this weekend.

This week’s column addresses proposed legislation relating to pets!

First, a proposed amendment to Insurance Law § 3421 which prohibits homeowners’ insurers from distinguishing between breeds of dogs owned. The proposed amendment seeks to include renter’s insurance in this prohibition.

Second, a proposed regulatory structure for pet insurance! As someone who loves insurance, I got insurance for my goldendoodle the day we brought him home. As such, this proposed legislation was particularly interesting to read!

Enjoy!

Lexi
Lexi R. Horton
[emailprotected]

Exposing the Klan – 100 Years Ago:

Buffalo Courier Express
Buffalo, New York
30 Aug 1924

END MASKED PARADES

Klansmen must show faces in Williamson county, III.

Marion, III., Aug. 29. - Parades of masked Ku Klux Klansmen henceforth will be prohibited in Williamson county, Sheriff George Galligan declared today.

The sheriff’s statemen was made after an all-night vigil at the jail, where he and deputies armed with riot guns and one machine fun, stood guard, anticipating, they said, an attempt by Klansmen to liberate a man arrested in a Klan parade here last night for wearing a mask.

North of the Border:

How is it possible that we are on the eve of the Labour Day long weekend? Summer 2024 has disappeared in a flash. Nonetheless, I plan to enjoy the last long weekend of the summer with a couple of family barbeques and checking out some of the bike paths around the city.

My column this week deals with an Ontario Court of Appeal decision released August 27 concerning the duty to defend an injury claim that arose at a Labour Day weekend outdoor concert in Toronto back in 2016. Coincidental dating – but I will take it.

Heather
Heather A. Sanderson
Sanderson Law, Calgary, Alberta
[emailprotected]

Headlines from this week’s issue, attached:

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[emailprotected]

• Where Additional Insured Endorsem*nt Did Not Provide Coverage for the Additional Insured’s Independent Negligence, It Is Still Entitled to a Defense if the Accident Was Caused in Whole or in Part by the Named Insured

• While Courts Have Greater Discretion to Review Statutorily Required Arbitrations Than Private Arbitration, the Decision in This Case Is Affirmed

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

• All quiet this week

  See Also

  Squawk on the Street : CNBC : August 28, 2024 9:00am-11:00am EDT : Free Borrow & Streaming : Internet Archive

BARNAS on BAD FAITH
Brian D. Barnas
[emailprotected]

• An Insurer Does Not Owe a Duty of Good Faith to the Insured’s Adversary in Litigation

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[emailprotected]

• See you in two weeks.

KYLE'S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[emailprotected]

• Court Grants Insurer’s Declaratory Judgment Action, as Claimant Breached a Condition Precedent to Coverage by Failing to Respond to Post-EUO Demands

• Court Denies Insurer’s Petition to Vacate, as Policy Was Not Exhausted at the Time Claim Was Verified

RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[emailprotected]

• Treatment of Nonpatient Found to Fall Outside of Medical Malpractice Liability Coverage Under the Federal Tort Claims Act

STORM’S SIU
Scott D. Storm
[emailprotected]

• Here Is What You Need to Prove to Overturn an Arbitration Forums Decision; And the Law of Chain Reaction Accidents

• Issue of Fact as to Whether Omitting Uncle as an Additional Driver on the Policy Was a Material Misrepresentation Where Defendant's Factual Averments Require a Credibility Determination; And Plaintiffs Point to No Proof to Establish How Often One Must Operate the Vehicle to Be Considered an Additional Operator Under the Subject Policy

FLEMING’S FINEST
Katherine A. Fleming
[emailprotected]

• Manner in Which Notice of Cancellation is Given Is of Secondary Importance When Clear Evidence Shows an Insured’s Actual Notice

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

• Auto Carriers May Be Liable to Satisfy a Judgment up to Policy Limits, but the Claimant Ought to Make Sure the Carrier Is in the Case Before Seeking Such Enforcement

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

• Non-Disclosure of Threatened Litigation Constitutes Material Misrepresentation

ROB REACHES the THRESHOLD
Robert J. Caggiano
[emailprotected]

• Nothing new from the Appellate Division – check back in two weeks!

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

• Insured Motion to Vacate Denied Due to Admission of Personal Knowledge of Suit

LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[emailprotected]

• Proposed Legislation to Amend Insurance Law § 3421 in Relation to Prohibiting Certain Restrictions as it Relates to Dog Breed and Proposed Legislation to Amend § 1113 and § 3462 to Create A Regulatory Structure For Pet Insurance

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

• The Existence of an SIR Does Not Turn Entities Obliged to Discharge that SIR Into an Insurer; an SIR Cannot be Analogized to Constitute Separate, Primary Insurance

Have a lovely weekend and we’ll see you in two. By the way, my signature block contains my cell phone number, If you ever need to reach me at what some consider off-hours, don’t hesitate to do so. Some of my best work is done during co*cktail hour.

Dan

Hurwitz Fine P.C. is a full-service law firm providing legal services throughout the State of New York and providing insurance coverage advice and counsel in Connecticut and New Jersey.

In addition, Dan D. Kohane is a Foreign Legal Consultant, Permit No. 000241, issued by the Law Society of Upper Canada, and authorized to provide legal advice in the Province of Ontario on matters of New York State and federal law.

NEWSLETTER EDITOR
Dan D. Kohane
[emailprotected]

ASSOCIATE EDITOR
Agnes A. Wilewicz
[emailprotected]

COPY EDITOR
Evan D. Gestwick
[emailprotected]

INSURANCE COVERAGE/EXTRA CONTRACTUAL LIABILITY TEAM
Dan D. Kohane, Chair
[emailprotected]

Steven E. Peiper, Co-Chair
[emailprotected]

Michael F. Perley

Agnieszka A. Wilewicz

Lee S. Siegel

Brian F. Mark

Scott D. Storm

Brian D. Barnas

Ryan P. Maxwell

Kyle A. Ruffner

Katherine A. Fleming

Evan D. Gestwick

Ryan P. O’Shea

Isabelle H. LaBarbera

Lexi R. Horton

FIRE, FIRST PARTY AND SUBROGATION TEAM
Steven E. Peiper, Team Leader
[emailprotected]

Michael F. Perley

Scott D. Storm

Brian D. Barnas

NO-FAULT/UM/SUM TEAM
Dan D. Kohane
[emailprotected]

Kyle A. Ruffner

APPELLATE TEAM
Jody E. Briandi, Team Leader
[emailprotected]

Topical Index

Kohane’s Coverage Corner

Peiper on Property and Potpourri
Barnas on Bad Faith

Lee’s Connecticut Chronicles

Kyle’s Noteworthy No-Fault

Ryan’s Federal Reporter

Storm’s SIU

Fleming’s Finest

Gestwick’s Garden State Gazette

O’Shea Rides the Circuits

LaBarbera’s Lower Court Library

North of the Border

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[emailprotected]

08/22/24 Arch Specialty Insurance Co. v. HDI Gerling American Ins. Co.
Appellate Division, First Department
Where Additional Insured Endorsem*nt Did Not Provide Coverage for the Additional Insured’s Independent Negligence, It Is Still Entitled to a Defense if the Accident Was Caused in Whole or in Part by the Named Insured

HDI has a duty to defend SHS-LLC, the owner of the property undergoing construction, as an additional insured based on an agreement between SHS-LLC and elevator contractor TKE, HDI's insured, as well as the allegations in the underlying Labor Law complaint and related third-party action, providing a basis to find a reasonable possibility of coverage, to be an additional insured covered by the same HDI policy and entitled to defense although its liability, the nature of which could ultimately exclude it from coverage, had yet to be determined]).

An amendment to the additional insured provision providing that an additional insured was to be defended and indemnified for claims arising from TKE's acts, actions, omissions, or neglects, but not for its own acts, actions, omissions, neglects, or bare allegations, does not raise triable issues warranting denial of SHS-LLC's request for a declaration of HDI's duty to defend it in the underlying Labor Law action. Liability is not at issue at this juncture; the fact that an additional insured may ultimately be found liable solely for its own independent negligent acts or omissions, which are not covered under an additional insured provision, does not negate an insurer's duty to defend Thus, because all defendants, including TKE, might still be found to have proximately caused Caracciolo's injuries, HDI's duty to defend remains extant.

Editor’s Note: Court considered allegations in third party complaint as well, ala Indian Harbor.

08/21/24 State Farm Mut. Auto. Ins. Co. v. N.Y. Black Car Operators' Injury Comp. Fund
Appellate Division, Second Department
While Courts Have Greater Discretion to Review Statutorily Required Arbitrations Than Private Arbitration, the Decision in This Case Is Affirmed

This was an Article 75 proceeding pursuant to vacate an arbitration award.

In September 2017, Dominguez was injured when he was involved in a motor vehicle collision while operating a vehicle bearing a New York City Taxi and Limousine Commission license plate and registered as a for-hire vehicle. New York Black Car Operators' Injury Compensation Fund (hereinafter Black Car Fund) paid workers' compensation benefits to Dominguez for his injuries.

In a compulsory arbitration proceeding – a “loss transfer” arbitration, pursuant to Insurance Law § 5105(b), Black Car Fund sought to recover from State Farm the benefits paid to Dominguez. In an arbitration award dated June 22, 2021, the arbitrator determined that State Farm, as the insurer of the other vehicle involved in the collision, was liable for the benefits paid to Dominguez.

In September 2021, State Farm commenced this proceeding pursuant to CPLR article 75 to vacate the arbitration award.

Where, as here, the obligation to arbitrate arises through a statutory mandate, the arbitrators' determination is subject to closer judicial scrutiny under CPLR 7511(b) than it would receive had the arbitration been conducted pursuant to a voluntary agreement between the parties. To be upheld, an award in a compulsory arbitration proceeding must have evidentiary support and cannot be arbitrary and capricious.

Contrary to State Farm's contention, the determination of the arbitrator had evidentiary support and was not arbitrary and capricious.

Editor’s Note: We have no idea, from the decision, what State Farm argued to overturn the award.

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

All quiet this week.

BARNAS on BAD FAITH
Brian D. Barnas
[emailprotected]

08/23/24 McWilliams v. Liberty Mutual Group, Inc.
United States District Court, Southern District of New York
An Insurer Does Not Owe a Duty of Good Faith to the Insured’s Adversary in Litigation

McWilliams developed cancer after working with valve products that contained asbestos. In 2018, McWilliams sued Jenkins Bros., the manufacturer of the valves, in New York state court. Jenkins was dissolved by the New Jersey Department of State in 2004, so the defense of the case was handled by Liberty Mutual and Resolute. The jury awarded McWilliams a total of $23,000,000, which was subject to certain statutory offsets, resulting in a judgment of $18,633,617.67. To date, this judgment remains unsatisfied.

McWilliams alleged that Liberty and Affiliated FM were Jenkins's insurers and Resolute was the third-party claims administrator handling the New York case. McWilliams alleged that Liberty and Resolute handled the case inbadfaithby failing to make good-faith efforts to settle the case, forcing McWilliams to take the case to trial, and then after losing, delaying payment of the judgment.

McWilliams commenced this action seeking satisfaction of the judgment. He also asserted claims for common law bad faith, negligence, and tortious interference.

Williams failed to serve notice of entry of the unsatisfied judgment on Affiliated and Liberty Mutual prior to commencing the action as necessary for a statutory cause of action under Insurance Law § 3420. However, he later served the judgment on them. Thus, the court granted leave to amend to plead compliance with the statutory obligation.

Liberty moved to dismiss the bad faith claim. The court considered the question of whether an insurer owes a duty of good faith to the insured’s adversary in litigation. It held that the answer was no.

A bad faith claim in New York can only be brought by a party to the insurance contract. A third party may bring a bad faith claim when the insured assigns its contractual rights to that third party. Absent an assignment from the insured, an injured party’s standing to bring an action against an insurer is limited to recovering only the policy limits of the insured’s policy. The court rejected McWilliams’ arguments that an assignment was not necessary to bring a bad faith claim. It also rejected McWIlliams’ argument that there should be an implied assignment of the bad faith claims.

LEE’S CONNECTICUT CHRONICLES
Lee S. Siegel
[emailprotected]

See you in two weeks.

KYLE’S NOTEWORTHY NO-FAULT
Kyle A. Ruffner
[emailprotected]

08/02/24 Liberty Mutual Insurance Company v. Judith DeJoie et al.
Supreme Court, New York County
Court Grants Insurer’s Declaratory Judgment Action, as Claimant Breached a Condition Precedent to Coverage by Failing to Respond to Post-EUO Demands

This declaratory judgment action arose from a motor vehicle accident where the claimant was driving a vehicle insured by Liberty Mutual Insurance. The insurer moved for a default judgment against all non-answering Defendants in this action based on the claimant's failure to cooperate with document demands made after her Examination Under Oath ("EUO"). Further, the insurer sought a permanent stay of any arbitration or court proceeding brought by the non-answering defendants for No-Fault benefits and a declaration that their denial of No-Fault claims was valid.

The court held that the plaintiff properly filed proof of service of the Summons and Complaint and proof of the non-answering defendants' default. With regard to the underlying claim, the insurer argued the claimant failed to respond to post-EUO document demands and that her failure to do so violated a condition precedent to coverage under the applicable policy. 11 NYCRR 65-1.1 requires a claimant to fully comply with the terms of coverage in a No-Fault policy as a condition precedent to all claims and an insurer may deny coverage based upon a claimant's failure to comply, as such a failure to cooperate warrants a declaration of noncoverage (State Farm Mut. Auto. Ins. Co. v All City Family Healthcare Ctr., Inc.,206 AD3d 584, 585[1st Dept 2022]).

Here, the court held the insurer demonstrated that the claimant attended her EUOs, and that the insurer then served post-EUO document demands. Further, it was established that the claimant failed to respond to the post-EUO document demands. Therefore, the Court found that the insurer established their entitlement to default judgment against the non-answering defendants based on Claimant's failure to comply with a condition precedent to coverage. Accordingly, the Court held that the insurer’s denial of all claims for No-Fault benefits by the Non-Answering Defendants stemming from the alleged accident involving the claimant were valid and granted a permanent stay of any arbitration or court hearing brought by the Defendants.

08/14/24 Country-Wide Ins. Co. v. Sono Rx a/a/o Eligio Rodriguez
Supreme Court, New York County
Court Denies Insurer’s Petition to Vacate, as Policy Was Not Exhausted at the Time Claim Was Verified

The insurer in this case brought a petition to vacate the award of a master arbitrator which rejected the insurer’s policy exhaustion argument and awarded no-fault benefits to the medical provider. The insurer had issued a denial for the claim at issue more than a year after the provider made the claim to the insurance company, on the basis that the limits of coverage under the policy had been exhausted. Further, after the provider’s claim for arbitration, Country-Wide further asserted that collateral estoppel barred the claim because the same issue had been decided in a prior arbitration proceeding involving a different claimant, where the arbitrator held the policy had exhausted. However, upon review of the lower arbitrator’s decision, a master arbitrator held the doctrine of collateral estoppel was incorrectly applied.

The master arbitrator acknowledged that, as a general rule, it would be beyond an arbitrator's authority to award benefits to a no-fault claimant after the limits of the relevant policy had been exhausted. He explained, however, that the carrier has the burden of establishing that the policy has been exhausted,and that it has been exhausted while following the priority of payment rule found at 11 N.Y.C.R.R. 65-3.15which states that when claims exceed the policy limits `... payment for basic economic loss shall be made ... in the order in which each service was rendered or each expense was incurred. One exception to this rule was laid out inNyack Hospital v. General Motors Acceptance Corporation,8 N.Y.3d 294 (2007),where the Court of Appeals held that the insurer should continue to pay on claims as received and should not set aside a portion of the policy to pay claims that were challenged and which might be subsequently upheld.

The master arbitrator remitted to a lower arbitrator for review of payment logs and a determination of whether the policy exhausted. The lower arbitrator held that Country-Wide received the claim no later than March 27, 2018, and did not request further verification, which would have tolled the 30-day period for paying the claim. Further, the insurer did not deny the claim on any substantive or procedural ground within that 30-day period. Therefore, at the conclusion of that 30-day period, when the claim was deemed to have been verified by operation of law, the policy had not been exhausted, and, in fact, was not exhausted for more than one year after that claim was deemed to have been verified.

The insurer brought the present action to vacate this arbitration award pursuant to CPLR 7511, arguing the arbitrator exceed his power. On review, the court noted that even if a claim is made prior to the exhaustion of a policy, an arbitrator exceeds his power in awarding no-fault benefits to a claimant even where the claim had been improperly denied on other grounds prior to the arbitration. Such a claim does not retain its priority of payment with respect to other claims that had later been submitted and paid. In this case, however, the provider established that the policy had not been exhausted, both when it submitted its claim to the insurer, and when the claim was verified by operation of law 30 days later. The insurer had not denied the claim on other grounds, which would have permitted Country-Wide to vault later-submitted verified claims ahead of Sono's claim. Therefore, the insurer violated the priority of payment regulation by processing and paying later-submitted claims and is still liable to pay a claimant in excess of the policy limits.

Accordingly, the court denied the petition to vacate the master arbitrator’s award and entered judgment in favor of the provider.

RYAN’S FEDERAL REPORTER
Ryan P. Maxwell
[emailprotected]

08/28/24 Kelley v. Richford Health Center, Inc.
United States Court of Appeals, Second Circuit
Treatment of Nonpatient Found to Fall Outside of Medical Malpractice Liability Coverage Under the Federal Tort Claims Act

Bruce Kelley (“Kelley”) and his spouse filed a medical malpractice suit in Vermont state court after Kelley was paralyzed from the waist down while residing in the Franklin County Rehabilitation Center (“FCRC”), a skilled nursing facility. The Kelleys blame the injury on Dr. Teig Marco, who treated Kelley in the facility under a contract between FCRC and Dr. Marco's employer, the Richford Health Center, Inc. (“RHC”).

As a federally funded community health center, RHC is “deemed” to be a member of the Public Health Service under the Federally Supported Health Centers Assistance Act (FSHCAA), which, along with its employees, is “immune from malpractice suits for acts or omissions that occur within the scope of their [deemed] employment.” This FSHCAA makes the Federal Tort Claims Act (FTCA) “the exclusive remedy for specified actions against members of the Public Health Service” (including deemed health centers) and protects “employees of the Public Health Service from being subject to suit while performing medical and similar functions by requiring that such lawsuits be brought against the United States instead.” The statute's protection covers malpractice claims that arise from a deemed health center's provision of medical services to patients and, in limited circ*mstances, nonpatients too.

After the Kelleys filed their lawsuit, the Government invoked the FSHCAA and the FTCA to intervene, remove the case to federal court, and substitute itself as the sole proper defendant. The FCRC opposed and filed a motion to remand, and, after an evidentiary hearing, the Government reversed course and urged that the matter be remanded to state court, ultimately resulting in a remand order for three reasons:

“First, Kelley was not a RHC patient; second, the treatment fell outside the enumerated examples of services to nonpatients that qualify for FTCA coverage; and third, RHC never applied for a particularized coverage determination as to Dr. Marco's treatment of FCRC patients.”

Thereafter, this appeal by Dr. Marco and his employer, the RHC, ensued.

Skipping over the Court’s discussion of the propriety of the Government’s initial removal and appellant’s standing to appeal, we will jump to the juicy part—the “Merits of the Remand Order.”

The Second Circuit expressly notes that “a]s the District Court explained, “[t]he deeming decision is highly consequential for [a federally qualified health center] because it makes it unnecessary to purchase liability insurance for many types of claims. Instead, the United States becomes the insurer of the [federally qualified health center], providing a defense and indemnity within the procedures of the FTCA.” (Emphasis added). However, the scope of HHS's deeming decision, and its corresponding FTCA coverage for malpractice claims, depends on the patient's status, with coverage only extending to nonpatients if the treatment meets specified statutory criteria.

It was agreed that Kelley was not a RHC patient before Dr. Marco treated him, but the appellants argued that Kelley became a patient once Dr. Marco’s treatment commenced. However, the statute is focused upon patients of the entity, not patients of the entity’s employees like Dr. Marco. Since Kelley was merely a patient of Dr. Marco—not the RHC—he was a nonpatient for purposes of FTCA coverage, which only applies in limited circ*mstances. Here, Kelley did not fit squarely within any of the FSHCAA’s specified categories as described under HHS regulations.

Accordingly, remand was warranted and medical malpractice coverage, were it to exist, was not the Government’s problem under the FTCA.

Maxwell’s Minute: This decision really is not a coverage decision, but it is certainly coverage-adjacent. Kelley will need to pursue his medical malpractice claim in Vermont state court. Insurance coverage may be available through either Dr. Marco or RHC’s separate medical malpractice policies. While those policies likely have carve-outs for claims falling under the FTCA coverage as the district court noted (saving on premium), any such carve-out is inapplicable with that issue now fully adjudicated. At least I hope, for their sake, they have such coverage available.

STORM’S SIU
Scott D. Storm
[emailprotected]

08/05/24 N.J. Mfrs. Ins. Co. v. Arbitration Forums, Inc.
Supreme Court, New York County
Here Is What You Need to Prove to Overturn an Arbitration Forums Decision; And the Law of Chain Reaction Accidents

Petitioner N.J. Manufacturers Ins. Co. A/S/O Vitiello seeks to vacate, pursuant to CPLR § 7511, an arbitration award issued by respondent Arbitration Forums, naming Liberty Mutual, Geico, and Travelersas additional respondents. For the reasons discussed below, the Petition is denied.

The underlying arbitration proceeding involved a seven-vehicle, chain-reaction automobile accident that occurred on the Henry Hudson Parkway. Petitioner is the insurer and subrogee of Vitiello, who drove the fourth vehicle in the chain. Travelers insured the second vehicle, driven by Rivas. Geico insured the third and seventh vehicles, driven by Fernandez and Douglas, respectively. Liberty Mutual insured the fifth vehicle, driven by Perez. The first vehicle, driven by Joaquin, and the sixth vehicle, driven by Bisblkis, were insured, respectively, by American Transit Ins. Co. and Hereford Ins. Co., both nonparties to this proceeding.

Liberty Mutual initiated the arbitration proceeding. ATIC was a non-signatory to the applicable arbitration agreement and so was not a party to the proceeding. Hereford's participation was apparently "deferred" due to pending court litigation. The arbitration, therefore, was between NJM, Liberty Mutual, Geico, and Travelers.

To restate the arbitrator's findings, the evidence supported the conclusion that the sixth vehicle (driven by Bisblkis and insured by Hereford) struck the rear of the fifth vehicle (driven by Perez and insured by Liberty Mutual), which was pushed by the force of that impact into the rear of the fourth vehicle (driven by Vitiello and insured by Petitioner), and that the seventh vehicle (driven by Douglas and insured by Geico) caused damage to the rear of the sixth vehicle (again, driven by Bisblkis and insured by Hereford). AFI further found that the seventh vehicle had breached a duty by "[f]ollowing too close" but that no party had proven entitlement to damages. The award, therefore, provided for no damages award to any party.

Petitioner contends that AFI's failure to award it damages is cause to vacate the award pursuant to CPLR § 7511(b)(1)(iii), because the arbitrator failed to apply well-settled New York law concerning liability in rear-end collisions. Specifically, it appears that Petitioner faults the arbitrator for not assigning liability to, and thus awarding damages against, Liberty Mutual, even though the arbitrator found that the fifth vehicle (driven by Perez and insured by Liberty Mutual) struck Petitioner's insured's vehicle in the rear.

Geico and Liberty Mutual oppose the Petition on identical grounds.First,they contend that the Petition is untimely as to them because it was filed beyond the applicable 90-day deadline for filing an application to vacate an arbitration award set forth in CPLR § 7511(a).Second,they contend that the award attached to the Petition is neither signed nor affirmed by the arbitrator, as required by CPLR § 7507, essentially rendering it incapable of supporting Petitioner's application.Third,they contend that the award is sufficiently explained and supported in evidence and law to survive the limited scope of review that a court may undertake upon a § 7511 application.

In reply, Petitioner argues that the Amended Petition relates back to the original Petition and is therefore timely as to Geico and Liberty Mutual. Petitioner also essentially repeats his arguments made in the Petition.

Initially, Petitioner does not cite to any caselaw in support of its argument that the Amended Petition relates back to the original Petition, and, similarly, Respondent does not cite to any caselaw demonstrating that CPLR § 7507 should be interpreted in such a way that the arbitration award issued by AFI is essentially nonfinal and invalid for purposes of a § 7511 application. Neither issue need be addressed to resolve Petitioner's application, however, because it fails on substantive grounds. "It is well settled that a court may vacate an arbitration award only if it violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator's power." Such enumerated limitations are set forth in CPLR § 7511, which provides that an arbitration award may be vacated upon a finding that the rights of a party were prejudiced by: (1) corruption, fraud, or misconduct in procuring the award; (2) the partiality of an arbitrator; (3) the arbitrator having exceeded their power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or (4) failure to follow the procedures set forth in Article 75 of the CPLR. CPLR § 7511(b)(1)(i)-(iv). A party seeking to vacate an arbitration award bears a "heavy burden of establishing by clear and convincing evidence the existence of any ground for vacating [an] arbitration award under CPLR 7511." "Even where an arbitrator has made an error of law or fact, courts generally may not disturb the arbitrator's decision."

Here, contrary to Petitioner's contentions, the arbitrator did not exceed its power by failing to award Petitioner damages. Petitioner's argument relies on the arbitrator having manifestly disregarded the law concerning liability for rear-end collisions, but the arbitrator's decision not to assign liability to any of the vehicles in the chain behind Petitioner's insured's vehicle is consistent with the arbitrator's written findings of fact and with the law concerning chain-reaction collisions. The arbitrator specifically found that the evidence supported that the sixth vehicle (driven by Bisblkis and insured by Hereford) struck the rear of the fifth vehicle (driven by Perez and insured by Liberty Mutual),which was pushed by the force of that impactinto the rear of the fourth vehicle (driven by Vitiello and insured by Petitioner). Thus, the law generally assigns no liability to the fifth vehicle for damages to Petitioner's insured's vehicle. "In a chain collision accident, the operator of the middle vehicle may establishprima facieentitlement to judgment as a matter of law by demonstrating that the middle vehicle was properly stopped behind the lead vehicle when it was struck from behind by the rear vehicle and propelled into the lead vehicle." Additionally, the arbitrator could not award damages against the sixth vehicle because neither the driver nor the insurance company, Hereford, were active parties to the arbitration, as reflected in the award itself.

Moreover, the arbitrator did not find that the seventh vehicle pushed the sixth vehicle into the fifth vehicle, which then pushed the fifth vehicle into Petitioner's insured's vehicle; rather, the arbitrator found only that "the evidence is more consistent to support GEICO [i.e.,the seventh vehicle] was responsible for the rear damage" to the sixth vehicle. Thus, because there is no finding by the arbitrator, based on its review of the evidence submitted by the parties, that the seventh vehicle caused the chain reaction of collisions that led to the fifth vehicle being pushed into Petitioner's insured's vehicle, it is not inconsistent with the arbitrator's findings of fact or contrary to controlling law for the arbitrator not to have assigned liability to the seventh vehicle for the damage to Petitioner's insured's vehicle. Under the arbitrator's determination of the facts, the seventh vehicle would only be liable to the sixth vehicle for damages, but, again, Hereford was not an active party to the proceeding.

Accordingly, Petitioner's application to vacate the award must be denied. Where an application to vacate or modify an arbitration award is denied, CPLR § 7511(e) mandates that the reviewing court confirm the award. The award is, therefore, confirmed.

07/24/24 Liberty Mutual Ins. Co. v. Cruz
Supreme Court, New York County
Issue of Fact as to Whether Omitting Uncle as an Additional Driver on the Policy Was a Material Misrepresentation Where Defendant's Factual Averments Require a Credibility Determination; And Plaintiffs Point to No Proof to Establish How Often One Must Operate the Vehicle to Be Considered an Additional Operator Under the Subject Policy

This action arises from claims for no-fault reimbursem*nt stemming from a motor vehicle accident on 3/13/20 owned by non-party Jimenez, policyholder, operated by her uncle and claimant, Cruz, and insured by Liberty Insurance. Plaintiffs seek to deny no-fault benefits relating to the accident based on the alleged material misrepresentation of the policyholder that Cruz was not a frequent user of the vehicle.

Plaintiffs move, pursuant to CPLR 3212, for an order granting summary judgment in their favor against answering defendants.

Plaintiffs argue that the medical provider defendants are not entitled to no-fault benefits because Jimenez failed to list Cruz as a driver when procuring the policy, and that Cruz testified falsely in his EUO to perpetuate the material misrepresentation. Plaintiffs contend that Jimenez's failure to list Cruz as an additional operator when the policy was procured amounts to material misrepresentation because, as part of the investigation conducted in this matter, a Vehicle Locator Report revealed 147 sightings of the insured vehicle at Cruz's home address prior to the policy inception (12 days prior to the accident, and after policy inception). They furnish a copy of Jimenez's EUO testimony wherein she testified that the insured vehicle was regularly parked on the street next to her apartment, and that she allowed Cruz to use the car once or twice a week for work, or to pick up her children from school, as he lived roughly ten minutes from her. She testified that the subject car was parked near Cruz's apartment when Cruz was using the vehicle, or when she was unable to find parking near her apartment. Jimenez also testified that Cruz was not added as an additional operator on the policy because she is the sole owner of the vehicle. Plaintiffs further submit a copy of Cruz's EUO testimony wherein he testified that Jimenez, who lives about a mile from him, allowed him to use the insured vehicle twice or three times a month to go to work. He further testified that he did not have his own set of keys to the vehicle, and that he did not recall being involved in an accident before the accident at issue.

Plaintiffs dispute Cruz's and Jimenez's testimony and posit that their own investigations revealed that Cruz regularly used the insured vehicle and should have been listed as a driver on the policy.They set forth that Cruz made material misrepresentations when he testified that he only used the subject vehicle two to three times per month, that the vehicle was not regularly garaged at his residence, and that he was not previously involved in an accident involving the vehicle. Plaintiffs also submit the affidavit of their Lead Compliance Analyst, Darren Demmon, who affirms that, upon information and belief, Cruz was a frequent user of the insured vehicle, and that, had Cruz been added as an operator to Jimenez's policy, the policy premium would have been $7,299.00, instead of $3,008.00. In addition, plaintiffs submit the affirmation of Jennifer Petito, their Special Investigation Unit Team Manager, who affirms that Cruz was complicit in Jimenez's material misrepresentation, and that all claim denials were timely.

The medical provider defendants oppose the motion, arguing that the alleged misrepresentations are immaterial as a matter of law and therefore, summary judgment should be denied. They rely on New York Insurance Law § 3105[b] which provides, in pertinent part, that "[n]o misrepresentation shall be deemed material unless knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such contract" to contend that plaintiff does not state in unqualified terms that they would not have issued the subject insurance policy had they known of the alleged misrepresentation and, thus that summary judgment does not lie. The medical provider defendants maintain that plaintiffs admit that they would have issued the policy, but at a higher premium rate. They articulate that plaintiffs fail to establish material misrepresentation insofar as they fail to submit the required underwriting practices, such as underwriting manuals, bulletins, which would show that plaintiffs would not have issued the subject policy if Cruz's frequent use of the vehicle would have been disclosed on the policy application.

In addition, they assert that plaintiffs do not submit any proof to demonstrate that Cruz was required to be listed as a regular operator of the insured vehicle such that the alleged material misrepresentation may be determined as a matter of law. The medical provider defendants argue that Cruz and Jimenez testified, to the contrary, that the vehicle was principally garaged at Jimenez's residence and that Cruz only used the vehicle for occasional work purposes. They also assert that the record is devoid of any proof to support the claim that Cruz intended to defraud plaintiffs. Lastly, the medical provider defendants furnish a letter in which they rejected plaintiffs' discovery responses as incomplete to argue that the instant motion is premature insofar as there is outstanding discovery from plaintiffs.

In reply, plaintiffs state that the motion in opposition is untimely as it was filed on April 19, 2024, instead of April 16, 2024. They further note that they need not prove Cruz's intentions when establishing their right to deny the claims at issue because in the context of Insurance Law, the falsity of the representation is the relevant characteristic, and not the intent to misrepresent.

Next, plaintiffs contend that contrary to the medical provider defendants' claim, the First Department has held that any misrepresentation causing a policy to be issued at a lower premium than what would have been issued had the correct information been provided, is a material misrepresentation. They maintain that if Cruz had been added as a regular driver of the insured policy, the premium would have been $7,299.00, instead of $3,008.00. Plaintiffs further state that they have furnished a copy of Jimenez's policy application, wherein she allegedly attested to,inter alia,the drivers who would be using the insured vehicle, which was a relevant factor in plaintiffs' calculation of the policy premium on the subject policy.

Lastly, plaintiffs assert that, contrary to the medical provider defendants' contention, they have provided all discovery materials, in the form of exhibits, that the medical provider defendants have requested in this action.

"A misrepresentation in an insurance application is material, voiding the policyab initio,if, had the true facts been known, either the insurer would not have issued the policy or would have charged a higher premium". While the materiality of a misrepresentation is usually a question for the jury, materiality can be established by an affidavit from an underwriter and documentary evidence concerning its underwriting practices showing that the same policy would not have been issued if the correct information had been provided. A court, in finding a material misrepresentation as a matter of law, generally relies upon two categories of evidence, an affidavit from the insurer's underwriter and the insurer's underwriting manual.

Here, plaintiffs have failed to establish theirprima facieentitlement to summary judgment as a matter of law. The proof submitted, i.e., the Jimenez and Cruz EUO testimonies and a copy of the insurance policy, is insufficient to establish that Jimenez made a material misrepresentation by not adding Cruz as an additional operator of the insured vehicle when procuring the subject insurance. Jimenez and Cruz both testified at their respective EUOs that Cruz used the insured vehicle sparingly, and that the insured vehicle was garaged at Cruz's address only during the few instances Cruz either operated the insured vehicle or when Jimenez could not find parking near her own address.

This court finds that the deposition testimony of claimant and Cruz raises an issue of fact as to whether omitting Cruz as an additional driver on the policy was a material misrepresentation. Where, as here, defendant's factual averments require a credibility determination, summary judgment is not appropriate. Furthermore, plaintiffs point to no proof to establish how often one must operate the insured vehicle to be considered an additional operator of the said vehicle under the subject policy. Given the foregoing, the motion for summary judgment is denied.

FLEMING’S FINEST
Katherine A. Fleming
[emailprotected]

08/23/24 Ha v. Nationwide Gen. Ins. Co.
North Carolina Supreme Court
Manner in Which Notice of Cancellation Is Given Is of Secondary Importance When Clear Evidence Shows an Insured’s Actual Notice

Almost two months before a fire burned plaintiffs’ house down, Nationwide mailed plaintiffs a letter explaining when and why it was terminating their coverage. Plaintiffs previously had a policy with another carrier that was cancelled due to an unfenced swimming pool and rotting wood. Plaintiffs then sought coverage from Nationwide. The underwriting inspection unearthed the unfenced swimming pool, the rotting siding, and an unsecured trampoline. Nationwide also chose to cancel the policy.

The cancellation date came and went. Nationwide sent plaintiffs a premium refund check for the excess premium. The insurer also ceased drafting monthly premium payments from plaintiffs’ bank account, so they did not pay for insurance the month of the fire. Plaintiffs never saw the cancellation letter. However, plaintiffs received, signed, and cashed the premium refund check over a month before the fire.

Plaintiffs sued after Nationwide denied their claim. The insurer argued it cancelled the policy. Plaintiffs argued they had coverage, and that Nationwide had to provide actual notice of cancellation. The trial court dismissed plaintiffs’ claims in part and declared that Nationwide timely and properly cancelled their policy before the fire. The Court of Appeals reversed and remanded, reasoning that the applicable statute required actual delivery to and/or receipt of a cancellation notice. Nationwide appealed, and the Supreme Court vacated the appellate decision and remanded to determine what statutes govern the matter. Again, the trial court entered judgment for Nationwide because it held the mailing of the notice of cancellation satisfied the notice obligations. The divided Court of Appeals affirmed because the language of the statute does not require proof of receipt.

The North Carolina Supreme Court affirmed on slightly different grounds because the fact of notice is what matters. The purposes of the statutory notice requirements are to provide policyholders with information necessary for their protection and to give them the opportunity to procure other insurance. Here, there was ample evidence that plaintiffs had actual notice of the cancellation. Further, plaintiffs sought coverage from Nationwide when they were aware of the hazards that had led to another insurance carrier to end their coverage just weeks before. Plaintiffs did not correct the hazards, and the court noted it was significant that Nationwide cancelled the policy for the same risks known by plaintiffs. Additionally, plaintiffs received, signed, and cashed the check refunding the excess premium. After the cash was deposited, Nationwide stopped drafting payments from plaintiffs’ bank account. When the fact of notice is clearly shown, the manner of giving notice becomes of secondary importance. Since plaintiffs had forewarning, time, and information needed to secure other coverage before their insurance lapsed, the insurer properly cancelled the policy.

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

08/23/24 Reid v. McKeon
Superior Court of New Jersey, Appellate Division
Auto Carriers May Be Liable to Satisfy a Judgment up to Policy Limits, but the Claimant Ought to Make Sure the Carrier Is in the Case Before Seeking Such Enforcement

Reid was struck by a vehicle driven by McKeon. At the time of the accident, McKeon was insured by Cure Auto Insurance Company (“CURE”) under a personal automobile policy. Important to this discussion is that the lawsuit in which this opinion was rendered is the tort action brought by Reid for his personal injuries. CURE was never a party to this lawsuit.

At trial, the jury awarded Reid a $250,000 judgment against McKeon. The CURE policy’s bodily injury limit was $100,000 per occurrence. Being that this single accident constituted only one occurrence, CURE refused to pay anything over $100,000.

McKeon eventually went into bankruptcy, listing the $250,000 judgment as one of his debts. As a result, Reid sought to collect the judgment from CURE. In New Jersey, bankruptcy of an insured does not release the carrier from its obligation to pay the judgment. If the injured party is unable to execute the judgment against the insured, they can maintain an action against the carrier for the amount of the judgment, up to the policy limits. See N.J.S.A. 17:28-2. However, if this statute is going to be invoked in the personal injury action, the injured party would do well to make sure that the carrier is part of that action, and that it has previously pled a claim for enforcement against the carrier.

As above, CURE was never made a party to this personal injury action, nor had any pleadings or cause of action ever been asserted against CURE. The procedural rule under which Reid’s motion was based provides only for the methods to settle forms of judgments and orders—not enforcement of judgments. And, the rules applicable to enforcement of judgments only apply when there is a judgment to be enforced. Here, there was never a judgment or order against CURE, and therefore, there is nothing to enforce against it.

The Court found N.J.S.A. 17:28-2 inapposite to this glaring issue, explaining that the statute does not authorize a judgment against a carrier in response to a motion made in an action to which the carrier is not a party. Rather, as the Court explained, the statute provides a basis to maintain an action against the carrier. As the Court noted, Reid might have a valid claim against CURE under the statute, but Reid never commenced an action against CURE. Needless to say, Reid’s application was denied.

Editor’s Note: Reid had two options, once it became apparent that she needed to go after CURE: (1) amend the complaint in this action to assert a claim against CURE; or (2) start a separate action against CURE. Option #2 probably would have been the more feasible one, for two reasons—first, given the passage of time, amendment of the complaint may have been out of the question, and second, litigating coverage issues against the carrier within the personal injury action can sometimes be prejudicial to the carrier. The second concern is not really present here, though, as the claim against CURE appeared after jury trial, and was not as much of a coverage issue as it was an enforcement issue. Still, amendment of a complaint after trial probably would have been frowned upon.

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

08/21/24 Grinnell Mut. Reinsurance Co. v. S.B.C. Flood Waste Sols., Inc.
United States Court of Appeals, Seventh Circuit
Non-disclosure of Threatened Litigation Constitutes Material Misrepresentation

This recession action involved a family dispute that began in 2017. Brian Flood and his sons, Chris and Shawn Flood (the “Floods”) ,operated a waste disposal company named Flood Brothers. That company was started by Brian Flood’s father. In 2014, Chris Flood began a side business named Flood, Inc., which also operated as a waste disposal company. A family disagreement occurred over Chris’s use of the Flood name in the same industry and in the same area.

So, in October 2017, the grandfather fired the Floods, Within a day the Floods incorporated a new disposal business named Flood Waste Solutions. Chris received a cease and desist letter threatening litigation over the commercial use of the Flood name. Chris’s attorney responded with a challenge to the claim, sought monies, and requested documentation be preserved for potential litigation. In January 2018, Brian met with his lawyer and changed the new company’s name to SBC Flood Waste Solutions, Inc. so the word Flood did not jump out and to avoid litigation.

In February 2019, SBC Flood applied for commercial general liability and commercial auto insurance with Grinnell. The applications inquired about previous lost history, including “all clams, losses, or occurrences that may give rise to claims.” SBC Flood responded “none” to that inquiry. It also answer “no” to the question of whether any of SBC Flood’s principals operated any other business ventures. Three months later Flood Brothers sued SBC Flood, as well as the Floods for unfair, improper use of the Flood name. Grinnell immediately filed a rescission action against SBC Flood.

Illinois Law, like New York, permits recession of insurance policies if an innocent misrepresentation is made in an application that materially affects the risk. Materiality is determined by whether an underwriter would have considered the true facts as substantially increasing the risk, so as to cause the rejection of the application. Grinnell’s underwriter testified she would have rejected the applications if she knew of the threatened litigation. The underwriter did not state the omission of Flood, Inc. would have caused a rejection, only that she would have requested more information on its business, including what insurance coverage the side-business possessed.

The court noted SBC Flood omitted the family dispute of which it was actively aware of and embroiled in prior to and at the time of the application. The termination letters, cease and desist letter, the response letter, and company’s name change to avoid suit all established knowledge of a potential claim. Next, SBC Flood also failed to disclose Flood, Inc. on the application, Chris’s side business. The false responses constituted misrepresentations.

Little challenge faced the court on the materiality issue because of the underwriter’s testimony. SBC and the Floods challenged the testimony as subjective. That was rebutted simply because the Floods objectively knew of the potential litigation prior to the application, which constituted as a material misrepresentation.

The insureds further contested the underlying suit dispute involving Flood, Inc.’s use of the Flood name only. This argument was also rejected due to Chris and Brian’s testimony and actions. Their grandfather advised them in December 2017, the issue was the commercial use of the family name Flood. The cease and desist letter also related to the use of the name Flood for waste disposal in the Chicago area, which led directly to the suit against SBC Flood; and in turn is what SBC Flood sought coverage for.

On the omission of Flood Inc., the appellate court noted in some instances such a lack of disclosure may not be material. But due to the identical nature of the business, it need not engage in the lack of materiality discussion. It pointed out Flood, Inc.’s operation in the same industry, in the same location, for three years prior to the application, and operated without insurance. It reasoned any reasonable underwriter would expect to know these facts before issuing a policy and no reasonable person would not think they could omit the disclosure.

In addition, SBC Flood argued the court could not affirm the rescission, unless it also affirmed the district court’s determination that SBC Flood and Flood, Inc. operated as alter egos. Due to the blatant and obvious material misrepresentations, the court did not engage in any alter-ego analysis because it was unnecessary. SBC Flood failed to disclose material facts on the applications, so Grinnell was entitled to a declaration of rescission.

ROB REACHES the THRESHOLD
Robert J. Caggiano
[emailprotected]

Nothing new from the Appellate Division – check back in two weeks!

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

08/15/24 Colony Ins. Co. v. 21 Park Place NY LP
Supreme Court, New York County
Insured Motion to Vacate Denied Due to Admission of Personal Knowledge of Suit

Colony Insurance Company (“Colony”) commenced a declaratory judgment action against its 21 Park Place NY LP (“21 Park”), seeking an order declaring it was not obligated to defend nor indemnify 21 Park in four separate underlying actions under a commercial general liability policy. The Colony policy contained an endorsem*nt which conditioned coverage on the risk location being vacant.

The four underlying actions stemmed from a collapse of the risk location, each action containing allegations that the building was not vacant. Colony assigned defense counsel and subsequently commenced the instant declaratory judgment action. After 21 Park failed to appear, Colony was granted a default judgment in June of 2023. In support of the default motion, Colony submitted an affidavit and the underlying action complaints. Colony failed to provide evidence of its investigation indicating the building was indeed vacant. Nonetheless, the court granted the default motion since 21 Park failed to answer and was therefore “deemed to have admitted all factual allegations in the complaint and all reasonable inferences that flow from them.”

21 Park moved to vacate the default judgment pursuant to CPLR Sec 5015(a)(1) and CPLR Sec. 317. Under each Civil Procedure section, the moving party is required to demonstrate a reasonable excuse for the failure to appear, and a potentially meritorious defense to the action.

21 Park submitted an affidavit from a general partner, an affidavit from a general contractor, and email correspondences between defense counsel. Both affidavits identify that the risk location was vacant. Additionally, 21 Park argued that the failure to define the term ‘vacant’ requires the term to be narrowly interpreted in favor of the insured. The court determined the arguments were unavailing, finding that even if such arguments raise a meritorious defense, the failure to provide a reasonable excuse for its failure to appear was detrimental.

In fact, by 21 Park’s own admission, notice of the declaratory judgment action was emailed to 21 Park by its agent designated for service by the Secretary of New York. However, the affidavit contains no explanation as to why no action was taken after 21 Park was alerted of the declaratory judgment action.

Accordingly, the court found 21 Park’s argument that the general partner was not personally served did not satisfy the burden of a reasonable excuse for the failure to appear. Instead, the court found that the evidence submitted in support of the motion to vacate affirm that 21 Park had actual notice of the lawsuit for almost a year and a half prior to the issuance of a default judgment.

As such, the court denied the motion to vacate the default judgment.

LEXI’S LEGISLATIVE LOWDOWN
Lexi R. Horton
[emailprotected]

08/28/24 Proposed Amendment to Ins. Law §§3421, 1113, and 3462
Proposed Legislation to Amend Insurance Law § 3421 in Relation to Prohibiting Certain Restrictions as it Relates to Dog Breed and Proposed Legislation to Amend § 1113 and § 3462 to Create A Regulatory Structure For Pet Insurance

In 2021, the governor signed into law an amendment to § 3421 that prohibits homeowners’ insurers from canceling, refusing to issue or renew, or charging a higher premium for insurance based on the breed of dog owned.

The proposed amendments to Insurance Law § 3421 to include renters insurance policies.

The Amendment Reads as Follows:

Homeowners' liability insurance AND RENTERS' INSURANCE; dogs. 1. With respect to homeowners' insurance policies as defined in section two thousand three hundred fifty-one of this chapter AND RENTERS' INSURANCE POLICIES AS DEFINED IN SECTION THREE THOUSAND FOUR HUNDRED FIFTY- FOUR OF THIS CHAPTER, no insurer shall refuse to issue or renew, cancel, or charge or impose an increased premium or rate for such policy or contract, or exclude, limit, restrict, or reduce coverage under such policy or contract based solely upon harboring or owning any dog of a specific breed or mixture of breeds.

Next, Bill S7845 seeks to create a regulatory structure for pet insurance. The purpose of the bill is to regulate and define the issuance of pet insurance that provides coverage for accidents and illnesses of pets.

The Provisions include an amendment to subsection (a) of section 1113 of insurance law to add a new paragraph including “pet insurance” and amendments to insurance law by adding a new section to 3462.

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

08/27/24 Live Nation Ontario Concerts GP, Inc. v. Aviva Ins. Co. of Canada
Ontario Court of Appeal
The Existence of a SIR Does Not Turn Entities Obliged to Discharge That SIR Into an Insurer; A SIR Cannot Be Analogized to Constitute Separate, Primary Insurance

On Labour Day weekend, 2016, Florida Georgia Line played the outdoor Molson Amphitheatre (now known as the Budweiser Stage) at Ontario Place in Toronto. FGL were in Toronto as part of a North American celebration of that band’s third studio album, ‘Dig Your Roots’ … (celebrating hit singles such as "H.O.L.Y.," "May We All," and "God, Your Mama, and Me"). The venue was crowded, and the suds were flowing. Security moved in to remove an inebriated and unruly patron, who objected to his personal escort off the property. Another patron, Tara Nimmo, was accidentally struck and injured by the security officers as they dealt with their charge.

At the time of the FGL concert, Live Nation Ontario Concerts GP, Inc., a concert producer and promoter had leased the Molson Amphitheatre from Ontario Place Corporation. That entity operated the 155-acre waterfront park known as Ontario Place that houses exhibition spaces including this Amphitheatre. Live Nation contracted with Northwest Protection Services Ltd. to provide crowd management services at the Amphitheatre for each of its 2016 summer concerts, including the FGL concert.

Nimmo’s action named Northwest alleging security negligence. Also named were Live Nation and Ontario Place. Nimmo’s action alleged that Live Nation and Ontario Place failed to properly train, supervise, and instruct their security personnel to deal properly with unruly patrons and were liable for Northwest’s actions. She also set out independent allegations of negligence against Live Nation and Ontario Place that are unrelated to the security negligence claims.

In other words, on the face of the pleading, Nimmo could succeed solely against Live Nation and Ontario Place, if it was proven that one or both of them failed to comply with their statutory obligations under the Liquor Licence Act, R.S.O. 1990, c. L.19 and the Occupiers’ Liability Act, R.S.O. 1990, c. O.2, including serving alcohol in excessive amounts and failing to provide safe premises, to post any warning signs, to properly illuminate the premises, to perform routine ground maintenance on the premises, to implement a program or procedure for the routine inspection of the premises, and to provide alternative passages or entrance or exit ways (“the statutory negligence claims”).

Aviva Insurance Company issued a CGL policy to Northwest - the policy period covered this event. Live Nation and Ontario Place were each “additional insureds” as defined under the Aviva policy with respect to losses “arising from the acts or omissions of NorthWest.” The application or trial judge and the Court of Appeal both agreed that only the allegations of security negligence were covered by that policy.

For their part, Live Nation and Ontario Place were the named insureds under a CGL issued by Starr Indemnity & Liability Company. Under the Starr policy, the respondents had a self-insured retention (“SIR”) of $1 million applicable to “each wrongful act” that had to be exhausted before Starr’s duty to defend and pay defence costs was triggered. The insurance provided under the Starr policy would only apply in excess of the SIR payable by Live Nation and Ontario Place.

There was no evidence before the Court as to whether Live Nation and Ontario Place had made a claim under the Starr policy; or, whether Starr accepted coverage; or, whether the SIR had been exhausted or was likely to be exhausted such that Starr’s duty to defend under the Starr policy was potentially triggered.

Who pays the costs to defend Nimmo’s action? Aviva took the position that the costs should be shared with Starr on the basis of equitable contribution. Live Nation and Ontario Place insisted that Aviva pay 100% of the costs for all defendants even though not all of the allegations are covered under the Aviva policy.

The Court of Appeal agreed with the application/trial judge that Aviva must pay 100% of the costs at this time as:

• There was no material filed such as discovery transcripts nor any productions to assist the court in properly assessing the costs incurred. The court could not prorate the costs even though the case was apparently ready for trial – it would be mere guess work on the part of the Court. The Court had no idea of the prominence of the security negligence claims as compared with the statutory negligence claims or even whether the statutory negligence claims were seriously pursued.

• Equitable contribution can only be sought from a concurrent insurer, not from the insured. The doctrine of equitable contribution flows from the fundamental principle of indemnity. Where an insured holds more than one insurance policy that may respond to claims in an action, the insured may not recover from theconcurrent insurers more than the amount of the full loss. However, theinsured is entitled to select the policy under which to claim indemnity, subject to any conditions to the contrary. The selected insurer is entitled to claim contribution from all other insurers who have a concurrent duty to defend the insured on the same or other of the pleaded claims.In this case, Starr was not before the court.

• The existence of the SIR does not turn Live Nation and Ontario Place into an insurer and cannot be analogized to separate, primary insurance. Rather, it is a contractual provision between each of them and their insurer, Starr, that affects the timing of the triggering of Starr’s duty to defend and to pay defence costs and, as such, merely represents a sharing of the potential costs by an insured under its contract with its insurer.

Aviva’s application to share the costs of defence with Starr was rejected. Aviva must, pay the costs of defence but can reapply to the court to have those costs re-allocated. At that time, the defence costs associated with the statutory claims will be known. Aviva can then claim those costs from Starr. If when those costs are presented, the applicable SIR has not reached exhaustion, then Live Nation and Ontario Place will be obliged to pay those costs.

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