A NY Coverage Distinction With a Difference: “Earth Made” Exclusion Applied to “Man Made” Excavation.

In Pioneer Tower Owners Assn. v State Farm Fire & Cas. Co. (April 2009), State Farm insured a building against “accidental direct physical loss.”  The building suffered cracks and other damage as a result of an excavation on an adjoining lot.  State Farm refused to pay, relying on an “earth movement” exclusion.  The Court of Appeals held that the “earth movement” exclusion did not unambiguously apply to excavation, and would not apply the exclusion to preclude coverage.

More recently, in Bentoria Holdings, Inc. v. Travelers Indemnity Company (Oct. 2012), the Court of Appeals revisited the issue and came to a different conclusion based on the specific wording of the exclusion.  The facts in Bentoria Holdings were virtually identical to the facts in Pioneer.  However, the “earth movement exclusion” in Bentoria Holdings had one additional sentence that was absent in the Pioneer policy.  The Bentoria Holdings policy stated that it would not pay for loss or damage caused by “earth movement” “whether naturally occurring or due to man made or other artificial causes.”  While the plaintiff in Pioneer successfully argued that the “earth movement” exclusion did not clearly exclude “excavation–the intentional removal of earth by humans,” the same argument could not be made in Bentoria Holdings since the policy specifically excluded “man made” earth movement.

The moral of this case is that even though application of an exclusion may have been shot down by courts in the past, when there is any distinction in the policy language it can make all the difference.

For more information about this post, please contact Cheryl Fuchs at cfuchs@wcmlaw.com

WCM Publishes Essay in Pennsylvania Defense Institute Quarterly Newsletter

Philadelphia, PA 

Senior Partner Paul Clark, Partner Bob Cosgrove and law clerk Adam Gomez have published an essay entitled Winning One for the Gipper: The Looming Legal Threats to American Football in the December 2012 edition of Counterpoint, the Pennsylvania Defense Institute’s quarterly newsletter — http://www.wcmlaw.com/pdf/Gipper.pdf

The PDI is the Pennsylvania state affiliate of the Defense Research Institute.  The article explores some of the common issues involved in the rise of head trauma injuries and resulting litigation.  For more information about the essay, please contact Paul Clark at pclark@wcmlaw.com or Bob Cosgrove at rcosgrove@wcmlaw.com.

Does PA Allow for a Wrongful Birth Claim? It Does Now.

In 1988, Pennsylvania passed 42 Pa.C.S. 8305 that clarified that Pennsylvania does not allow for a cause of action based on a claim that “but for an act or omission of the defendant, the person would not have been conceived or, once conceived, would or should have been aborted.”  This law has remained intact until the past 30 days.  In the case of Sernovitz v. Dershaw, shortly after the Sernovitzes’ son was born, he was diagnosed with Riley-Day syndrome, a serious health defect.  The Sernovitzes claimed that the failure of their ob-gyn to reveal that Mrs. Sernovitz was a carrier of the genetic mutation that causes Riley-Day resulted in their failure to conduct additional testing — testing which (because of the positive results) would have resulted in their abortion of their son.  On its face, this cause of action was barred by 8305, and so the trial court dismissed the action.

An appeal was lodged and the plaintiffs argued that the 8305 was unconstitutional because the bill contained more than one subject (the bill’s focus was post-trial criminal procedure) and thus violated the single-subject rule of the Pennsylvania constitution.  The Superior Court agreed and reinstated the plaintiffs’ complaint.

So, for the moment (and an appeal to the Supreme Court or legislative action is likely), you can file a wrongful birth claim in Pennsylvania.

For more information about this post, please contact Bob Cosgrove at rcosgrove@wcmlaw.com.

Credibility Gap Between Insured and Insurer’s Agent in NJ

In a classic “he said” “she said” dispute, a driver won the prize of uninsured motorist coverage. In Rodriguez v. Ocean Risk Retention Group, Inc., a cab driver sought uninsured motorist coverage for an accident. However, he was not listed as a driver on the cab company’s policy.

 The insured cab company’s president claimed that he had advised his insurer’s managing agent that he was hiring a new driver. He allegedly telephoned to request that the insurer add the new driver to the policy. The managing agent denied ever having received such notice.

 The policy actually required written notice to request the addition of new drivers by endorsement. Additionally, in practice, when such notice was given, the insurer’s managing agent would evaluate all proposed drivers by their driver abstracts to determine their insurability. However, this practice was not always followed, and, in fact, during the policy period, thirty-seven such endorsements were permitted, five of which were by telephonic rather than written request.

 The managing agent certified that she had received a request for the plaintiff driver – but not until seven months after the accident. Moreover, when she obtained his abstract, she determined that he was not acceptable.

 In a hearing, the judge found the insured’s testimony more compelling and credible. Yet, in awarding underinsured motorist coverage, the judge did not make a finding as to exactly when the alleged phone call was made. Nonetheless, he apparently accepted that the call was made sometime prior to the accident. The appellate division did not disturb the court’s decision and affirmed the coverage determination.

 A lingering question remains whether the result might have been different if the written notice requirement had been fastidiously observed.

 For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com

NJ UIM Coverage: What Are Your Limits?

For years auto insurance in New Jersey was a hot topic as the Legislature wrangled with how to make no fault insurance cost effective. The result was a very defined statutory scheme that requires all liabilities policies to include uninsured and underinsured motorist protection.

Of course, individuals have options, including just how much protection they want to purchase. In the realm of uninsured/underinsured protection, an insured can choose what limits they would like to have. However, they must be aware that the limit they select will strictly bind them.

In Aggour v. GEICO, the plaintiff was injured in a multi-vehicle accident involving injuries to a number of individuals. The tortfeasor driver had policy limits of $100,000 per person and $300,000 aggregate. Coincidentally, the plaintiff had the same per person policy limit for underinsured coverage. Because of the multiple claimants, the plaintiff’s settlement share was less than she believed she would have been entitled. However, her insurer denied coverage inasmuch as the policy limits were identical.

GEICO’s motion for summary judgment was granted based upon N.J.S.A. 17:28-1.1(e)(1) since the tortfeasor had the same liability limit as the underinsured motorist limit applicable to plaintiff’s policy. The appellate division agreed that the comparison of policy limits determines whether a claim for underinsured coverage may prevail. That there may have been a shortfall in coverage due to multiple settlements is of no consequence.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com


Storm in Progress? Snow Removal Contractor Has Reasonable Time to Respond in NY

In the case of Espinal v. Melville Snow Contractors, 98 NY2d 136, 142-143, the New York State Court of Appeals, held that a snow removal contractor does not owe a duty of care to third-parties. However, in the years since the holding in Espinal, the trial courts have made it more difficult for a snow removal contractor to win summary judgement. In the case of Eugenia Smilowitz v. GCA Services Group, the Supreme Court, Queens County got it right. The plaintiff, an employee of St. Johns slipped and fell on snow and ice on the St. Johns campus. The defendant, GCA was responsible for maintaining the grounds, including snow removal.

GCA moved for summary judgment, arguing that under the “storm and progress rule” a snow removal contractor cannot be held liable for injuries sustained as a result of slippery conditions that occur during an ongoing storm, or for a reasonable time thereafter. In opposition, the plaintiff tendered no evidence that GCA fell into any of the Espinal exceptions. More specifically. the plaintiff failed to prove that GCA created or exacerbated the icy condition that she slipped on. The Appellate Division, Second Department upheld the lower court’s decision, holding that merely undertaking snow removal duties, as required by contract, cannot be said to have created or exacerbated a dangerous condition.

Thanks to Ed Lomena for his contribution.

For more information contact  Denise Fontana Ricci at dricci@wcmlaw.com.


NY Sports Clubs: Careful, Or New Year’s Resolutions May End Up Costing You

In Levy v. Town Sports International, Inc., the First Department demonstrated just how narrowly the doctrine of assumption of risk is applied to bar a negligence claim. The assumption of risk doctrine bars a participant injured while engaged in a sport or recreational activity from bringing suit because the participant consents to those commonly appreciated risks which are inherent in and arise out of the nature of the sport generally and flow from such participation. The doctrine does not apply, however, to unassumed, concealed, or unreasonably increased risks.

In Levy, the plaintiff, who recently had surgery and suffered from osteoporosis, was directed by her personal trainer to perform jump repetitions on an exercise ball. After one too many jumps, she fell and was injured. The defendants were granted summary judgment on the basis that plaintiff assumed the risk of injured.

The First Department reversed, finding that an issue of fact as to whether the trainer knew of the recent surgery and osteoporosis, and whether he increased the risk of injury to plaintiff by having her perform an advanced number of repetitions. The court also found that the trainer may have increased the risk of injury by not properly positioning himself to guard her against a fall.

Thanks to Gabe Darwick for his contribution.

For more information, contact Denise Ricci at dricci@wcmlaw.com.


Notice to Broker not Notice to Insurer — and not a Valid Excuse for Lateness (NY)

Courts accept a lot of excuses for late notice — even in New York, prior to the prejudice rule — but a recent decision affirmed the concept that the insured’s notice to its own broker does not constitute notice to the insurer.

In Pfeffer v. Harleysville Group, Inc., the insured owned a building that was insured by Harleysville under a deluxe business owner’s insurance policy.  The insured’s building suffered property damage in December 2006.  The damage was allegedly caused by excavation and construction work performed on an adjacent property.  The insured promptly notified his insurance broker, but his broker advised him to “wait and see” the extent of the damage before reporting the claim to the insurer.  As such, the insured retained engineers to assess the damage to his building, and retained an attorney to commence a legal action against his neighbor.  The insured finally notified his insurer, Harleysville, in January 2008 — more than a year after he first received notice of the property damage.

Accordingly, Harleysville disclaimed coverage to the insured based on the insured’s breach of the policy’s notice of occurrence clause.  The insured commenced a declaratory judgment action, and the U.S. District Court for the Eastern District found in favor of Harleysville.

On appeal, the Second Circuit Court of Appeals noted that New York courts “uphold notice-of-occurrence provisions in insurance contracts to aid insurers in early investigations, detection of fraudulent claims, and proper capital allocation.” The Second Circuit rejected the insured’s contention that his late notice should be excused because he had a good faith belief in non-liability and did not know that the Harleysville policy provided coverage.  The panel found that the insured had a duty to notify its insurer even if it believed that a third-party was liable for the damage to the building.  Of significance, the Second Circuit also rejected the insured’s excuse that it relied on his broker’s advice to “wait and see” the extent of any damage.  The appellate panel ruled that the insured could not satisfy the policy’s notice requirements by giving notice of the loss to its insurance broker.

Thanks to Steve Kaye for his contribution to this post.  If you would like further information please write to mbono@wcmlaw.com.

Lawsuit by Warhol Foundation Against its Insurer Continues (NY)

We previously posted that some notable art foundations have ceased authenticating art due to concerns over litigation costs and exposure.  Once such group is the Andy Warhol Foundation, who is currently locked in a battle with its insurance carrier, Philadelphia Indemnity Insurance Company, over whether its policies covered lawsuits arising out of authentication.

The Foundation was involved in an authentication dispute over a painting submitted by Joe Simon-Whelan.  The Foundation was eventually sued by Simon as part of a class action, and later named in a second similar class action lawsuit.  PIIC denied coverage initially but ultimately agreed to pay the full limit of  $2,000,000 of defense fees under its Errors & Omissions policy but nothing under its Directors & Officers policy.  The parties agreed to hold off on litigating the D&O coverage issues until the class actions were resolved.

Eventually, the class action plaintiffs and the Foundation agreed to dismiss all claims against each other, including the Foundations’ counterclaims seeking indemnification for legal fees, as an investigation revealed that the plaintiffs would be unable to satisfy any judgment.  The Foundation then filed suit, seeking to recover the $4.6 million it paid in legal fees from PIIC under the D&O policies.

PIIC moved for summary judgment on the bases that the claims were either excluded under the policy or that the Foundation failed to meet certain conditions precedent.  Notably, the Court rejected PIIC’s argument that the art authentication services were excluded as “professional services,” finding an ambiguity in the way the policy listed and described what a professional service was.  The Court likewise rejected the remaining PIIC arguments and denied the motion.

If you would like more information, please write to Mike Bono at mbono@wcmlaw.com.


No Egregious Conduct, No Breach of Good Faith (NY)

Attorneys for policyholders often plead claims in complaints that sound like torts or bad faith claims in an effort to pierce policy limits.  But in order to succeed in New York, a policy holder must plead and proof specific tortious conduct.  Otherwise, they are limited to breach of contract claims for policy proceeds.

Recently, in Quick Response Commercial Division, LLC, v. AON Risk Services Of Illinois, Inc., the insurer paid only a portion of a fire loss and the plaintiff sued seeking payment of the entire loss. The complaint alleged that the insurer breached the insurance contract and that it also breached “the implied covenant of good faith and fair dealing.” But the Court dismissed the breach of the implied covenant of good faith and fair dealing claim as duplicative because every insurance contract contains this implied covenant.

In order to prevail on an independent tort of a breach of implied covenant, the insured must allege that the insurer engaged in “egregious conduct” directed to the insured and that this conduct was also a pattern directed to the public generally. Because the plaintiff had failed to make such an allegation here, it was limited to the breach of contract claim.

Thanks to Mendel Simon for his contribution to this post.  If you would like more information, please write to Mike Bono at mbono@wcmlaw.com.