Monthly Archives: February 2013

Pundits Debate Mandatory Gun Liability Insurance

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Over the past few weeks, media outlets such as Fox News, the Huffington Post, and the Economist have weighed in on the prospect of mandatory liability insurance for gun owners, similar to the current requirement for motor vehicle insurance in most states.

The CDC estimates that in 2000, approximately $822 million in damages were caused by gunshot injuries.  So the argument in support of insurance alleges that there is a significant risk of potential  injuries, and thus ensuing claims and lawsuits.  Insurers would be able to assess this risk and pass the cost for such claims onto the owners of the firearms, as opposed to the injured parties of health care system.  As Jonathan Diamond suggested in his editorial in the Huffington Post, “(r)equiring owners of firearms to carry, say, $1 million in liability insurance … would offer recourse to those affected by gun violence, and it would raise the bar of responsibility for gun owners.”

Opponents claim this is simply a tactic to increase the cost of gun ownership  in order to serve as a deterrent.

Individual states have already begun to propose their own legislation, such as California and Illinois cited in the above-referenced articles.

Thanks to Brian Gibbons for his contribution to this post.

 

 

 

Eve of Trial is Poor Time for a Disclaimer (NY)

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Insurers are often faced with the difficult task of simultaneously defending an insureds while also investigating whether in fact coverage exists.  A recent decision by the Appellate Division, Fourth Department, serves as a reminder that the coverage determination needs to be made sooner rather than later.

In Penn Millers Ins. Co. v. C.W. Cold Storage, Inc., Penn Millers Insurance Company issued C.W. Cold Storage, Inc. an Agribusiness Property and Commercial General Liability insurance policy.  The insured was sued purely for economic damages, and as such, Insurance Law 3420, which sets strict time requirements for disclaiming coverage, did not apply.

Shortly after receiving notice of the claim, Penn Millers agreed to defend C.W. under a reservation of rights.   Some four years later on the eve of trial — and while still defending C.W. — Penn Millers disclaimed coverage.  It is not clear when Penn Millers received sufficient information to disclaim coverage, but it was presumably some time before the issuance of the disclaimer.

Penn Millers commenced a declaratory judgment action against C.W. seeking a judgment that it had no duty to defend or indemnify C.W. in the underlying action.   C.W. argued that Penn Millers was estopped from denying coverage because Penn Millers provided an untimely disclaimer of coverage.  The trial court denied summary judgment motions and found that C.W. failed to establish that it suffered prejudice from Penn Millers’ untimely disclaimer.

The Appellate Division, Fourth Department, modified the trial court’s order, finding that there was a issue of fact in regard to whether Penn Millers denial of coverage was effective.  The Court ruled that Penn Millers untimely disclaimer plausibly prejudiced C.W., as the disclaimer was issued four years after notice of the claim and on the eve of trial.  The court was unconvinced that the reservation of rights permitted Penn Millers to “unreasonably delay” its rights to the detriment of the insured.

Although the Court would not go as far as to hold that the disclaimer was ineffective as a matter of law, it left the matter to a jury.  From a common sense standpoint, it seems that the insured will likely be able to establish prejudice, so the ruling was favorable to the policyholder.

Thanks to Steve Kaye for his contribution to this post.  If you would like more information please e-mail Mike Bono at

Putting A Ring on It Doesn’t Bind Driver to Auto Policy Tort Election in PA

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In many states, auto policy holders need to decide under what circumstances they will be able to pursue pain and suffering claims when they sign up for coverage.  The Superior Court of Pennsylvania recently addressed what parties are bound to the policy holder’s choice in  Sally McWeeney v. Estate of Janet R. Strickler.   McWeeney was injured in an auto accident with Janet Strickler, and the York County Court of Common Pleas granted summary judgment to Strickler on the basis that McWeeney was insured under her fiancee’s Progressive Insurance policy and that her claims were barred under the policy’s limited tort option.  McWeeney’s fiancé, Richard  Brant, was the named insured on the policy but McWeeney was listed as a principal driver along with Brant, and was also a permissive driver at the time of the accident.

The lower court held that McWeeney was a named insured for the purposes of the Pennsylvania Motor Vehicle Financial Responsibilities Law, and thus bound to Brant’s limited tort election, because her name was listed on the declarations page as a principal driver.

McWeeney appealed the York County Court decision, focusing on whether or not McWeeney was forced to accept the limited tort option under Brant’s policy or could elect the full tort option.   The  Superior Court, performing a statutory analysis, held that that a “named insured” on a policy is only that one person who is identified by name as an insured on the policy, as defined in the MVFRL.    The MVFRL holds that only one who is identified by name as an insured can elect the limited court option

The court also considered the issue of McWeeney’s position as a permissive driver and whether that bound her as an “insured” driver to Brant’s election of limited tort because the Progressive policy stated that all permissive drivers are considered insureds for purposes of tort election.  The Superior Court found that the Progressive policy “impermissibly bars more drivers from claiming non-economic damages against third party tortfeasors than was contemplated in Section 1705”,  and was therefore not enforceable.

This case thus serves to clarify the meaning of “insured” under section 1705 of MVFRL and Pennsylvania insurance policies.  A motorist who owns no vehicle and is unrelated to the owner of the car she drives may seek non-economic damages against a third party torfeasor, even if she was a fiancee of the named insured and a permissive driver under the policy.  Any insurance policy that seeks to expand the definition of insured beyond that which is described in section 1705 will be invalidated.

Thanks to Remy Cahn for her contribution to this post.  If you would like more information please write to .

Will Sandy Be the Straw that Causes the Creation of a Bad Faith Statute in New Jersey?

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It is our belief that Superstorm (not Hurricane mind you) Sandy will be the cause of significant changes in bad faith law in New York and New Jersey.  It appears that our fear is well founded as post-Sandy bad faith legislation has been propounded in New Jersey.

Currently pending in the New Jersey Senate and New Jersey House are bills that would create a statutory cause of action against insurers who deny coverage in bad faith.  Under the proposed bills, a private cause of action would be created for violations of New Jersey’s Unfair Claims Settlement Practices Act.  Potential lawsuits could be based on a single example of: compelling litigation for amounts due under the policy by offering substantially less than what is ultimately recovered; failing to make a good-faith attempt to settle claims in which liability has been made reasonably clear; refusing payment without a reasonable investigation; misrepresenting facts or policy provisions; and failing to acknowledge or promptly respond to communications regarding claims.  Prejudgment interest, attorney fees, litigation costs, full damages determined in final judgment, regardless of the policy limits, and punitive damages could be recovered if a violation is proven.  If the bill becomes a law, this will be a significant departure from the current Rova Farms Resort Inc. v. Investors Ins. standard.  We will monitor the situation and keep you posted.

For more information about this post, please contact Bob Cosgrove at .

Is Mailed Notice of a Policy Change Sufficient? A PA Jury Will Decide.

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A jury is set to determine whether the addition of a “household exclusion” provision in an automobile insurance policy rises to the level of a material change, such that it would require proof that the insured was notified of and understood the change to his subsequent coverage.  In Oesterling v. Allstate Insurance, the plaintiff, Robert Oesterling, was injured in a 2006 accident involving his motor scooter which was not covered under his Allstate insurance policy. Though his original 1998 policy did not include a household exclusion, it was incorporated into the terms of his policy in 2005, and he received notice in the mail which he now contests was inadequate.

When faced with the issue, Lawrence County Court of Common Pleas Judge Thomas M. Piccione distinguished cases where an insured specifically requests a level of coverage that was unilaterally reduced at a later point in time, from those where the insured failed to read the policy with the detail necessary to discover regular exclusions.  The judge noted that although Oesterling’s original 1998 policy would have provided him with coverage for his accident, the household exclusion served to block coverage for vehicles not specifically covered under the policy, including his motor scooter. While Allstate notified Oesterling of the change to his policy in a mailer with “Important Notice” printed in large, bold font and the mailer clearly and unambiguously expressed the addition of the household exclusion provision, and instructed Oesterling to read the relevant changes and contact his insurance agent if he was confused or needed clarification, the court ruled that a jury must decide whether an “Important Notice” advisory notice was legally sufficient to change the scope of coverage.

Special thanks to Samantha Berman for her contributions to this post.  For more information, please contact Bob Cosgrove at .

 

WCM Wins Appellate Victory in $25 Million Art Loss

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In March 2010, the now infamous art dealer Larry Salander pleaded guilty to a $120 million fraud scheme, admitting to stealing numerous works of art.  Renaissance Art Investors LLC claimed that it was entitled to coverage for Salander’s theft of approximately $25 million in artwork under insurance policies issued by AXA Art Insurance Corporation.  Wade Clark Mulcahy successfully obtained affirmance of the trial court’s decision that RAI is not entitled to coverage under the policies.

RAI consigned its artwork to Salander, a principal of RAI, and the Salander O’Reilly Galleries LLC, a member of RAI.  Ultimately, Salander and the Gallery betrayed RAI, stealing artwork valued at over $42 million.  RAI made a claim to AXA under its commercial inland marine insurance policies, seeking indemnity for the theft.  Litigation followed and the trial court awarded summary judgment in AXA’s favor, finding that there was no coverage for the loss under AXA’s policies.

In a unanimous decision, the Appellate Division, First Department, recently ruled that the AXA policies contained an unambiguous dishonesty exclusion.  The exclusion precludes coverage for losses arising from the dishonesty of an insured, anyone with an interest in the property, or anyone to whom the covered property is entrusted.  The Court held that this policy exclusion applied to both Salander and the Gallery, who were entrusted with the artwork.

In the decision — which is sure to add another arrow to an insurance carrier’s quiver — the First Department held that as a matter of law, insurance coverage only extends to fortuitous losses, even under all-risk policies.  The Court further held that whether there was a fortuitous loss is a legal question to be resolved by a court.  Applying this standard, the Court held that the fraud perpetrated by Salander and the Gallery, which resulted in the loss, was not fortuitous.

In context, the Court suggests that even in the absence of an unambiguous exclusion, where the insured’s principal steals from the insured entity, the loss is not fortuitous and therefore not covered.

Also of note, the Court held that RAI’s claim that AXA breached the implied covenant of good faith and fair dealing was duplicative of its breach of contract claim.

WCM Victorious in Second Department Appeal Arising Out of a Personal Injury Burn Case

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New York, NY 

Counsel Cheryl Fuchs and Associate Gabriel Darwick successfully convinced the Second Department to reverse a Brooklyn trial court decision that denied our client’s motion for summary judgment in a case involving burns allegedly sustained in a bathtub.   In Mauskopf v. 1528 Owners Corp., the decedent was found in his bathtub with burns to the left side of his body.   The then 95-year old died a month and a half later.   There were no witnesses to the accident, but the decedent’s son claimed his father told him he was burned in the bathtub.  
 
We represented G. Bauer, Inc., a boiler service company that, upon request, performed repair and maintenance work on the burner of the building and otherwise performed annual Department of Building inspections of the boiler.   We moved for summary judgment on the basis that plaintiff could not identify the cause of the decedent ’s injuries without resorting to hearsay or speculation.   We also argued, that even if the decedent was burned in the bathtub, G. Bauer did not have a contract with the building to perform routine or systematic maintenance of the boiler, and never performed work on, or inspected the mixing valve that controlled the hot water temperature.   The trial court judge denied our motion on the basis that there were “issues of fact”.  The alleged “issues of fact” were not identified in the court’s order.  On appeal, the Second Department reversed the trial court and granted our motion on the basis that G. Bauer owed no duty to the plaintiff, as there was no evidence that G. Bauer’s work involved inspection or maintenance of the mixing valve.