Don’t Judge A Book By Its Cover (NJ)

In Evanston Insurance Co. v. A&R Homes Development, LLC, et al., the New Jersey Superior Appellate Division held that a declarations page alone cannot create a reasonable expectation of coverage.

Evanston Insurance issued a CGL policy to A&R Homes, a development company hired to construct an apartment building in Jersey City.  The injured plaintiff in the underlying action was an employee of a subcontractor engaged by A&R.  The Plaintiff was allegedly injured at the job site when he fell more than twenty feet.

Evanston initially agreed to provide A&R a defense pursuant to a reservation of its rights.  However, once Evanston confirmed that the Plaintiff was a subcontractor employee, it initiated the instant declaratory judgment action seeking a ruling of no coverage based on the policy’s Employer’s Liability Exclusion.

On appeal, the Insured argued, inter alia, that the policy’s declarations page created a reasonable expectation of coverage for the Plaintiff’s injuries, which was sufficient to overcome any policy exclusions. Specifically, the Insured relied upon Lehroff v. Aetna, a 1994 App. Div. case that found UIM coverage based upon the policy declarations page, holding that “the average automobile policy holder” should not be held responsible to “undertake to attempt to analyze the entire policy in order to penetrate its layers of cross-referenced, qualified and re-qualified meanings.”  Ultimately, the Evanston Court did not find the holding in Lehroff to be analogous to the Evanston CGL policy, noting also that the Evanston declarations page did specifically state that all coverage would be subject to the “following forms and endorsement.”

Thus, this ruling is useful as it holds that prior case law regarding reasonable expectations of coverage in the UIM context are not always applicable to CGL policies.

Thanks to Vivian Turetsky for her contribution to this post.  Please email Colleen Hayes with any questions.

Dear John Doe (PA)

Don’t forget about John Doe when appealing trial court orders holds Pennsylvania Superior Court.  In William Massaro v. Tincher Contracting, LLC, Kenneth E. Tincher II, & John Does 1-10, William Massaro (“Massaro”) sued Kenneth Tincher and his contracting company, Tincher Contracting, LLC (together, “Tincher”) for breach of contract, breach of implied warranties, and unfair trade practices relative to the build of Massaro’s home.  Tincher successfully moved for summary judgment on all counts at the close of discovery, and an order was entered dismissing Tincher, but not the John Doe defendants, from the case.  Massaro appealed the trial court’s order.

However, the Pennsylvania Superior Court quashed the appeal.  In reaching its conclusion, the Court held that Pennsylvania’s appellate courts have jurisdiction over only final orders.  It is established in the Commonwealth that final orders are those judgments that dispose of all claims and all parties.  If any claim remains unresolved even after a judgment, then the order is not final, and it cannot be appealed.  Here, the grant of summary judgment, the Court concluded, did not resolve the case as between Massaro and the John Doe defendants and, thus, was not final.

Thus, while John Doe defendants are easy to overlook, this case shows that they should not be whenever an attorney is assessing appellate court jurisdiction.

Thanks to Robert Turchick for his contribution to this post.  Please email Colleen Hayes with any questions.

It’s Not Your Fault (PA)

In Precision Underground Pipe Servs. v. Penn Nat’l Mut. Cas., Verizon entered into a contract with Parkside to install an underground conduit for Verizon’s fiber optic cable in Villanova, Pa. Under this agreement, Parkside was required to name Verizon as an additional insured and to indemnify Verizon. Parkside subsequently contracted with Precision to provide additional labor. Under this agreement, Precision was required indemnify Parkside and Verizon and name them as additional insureds on their Penn National policy.

The Penn National policy included an “Automatic Additional Insureds-Owners, Contractors, and Subcontractors” endorsement, which stated the following would constitute an additional insured under the policy: “[a]ny person(s) or organization (s) . . . with whom you are required in a written contract or agreement to name as an additional insured, . . . caused, in whole or in part, by: (1) your acts or omissions; or (2) the acts or omissions of those acting on your behalf in the performance of your ongoing operations”.

An employee of Precision suffered injury while working at the work-site and filed a complaint against Verizon and Parkside. Penn National refused to provide a defense and indemnity to Verizon and Parkside. In determining whether Verizon and Parkside were entitled to defense and indemnity, the court looked to the underlying complaint. The court reasoned the complaint lacked any indication that Precision committed any act or omission that lead to the plaintiff’s injury. Specifically, the plaintiff’s complaint alleged wrongdoing on the part of Verizon and Parkside but did attribute fault Precision.  Therefore, the court concluded no additional insured coverage was provided under the policy because there were no allegations that the plaintiff’s injuries were caused by Precision.

Thus, this opinion emphasizes the importance of scrutinizing the underlying complaint’s language when dealing with duty-to-defend matters.

Thanks to Rachel Thompson for her contribution to this post.  Please email Colleen Hayes with any questions.

Second Circuit Highlights Importance of Preserving All Coverage Arguments for Appeal (NY)

In Harleysville v. Wesco, the Second Circuit upheld a District Court ruling that an insurance company must reimburse another insurance company for costs incurred defending and indemnifying their mutual insured.  In the underlying action, M&T, the mutual insured, was sued after delivering milk contaminated with metal filings to a client, causing extensive damage to their factory.  Wesco, who issued an auto liability policy to M&T, disclaimed coverage.  Harleysville, MT&T’s general liability carrier, assumed the defense and ultimately paid $180,000 in defense costs and $1 million in settlement.  It subsequently filed suit against Wesco, arguing it was Wesco’s policy, and not its own, covered the loss.

At the District Court level, Wesco had disputed the argument that their policy provided coverage.  On appeal, however, Wesco dropped that argument and instead asserted that Harleysville acted as a volunteer and thus could not pursue recovery under an assignment or subrogation theory.  The Second Circuit held that, while it had the authority to consider new arguments on appeal, this was not the appropriate case to do so.  Specifically, Wesco did not justify its decision to not raise the argument at the District Court level.  Further, while Wesco argued that its new argument presented a question of law, the Court could only exercise its discretion to decide purely legal issues where the resolution is beyond any doubt.  As Wesco was asking the court to essentially predict how the New York Court of Appeals would decide the issue, this was not “beyond any doubt.”  Finally, the Second Circuit rejected Wesco’s argument that no coverage exists because Harleysville failed to provide timely notice.  Under New York Insurance Law 3420(a)(5), Wesco was required to show that it was prejudiced by the late notice.  While Wesco asserted that it was prejudiced because they were unable to participate in discovery and the summary judgment briefing in the underlying action, the court held that “such a generalized assertion” is insufficient to establish prejudice under New York law.

Thus, this case highlights the importance of preserving all arguments for appeal, as well as further demonstrating the high bar insurers must clear in order to disclaim coverage based on late notice.

Thanks to Doug Giombarrese for his contribution to this post.  Please email Colleen Hayes with any questions.

It’s Not An Accident That You’re Sick (PA)

In Mollura v. Aflac Insurance, the Pennsylvania Court of Common Pleas grappled with determining whether a sickness constitutes an accident under policy language.  In Mollura, a physician, Joseph Mollura, provided health care for the Pennsylvania State Prison System.  Pursuant to his employment, he purchased an accidental injury insurance policy.  Mollura, unfortunately contracted legionella pneumonia from the water source at his job and later died.  Mollura’s widow then sought death benefit payments under the Policy which were denied, and she subsequently commenced a lawsuit seeking those benefits.

The relevant policy language provided that Mollura was only covered for accidents, specifically stating that the Policy “does not pay benefits for loss from sickness.”  The Policy also contained an exclusion for “loss, injury, total disability or death contributed to, caused by, or resulting from…sickness.”  The Policy defined sickness as “any disease or bodily/mental illness or degenerative process.”  In reaching its conclusion, the court looked to case law in Pennsylvania that distinguished between an accident, which was a sudden and unexpected event/occurrence at a particular time, and a sickness, which was always “latent and insidious.”  The Court found that there was a clear distinction between a sickness and an accident.  As such, the Court ruled that the Policy did not provide coverage for Mollura’s contraction of pneumonia and there was no coverage under the Policy.

Thus, this case reveals that, in connection with certain policies, Pennsylvania courts may attempt to draw a distinction between an accident and a sickness.

Thanks to Malik Pickett for his contribution to this post.  Please email Colleen Hayes with any questions.

Art Law & Litigation Conference

Dennis Wade, a member of the planning committee for the Federal Bar Association Art Law & Litigation Conference, served as a moderator at a day long CLE program on February 7, 2019 at the National Arts Club.  The program addressed cutting edge topics across the spectrum of art law, litigation and copyright issues in the digital age. For more information on the program’s substance, please call or email Dennis at dwade@wcmlaw.com.

Conflicting Testimony in Case Involving an Infant Warrants Denial of Summary Judgment (NY)

An infant plaintiff was injured when she fell from a chairlift at Catamount Ski Area in Hillsdale, New York. Unsurprisingly, there was conflicting testimony regarding how the accident occurred.

Many of the relevant facts are not in dispute. The infant plaintiff was four-years-old at the time of her accident. Plaintiff began taking weekly lessons with the Catamount Mountain Cats program in January 2013 and was being instructed by Sean Suydam. At that point, Suydam had been working as an instructor at Catamount for approximately four years. Suydam described the infant plaintiff as an above-average skier. Before the accident, the infant plaintiff had made two or three runs down the bunny hill before proceeding to a quad chairlift (the “lift”), which she ultimately fell from.

In Laura V v. Catamount Development Corporation, the Appellate Division, First Department affirmed a lower court decision by deeming conflicting testimony as to how an accident occurred sufficient to preclude granting Catamount’s motion for summary judgment and finding that defendants failed to prove that the doctrine of assumption of the risk applied in this case.

When she got on the lift, the infant plaintiff was accompanied by Suydam and two other young students. Sudyam got all the students in place and the chair lift began to rise. Based upon the testimony, the infant either spontaneously propelled herself forward or was pushed. Infant plaintiff believed that ‘someone like scooted by accident and then pushed me off, but not like pushed on purpose. They just scooted a bit and I just slid off under the bar.’ Suydam tried to grab the infant plaintiff, but was unable to get a good grip. Suydam was still holding the infant plaintiff for another thirty seconds before she fell 25 feet into the snow below. As a result of her fall, plaintiff sustained a broken leg.

Defendants argued that they were entitled to summary judgment because plaintiff’s fall was “an unfortunate accident”, defendants “satisfied [their] duty to make the conditions as safe as they appeared to be” and “[p]laintiff assumed the obvious risk of falling from the lift.” Further, defendants maintained that “[p]laintiff’s accident occurred only because she hopped forward in the seat just as Suydam had his arm raised to lower the safety bar.” Defendants also contended that there is no evidence that Suydam’s instruction was improper.

Plaintiffs successfully disputed Suydam’s claim as to when he allegedly lowered the bar, and further claimed that the lift operators delayed in stopping the lift, which also contributed to the accident. Plaintiffs also contended that whether the infant plaintiff could assume the risk of riding the lift is a question of fact at best, and argued that it is inapplicable to a four-year-old child.

Conflicting testimony in cases involving infants is a given.  Moreover the courts appear to bend over backwards to allow infant cases to proceed to a jury.

Thanks to Paul Vitale for his contribution to this post.

When is a Win Not a Win? (NY)

In Mitchell v Quincy Amusements Inc. (2019 NY Slip Op 00430), plaintiff sought to recover for personal injuries sustained from a slip and fall on popcorn oil present on the floor of one of the auditoriums in defendant’s multiplex theatre. Plaintiff did not realize she was injured until the movie was over and she realized she was having difficulties rising from her seat.

After the trial was completed, the jury rendered a verdict finding that the defendant was negligent, but that such negligence was not a substantial factor in causing the plaintiff’s injuries. The plaintiff then moved to set aside the jury verdict as contrary to the weight of the evidence and for a new trial. The Supreme Court denied the motion and thereafter entered judgment in favor of the defendant and against the plaintiff dismissing the complaint. The plaintiff appealed from the judgment.

The Second Department Appellate Division found that the issues of negligence and proximate cause were so inextricably interwoven, that the jury’s finding that the defendant was negligent, but that such negligence was not a substantial factor in causing the plaintiff’s injuries, could not have been reached on a fair interpretation of the evidence. The plaintiff, and her friend who accompanied her on the day of the accident, both consistently testified that the plaintiff slipped and fell on an oily substance on the floor of the auditorium, and the defendants failed to submit any evidence to refute this testimony. Accordingly, the plaintiff’s motion to set aside the jury verdict should have been granted.

The case illustrates that certain fact patters almost require appellate practice before either side can discuss resolution.

Thanks to Meg Adamczak for her contribution to this post.

Lowering the Bar? (NY)

The Appellate Division, Second Department, recently took up the issue of whether a plaintiff involved in a motor vehicle accident may recover damages for lost earnings despite failure to prove a serious injury as defined by Insurance Law § 5102(d).

In Gore v. Cardany 2018 NY Slip Op 08632 (2d Dep’t 2018), plaintiff was rear-ended by the defendant while stopped at a red light. Plaintiff then commenced an action to recover damages for personal injuries allegedly sustained to his neck, back and left shoulder. At the time of the accident, plaintiff was in the course of his employment as a bus driver, and sought additional damages for past and future lost earnings in light of his inability to work following the accident. Plaintiff was granted summary judgment on the issue of liability and the case proceeded to trial on the issue of damages.

A Westchester County jury found that plaintiff’s injuries did not meet any of the threshold categories under Insurance Law § 5102(d), awarding him nothing at all for pain and suffering. Despite concluding that plaintiff had not sustained a serious injury, however, the jury awarded plaintiff for past lost earnings in the amount of $156,000 and future lost earnings in the amount of $750,000 (over 15 years.) Defendant thereafter moved to set aside this portion of the jury verdict. The trial court agreed, setting aside the verdict as to all damages.

On appeal, the Appellate Division reinstated the award for past lost earnings in the sum of $156,000, finding that plaintiff had established these damages with “reasonable certainty,” and as such, plaintiff had satisfied his burden of proof (see Lodato v. Greyhawk N. Am., LLC, 39 AD3d 494, 495; Harris V City Of New York, 2 AD3d 782, 784). Relying on provisions of the Insurance Law, the Court held that “a plaintiff is not required to prove that he or she sustained a serious injury as defined by Insurance Law §5102(d) in order to recover for economic loss exceeding $50,000 incurred as a result of a motor vehicle accident (see Insurance Law § 5104[a].” (Internal citations omitted). Thus, plaintiff’s own testimony that he had been unable to work because of the injuries sustained in the accident, together with submission of his W-2 forms, was sufficient to meet his burden of proof. By contrast, plaintiff failed to provide any competent medical evidence that he would be unable to perform any work in the future, and therefore failed to prove his damages for future lost earnings with the required reasonable certainty. Nevertheless, plaintiff was permitted to recover $156,000 for lost earnings despite failure to prove that he had sustained a serious injury under the Insurance Law.

Thanks to Tyler Rossworn for his contribution to this post.

Geico—15 Minutes Could Save You 15% or More on Car Insurance (PA)

On January 23, 2019, the Pennsylvania Supreme Court overturned numerous published decisions consisting of decades of precedent deciding that the “household vehicle exclusion” found in many auto policies. The Gallagher v. Geico Indemnity Company decision shows how the Court reasoned that the “household vehicle exclusion” conflicted with the UM/UIM stacking provision codified in the Pennsylvania Motor Vehicle Financial Responsibility Law (“PMVFRL”).

Gallagher was driving his motorcycle when the driver of a truck ran a stop sign. The truck crashed into Gallagher and he sustained serious injuries as a result. Importantly, Gallagher had two separate Geico auto policies. The first policy insured only the motorcycle and provided $50,000 in UIM coverage. The second Geico policy provided coverage for two of Gallagher’s other vehicles. It contained limits of $100,000 UIM coverage for each vehicle. In their analysis, the Court relied on the fact that Gallagher did not sign a specific waiver form to reject stacking. Instead, Gallagher actually paid higher premiums for stacked UIM coverage under the second Geico policy. Gallagher eventually settled the claim against the truck driver. However, he did not receive sufficient funds with respect to the serious nature of his injuries. Consequently, Gallagher sought $250,000 in UIM coverage from Geico.

Geico tendered its entire UIM policy limit of $50,000 pursuant to its first motorcycle policy but denied coverage with respect to its second auto policy as it contained a “household vehicle exclusion.” Geico filed a MSJ, citing applicable precedent which argued that Courts consistently enforce the exclusion. Upon application to the Supreme Court of Pennsylvania, Gallagher argued that the household vehicle exclusion acted as a de facto waiver of stacking – which, pursuant to the PMVFRL, required a specific waiver form to be enforceable. Gallagher further argued – and the Court emphasized – that he specifically paid additional premiums for stacked coverage. The Court agreed that the household vehicle exclusion was a de facto waiver of stacking and thus violated provisions of the PMVFRL.

However, the Court did provide several other statements that appear to be glimpses of possible trends with respect to the “household vehicle exclusion”. First, Geico provided all relevant policies. The Court did admit this may change insurance underwriting practices. However, it emphasized here that Geico possessed all information regarding his insurance policies and collected higher premiums from him for stacked coverage.  Second, the Court, in a footnote, argued that any insurer could likewise be on notice of multiple policies, even from different carriers. The Court stated “[f]or example, when multiple policies or insurers are involved, an insurer can require disclosure of all household vehicles and policies as part of its application process.” Ostensibly, while the Court states multiple times that this case is unique as Geico provided all policies, this footnote is an ominous sign of changes to come.

Thanks to Matthew Care for his contribution to this post.