Category Archives: Insurance

Property Owner’s Admission of Non-Residence Warrants No Coverage (NY)

Posted on by

In the recent case Tower Ins Co of New York v Brown, the Appellate Division, First Department, addressed whether property owner was entitled to a defense and indemnity in an underlying personal injury action brought by a tenant of the insured’s premises.  The underlying personal injury action by a tenant arose from a slip and fall in the kitchen. Tower denied coverage under a homeowner’s policy, and brought a declaratory judgment action for a determination that it did not have a duty to defend or indemnify the property owner, Brown. The homeowner’s insurance policy included a specific exclusion for bodily injuries which occur at a location where Brown did not reside.  

 Tower moved for summary judgment in the trial court, which included an affidavit from the liability examiner. The liability examiner attested to speaking with the property owner who admitted he had not resided at the premises since 2008, which was two years before the tenant’s accident. Although the trial court found Tower made a prima facie showing that it was entitled to summary judgment, the court found that the co-defendant tenant raised an issue of fact by arguing that discovery may lead to admissible evidence sufficient to defeat Tower’s motion. Specifically, the trial court found the tenant should be able to depose both the investigator that spoke with property owner Brown, and Brown himself to determine his residency status at the time of the accident.

 In reversing the trial court’s finding, the Appellate Division held that the investigator’s affidavit attesting to Brown’s claim of not residing at the premises since 2008 constituted admissible evidence sufficient to support Tower’s prima facie showing for summary judgment. The court further noted that the tenant’s challenge to the truthfulness of the investigator’s affidavit was insufficient to raise any issues of material fact or that tenant should be entitled to depose the investigator or Brown.  

 This analysis by the First Department follows a tradition by other New York Appellate courts supporting exclusions when the property owner does not reside at the premises where the accident occurred. See Metropolitan Property & Cas. Ins. Co. v. Pulido, 710 N.Y.S.2d 375, 378, (N.Y.A.D. 2 Dept.,2000) (“The policy cannot be read to provide coverage to a location where the insured did not reside, even if they owned such premises”); Marshall v. Tower Ins. Co. of New York, 845 N.Y.S.2d 90, 91, 44 A.D.3d 1014, 1015 (N.Y.A.D. 2 Dept.,2007) (“As the parties do not dispute that the plaintiff, the named insured under the policy, did not reside at the subject premises, the [insurer] … properly concluded that the subject premises were not covered under the policy and properly disclaimed on that basis”); Walburn v. State Farm Fire and Cas. Co., 626 N.Y.S.2d 315, 317, 215 A.D.2d 837, 839 (N.Y.A.D. 3 Dept.,1995)(“As the evidence submitted clearly establishes that Robert Krucina did not reside at the Browntown Road property at the time of the accident, we find that summary judgment was properly granted”).

Thanks to Daniel Beatty for his contribution.

For more information, contact Denise Fontana Ricci at

 

 

Pennsylvania Court Applies Employer’s Liability Exclusion

Posted on by

In Nationwide Mut. Ins. Co. v. Rainone, the Philadelphia County Court of Common Pleas addressed whether an insurer had a duty to defend and indemnify its insured, Sunco, in an underlying action commenced by one of its employees.

In the underlying action, the plaintiff, an employee of Sunco, alleged that her manager inappropriately touched her, and sued Sunco and the manager for negligence, negligent infliction of emotional distress, negligent hiring and failure to supervise.

In its declaratory judgment action, Nationwide argued that the policy’s employer’s liability exclusion barred coverage.  The policy’s employer’s liability exclusion stated, that no coverage was provided under the policy for bodily injury sustained by an employee while performing duties related to the conduct of the insured’s business or arising out of employment by the insured.

The court noted that in Pennsylvania, if the employee’s alleged injuries occurred within the proximate time of work, the exclusion would act as a bar to coverage.  Since the plaintiff was allegedly injured while “on the clock,” the exclusion applied.  The court held that the insurer had no duty to defend or indemnify the insured in the underlying action.

Depending on the factual circumstances of a case, the employer’s liability exclusion could provide a strong basis for an insurer to disclaim coverage.

Thanks to Colleen Hayes for her contribution to this post.

 

 

 

Insurer Foots Large Bill in Settlement with Homeowner Over Furnace Oil Explosion

Posted on by

Property damage plus a family’s benzene exposure from a home furnace oil explosion equaled a $945,000+ settlement for an insurer in Nebiol v. Erie Insurance Exchange, C.P. Bucks No. 2014-00766.

On February 7, 2013, unburned furnace heating oil exploded in an insured’s home, which contaminated the home and personal items with odor and excessive benzene levels. The insurer initially determined the loss was covered and agreed to pay for the insured’s hotel and remediation costs. After extensive remediation over the course of a year, benzene levels were still excessively high, which prevented the insured from selling the home. At a certain point, the insurer stopped paying its insured’s hotel fees, claiming that at that point the insured voluntarily chose to stay out of the home.

The insured sued claiming breach of contract, negligence, battery (for the benzene exposure), intentional infliction of emotional distress, and bad faith for failing to settle their claim. A settlement was eventually reached whereby the insurer agreed to purchase the home, transfer taxes (totaling $945,000) and cover the hotel expenses until the sale of the home occured (totaling $4,000 per month). Further, the settlement agreement allowed the insured to bring future claims against the insurer relating to benzene-related illnesses they may contract.

This settlement demonstrates the potential for inflated value of claims where extensive property damage is combined with bodily injury, or in this case, the potential for future bodily injury.

Thanks to Rachel Freedman for her contribution to this post.

 

 

Insurer Fails to Establish Fraud in Summary Judgment Motion (NY)

Posted on by

An intentional and staged auto collision caused in furtherance of an insurance fraud scheme is not a covered accident under a policy of insurance.  However, the challenge when seeking to prove a claim for fraud is to be able to establish admissible evidence. Recently, in Nationwide Gen. Ins. Co. v Linwood Bates III, Nationwide was unsuccessful in establishing on summary judgment that they had no duty to provide coverage and the policy issued was null and void due to a fraudulent scheme involving three intentional, staged accidents.

A prima facie entitlement to judgment as a matter of law required admissible evidence that the collisions were deliberately caused to fraudulently obtain insurance benefits. Here, Nationwide asserted that several defendants failed to attend their scheduled Examinations Under Oath which was purportedly a breach of the insurance contract with the plaintiff but failed to submit evidence from someone with personal knowledge of the mailings of the examination requests. In addition, the uncertified police accident reports submitted by the plaintiff were also inadmissible. Further, the unsigned and unsworn transcript of one of the defendants was inadmissible. Nationwide submitted an affidavit of its investigator, but the investigator relied primarily on inadmissible evidence, and lacked personal knowledge of the facts surrounding the three collisions. Accordingly, the Court found the insurer failed to meet its burden and the summary judgment motion as denied.

Thanks to Poona Sethi for her contribution to this post and please write to Mike Bono for more information.

Disclaimer Valid Even Where Insurer Defends Insured (NY)

Posted on by

Under certain circumstances, it is prudent for an insurer to provide a “gratuitous defense” to its insured, even though the insurer may be confident in its position that it is under no duty to provide a defense.  Although this type of good faith action provides a benefit to the insured and helps the insurer guard against a default, it does open the insurer to “estopell” claims.

Recently, the Appellate Division, First Department, addressed this issue in Castlepoint Insurance Company v. Hilmand Realty, LLC.  The insured argued that the insurer was not permitted to take “factually inconsistent positions” by retaining counsel to vacate a default against the insureds in the underlying action, while at the same time commencing an action seeking a declaration that there is no coverage due to late notice.

The Court rejected this argument, finding that where “coverage may be arguable” it was better practice for the insurer to defend an insured and commence a declaratory judgment action” rather than simply disclaim coverage in order to avoid the risk that the injured party obtains a judgment against the insured.

Thanks to Steve Kaye for his contribution to this post and please write to Mike Bono for more information.

Pennsylvania Court Strictly Construes Release Against Insurer

Posted on by

In Villare v. Geico, the plaintiff was injured in a car accident when he was struck by another driver.  The plaintiff alleged that the other driver’s insurance policy did not provide full compensation for plaintiff’s injuries.  As such, the plaintiff sued his insurer seeking underinsured motor vehicle coverage under his own policy.  Subsequently plaintiff settled his suit with his insurer and signed a release.  When his insurer refused to pay the settlement proceeds, plaintiff initiated suit to enforce the settlement.

The insurer argued that it was not required to pay the plaintiff the settlement amount as the plaintiff had not fulfilled his obligations under the agreement.  Specifically, Geico contended that the release agreement included a provision in which the plaintiff was required to verify that all liens had been settled or satisfied, and that plaintiff was to verify that he would not become Medicare eligible in the next 30 months.  However, before signing the release, plaintiff removed the sentence regarding his Medicare eligibility, and took steps to show that there were no Medicare liens.  Thus, the plaintiff argued his insurer was contractually obligated to pay him the settlement amount.  The court agreed that the release as signed did not include any specific terms regarding Medicare liens.

Thus, this case shows that when drafting releases it is extremely important to explicitly include any preconditions to payment – to fully protect an insurer – as a court interpreting a release could strictly construe the release’s terms and provisions – regardless of what the drafter may have intended the release would cover.

Thanks to Colleen Hayes for her contribution to this post.

 

 

 

 

PA Court Says Insurance Company Employees May Be Personally Liable for Bad Faith and Other Claims.

Posted on by

Imagine that a policyholder makes a claim under a policy following an accident. A claims professional, an insurance company employee, then begins to handle the claim. The insured becomes disenchanted with the handling of the claim and a coverage and bad faith lawsuit is filed. Could the insured bring a negligence or consumer fraud claim directly against the claims professional? According to Judge O’Neill of the United States District Court, Eastern District of Pennsylvania (i.e. Philadelphia), the answer is “yes”.

In Kennedy v. Allstate, et al., Rachel Kennedy was injured in a car accident. Rachel Kennedy and her husband, Sean Kennedy, had an underinsured motor policy with Allstate Property and Casualty Insurance (“Allstate”). After settling with the tortfeasor, the Kennedys made a UIM claim under their Allstate policy. When they were unhappy with the results of that claim, the Kennedys instituted suit, in state court, against Allstate as well the Allstate claims professionals working on their claim. The Kennedys claimed, inter alia, that Allstate had improperly evaluated their claims and engaged in intentional delay, misrepresentation and fraud in the course of processing, investigating and arbitrating their claims. In respect of the Allstate adjusters handling their claims, the Kennedys alleged that the adjusters affirmatively misrepresented and concealed material facts so as to delay settling the Kennedys’ claims and to reduce the amount of money Allstate would ultimately have to pay for their claims. As a result, the Kennedys brought a negligence and consumer fraud claim personally against the Allstate adjusters.

In response to the Kennedys’ lawsuit, Allstate removed the case to federal court. Allstate claimed that the Kennedys had fraudulently joined the Allstate adjusters to defeat federal diversity jurisdiction and keep the case in state court; in other words, Allstate claimed that PA does not allow for insurance company employees to be personally sued for their claims decisions.

The Kennedys filed a motion to remand and Judge O’Neill was asked to decide whether the joinder of non-diverse defendants (i.e. the insurance company employees) was “fraudulent” (and designed only to defeat federal diversity jurisdiction) as there was no reasonable or legal basis to support the claims against them. Judge O’Neill ultimately ruled that the joinder was not fraudulent as a viable cause of action existed and thus remanded the case to state court.

In his opinion, Judge O’Neill concluded that there was at least “a possibility” that, under Pennsylvania law, an insurance claims professional owes a duty of care to an insured. If that duty was breached, if, for example, the adjuster failed to reasonably investigate an insured’s claims and/or made misrepresentations regarding the status of the investigation into the insured’s claims, a negligence claim could be filed.

Next, in respect of the viability of an insured bringing a consumer fraud claim against a claims professional (which opens the door to punitive or statutory damages), Judge O’Neill concluded that Pennsylvania allows consumer fraud claims directly against an insurance company’s employees.

While it is important to recognize that Judge O’Neil’s decision only dealt with the threshold issue of whether a colorable claim existed, the case will no doubt be seized upon by policyholder counsel. We fully expect to see an onslaught of claims in which both insurer and insurance professional are named as defendants. As if a claims job was not challenging enough…

Special thanks to Colleen Hayes for her contributions to this post. For more information about it, please e-mail Bob Cosgrove .

CGL Policy No Answer For Landlord’s Failure to Maintain Property (NJ)

Posted on by

In Herz v. 141 Bloomfield v. Penn-America Ins. Co.., the Appellate Division recently considered whether a landlord was owed a defense and indemnification under its CGL policy for a tenant’s lost profits and other consequential damages.  The claim arose when a restaurant owner sued his landlord for damages that ensued when a defective furnace resulted in bursting pipes.  As a result of water damage and the ensuing complications, the restaurant was forced to close for a period of time for repairs.

The restaurant operators’ complaint attributed the sequence of events to the landlord’s failure to properly maintain the furnace, failure to pay the water bill, and failure to maintain the septic tank.  The damages were all related to the restaurant’s constructive eviction from and loss of use of the premises.  However, its damages did not include any property damage, strictly speaking.

The landlord’s insurer denied coverage for the claim under various policy terms and conditions.  First, the policy excluded coverage for damage to property owned by the insured.  Since the tenant’s claims were only for consequential damages, there was no claim by a third party for property damage caused by a covered occurrence.  Moreover, the Appellate Division held that if the property damage to the insured’s property was excluded, consequential damages suffered by the tenant for loss of use would likewise be excluded.

Second, the policy’s pollution exclusion also applied.  As a result of improper maintenance of the septic system, the town shut down the restaurant because of a  threatened discharge of waste from the failed system.  The court held that the terms of the pollution exclusion precluded coverage for this threatened discharge.

Thanks to Ann Marie Murzin for her contribution.

For more information, contact Denise Fontana Ricci at .

 

 

Public Adjuster Left Uncovered for Construction Defect (NJ)

Posted on by

A professional should beware before embarking upon an endeavor outside of his profession.  In NJ Public Adjusters v. Phil Ins Co, plaintiff North Jersey Public Adjusters, Inc. learned that the hard way when it sought indemnification for a claim under an errors and omissions professional liability policy.

Plaintiff, a public adjuster,  was retained by homeowners to negotiate and settle their claim against their homeowners’ insurance carrier arising from a fire that severely damaged their home. After the plaintiff settled the homeowners’ claim, the adjuster assumed the role of “project manager” in the reconstruction of the home. However, the homeowners became dissatisfied with the services provided and sued the adjuster for negligence.  They contended that he failed to properly discharge his responsibilities as project manager by hiring an incompetent contractor and thereafter failing to supervise the contractor’s performance while the construction was in progress.

The public adjuster turned to his professional liability insurer for defense of the homeowners’ lawsuit.  However, the claim arose out of his actions as a project manager – not for conduct related to his work as a public adjuster.  The errors and omissions policy included  a definition of a public adjuster that mirrored that in the Public Adjusters’ Licensing Act.  N.J.S.A. 17:22B-1 to 20.  In order to trigger coverage under the policy, the alleged wrongful act must arise from the rendering of “professional services” as limited to services rendered as a “claim adjuster” or “claim consultant”.

Given these facts, the court found that the claim related to construction management was outside the scope of the definition of public adjuster and, hence, outside the scope of coverage under the errors and omissions policy.  While courts broadly apply an insurers have a duty to defend when the allegations in a complaint correspond with the language of the policy, there will be no duty to defend a professional acting outside the scope of his profession.

Thanks to Steve Kim for his contribution.

For more information, contact Denise Fontana Ricci at .

 

Fire Loss Property Claim Goes Up In Smoke For Failure to Comply With Limitations Period in Policy (NJ)

Posted on by

In McClees v. New Jersey Insurance Underwriting Association, an insured property owner lost his bid to contest a declination of coverage for a fire loss.  The insurer denied the claim on the basis of a policy condition that the property not be left vacant for more than sixty days.  The insurer had information that the tenant was evicted four months before the fire that burned down the dwelling.

Immediately following the fire, the insured filed a notice of claim. After the denial of coverage, the insured appealed the denial with the insurer, documenting the alleged occupation of the premises through the time of the fire. However, the insurer continued to decline coverage as it was still convinced that the premises had been vacant for more than sixty days before the fire.

Plaintiff again wrote to the insurance carrier appealing the decision and specifically asking for clarification of the deadline to bring a court action. The insurer advised the plaintiff that the appeals period had expired and informed him that he had approximately two months to file a lawsuit based upon a one-year limitations provision contained within the insurance policy. Plaintiff did not file a lawsuit until three months after the expiration of the limitations period.

Due to the plaintiff’s lack of diligence, the Appellate Division upheld the policy limitation period and affirmed dismissal of the claim.  Although the plaintiff argued that the limitation condition should not be enforced, the court was not persuaded.

The plaintiff cited to  a prior decision that refused to enforce the limitation.  Warren v. Employers’ Fire Insurance Co. However, that case proved unavailing because therein  the insurer had acknowledged coverage and attempted to negotiate a lower amount than the covered loss, delaying the matter beyond the policy time limit. Whereas, in McLees, the insurer never conceded coverage.

Significantly, the court noted that had the plaintiff filed his complaint within the one-year limitations period, he would have had the opportunity to present his case in court and dispute the insurer’s contention that the property had been vacant.

Thanks to Steve Kim for his contribution.

For more information, contact Denise Fontana Ricci at .