Sunday, March 26, 2017

No-Fault Insurer Found Entitled to Breakdown of What Hospital Services Constituted Necessary Emergency Health Services

NO-FAULT – NECESSARY EMERGENCY HEALTH SERVICES – STABILIZATION – INTOXICATION-CAUSED INJURIES
St. Barnabas Hospital v. Government Employees Insurance Company
(Sup. Ct., Nassau Co., decided 2/1/2017)

Once upon a time (before 2011) New York no-fault insurers could deny personal injury protection (no-fault) coverage benefits to a person "injured as a result of operating a motor vehicle while in an intoxicated condition or while his ability to operate such vehicle is impaired by the use of a drug within the meaning of section [1192] of the vehicle and traffic law[.]"

Since January 26, 2011, when the amended Insurance Law § 5103(b)(2) went into effect, however, New York no-fault insurers could no longer exclude from coverage payments for "necessary emergency health services rendered in a general hospital" to a person injured as the result of operating a motor vehicle while in an alcohol intoxicated or drug impaired condition.

In August 2015 I blogged about the new law and was surprised to report that in the more than four years since the new law's effective date, no New York court had yet issued a decision on its interpretation and application to no-fault claims.  In that blog post I did digest the 15 AAA awards issued since January 2011 that mentioned NEHS.

We now have our first (and so far only) New York reported decision on necessary emergency health services in the no-fault context, and it comes from Nassau County Supreme Court.

Utilizing a Hospital Facility Form (Form NF-5) and a UB-04, St. Barnabas Hospital submitted a bill for hospital services to GEICO in the amount of $43,212.59.  Based in part on the hospital's own toxicology report showing that GEICO's insured had a BAC of 0.15% and THC in her system at the time of her admission to the hospital's emergency room, GEICO timely requested verification in the form of a breakdown of which hospital services constituted necessary emergency health services (NEHS). Specifically, GEICO requested a "breakdown of charges up to where the patient was found to be stabilized".

In response to GEICO's verification request, the hospital stated that GEICO's "request for a `breakdown of charges up to where the patient was found to be stabilized' is not required under the insurance regulations or no fault law'", and added that "[t]he patient received `Necessary Emergency Health Services' during his admission at the hospital."

When GEICO did not pay the bill, plaintiff commenced this action contending, in part, that GEICO's payment was overdue because GEICO's verification request did not toll the 30-day deadline to pay or deny the hospital's bill.  GEICO argued that the hospital's action was premature because it had not responded to GEICO's proper verification request.  Both parties moved for summary judgment.

In DENYING the plaintiff's motion and GRANTING GEICO's motion for summary judgment, dismissing the complaint, Supreme Court reasoned:
The Plaintiff's position that the verification request was improper because it is not required under the insurance regulations or no fault law is without merit. The Defendant, GEICO, referenced Circular Letter No. 4 dated January 12, 2011, issued by the State of New York Insurance Department, in its original request for additional verification. The purpose of the Circular Letter is to advise no-fault insurers and health insurers of the amendment of Insurance Law §5103(b)(2) and to interpret the regulations related thereto. While the Plaintiff concedes that the law was amended in January 2011 to reflect that insurers are prohibited from excluding from coverage necessary emergency health services even where the patient was intoxicated by alcohol or drugs, the Plaintiff fails to address the portion of the Circular Letter at issue here. Specifically, the Plaintiff submits no argument or opposition with regard to the portion of the Circular Letter that permits a no-fault insurer to request a hospital to specify what portion of the bill consists of "necessary emergency health services". Rather, the Plaintiff claims that the statutory language does not explicitly provide as such. The Court disagrees. 11 NYCRR 65-3.5(c) provides that "[t]he insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested." 
The Court also disagrees with the Plaintiff's contention that it fully responded to the Defendant's verification requests by merely stating, "[t]he patient received `Necessary Emergency Health Services' during his admission at the hospital." The Plaintiff's response is vague in that it fails to delineate whether some, most or all of the services were in fact "necessary emergency health services". Further, in its Circular Letter, the Insurance Department contemplated the need for hospitals to specify what portion of the bill consists of such emergency services. The Insurance Department also defined "necessary emergency health services" as sudden pain or injury that is treated until the patient is stabilized, generally in the emergency room. 
In the matter sub judice, the patient was admitted to St. Barnabas for approximately three (3) days from April 10, 2016 through April 13, 2016. The Defendant, GEICO, submitted sufficient proof in admissible form showing that the patient was intoxicated by alcohol and Marijuana at the time of the accident. As such, GEICO was entitled to request information concerning the breakdown of services until the patient was found to be stabilized in accordance with the Insurance Law §5103(b)(2), as amended, and the related Circular Letter No. 4 interpreting the statute. Such information would permit GEICO to assess when the no-fault insurance coverage ceases, if at all, and the appropriate amount of the claim that must be paid. 
Pursuant to 11 NYCRR 65-3.6(b), where there is a timely original request for verification, but no response to the request for verification is received within 30 calendar days thereafter, or the response to the original request for verification is incomplete, then the insurer, within 10 calendar days after the expiration of that 30-day period, must follow up with a second request for verification. When a no-fault medical service provider fails to respond or inadequately responds to two timely verification requests, the 30 days in which to pay or deny the claim is tolled and does not begin to run. Accordingly, any claim for payment by the medical service provider after two timely requests for verification is premature (See Sound Shore Med. Ctr. V. New York Cent. Mut. Fire Ins. Co., 963 N.Y.S.2d 282 [2d Dept. 2013].
New York no-fault insurers that would seek to deny PIP benefits on intoxication grounds must always be mindful of their burden to show not only that its insured was alcohol intoxicated or drug impaired, but also that the insured's intoxication or impairment was a proximate cause of the accident.  Failure to make a prima facie demonstration of both may undermine an NEHS verification request or defense, like in this arbitration matter.  

Since I last blogged about NEHS in August 2015, 14 AAA arbitration awards have mentioned NEHS.  You can search those yourself by doing a date-limited, exact phrase, full text search for awards with "necessary emergency health services" here.  Relative to the NEHS issue, the most notable seven of those arbitration awards are:
Erie County Medical Center aao [Redacted] and Geico Ins. Co.  (Arbitrator Mona Bargnesi, issued 3/8/17)
"I find that 'good reasons' for Respondent's verification request are lacking in the present circumstances, as the outcome of criminal charges has no effect on whether emergency services should be reimbursed. * * * As the services provided in the instant case were 'necessary emergency services rendered in a general hospital', the insurer cannot exclude Assignor from coverage. Respondent did not contend that the criminal charges related to anything other than intoxication. Therefore, Respondent's pend of the claim for suspected intoxication was improper in this case."
North Shore University Hospital aao [Redacted] and Hertz Rent A Car  (Arbitrator Greta Vilar, issued 11/28/16)
"Admittedly, the burden placed upon the respondent in this case [to prove causation] is a high one. However, it is the burden placed upon the respondent by the statutory framework applicable to this case. Having determined that the respondent has failed to meet its burden of proof, I do not reach the additional issues raised at the hearing of this matter including what portion of the treatments provided to the patient constituted emergent care prior to stabilization (an issue upon which an IHC's opinion was sought). This issue would only be relevant in the event that the respondent proved that the patient was intoxicated, and that the intoxication was the cause the accident. In light of my holding, the argument is moot. I find in favor of the applicant."
Westchester Medical Center aao [Redacted] and New York Central Mut. Fire. Ins. Co.  (Arbitrator Marcelle Brandes, issued 5/30/16)
"After a careful and thorough review of the evidence, it is hereby determined that Applicant's claim is denied. Respondent has established that Assignor was intoxicated at the time of the accident (Assignor's statements to the police and EMS), and that this single car crash was the proximate cause of the accident, (police report). Moreover, the medical services provided to Assignor at Westchester Medical Center does not fall within the "necessary emergency health services" as defined by the Department of Finance [sic] circular letter inasmuch as Assignor was not transported directly from the scene of the motor vehicle accident to Applicant's facility."
Nassau University Medical Center aao [Redacted] and Liberty Mut. Fire Ins. Co.  (Arbitrator Anthony Joseph Bianchino, issued 3/7/16)
"Here based upon the bill submitted by the Applicant I find that the Applicant has made a prima facie showing that the services the patient received on December 26, 2013 in the emergency room were 'necessary emergency health services'.  As such the burden now shifts to the Respondent to prove that the emergency room services in dispute were not 'necessary emergency health services'.  However since the Respondent has submitted nothing from a medical professional which states that the emergency room services the patient received on December 26, 2013 were not 'necessary emergency health services' I find that the Respondent has not rebutted the Applicant's prima facie showing that the emergency room services in dispute were 'necessary emergency health services'. Therefore since the emergency room services in dispute were 'necessary emergency health services' based upon Section 5103 (b) (2) of the New York State Insurance Law the Respondent must provide No-Fault coverage for these services. As such I find that the Applicant is entitled to be reimbursed for the emergency room services in dispute."
Westchester Medical Center aao [Redacted] and Allstate Ins. Co.  (Arbitrator John Kannengieser, issued 12/15/15)
Allstate paid $27,011.31 of applicant's $47,011.31 bill on the basis that the lesser amount represented payment for NEHS to stabilize the EIP (which Allstate delineated as number of days the EIP spent in the hospital's ICU).  The EIP's admission was for a period of six days.  Applicant's coding expert "re-ran DRG 912-3 with the EIP's stay as if it had been four days instead of six days (the length of time the EIP was in the ICU), and the DRG rate came out the same at $47,011.31. The reason for this is that DRG rates are primarily determined based on the injuries, as well as the admitting diagnosis and discharge diagnosis. The length of stay and treatment rendered have a minimal effect on the DRG assigned, and the proper billing was $47,011.31."
Westchester Medical Center aao [Redacted] and Geico Ins. Co.  (Arbitrator Ben Feder, issued 11/3/15)
"Upon a thorough review of the evidence submitted and position statements presented at the hearing, it is this Arbitrator's determination that Respondent's expert failed to explain why Applicant's medical treatment did not fall under the definition of necessary emergency medical care. The peer review is not supported by factual evidence. No medical authority was provided that supports the position that extubation is deemed the end of necessary emergency medical care. I find no basis for Dr. Sharahy's statements other than her own opinion on the matter. I find that the peer review report is insufficient to meet Respondent's burden of proof as referenced above, the burden of which shifts to Respondent once Applicant has established a prima facie case." 
Westchester Medical Center aao [Redacted] and Geico Ins. Co.  (Arbitrator Michael Achtziger, issued 10/25/15) 
"Applicant further noted that Respondent's denial was defective on its face in not stating that these were not emergency health services. In any event, Applicant noted its following services were emergency health services:  An exploratory emergency laporotomy, bladder repair, repair of colonic serosal tear.  Applicant's counsel noted that Dr. Benatar confirmed the emergency nature of the hospitalization, and Applicant's counsel justified its mandated billing (Diagnostic related Group), and that a breakdown of charges is not required with Respondent obligated pursuant to 11 NYCRR 65-3.5(g) to accept an NF5 Form or an NF5 Form with a UBF-1. Counsel noted Respondent was sent a UB-04 and Master Output Report. Finally, counsel noted that a split of the DRG to award only the emergency health care portion of the bill would release the DRG rate and create a balance due of $51,746.00.  Accordingly, as Applicant has proven its entitled pursuant to law and its appropriate breakdown of charges. Applicant is awarded $27,933.45."

Tuesday, March 21, 2017

What Does It Mean To "Reside" for Insurance Purposes?

PROPERTY – RESIDENCY REQUIREMENT – CHANGE IN OCCUPANCY – AGENT LIABILITY
Harrison v. Allstate Indemnity Co.
(Sup. Ct., Steuben Co., decided 3/3/2017)

In 2009 plaintiffs moved 5-6 miles from the insured dwelling, their home of more than 15 years, to live with and care for Mrs. Insured's ill mother.  They both changed the address on their drivers licenses and used their new address on their income tax returns. In July of 2010, Mr. Insured spoke with his Allstate agent to inform them that plaintiffs were living at the new address.  As a result of that contact, the billing address for policy renewals was changed to the new address, but no other changes were made to the policy itself.

At some point after the plaintiffs had moved, plaintiffs' two sons, a cousin, and a friend began staying at the insured dwelling at different times and for various amounts of time. The house was destroyed by a fire on August 30, 2012. After plaintiffs filed a claim for insurance coverage, Allstate disclaimed liability on the ground that, as plaintiffs had not resided in the home for nearly three years, the home did not meet the policy's definition of a covered "dwelling".

Plaintiffs sued Allstate and their agent and, after discovery, Allstate and plaintiffs moved for summary judgment.  In denying summary judgment to both sides, Steuben County Supreme Court Justice Marianne Furfure held:
In this case, the term "reside" is not defined in the policy and, therefore, it is possible that under the circumstances of this case, plaintiffs may be found to have resided at Pine Hill for insurance policy purposes even while they were caring for Mrs. Harrison's mother on Dodge Avenue for an extended period of time. While residency does require some temporary or physical presence, a degree of permanence and intention to remain at the property is a necessary component (Government Empls. Ins. Co. v. Paolicelli, id.; Yaniveth R. v. LTD Realty Co., Id.; Dean v. Tower Ins. Co. of NY, Id. at 708-709; Auerbach v. Otsego Mut. Fire Ins. Co., Id.). It is possible that, despite the length of time plaintiffs spent at the Dodge Avenue home, the average person might assume that regular maintenance and visits to the Pine Hill property during that time satisfied the policy's requirements (Dean v. Tower Ins. Co. of NY, Id. at 708-709). Plaintiffs' evidence that they had always intended that their absence from Pine Hill to be temporary and that they planned to return as soon as possible, coupled with the fact that they left all of their possessions at Pine Hill, continued to pay the taxes and make improvements to the property raises a question of fact whether, under these circumstances, plaintiffs have satisfied the insurance policy requirement that they reside in the insured premises. This question of fact precludes a grant of summary judgment to both parties (Dean v. Tower Ins. Co. of NY, Id.; cf. Vela v. Tower Ins. Co. of NY, 83 AD3d 1050 [2nd Dept. 2011]; New York Cent. Mut. Fire Ins. Co. v. Kowalski, 222 AD2d 859, 860 [3rd Dept. 1995]).  (Bold added.)
In rejecting Allstate's argument that there was a undisclosed change in occupancy to the home in breach of the policy's condition requiring notice of same, Supreme Court further held:
The term "occupancy", like the term "reside", is also not defined in the contract. Under the circumstances of this case, it is fair to assume that the average insured person may reasonable believe that notification is not necessary if the insureds, while residing at the property, have friends and family stay over for an extended and indefinite time. Before an insurance company is permitted to avoid policy coverage, it must satisfy the burden which it bears of establishing that the exclusions or exemption apply in the particular case, and that they are subject to no other reasonable interpretation (Dean v. Tower Ins. Co. of NY, Id.; citing Seaboard Sur. Co. v. Gillette Co., Id.). The burden is on the insurance company to show that there is no material question of fact that the notification requirement applies in this case. Allstate has not met that burden because there is a question of fact, in the first instance, whether plaintiffs met the insurance policy requirement of residence and whether the presence of their sons, a cousin, and a family friend constitutes a change in the occupancy of the residence sufficient to trigger the notification obligation (Dean v. Tower Ins. Co. of NY, Id.). Therefore, Allstate's motion for summary judgment dismissing the complaint on the grounds that plaintiffs breached the insurance contract is denied.
Finally, the court declined to grant summary judgment dismissing the agent from the action. Allstate's records indicated that normal protocol when a mailing address change was made was to "question insured about use of property and if they were aware of insured not living there or letting others live there they would have changed to [landlords package] policy or discussed second residence".  In the court's opinion, this was sufficient to raise a question of fact regarding what plaintiffs advised the agent and whether there was a failure by Allstate's agent to follow company protocol or notify Allstate of the change in use, given their move to the in-laws' residence for that prolonged period of time.

Note:  This is a lower court decision.  I'll monitor for appellate treatment.

Saturday, March 18, 2017

The Updated Should-You-Wish-to-Complain-About-Your-Insurance-Company Advisory Paragraph

I've blogged several times about the consumer advisory paragraph of New York Insurance Regulation 64 (11 NYCRR Part 216).  Personal Lines insurers that do business in New York State should know that Regulation 64 requires certain letters to "prominently set out" a certain paragraph advising those to whom your letters are addressed that they may complain about you or your coverage position to New York's insurance regulator, known since October 2011 as the New York State Department of Financial Services

Effective February 1, 2017 the consumer advisory paragraph changed with a new Garden City address for the NYS DFS's Long Island office.  Pursuant to the Sixteenth Amendment to 11 NYCRR Part 216, the paragraph now reads (new language highlighted):
Should you wish to take this matter up with the New York State Department of Financial Services, you may file with the Department either on its website at http://www.dfs.ny.gov/consumer/fileacomplaint.htm or you may write to or visit the Consumer Assistance Unit, Financial Frauds and Consumer Protection Division, New York State Department of Financial Services, at: One State Street, New York, NY 10004; One Commerce Plaza, Albany, NY 12257; 1399 Franklin Avenue, Garden City, NY 11530; or Walter J. Mahoney Office Building, 65 Court Street, Buffalo, NY 14202.
As demonstrated by the claim file materials we continue to receive in my office, a number of New York insurers apparently remain uncertain of what kinds of letters must actually include that advisory paragraph. Under Regulation 64, there are only two kinds of letters that must do so: 
  1. letters "rejecting any element of a claim involving personal property insurance" (11 NYCRR § 216.6[h]); and
  2. letters explaining or rejecting any element of a claim for auto physical damage (11 NYCRR § 216.7[d][3]).
Let's take these in reverse order. Everyone knows what an "auto physical damage" claim is, right? We're talking first-party, not third-party claims. Indeed, § 216.7 begins by stating that “[t]his section is applicable to claims arising under motor vehicle collision or comprehensive coverages”. Thus, by implication, letters regarding third-party property damage claims need not include the advisory paragraph. Notice also that § 216.7(d)(3) is somewhat broader in its scope than § 216.6(h) in that the advisory paragraph must be included in both coverage rejection and explanation letters.

Which brings us to letters "rejecting any element of a claim involving personal property insurance", the first type of letter in which the advisory paragraph must be included. A letter rejecting an element of a personal property claim is not:
  • an acknowledgement letter;
  • an ROR letter;
  • a non-waiver agreement;
  • a letter written solely to explain personal property coverage or payments;
  • a letter forwarding payment to an insured;
  • a liability coverage declination letter; or
  • every single letter that leaves the insurer's office addressed to an insured or claimant.
In a January 6, 2004 opinion letter, the NYS Insurance Department's OGC (Office of General Counsel) opined:
The term "personal property insurance" in Section 216.6(h) limits the applicability of subdivision (h) to personal lines property insurance. Thus, subdivision (h) is not applicable to commercial lines property insurance or to liability insurance.
Letters rejecting commercial lines property insurance -- no advisory paragraph required.
Letters rejecting (disclaiming/denying) liability coverage -- no advisory paragraph required.

See?

Over the 22+ years that my office has been open I've seen the advisory paragraph included in letters in which it is not required.  If you don't care about your consumer complaint ratios, then keep on keeping on.  If you question whether the paragraph belongs in a certain letter even after reading the above, email me.  We'll  figure it out.

Thursday, March 16, 2017

Falsus in Uno, Falsus in Omnibus

It has been said that someone who lies about little things will lie about big things.  Not may lie. Will lie.  True or not, many jurisdictions recognize the legal maxim of falsus in uno, falsus in omnibus ("false in one thing, false in everything"), at least in terms of permitting the principle to be charged to juries or otherwise applied by the trier-of-fact.

For example, New York Pattern Jury Instruction 1:22, entitled "Falsus in Uno", reads:
If you find that any witness has wilfully testified falsely as to any material fact, that is as to an important matter, the law permits you to disregard completely the entire testimony of that witness upon the principle that one who testifies falsely about one material fact is likely to testify falsely about everything. You are not required, however, to consider such a witness as totally "unbelievable." You may accept so much of his or her testimony as you deem true and disregard what you feel is false. By the processes which I have just described to you, you, as the sole judges of the facts, decide which of the witnesses you will believe, what portion of their testimony you accept and what weight you will give to it. 
One federal court has described the principle as "a hoary maxim which allows a fact-finder to disbelieve a witness's entire testimony if the witness makes a material and conscious falsehood in one aspect of his testimony. [citation omitted.] The maxim is based on the logic that a person may mistakenly testify wrongly and still be believable, but if a person testifies falsely, willfully, and materially on one matter, then his 'oath' or word is not 'worth anything' and he is likely to be lying in other respects." Enying Li v. Holder, 738 F. 3d 1160 (9th Cir. 2013).

Insurance companies' special investigators likely have a special appreciation of this maxim, as their jobs often involve determining whether an misstatement or inconsistency is a lie, whether a lie is material, and whether a material lie supports a denial of coverage based on its voiding of coverage. Not everything that is false is a lie, and not everything that is a lie voids coverage.

Coupled with the maxim mendacem memorem esse oportet ("a liar needs a good memory"), the falsus in uno, falsus in omnibus principle is something that special investigators (and attorneys) may and should keep in mind in assessing the credibility -- or more accurately, predicting how the triers-of-fact may assess the credibility -- of the insured or claimant.

In application, the principle can net a prevaricating insured or claimant zero.  Like in this case.  Be guided accordingly.  

Wednesday, November 23, 2016

Poults, Planes, Piling & Named Perils -- A Fowl Coverage Decision for Thanksgiving

COMMERCIAL PROPERTY – TURKEY FLOATER POLICY – MALICIOUS MISCHIEF 
Larson v. Fireman's Fund Insurance Company
(Iowa Sup. Ct., decided 12/14/1965)

Did you know that a "turkey intitle:insurance" search on Google Scholar in all state and federal court databases returns 54 results?  No?  Well, now you do.

And that turkeys are NOT the dumbest animal on the planet?  In fact, I've tried cases before ceiling-staring judges who may also have been suffering from tetanic torticollar spasms, and they were no dumber that the tryptophan-laden fowl that will be my main course tomorrow.

And that while turkeys can be emotionally comforting on airplanes (the Air Carrier Access Act of 1968 legally permits customers to fly with emotional support animals), they are not emotionally comforted by overflying ones?  It's the predator shadow thing, apparently (see captioned image, infra).

A poult is a young turkey being raised for food.  Plaintiff's family owned and operated a turkey farm in Iowa (still does, apparently, albeit with two fewer barns and 11,000-12,000 fewer turkeys as of two weeks ago) that as of 1965 had raised and marketed about 9,500 turkeys a year for 15 years.

On March 11, 1964 plaintiff purchased 4,335 poults and, being the prudent poultry farmer he was, that same day obtained a "turkey floater policy" from Fireman's Fund Insurance Company.  In fact, I think Fireman's Fund's company slogan just before it became "Protecting Your Future for 150 Years" was "Fireman's Fund -- We Insure Turkeys".  Rumor has it that FF's underwriters came up with that beaut.

In any event, plaintiff's turkey floater policy did not provide all-risk turkey coverage, but insured against death of the turkeys from only certain perils and causes:
INSURED AGAINST LOSS BY DEATH: * * * (A) Directly resulting from: (a) Fire, Lightning, Explosion, Smoke, Vandalism and Malicious Mischief; * * * (B) Caused by huddling, piling, smothering, drowning, or freezing ONLY: (a) As the immediate and direct result of one of the above mentioned perils insured against coming in contact with the turkeys, or (b) If one of the perils mentioned (exclusive of collision, upset or overturning) causes damage to or on the premises of the Assured[.]
As pluck would have it, on July 21, 1964 at approximately 5:00 p.m. a single engine airplane, flying at an estimated altitude of only 150-200 feet, passed over the plaintiff's turkey farm and its poult-holding turkey pens and shelters. Early that evening, plaintiff and his wife went to the turkey pens and found hundreds of dead turkeys piled tight under the shelters.  All were large birds averaging 23 ½ lbs. They were being kept in pens just east of the smaller turkeys the witnesses observed running when the plane went over at 5 p. m.

An investigation and count the next day established that 2,066 large turkeys insured by Fireman's Fund had died. Plaintiff fixed their value at five dollars each ($10,333 in 1964 dollars and $79,591 in 2016 dollars). Subsequent investigation led plaintiff to believe the turkeys had died of suffocation after being frightened by the 5 p. m. low flying plane. Piling and smothering was the cause, but plaintiff needed a covered peril to warrant recovery.  There wasn't a fire, lightning, smoke or vandalism.  Plaintiff's claim to Fireman's Fund for the dead turkeys instead asserted that their death was due to the piling-caused and smothering-caused malicious mischief of the low flying plane's unidentified pilot.

Turkey Predator Silhouettes
In support of the claim, plaintiff's turkey expert, Tom Slaughter (okay, maybe his first name was Robert), testified (yes, at trial) that turkeys are very alert to flying objects (probably because they're looking up all the time; see, tetanic torticollar spasms, supra) and are easily frightened. He spoke of his own experience of having had turkeys die because of having been frightened. "The birds that die from fright will die in a pile. I mean they will get to an object and that stops them, but they just keep piling on top of one another, whether it be from flying objects or from rats or anything else, they will do the same identical thing. I have had experience of a flock that died from the fright of an airplane. That was in 1959."

I know what you're thinking.  Doesn't help with the dumbest animal rep, now does it?

At the close of the evidence the trial court directed a verdict for Fireman's Fund, finding the evidence insufficient to raise a jury question on malicious mischief and proximate cause.   Plaintiff appealed and the Iowa Supreme Court AFFIRMED, holding that the trial evidence regarding malicious mischief was insufficient:
Plaintiff calls to our attention several cases in which recovery was allowed because of low flying planes. In Leisy v. United States, D.C., 102 F.Supp. 789, low flying Navy planes near Hackensack, Minnesota frightened plaintiff's minks, causing the mothers to kill their kits. Recovery was allowed on the theory of negligence. In Maitland v. Twin City Aviation Corporation, 254 Wis. 541, 37 N.W.2d 74, recovery was also allowed for loss of minks caused by low flying planes in violation of the 500 foot safety standard rule. Matson v. United States, 171 F.Supp. 283, 145 Ct.Cl. 225, holds plaintiff entitled to damages from military aircraft flying below the minimum altitude. In Aaron v. United States, 311 F.2d 798, 160 Ct.Cl. 295, recovery for taking of an easement of flight was allowed as a result of jets flying in violation of the 500 foot safety rule. These cases do not consider malice or malicious mischief, they only support tort liability of the pilot or owner of the low flying plane. They do not support recovery here.
Apparently prolicidal minks are sKITtish creatures, as well.  I did not know that either.

Perhaps the bestest thing of all about being an insurance coverage lawyer is the variety of factual scenarios that give rise to the coverage questions and contests I see in my practice.  Who'd a thunk I'd learn something today about named peril turkey floater insurance coverage? Not me, or Mortimer Snerd, that's for sure.

Happy Thanksgiving all.

Monday, November 14, 2016

Get Your Current 11 NYCRR Part 216 (NY Insurance Regulation 64) Here

Go on.  Find a copy of New York Insurance Regulation 64 (11 NYCRR Part 216) on the New York Department of Financial Services' website.  I double dog dare ya.  Click as many links as you want within the DFS website and you still won't find Regulation 64 in a current, single document.  Tell me I'm wrong.

Google "New York Insurance Regulation 64" (without the quotation marks) instead, and the first search result points to a non-current version of Reg 64 hidden but still found on the NYSDFS's website server.  Nice, huh?

It would appear that the only path currently existing through the NYSDFS's website to that which represents the embodiment of New York's Unfair Claims Settlement Practices Act (though the reg is not an act) is on the footer of the DFS's website under "Laws and Regs".  Of course, one would need to know that "NYCRR" refer to the New York Codes, Rule and Regulations or by process of elimination click that link to find one's way to Title 11, New York's insurance regulations.  Three clicks later (Title 11 Insurance, Chapter IX Unfair Trade Practices, and Part 216 Unfair Claim Settlement Practices and Claim Cost Control Measures) and you might find your way to what is commonly known to New York insurers and insureds as Regulation 64.  Congratulations.  Now bookmark that location.

Or click HERE and download what I compiled earlier today as what passes as the current version of Regulation 64.  You're welcome.

Monday, October 10, 2016

Can You Find The The Mistake?

HOMEOWNERS – INTENTIONAL ACT – CRIMINAL ASSAULT – DUTY TO DEFEND – DUTY TO INDEMNIFY
State Farm Fire & Cas. Co. v. Gloria
(Sup. Ct., Suffolk Co., decided 3/14/2016)

When I was blogging regularly I rarely blogged about decisions from trial-level courts.  Trial-level decisions are rarely significant enough to merit your time and my effort on these pages.  But I came across this decision today and decided to throw it on here as a sort of can-you-find-the-mistake exercise.

We all know that for liability insurers the duty to defend is broader than the duty to indemnify and is determined, in the first instance, by the allegations of the complaint.  You may also know that once that the liability insurer can establish that it will have no duty to indemnify, its duty to defend terminates.  And that collateral estoppel, when applicable, precludes the re-litigation in a subsequent action of an issue raised and decided against an insured in a prior action.

I think the court made a mistake in deciding State Farm's motion for summary judgment.  Can you find it?  Comment below if you can.

Summary Judgment Granted to Commercial Property Insurer on New York General Business Law § 349 Deceptive Acts and Practices Claim

COMMERCIAL PROPERTY – WATER DAMAGE – BROADENED WATER-DIRECT DAMAGE COVERAGE EXTENSION – ENGINEERING EXPERT – GENERAL BUSINESS LAW § 349 DECEPTIVE ACTS AND PRACTICES CLAIM
JD&K Assocs. LLC v. Selective Ins. Group, Inc.
(4th Dept., decided 10/07/2016)

During last month's NYSBA Law School for Insurance Professionals' Interactive Presentation with an Expert Engineer: Homeowners Insurance topic I reminded those attending about the importance of vetting the insurer's expert.

In this case, Selective had been sued, in part, for its allegedly deceptive act and practice of commissioning and using in the making its coverage decisions "Investigative Engineering Analysis Report[s]" that had been prepared and signed by someone who was not an engineer.  The plaintiff insured alleged that this was a general practice of Selective that violated New York General Business Law § 349.  Why add a GBL § 349 claim to a breach of contract action?  To recover treble damages and one's attorneys' fees for prosecuting the action if successful.

In June 2014, the Appellate Division, Fourth Department, agreed with Selective that Supreme Court had erred in denying its motion for summary judgment dismissing plaintiff's bad faith, misrepresentation and fraud cause of action, but affirmed the lower court's denial of Selective's dispositive motion to dismiss the complaint's GBL § 349 deceptive acts and practices cause of action because discovery relating to that cause of action was not yet complete, holding:
The court also properly denied that part of defendants' motion seeking summary judgment dismissing the fourth cause of action, alleging deceptive acts and practices under General Business Law § 349.  Plaintiff alleged that the Vallas employee who investigated the loss and prepared the Vallas Report was not an engineer, and that defendants misrepresented his credentials to plaintiff. Plaintiff further alleges that defendants' conduct was deceptive and part of a pattern of conduct that was not unique to plaintiff, but was directed at their policyholders generally. Certain discovery relevant to the General Business Law § 349 cause of action remains outstanding, and thus the court properly concluded that summary judgment with respect to that cause of action would be premature (see Skibinsky v State Farm Fire & Cas. Co., 6 AD3d 975, 976 [2004]; see generally Colombini v Westchester County Healthcare Corp., 24 AD3d 712, 715 [2005]). Inasmuch as punitive damages may be available under General Business Law § 349 (see Ural v Encompass Ins. Co. of Am., 97 AD3d 562, 565 [2012]; Wilner v Allstate Ins. Co., 71 AD3d 155, 167 [2010]), the court properly concluded that dismissal of plaintiff's claim for punitive damages would also be premature.
After discovery was complete, Selective again moved for summary judgment on the GBL § 349 cause of action, and Supreme Court again denied that motion, instead granting plaintiff's cross motion to amend that cause of action.  Selective appealed and the Fourth Department unanimously REVERSED Supreme Court's order, finding that Selective had established as a matter of law that its conduct in this case was not consumer-oriented (the first of the three required elements of a GBL § 349 claim) and that, in any event, plaintiff was not injured as a result of the allegedly deceptive act or practice (the third of the three required prima facie elements).  The Fourth Department explained: 
We agree with defendants that they met their initial burden of establishing as a matter of law that their conduct was not consumer-oriented. It is well settled that, although the conduct need not be repetitive or recurring to qualify as consumer-oriented, a plaintiff "must demonstrate that the acts or practices have a broader impact on consumers at large" and, thus, "[p]rivate contract disputes, unique to the parties, . . . [do] not fall within the ambit of the statute" (Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25; see New York Univ. v Continental Ins. Co., 87 NY2d 308, 321). Defendants established that the conflict here stems from "a private' contract dispute over policy coverage and the processing of a claim which is unique to these parties, not conduct which affects the consuming public at large" (New York Univ., 87 NY2d at 321). Indeed, the record establishes that defendants' decision to disclaim coverage was based on the particular facts concerning the nature of plaintiff's property damage and the language in the policy (see Security Mut. Life Ins. Co. of N.Y. v DiPasquale, 283 AD2d 182, 182, lv dismissed 97 NY2d 653, 700), and that the alleged deceptive practice here, i.e., defendants' use of the report from a non-engineer in disclaiming coverage, had the potential to affect only a single commercial property loss claim between plaintiff and defendants (see Canario v Gunn, 300 AD2d 332, 333). Contrary to plaintiff's contention, the information concerning defendants' prior use of Vallas' investigative services contained in the affidavit of defendants' in-house complex claims counsel, which was based upon his personal knowledge, established that defendants had not implemented any type of practice of hiring an unqualified site investigator and then misrepresenting his or her qualifications to render an investigative report as a method of deceiving unsuspecting policyholders and improperly disclaiming coverage. We further conclude that the fact that defendants may have disclaimed coverage based in part on reports drafted by Vallas in a few commercial property cases closed within the last 15 years is insufficient to raise a material issue of fact whether the allegedly deceptive practice was standard or routine such that it potentially affected similarly situated consumers (cf. Oswego Laborers' Local 214 Pension Fund, 85 NY2d at 26-27; North State Autobahn, Inc. v Progressive Ins. Group Co., 102 AD3d 5, 14), or whether the alleged conduct had a broad impact on consumers at large as contemplated by the statute (see Anesthesia Assoc. of Mount Kisco, LLP v Northern Westchester Hosp. Ctr., 59 AD3d 473, 479-480). Furthermore, we reject plaintiff's contention that the court properly determined that the investigator's deposition testimony indicating that he prepared a significant number of engineering analysis reports for defendants in the past raises a material issue of fact whether the allegedly deceptive conduct impacted consumers at large. The underlying inference supporting that determination is that, if the investigator had prepared other reports for defendants, then defendants must have also misrepresented the investigator as an engineer to other policyholders, and such an inference is purely speculative and unsupported by the evidence in the record (see generally Edelman v O'Toole-Ewald Art Assoc., Inc., 28 AD3d 250, 251, lv denied 7 NY3d 706; Drepaul v Allstate Ins. Co., 299 AD2d 391, 392-393; Teller v Bill Hayes, Ltd., 213 AD2d 141, 149, lv dismissed in part and denied in part 87 NY2d 937). 
Even assuming, arguendo, that there is an issue of fact whether defendants' conduct was materially misleading, we nonetheless further agree with defendants that the record establishes that plaintiff was not injured as a result of the allegedly deceptive act or practice. "[W]hile the statute does not require proof of justifiable reliance, a plaintiff seeking compensatory damages must show that the defendant engaged in a material deceptive act or practice that caused actual, although not necessarily pecuniary, harm" (Oswego Laborers' Local 214 Pension Fund, 85 NY2d at 26; see generally Small v Lorillard Tobacco Co., 94 NY2d 43, 55-56). Here, the submissions establish as a matter of law that the alleged misrepresentation of the investigator's credentials, and/or any reliance on the conclusions set forth in the report, did not cause actual harm to plaintiff. With respect to the claimed injury arising from the disclaimer of coverage, the record establishes that defendants' decision was based upon the factual observations contained in the report, i.e., that the depressions in the concrete slab were caused by settling of the fill with water discharge from a drain pipe as a contributing factor, coupled with defendants' interpretation of the policy exclusions as applied to those facts. The disclaimer was wholly unrelated to any misrepresentation made by defendants to plaintiff regarding the investigator's credentials. That conclusion is further supported by the fact that defendants erroneously continued to disclaim coverage even after the policy extension applicable to certain water damage was brought to their attention (see JD&K Assoc., LLC, 118 AD3d at 1402-1403). To the extent that plaintiff contends that it suffered actual harm because it was compelled to retain a professional engineer to investigate the cause of the property damage, that decision resulted from defendants' adherence to the disclaimer given its interpretation of the policy despite the investigator's factual observations that supported coverage under the applicable policy extension (see id.). We note that the factual findings in the report are not challenged by plaintiff and are essentially indistinguishable from the findings made by plaintiff's professional engineer. We thus conclude that plaintiff's alleged injuries were caused by a disclaimer made on the basis of the undisputed factual circumstances of the property damage and defendants' adherence to its erroneous interpretation of the policy language, and did not result from any misrepresentation to plaintiff about the investigator's credentials (see Amalfitano v NBTY, Inc., 128 AD3d 743, 746, lv denied 26 NY3d 913).
Important case.  Be sure to read it through if your job includes the oversight or direct handling of litigated first-party property coverage disputes.

Tuesday, October 4, 2016

Multiple Claimants But Limited Coverage: Chronological Priority or Pro Rata Payments?

One of our auto insurer clients called me this morning with a question.  Does New York follow the "first in time, first in right" (or first come, first served) or pro rata method of making payments of limited coverage to a single occurrence's multiple claimants?  The loss scenario was a familiar one:  insured with a $25,000 property damage coverage limit totals five autos in one swell foop.  Four of the vehicles had physical damage coverage; one did not.  By what method should the auto insurer pay each of the five claimants?  

It had been a while since I looked at that question, so I did a smidge of research (on Google Scholar of course) and rediscovered that New York generally follows the “first in time, first in right” or pro rata payment rule for third-party liability coverage payments in cases where there is limited liability coverage but multiple claimants.  There is no statutory (Vehicle & Traffic Law or Insurance Law) or regulatory (Regulation 64) law in New York controlling or answering this question other than for vehicles for hire (Vehicle & Traffic Law § 370[1]).  Case law, however, indicates that the New York follows the “first in time, first in right” method or principle in paying multiple PD claims for other than damages caused by vehicles for hire. 

In Cruz v. Covert (2013 NY Slip Op 30874 [Sup. Ct., Suffolk Co., 2013], for example, the court held:

Generally, absent bad faith, an insurer is not obligated to pay out claims ratably and/or consolidate them (Allstate Ins. Co. v Russell, 13 AD3d 617). Instead, under the "first to settle rule," it is recognized that insurers are able to settle with any or several of multiple claimants, even though these settlements deplete or exhaust the policy limits (see STV Group v American Cont. Props., 234 AD2d 50Duprey v Security Mut. Cas. Co., 22 AD2d 544David v Bauman, 24 Misc 2d 67).

In an auto bodily injury context, the court in Gerdes v. Travelers Ins. Co. (109 Misc. 2d 816 [Sup. Ct., Suffolk Co., 1981]), similarly held:

It is not asserted that the policy at issue here provided for ratable distribution (Stolove v Fidelity & Cas. Co. of N. Y., 157 Misc 106) and, with one exception, there appears to be no statutory provision which requires a liability insurer to make a distribution of the proceeds of a policy among multiple claimants injured in an automobile accident on a pro rata basis. The one exception is section 370 of the Vehicle and Traffic Law which provides for such a distribution with respect to vehicles for hire. The fact that the Legislature has explicitly named a class of persons who are to be benefited by a ratable distribution of insurance proceeds raises an inference that the omission of such a provision with respect to others was intentional (see McKinney's Cons Laws of NY, Book 1, Statutes, § 240; see David v Bauman, 24 Misc 2d 67).

Where section 370 is not applicable and there is no pro rata provision in the policy, the contest of multiple plaintiffs for the limited assets of a common defendant has generally — at least in this jurisdiction — been solved in terms of chronological priority, the "first in time, first in right" rule (David v Baumansupra; see 32 U of Chi L Rev 337). Thus, an insurer who settles with some parties injured in a collision is liable only for the remainder of the policy limits even though it may have been aware that the total claims would probably exceed the policy limits (Duprey v Security Mut. Cas. Co., 22 AD2d 544O'Dwyer v Grove Serv. Corp., 15 Misc 2d 154, affd 15 AD2d 457), and an injunction enjoining payment by an insurer on judgments already obtained until after all claims have been reduced to judgment so there can be a pro rata distribution will not issue (Pisciotta v Preston, 170 Misc 376; see Ann., 70 ALR2d 416).  Research reveals only one recorded case in New York where a court has ordered a ratable distribution among multiple plaintiffs (see Wasserman v Glens Falls Ins. Co., 19 AD2d 552) but in the cited case the two claims (that of the injured plaintiff and the derivative claim of her spouse) were joined in one suit.

In answering the client's question, I presumed that the policy at issue does not provide for ratable payments in cases of multiple claimants from a single occurrence.  In the loss scenario described, therefore, the insurer could elect to follow the “first in time, first in right” or chronological priority method of paying the multiple claims. 

What I recommended the insurer do was to try to obtain agreements from all five claimants (the one uninsured claimant and four subrogating insurer claimants) to accept a pro rata share of the $25,000 policy limit.  Section 216.10(e) of Regulation 64 would still require written offers “[w]ithin ten business days of the completion of [the insurer's] investigation of [each] property damage claim”, and I recommended each such written offer advise each claimant that the sum of all five claims exceeds the $25,000 policy limit, just to be on the safe side of Regulation 64 compliance.

The best outcome for the insured obviously would be for the insurer to obtain releases from all five claimants for pro rata payments to all five claimants, but the uninsured claimant may not be as willing to accept a pro rata amount as the subrogating auto physical damage insurers likely will be.  In such a case, I would make the best deal possible with the uninsured claimant and pay a pro rata  amount to the remaining insurer claimants in exchange for releases.  Any claimant not willing to provide a release of the insured in exchange for a pro rata payment could be paid in full from any remaining coverage limit on a chronological priority -- first in time, first in right -- basis. 

Sound right?  Let me know by commenting below if you think differently.    

Monday, December 28, 2015

Declaratory Judgment Granted on Default Serves as Res Judicata of Previously Commenced Provider Recovery Claim

NO-FAULT – DECLARATORY JUDGMENT – DEFAULT JUDGMENT – RES JUDICATA
Daily Med. Equip. Distrib. Ctr., Inc. v. American Tr. Ins. Co.
(App. Term, 2nd Dept., decided 12/18/2015)

Collateral estoppel is issue preclusion.  Res judicata, Latin for "a matter [already] judged", is claim preclusion.

Plaintiff provider sued American Transit in Queens Civil for for medical supplies provided to its assignor.  After this action was commenced, American Transit commenced a declaratory judgment action in Bronx Supreme against the assignor and all billing providers.  All defendants defaulted in that Bronx Supreme action, and Supreme Court granted American Transit's motion for a default judgment against all defendants, finding that all defendant providers, including the plaintiff in this action, Daily Medical Equipment Distribution Center, were not entitled to recover no-fault benefits arising out of the subject motor vehicle accident.  American Transit then cross-moved for summary judgment in this action based on the declaratory judgment that had been granted by default in Bronx Supreme.

In AFFIRMING Queens Civil's order that denied plaintiff's motion and granted American Transit's cross motion for summary judgment, the Appellate Term agreed that res judicata applied to preclude plaintiff's claim for recovery, even though the declaratory judgment had been granted on default:
Contrary to plaintiff's contention, the instant action is barred under the doctrine of res judicata based upon the declaratory judgment (see Vital Meridian Acupuncture, P.C. v Republic W. Ins. Co., 46 Misc 3d 147[A], 2015 NY Slip Op 50222[U] [App Term, 2d, 11th & 13th Jud Dists 2015]; EBM Med. Health Care, P.C. v Republic W. Ins., 38 Misc 3d 1 [App Term, 2d, 11th & 13th Jud Dists 2012]). To hold otherwise could result in a judgment in this action which would destroy or impair rights established by the Supreme Court (see Schuykill Fuel Corp. v Nieberg Realty Corp., 250 NY 304, 306—307 [1929]; Ava Acupuncture, P.C. v NY Cent. Mut. Fire Ins. Co., 34 Misc 3d 149[A], 2012 NY Slip Op 50233[U] [App Term, 2d, 11th & 13th Jud Dists 2012]). Moreover, the declaratory judgment is a conclusive final determination notwithstanding that it may have been entered on default (see Lazides v P & G Enters., 58 AD3d 607 [2009]; Matter of Allstate Ins. Co. v Williams, 29 AD3d 688, 690 [2006]; Matter of Eagle Ins. Co. v Facey, 272 AD2d 399 [2000]; Ava Acupuncture, P.C. v NY Cent. Mut. Fire Ins. Co., 34 Misc 3d 149[A], 2012 NY Slip Op 50233[U]). 

"Not It" Affidavit Sufficient to Merit Summary Judgment on Lack of Coverage Defense

NO-FAULT – LACK OF COVERAGE DEFENSE
New Way Med. Supply Corp. v. Dollar Rent A Car
(App. Term, 2nd Dept., decided 12/8/2015)

In support of its motion for summary judgment to dismiss this provider recovery action, Dollar Rent A Car submitted an affidavit from its third-party claims examiner, which stated:
     2.  [A] Dollar vehicle was not involved in an alleged vehicular collision on June 18, 2011, a loss for which plaintiff's assignor allegedly received medical treatment[.] 
     6.  The claimant Jacen Adams (nor Adams Jacen) did not appear in any claimant name search. There are no records of an accident associated with said individual in Dollar's system.  
     7.  Secondly, Dollar is a self-insured entity and does not issue automobile policies to individuals or other entities.  
     8.  Based upon the foregoing, I can attest with certainty that a Dollar vehicle was not involved in this particular vehicular collision on June 18, 2011, the loss for which plaintiff claims entitlement to No-Fault reimbursement.
Plaintiff provider argued that Dollar's denial of coverage as supported by this affidavit was insufficient to warrant summary judgment.  Queens Civil (Cheree A. Buggs, J.) and the Appellate Term disagreed:
In our view, contrary to plaintiff's contention on appeal, this was sufficient to establish, prima facie, defendant's lack of coverage defense (see Delta Diagnostic Radiology, P.C. v American Tr. Ins. Co., 44 Misc 3d 136[A], 2014 NY Slip Op 51240[U] [App Term, 2d, 11th & 13th Jud Dists 2014]; Jesa Med. Supply, Inc. v NYC Tr. Auth., 38 Misc 3d 138[A], 2013 NY Slip Op 50188[U] [App Term, 2d, 11th & 13th Jud Dists 2013]). Moreover, contrary to plaintiff's further contention on appeal, "defendant was not required to describe in detail the steps which it had taken in searching its records in order to demonstrate that there was no coverage in effect at the time of the accident" (Delta Diagnostic Radiology, P.C. v American Tr. Ins. Co., 44 Misc 3d 136[A], 2014 NY Slip Op 51240[U], *1). In opposition to defendant's prima facie showing, plaintiff failed to demonstrate the existence of a triable issue of fact.

Monday, December 21, 2015

'Twas The Risky Night Before Christmas -- How an Insurance Professional Reads the Classic (Reprised)




[Those of you who have been reading this blog for at least the past five years will recognize this.  Reprised for our more recent and current readers.] 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

'Twas the night before Christmas (12:01 a.m. 12/25) and all through the house (single family, joisted masonry, e.c.3, terr. 44, pc5), not a creature was stirring, not even a mouse (thorough pride of ownership and excellent maintenance).
The (flame-retardant) stockings were hung by the (contractor-installed?) chimney with care, in hopes that St. Nicholas soon would be there (check protective safeguard discount -- application lists deadbolt locks and central station alarm system).

The children (ages 4, 8, 14, & 16) were all nestled snug in their beds (check MVR on 16-year-old) while visions of sugar plums danced in their heads (check for drug use; possible malfunctioning furnace/CO poisoning issue).

Ma in her kerchief (scheduled heirloom) and I in my cap (wearing headgear to bed? possible inadequate heating system) had just settled down for a long winter's nap. (Check employment -- is insured sleeping all day?)

When out on the lawn there arose such a clatter (check into condition of premises, housekeeping, etc.), I jumped out of bed to see what was the matter.

Away to the window I flew like a flash, threw back the curtains and tore open the sash (intentional destructive act, no coverage; also, appears insured only wearing a cap in front of uncovered window -- possible emotional distress claim by neighbors).

When what to my wondrous eyes should appear, but a miniature sleigh and eight tiny reindeer. (check if sleigh is rated business use and corporate owned.) With a little old driver so lively and quick, I knew in a moment it must be St. Nick. (Notify life underwriting, order medical on 600-year-old driver).

More rapid than eagles (check MVR for speeding violations) his coursers they came and he whistled and shouted and called them by name (possible aggressive driver).

Now Dasher (turbo equipped?), now Dancer (classic?), now Prancer (check occupation), now Vixen (definitely check occupation), on Comet (possible muscle deer), on Cupid (check credit score), on Donner (4x4) and Blitzen (possible drinking problem?).

To the top of the porch, to the top of the wall (check for structural damage; also look into height exposures), now dash away, dash away, dash away all (old man climbing walls either in great shape or overly medicated).

So up to the housetop his coursers they flew, with a sleigh full of toys and Saint Nicholas, too. (Check for possible retail delivery or livery classification of autos). And then, in a twinkling, I heard on the roof, the prancing and pawing of each little hoof. (Check for shingle damage; also classification of operations—roofing is a prohibited class).

As I drew in my head and was turning around, down the chimney he came with a bound (comp neg for using unusual ingress).

He was dressed all in fur (scheduled items) from his head to his foot, and his clothes were all tarnished with ashes and soot. (Part-time job as firefighter?)

A bundle of toys he had flung on his back. (Check to see if insured has safety committee; check lifting training). His eyes how they twinkled, his dimples how merry, his cheeks were like roses, his nose like a cherry (order updated medical report, possible drinking and/or drug abuse).

The stump of a pipe he held tight in his teeth (ineligible for nonsmoker discount) and the smoke encircled his head like a wreath (check batteries in smoke detectors to make sure operational).

He was chubby and plump a right jolly elf (overweight for height) and I laughed when I saw him in spite of myself. A wink of his eye and a nod of his head soon gave me reason I had nothing to dread (Stranger enters past alarm and insured not worried? Sounds suspicious.)

He spoke not a word, but went straight to his work, and filled all the stocking, then turned with a jerk (review workplace for ergonomic compliance).

And laying his finger aside of his nose (obscene gesture?), and giving a nod, up the chimney he rose. (Check operations, chimney sweeps are prohibited classification, look into GL PD deductible.)

He sprang to his sleigh, to his team gave a whistle, and away they all flew like the down of a thistle (not likely with fat man and sleigh full of toys. Check GVW for proper classification, light/service/local seems unlikely).

And I heard him exclaim as he drove out of sight, "Merry Christmas to all, and to all a good night!" (Check hours of operation; 24-hour service operations prohibited. Also check into seasonal nature of business.)

NOTE: ORDER NEW LOSS CONTROL REPORT.  DIARY FOR 07/01/16 TO DISCUSS WITH AGENT.

-- Source (Still) Unknown

Tuesday, December 15, 2015

86-Day Delayed Notice of an Approximately $200,000 Claimed Theft Loss Found Inexcusable as a Matter of Law

PROPERTY – RENTERS POLICY – PERSONAL ARTICLES POLICY – THEFT – LATE NOTICE – LATE NOTICE EXCUSES – PREJUDICE
Minasian v. IDS Prop. Cas. Ins. Co. and State Farm Fire & Cas. Co.
(SDNY, decided 12/9/2015)

Plaintiffs Nikolai Minasian and Harutyun Minasian, son and father, respectively, made claims to the defendant insurers for the reported theft on January 1, 2014 of approximately $190,000 in jewelry and $1,150 in cash from their apartment.  Plaintiffs' claims for their cash and "rather remarkably similar" (the court's words, not mine) two watches, two bracelets and two rings were to their two renters insurers: IDS Property Casualty Company under a tenants policy that incepted on September 23, 2013; and State Farm Fire & Casualty Company under a renters policy and a personal articles policy (PAP) that both incepted on October 23. 2013.

The facts of the reported loss and claim are worth reading for anyone who investigates theft claims  Although plaintiffs reported the purported theft to local police within 15 minutes of allegedly discovering it, it took them 86 days to report the burglary and alleged theft to IDS and State Farm.  Why?  They wanted to see whether the police would recover the items.  They were unsophisticated and had no prior experience with reading or understanding insurance policy conditions.  They did not have counsel at the initial claim stage.  Harutyun didn't read or write English.  Besides, State Farm wasn't prejudiced by the delayed loss notice, and it's PAP's notice condition was ambiguous.  Such were the plaintiffs' excuses for their late notice.

Both insurers investigated the plaintiffs' claims, and both insurers denied those claims: IDS based on fraud and failure to give timely notice; and State Farm based on plaintiffs' breach of the policies' notice conditions, plaintiffs' intentional concealment and misrepresentation of material facts or circumstances during the presentation of the claim, the absence of an accidental direct physical loss, the theft exclusion and the fact that the loss involved an intentional act.

Plaintiffs sued IDS and State Farm in federal court alleging claims for breach of contract and violations of New York General Business Law § 349 and New York Insurance Law § 2601.  Defendants answered the complaint and successfully moved to dismiss the GBL § 349 claims.  The insurers then each moved for summary judgment on their late notice defenses.

In GRANTING the insurers' summary judgment motions, District Court Judge Katherine B. Forrest found that the plaintiffs' notice was untimely and their delay was inexcusable as a matter of law.  The decision sets forth an excellent digest of salient New York case law regarding late notice of property claims, the court noting:
Th[e cited] decisions reflect the well-supported justification for a duty of timely notice, which is to allow the insurer an opportunity to promptly investigate so that it may protect itself from fraud, take early control of the direction in which a claim might lead, and provide for an adequate reserve fund. 
As to each of the plaintiffs' excuses for their delayed notice, the court held:
  • They wanted to see whether the police would recover the items, and the policies' notice conditions weren't triggered until the plaintiffs' subjectively believed that the police investigation had failed and the jewelry would not be recovered.  
Courts have routinely rejected claims by plaintiffs that notice is triggered by their subjective understanding of the availability of coverage. See Pfeffer v. Harleysville Grp., Inc., 502 F. App'x 28, 30 (2d Cir. 2012) (summary order) ("When the insured indefinitely reserves to itself the determination of whether a particular loss falls within the scope of coverage it does so at its own risk." (quoting Power Auth. v. Westinghouse Elec. Corp., 117 A.D.2d 336, 343 (1st Dep't 1986)). Under New York law, a plaintiff is not excused from timely notice by his belief that the loss will be recovered or otherwise reimbursed elsewhere. 
In light of the applicable standards, the Court easily rejects plaintiffs' interpretation of the notice provisions and their assertion that notice was timely. Plaintiffs do not dispute that they were aware that the Apartment had been burglarized and that the subject property had been stolen as of January 1, 2014. That awareness led plaintiffs to immediately contact the police. Plaintiffs also do not dispute that they were aware that the policies covered losses arising from theft and that the policies pertained to the property (i.e. the six pieces of jewelry and cash) that was stolen. No rational factfinder could find that a reasonable person, armed with that knowledge, would fail to understand that the facts suggested the possibility of claims under all three policies. Under New York law, plaintiffs adopted their "wait and see approach" at their own risk.
  • Plaintiffs were unsophisticated and had no prior experience with reading or understanding insurance policy conditions.  
As for plaintiffs' purported mitigating factors (i.e. their lack of sophistication and experience with filing insurance claims), they have failed to provide any authority supporting the proposition that these reasons are sufficient to excuse late notice under the sort of circumstances at issue here.  Even if any of plaintiffs' asserted excuses could be viable as to certain types of insurance policies in certain circumstances, plaintiffs have failed to present a genuine issue of material fact that the circumstances here provided a reasonable excuse for their lengthy delay.  Plaintiffs baldly assert their lack of sophistication and experience, yet the record shows that they were sophisticated enough to obtain appraisals, insurance coverage, safety deposit boxes, and specifically schedule the jewelry for coverage.  If plaintiffs were sophisticated enough to take each of these steps, they were certainly capable of providing timely notice to IDS and State Farm.
  • State Farm wasn't prejudiced by the plaintiffs' delayed loss notice.
[E]ven if [the investigating detective] provided [the State Farm producing agent] with information that gave State Farm good reason to begin investigating any potential claim, New York law does not require an insurer to demonstrate prejudice to successfully invoke a late notice defense, see AXA Marine, 84 F.3d at 624-25; Briggs, 11 N.Y.3d at 382, nor is an insurer deemed to have received notice by learning of the occurrence from a third party, Ins. Co. of the State of Pennsylvania v. Argonaut Ins. Co., No. 12 CIV. 6494 DLC, 2013 WL 4005109, at *10 (S.D.N.Y. Aug. 6, 2013); Heydt Contracting, 146 A.D.2d at 499. Plaintiffs fail to cite any authority for the proposition that the lack of prejudice is a mitigating factor that can itself create or support an excuse for late notice, FN9 and the Court does not find it appropriate to create or invoke such a rule on these facts. (Emphasis added.)
FN9   Plaintiffs concede that New York Insurance Law § 3420, which does impose a prejudice requirement, applies only to policies insuring against claims by third parties for bodily injury and property damage, and not to first-party policies insuring against claims by the named insured. N.Y. Ins. Law § 3420(a)(5). 
  • The notice condition of the State Farm PAP was ambiguous.  
Plaintiffs next argue that State Farm is not entitled to summary judgment as to the PAP Policy on the ground that the phrase "In case a covered loss occurs" in the duty of notice provision is ambiguous. * * * Here, plaintiffs' reading strains the plain meaning of the PAP Policy and there is nothing ambiguous about the duty of notice provision. As with the IDS Tenants Policy and the State Farm Renter's Policy, the language in the PAP Policy clearly indicates that plaintiffs' duty to notify was triggered as soon as they learned that the jewelry was stolen on January 1, 2014. Use of the term "covered loss" clearly connotes that property which is covered under the policy is no longer in the physical possession of the insured, and use of the phrase "loss . . . which may become a claim" indicates that an insured need not (and should not) wait until the loss has definitively ripened into a meritorious claim for payment. No reasonable person could interpret this language to mean that a known theft of property only becomes a covered loss once the police cease to conduct an active investigation. As discussed above, such an interpretation places no reasonable limit on the time by which an insured must provide notice of loss. Finally, the Court notes that the lost jewelry was the only property covered by the PAP Policy; no reasonable person who has taken out an insurance policy solely to insure specified personal property would believe that the theft of such property would not be a loss covered by that policy. (Emphasis added.)
Lot in here.  'Cept coverage.