Another (x5) 30 Days in the Toll -- Executive Order No. 202.60 Continues COVID-19 Tolling of Procedural Time Limits Through October 4, 2020

At least the Governor's office didn't wait until tomorrow morning at 6:11 AM this time.   

For the fifth time since New York's COVID-19 toll of "any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to *** the civil practice law and rules, *** or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof" went into effect, Governor Cuomo's office has further extended that toll for another 30 days. 

Executive Order 202.60, posted this afternoon, "do[es] hereby continue the suspensions, modifications, and directives, not superseded by a subsequent directive, made by Executive Orders 202 up to and including 202.21, and 202.27, 202.28, 202.29, 202.30, 202.38, 202.39, 202.40, 202.48, 202.49, 202.50, as extended, and Executive Order 202.55 and 202.55.1 for another thirty days through October 4, 2020[.]"

If New York's COVID-19 toll is not continued again past October 4, 2020, the number will be 199 -- 199 days added to the expiration date of the procedural time limit at issue, such as a statute of limitations or a contractual suit limitation. 

Another 30 days in the toll.

If you haven't been keeping track, my prior posts on this toll by executive order are here and here.

Now go enjoy your long Labor Day weekend, lawyers.

The Jenner Complaint

It's been dubbed "the Jenner complaint" and, last I knew, has been filed in Illinois and New York state courts. It's an evolved or mutated variant of predecessor COVID-19 BI policyholder complaints, embedding a table of contents, photos, floor plans and seating charts in its hundreds of pages in support of these policyholders' core argument that impairment or loss of function or functionality equals direct physical loss or damage.

Interested persons can follow the New York state court action's docket by clicking here.

#businessinterruptioninsurance #COVID19businessinterruptionlitigation

DC Court Grants Summary Judgment to Commercial Property Insurer on COVID-19 Business Interruption Claim

* * * SPECIAL ALERT * * *

This afternoon the Superior Court of the District of Columbia granted summary judgment to Erie Insurance Exchange, dismissing plaintiffs' complaint for COVID-19-related business income/ interruption losses.

The court concluded: 

With both dictionary definitions and the weight of case law supporting Defendant’s interpretation of the term "direct physical loss," Plaintiffs’ additional arguments are unconvincing. First, Plaintiffs argue that because the insurance contract has specific exclusions for "loss of use" under some coverage lines but not for Income Protection coverage, the Court should infer that the Income Protection coverage covers losses such as Plaintiffs’. Plaintiffs' Motion at 13-14. But as already discussed, even if “loss of use” was covered, Plaintiffs would still have to show that the loss of use was a "direct physical loss” similar to those in the cases discussed supra at 5-7. And for the reasons explained in this order, there was no “direct physical loss” to Plaintiffs.  Second, Plaintiffs argue that, unlike some similar insurance policies, their policies do not include a specific exclusion for pandemic-related losses. Id. at 19-20. But again, even in the absence of such an exclusion, Plaintiffs would still be required to show a 'direct physical loss.' Because they cannot do so, the Court grants summary judgment to Defendant.

The case is Rose's 1, LLC et al. v. Erie Insurance Exchange and you can read the court's decision and order by clicking here. 

Another 30 Days in the Toll -- Executive Order No. 202.55 Continues COVID-19 Tolling of Procedural Time Limits Through September 4, 2020

I went to bed last night and woke up before 6:00 this morning hitting F5 on my browser and thinking that today would be the day.  The day New York's COVID-19 toll of procedural time limits "for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to *** the civil practice law and rules, *** or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof" would be over.  The day the title of this morning's blog post would start with "Plus 139".  

Someone at the Governor's office, however, was up early this morning, too, and at 6:11 AM posted Executive Order 202.55, which "continue[s] the directives, not superseded by a subsequent directive, made by Executive Order 202 and each successor Executive Order up to and including Executive Order 202.21, and Executive Order ... 202.28, ... 202.38, ... [and] 202.48 ... for another thirty days through September 4, 2020[.]"

If you missed my July 6, 2020 post on what Executive Orders 202.8, 202.14., 202.28 and 202.38 provided, click here.  If the COVID-19 toll is not continued again past September 4, 2020, the addend will be 169 --  169 days added to the expiration of the procedural time limit at issue, such as a statute of limitations or a contractual suit limitation.

Another 30 days in the toll.

When the Insured's Shoes Are Bigger Than the Tortfeasor's Shoes

AUTO – SUM COVERAGE – TRIGGER

Gross v. Travelers Ins.
(4th Dept., 7/24/2020)

Gross had an auto policy with Travelers that was written to afford BI and SUM coverage of $300,000 per person and $300,000 per accident.  He and his wife were injured when their vehicle was rear-ended by a vehicle operated by a nonparty tortfeasor, who was insured by The Hartford under a policy affording BI coverage with limits of $100,000 per person and $300,000 per accident.

In other words, the comparative BI coverage limits were:

                                Insured                                         Tortfeasor
Per person               $300,000                                      $100,000
Per accident            $300,000                                       $300,000

Gross settled his underlying personal injury claim for the tortfeasor's $100,000 per person policy limit, and his wife settled her claim for $16,000. Gross submitted a SUM claim to Travelers, which denied it on the ground that plaintiff's SUM coverage was not triggered because the tortfeasor's $300,000 in per accident BI coverage was not less than Gross's $300,000 in per accident BI coverage. Supreme Court agreed, and granted Travelers' motion to dismiss the complaint pursuant to CPLR 3211(a)(1) on that ground.  Gross appealed and the Fourth Department REVERSED, holding:

"Insurance Law § 3420(f)(2) was enacted to allow an insured to obtain the same level of protection for himself [or herself] and his [or her] passengers which he [or she] purchased to protect himself [or herself] against liability to others'" (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 686 [1994], quoting Mem of St Exec Dept, 1977 McKinney's Session Laws of NY at 2446). It is well settled that, "[u]nder Insurance Law § 3420(f)(2), an insured's [SUM] coverage is triggered when the limit of the insured's bodily injury liability coverage is greater than the same coverage in the tortfeasor's policy" (id. at 684). More particularly, when determining whether SUM coverage is triggered, "[t]he necessary analytical step . . . is to place the insured in the shoes of the tortfeasor and ask whether the insured would have greater bodily injury coverage under the circumstances than the tortfeasor actually has" (id. at 687), which "requires a comparison of each policy's bodily injury liability coverage as it in fact operates under the policy terms applicable to that particular coverage" (id. at 688).  

Here, a comparison of the two policies at issue, in light of the circumstances of this case, demonstrates that plaintiff would be afforded greater coverage under his policy than under the tortfeasor's policy. The tortfeasor's policy would have provided plaintiff with only $100,000 of coverage for bodily injury, whereas plaintiff's policy would have provided him with up to $300,000 of coverage for bodily injury. Although plaintiff's SUM benefits would be reduced by the amount paid to his wife under the policy's $300,000 per accident maximum, he is still afforded more coverage under his policy than under the tortfeasor's policy because the bodily injury limit for an accident in which two people are injured would be $200,000 under the tortfeasor's policy, which is less than the coverage afforded by plaintiff's policy. Consequently, the SUM provision of plaintiff's policy was triggered (see Insurance Law § 3420[f][2][A]; Matter of Government Empls. Ins. Co. v Lee, 120 AD3d 497, 498-499 [2d Dept 2014]; Jones v Peerless Ins. Co., 281 AD2d 888, 889 [4th Dept 2001]).

Okay, you SUM savants.  What's the dispositive difference between the comparative coverage limits in this case and the comparative coverage limits in the seminal, controlling case of Prudential Prop. and Cas. Co. v. Szeli?  Hint: it has to do with swapping the headings in the above table.

New York County Supreme Court Grants Insurer's CPLR 3211(A)(1) Motion to Dismiss Plaintiff's Complaint Based on Insured's Failure to Submit Timely Proof of Loss

PROPERTY – BURST WATER PIPE-CAUSED WATER LOSS – PROOF OF LOSS REQUEST – MOTION TO DISMISS

Stein v. National General Ins. Co.
(Sup. Ct., NY Co., 6/9/2020)

Just when you thought you understood the "documentary evidence" basis of a CPLR 3211(a) pre-answer motion to dismiss, this decision issues.

In February 2018, Stein's Manhattan apartment sustained water damage from a burst water pipe.  National General investigated the loss and on April 15, 2019, paid Stein $30,519.82 for his loss. Unhappy with the amount of the loss payment, Stein hired a public adjuster, who inspected the loss and estimated the claim at $404,977.78.  National General declined to enter into an appraisal and, on July 9, 2019, sent a demand to Stein for a signed sworn proof of loss to be provided within 60 days.

On October 24, 2019, National General wrote to Stein, denying coverage for his claim based on various grounds, including Stein's failure to submit a signed sworn proof of loss within 60 days. Stein brought this action on February 18, 2020, alleging breach of contract and breach of the covenant of good faith and fair dealing.

In lieu of answering the complaint, National General moved on March 6, 2020 to dismiss Stein's complaint based on CPLR 3211(a)(1) (documentary evidence) and 3211(a)(7) (failure to state cause of action).  In support of its motion, National General submitted its attorney's affirmation with exhibits and a memorandum of law.  The exhibits attached to its attorney's affirmation were:

• a copy of the complaint;
• a copy of the relevant insurance policy;
• a copy of National General’s "Disclaimer of Coverage"; 
• copies of emails exchanged between National General and Stein’s public adjuster, Scott Modlin; 
• copies of emails exchanged between Stein and Modlin; 
• copies of emails sent by Modlin to National General and its representatives; 
• a copy of National General’s May 28, 2019 "Request for Information and Examination under Oath (“EUO”) demand"; 
• a copy of relevant sections of Stein’s testimony at his September 10, 2019 EUO; 
• a copy of National General’s June 24, 2019 letter requesting information and demanding an EUO; 
• a copy of National General’s July 15, 2019 letter requesting information and demanding an EUO; 
• a copy of a July 26, 2019 letter from Stein’s previous attorney; and
• a copy of National General’s July 9, 2019 letter demanding a signed, Sworn Statement in Proof of Loss, as well as the July 10, 2019 delivery receipt from Federal Express.

Stein opposed National General's motion to dismiss on two bases: (1) that National General's motion pursuant to CPLR 3211(a)(1) relied upon Stein's deposition testimony and, therefore, was not properly founded upon "documentary evidence"; and (2) National General should not be permitted to disclaim coverage as it only sent its proof of loss demand to Stein and not to his public adjuster.

In rejecting these arguments and GRANTING the motion, Supreme Court held:

These submissions conclusively resolve all factual issues as a matter of law and conclusively disposes of the plaintiff's claims for breach of contract and breach of the duty of good faith and fair dealing inasmuch as it is well settled that a plaintiff's "failure to file proof of loss within 60 days after receipt of defendant's notice is an absolute defense to an action on the policy, absent waiver of the requirement by the insurer or conduct on its part estopping its assertion of the defense." Hunter v Seneca Ins. Co., 114 AD3d 556, 557 (2014) citing Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., 63 NY2d 201, 209-210 (1984).  

In opposition, the plaintiff argues (i) that the defendant's motion pursuant to CPLR 3211(a)(1) relies upon the plaintiff's deposition testimony, and therefore is not properly founded upon documentary evidence, and (ii) the defendant should not be permitted to disclaim coverage as it only sent the demand to the plaintiff, not his insurance adjuster. The plaintiff's contentions are without merit. Contrary to the plaintiff's first contention, the defendant's submission of its demand of proof, with service, and the subsequent disclaimer of coverage are sufficient to establish the plaintiff's failure to respond within the 60-day time limit. See Hunter v Seneca Ins. Co., supra. Moreover, on a motion to dismiss pursuant to CPLR 3211(a)(1), documentary evidence may be supplemented by affidavits or deposition testimony that are not disputed. See Rosenbaum, Rosenfeld & Sonnenblick, LLP v Excalibur Grp. NA, LLC, 146 AD3d 489 (1 Dept. 2017). As the plaintiff does not dispute, in his deposition testimony or his opposition papers, that he did not timely respond to the defendant's demand, the court may properly rely on such evidence. See id. 

Furthermore, to the extent that the plaintiff contends that the defendant's failure to serve its demand on his adjuster constitutes a defense to this motion, such an argument is contrary to the plain language of New York Insurance Law § 3407, which only requires service of the demand be made upon the insured. Therefore, the plaintiff fails to rebut the documentary evidence submitted by the defendant, and dismissal pursuant to CPLR 3211(a)(1) is granted. 

As the action is dismissed pursuant to CPLR 3211(a)(1), the court does not reach the portion of the defendant's motion seeking to dismiss the complaint pursuant to CPLR 3211(a)(7).

Can this decision be reconciled with the Bonavita v. GEICO decision that I blogged about last week?  Is it because Stein did not dispute that he failed to submit a timely proof of loss?  Tell me what you think in the comments below.

As of the date of this post, no notice of appeal has been filed.  

The Unopposed Loss -- Court Denies Declaratory Judgment to No-Fault Insurer Based Solely on Default of Non-Answering Defendants

NO-FAULT – HIT-AND-RUN – AFFIRMATIVE ACTION – DEFAULT JUDGMENT – DECLARATORY JUDGMENT – INJUNCTIVE RELIEF

Ameriprise Ins. Co. v. Kim
(2nd Dept., 7/29/2020)

We've run into this before.

Your insurer client brings a global affirmative action against all carbon-based life-form claimants and their health care(less) assignee-providers spawned from a single, reported motor vehicle accident, seeking declaratory and injunctive relief.  All of the defendants are served, but most if not all them don't answer or move against the complaint.  Your client makes a motion for a default judgment against the non-answering defendants, who don't appear and oppose the motion.  Your client proves up good service of the summons and complaint, the non-answering defendants' default, and the facts constituting your client's claim.

Mark it down as a win, right?  Wrong.

In AFFIRMING Supreme Court's denial of Ameriprise's default judgment motion, the Second Department reminded:

"A plaintiff seeking leave to enter a default judgment must file proof of proper service of the summons and the complaint, the defendant's default, and the facts constituting the claim" (Global Liberty Ins. Co. v Surgery Ctr. of Oradell, LLC, 153 AD3d 606, 606; see CPLR 3215[f]). "[A] default judgment in a declaratory judgment action will not be granted on the default and pleadings alone for it is necessary that [the plaintiff] establish a right to a declaration'" against the defendants (JBBNY, LLC v Dedvukaj, 171 AD3d 898, 902, quoting Dole Food Co., Inc. v Lincoln Gen. Ins. Co., 66 AD3d 1493, 1494; see Merchants Ins. Co. of N.H. v Long Is. Pet Cemetery, 206 AD2d 827, 828).

Here, while the plaintiff submitted proof of proper service of the summons and the complaint, the non-answering defendants' default, and the facts constituting the plaintiff's claim, the plaintiff's submissions in support of the motion failed to establish its right to the declarations sought (see JBBNY, LLC v Dedvukaj, 171 AD3d at 903). As such, we agree with the Supreme Court's determination denying that branch of the plaintiff's motion which was for leave to enter a default judgment against the non-answering defendants.

Take-Away Point #1:  Establishing one's entitlement on motion to declaratory relief requires more than what is minimally required to obtain a default judgment.  Insurers must "establish their right" to the declaration, with a quantum of evidence equivalent to what is needed to avoid a directed verdict at trial.

Take-Away Point #2:  Although not apparent from this short memorandum decision, even if the movant establishes its right to a declaration, the decision whether to grant a declaratory judgment rests within the sound discretion of the court (CPLR 3001) and is "dependent upon facts and circumstances rendering it useful and necessary."  Denial of a default judgment is proper if the declaratory relief sought clearly affects the rights of other parties not alleged to be in default.  See Merchants Ins. Co. of N.H. v Long Is. Pet Cemetery, 206 AD2d 827, 828).

Mute the Barking, Playing, Sirening, Shuffling, Pinging, Drinking and Breathing Sounds, Please

ORDER TO SHOW CAUSE – TELECONFERENCE IN LIEU OF IN-PERSON HEARING GUIDELINES

Travelers Cas. & Sur. Co. of Amer. v. Omni Contracting Co., Inc.
(SDNY, 7/25/2020)

The COVID-19 pandemic has disrupted most aspects of court practice, including in-person appearances and hearings.  It has also caused United States District Court Judge Nelson Román, when converting an in-person show cause hearing to a teleconference, to remind counsel to follow the court's "guidelines" for teleconference participation:

1. Use a landline whenever possible. 
2. Use handset rather than speakerphone. 
3.  Identify yourself each time you speak. 
4. Be mindful that, unlike in a courtroom setting, interrupting can render both speakers unintelligible. 
5. Mute when not speaking to eliminate background noise, i.e., dog barking, kids playing, sirens, papers shuffling, emails pinging, drinking, breathing. It all comes through. This will also prevent interruptions. 
6. Avoid voice-activated systems that don't allow the speaker to know when someone else is trying to speak and they cut off the beginning of words. 
7. Spell proper names. 
8. Have judge confirm reporter is on the line. 
9. If someone hears beeps or musical chimes, that means someone has either come in or left the conference. Please be aware that the judge may need to clarify that the reporter has not lost the line. (This has happened before, and the reporter had to dial back in and tell the judge the last thing that the court reporter transcribed.)

For those wondering, Judge Román is two days older than me (so he surely speaks from experience about the audio reliability of landlines) and is someone who doesn't like dog-loving, paper-shuffling, heavy breathing, well-hydrated attorneys who have kids, live near first responders, prefer paper to plastic, and email a lot.  

Just kidding.  'Cept about being two days older than me.  

And who spells any more (other than Siri)?  

I'm out.  [Chime]

No, You May Not Be Excused... Court Denies Insurer's 3211(a)(1)-Based Pre-Answer Motion to Dismiss Declaratory Judgment Action

PERSONAL AUTO – TEMPORARY SUBSTITUTE AUTO – NON-OWNED AUTO – DECLARATORY JUDGMENT ACTION – MOTION TO DISMISS

Bonavita v. Government Employees Ins. Co.
(2nd Dept., 7/22/2020)

Before the Roman Catholic Mass was said in English in Mahwah, New Jersey, my brothers and sisters and I had to ask "May I be excused?" (may, not can) before leaving our assigned seats (assigned theoretically to preserve order in a family of then seven, rivaling siblings) at the dinner table to head back outside to play or into the living room to watch our allotted one hour of television.  The qualifying condition for an affirmative answer from one of our parents was a dinner plate cleared of the meat, starch AND vegetable food groups that made a daily appearance at our dinner table (ask me sometime about the inventive methods my mother came up with to get my brothers and me to finish our green vegetables, especially cellulose-armored asparagus).  There was no leaving our dinner table without finishing your dinner.  Period.  I learned to intensely dislike certain foods, while developing strategies for clearing my plate without eating its unappetizing contents (our family's German Shepherd was one such strategy until she was banned from the dining room during dinner), before I was ten.

Insurers facing declaratory judgment and breach of contract actions sometimes ask to be excused from a lawsuit without getting to the meat and potatoes (and even asparagus) of the action, moving to dismiss the complaints lodged against them before interposing an answer.  In New York state court actions, New York Civil Practice Law and Rules (CPLR) Rule 3211 provides the bases for doing so:

1. a defense is founded upon documentary evidence;  or 
2. the court has not jurisdiction of the subject matter of the cause of action;  or 
3. the party asserting the cause of action has not legal capacity to sue;  or 
4. there is another action pending between the same parties for the same cause of action in a court of any state or the United States;  the court need not dismiss upon this ground but may make such order as justice requires;  or 
5. the cause of action may not be maintained because of arbitration and award, collateral estoppel, discharge in bankruptcy, infancy or other disability of the moving party, payment, release, res judicata, statute of limitations, or statute of frauds;  or 
6. with respect to a counterclaim, it may not properly be interposed in the action;  or 
7. the pleading fails to state a cause of action;  or 
8. the court has not jurisdiction of the person of the defendant;  or 
9. the court has not jurisdiction in an action where service was made under section 314 or 315 ;  or 
10. the court should not proceed in the absence of a person who should be a party; or 
11. the party is immune from liability pursuant to section seven hundred twenty-a of the not-for-profit corporation law .  

Plaintiff Bonavita was driving a vehicle owned by plaintiff Molinari when the vehicle was involved in a multivehicle accident.  As a result of the accident, the plaintiffs were named as defendants in a pesonal injury action (the underlying action).  Plaintiffs subsequently commenced this action against GEICO, seeking a judgment declaring that, pursuant to an insurance policy issued to Bonavita's mother, GEICO is obligated to defend and indemnify plaintiffs in the underlying action. The plaintiffs alleged that Bonavita's use of Molinari's vehicle qualified for "temporary substitute auto" or "non-owned auto" coverage under the policy.

In lieu of answering, GEICO moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint, contending that the plaintiffs were not entitled to coverage under the policy because, among other things, the vehicle being driven by Bonavita on the date of the accident was neither a "temporary substitute auto" nor a "non-owned auto" as defined in the policy. In support of its motion, GEICO submitted, among other things, an affidavit of its claims examiner, an affidavit of its attorney, a letter sent to GEICO from the plaintiffs' counsel, a letter from GEICO disclaiming coverage, a copy of the GEICO policy, and policy "declaration sheets" issued by GEICO during the relevant period. Plaintiffs opposed the motion and submitted, among other things, an affidavit of Bonavita, who averred that he is the son of GEICO's policyholder and resided at her home at the time of the accident.  Supreme Court denied the motion, and GEICO appealed.

In AFFIRMING the denial of GEICO's motion to dismiss, the Second Department reiterated what kind of evidence constitutes "documentary evidence" under subdivision 1 of CPLR 3211(a):

A motion to dismiss a complaint pursuant to CPLR 3211(a)(1) on the ground that a defense is founded on documentary evidence may be appropriately granted only where the documentary evidence utterly refutes the plaintiff's factual allegations, conclusively establishing a defense as a matter of law (see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326; Leon v Martinez, 84 NY2d 83, 88; Rodolico v Rubin & Licatesi, P.C., 114 AD3d 923, 924). "[T]o be considered documentary,' evidence must be unambiguous and of undisputed authenticity" (Fontanetta v John Doe 1, 73 AD3d 78, 86; see Cives Corp. v George A. Fuller Co., Inc., 97 AD3d 713, 714). "[J]udicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable, would qualify as documentary evidence in the proper case" (Fontanetta v John Doe 1, 73 AD3d at 84-85 [internal quotation marks omitted]; see Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714). Affidavits, deposition testimony, and letters are not considered documentary evidence within the intendment of CPLR 3211(a)(1) (see Rodolico v Rubin & Licatesi, P.C., 114 AD3d at 925; Cives Corp. v George A. Fuller Co., Inc., 97 AD3d at 714).  

*  *  *  *  * 

Here, the affidavits and letters submitted by GEICO in support of its motion did not constitute documentary evidence within the intendment of CPLR 3211(a)(1) (see County of Westchester v Unity Mech. Corp., 165 AD3d at 885; Attias v Costiera, 120 AD3d 1281). Moreover, the GEICO insurance policy and declaration sheets failed to show that the plaintiffs were not, as they alleged in the complaint, entitled to coverage under the temporary substitute auto and/or non-owned auto provisions of the GEICO policy. Therefore, GEICO's submissions did not utterly refute the plaintiffs' allegations or conclusively establish a defense as a matter of law (see 25-01 Newkirk Ave., LLC v Everest Nat. Ins. Co., 127 AD3d 850; AGCS Marine Ins. Co. v Scottsdale Ins. Co., 102 AD3d 899).

An insurance policy is a contract, but the policy and policy declarations by themselves did not "utterly refute" the complaint's allegations and establish that plaintiffs were not entitled to coverage under the GEICO policy.  While I certainly understand an insurer's desire for the earliest possible exit from an insured's DJ or breach of contract action, this case is another example of how challenging it is for an insurer to get a lawsuit dismissed on a substantive coverage defense before answering the complaint.

NYSSIU Legal Update 2019-2020 Edition

 LEGAL UPDATE

I have been privileged since incorporating the New York State Chapter of Special Investigation Units (NYSSIU) in 1997 to serve as its Counsel.  Many times I have prepared and presented the NYSSIU Legal Update to members and guests at NYSSIU meetings.  Some of those updates even made it to NYSSIU's website.  

On May 6, 2020, my son Ryan Mura prepared and virtually presented the 2019-2020 edition of the NYSSIU Legal Update.  That edition digests eight no-fault, six property and two criminal law case decisions, as well as providing updates on New York legislative and regulatory developments affecting New York property and casualty insurers. 

You can read that Legal Update here.  Case decisions are hyperlinked within.  Questions can/should be directed to Ryan.

$7,332.02 a Day -- Bench-Trying a First-Party Property Coverage Dispute

Ever wonder how the non-jury trial of a first-party property coverage dispute plays out in court?  Wonder no more.

Christine Wagner's single family home in New Hartford, New York, sustained fire damage on May 1, 2016.  She and her homeowners insurer, New York Central Mutual Fire Insurance Company, agreed that the fire destroyed the home's garage, "bonus room" above the garage, and a breezeway connecting the home to the garage.  Wagner and NYCM disagreed over the extent to which the home sustained indirect damage.  The policy afforded replacement cost coverage.

Wagner's contractor and public adjuster submitted repair estimates of approximately $411,000 (including code upgrades) and $338,000 "plus code upgrades", respectively.  NYCM obtained and submitted a contractor's estimate and its claim handler's estimate of approximately $175,000 and $216,000, respectively.  NYCM ultimately paid Wagner the approximately $216,000 amount.

Wagner sued NYCM in May 2017, seeking "the approximate sum of $100,000.00 or the appproriate amount to be determined by the court."  In March 2018 Wagner's counsel filed her note of issue and statement of readiness for a non-jury trial.

The action was tried to Oneida County Supreme Court Patrick MacRae over the course of three days on November 13, 14 and 15, 2018.  On June 26, 2019, Justice MacRae issued his 21-page, detailed decision awarding Wagner a total of $21,996.06.  A month later, Wagner filed a judgment, with interest and costs, against NYCM for $28,413.10.  Ten days later, Wagner filed a notice of appeal.

Those who would take such a first-party property coverage dispute to trial -- especially a bench trial -- would do well to review Justice MacRae's detailed decision, who began and framed his decision with:

The central question is this: is plaintiff entitled to compensation above the $216,018.92 that has been paid by defendant?  

The first factor that bears on the determination of the appropriate amount of damages is whether plaintiff has met her burden of proof. The burden here is one of preponderance. So long as plaintiff's proof is sufficient to suggest that her evidence carries sufficient weight to tip the balance in her favor, she meets that burden and, at least in the first analysis, is entitled to a finding in her favor. It is only if plaintiff has met that initial burden that the burden would shift to the defendant to come forward with evidence that at least re-balances the scale. If the defendant does this, it has overcome plaintiff's evidence and is entitled to a finding in its favor. 

Plaintiff indicated at trial that the three (3) areas in which she was claiming entitlement to more than the defendant paid were: 1. Contents; 2. Code upgrades; and 3. An additional amount for the general cost of repair (Tr. 5-9).

On page 21, Justice MacRae concluded:

On the basis of the foregoing, plaintiff is awarded the following amounts above the $216.018.92 already paid by defendant.  For contents, $4.079.36; For the following code items: knob and tube wiring, $12,750.00; sheathing upgrade, $1,792.20; insulation upgrade, $1,699.50; and deck attachment, $1,675.00, for a total for code upgrades of $17,916.70; for a total award of $21,996.03.

On July 17, 2020, the Appellate Division, Fourth Department, unanimously AFFIRMED Justice MacRae's decision and the corresponding judgment without writing.  I surmise the Fourth Department concluded that Justice MacRae had written enough.

If there is a moral of this story, I suppose it could be that trying property coverage actions to a single judge rather than a petit jury might be the way to go for parties of the first and second part to insurance contracts, especially during a pandemic when jury trials are few and far between -- literally and figuratively.  I've tried several first-party property coverage action to a judge with good results for my insurer clients.  Especially when such a trial revolves around issues of scope and pricing/damages -- issues often compared in potential juror engagement and interest to watching paint dry -- entrusting the outcome to a sitting judge should, at least in theory, always be less risky (albeit usually less instant) than asking a jury to pay focused attention for three days, understand the technical (and dry) testimony on damages, and render a well-reasoned and accurate verdict.  Right?

LinkedIn Poll Results on Disclosing Adjuster and Engineer Reports

On July 8th I blogged about this question:

Is a New York Property Insurer Obligated to Disclose Copies of Its Adjuster and Expert Reports Prior to Litigation?

I also created a poll on this question on LinkedIn (connect with me here).  If you were interested in my blog post, you probably will be interested in the poll's results:

Answer              # Votes                   %   
YES.                        5                     14%
NO.                        16                     46%
IT DEPENDS.       14                     40%

Thank you to those who voted.  I appreciate your perspectives. 

Is a New York Property Insurer Obligated to Disclose Copies of Its Adjuster and Expert Reports Prior to Litigation?

Client's Question:

Are we required to provide a copy of our expert’s report to an insured when we send formal denial or after if they request? We have one now that the NYS DFS is involved and was questioning why we did not provide a copy of our roofer’s report and our adjuster’s reports to the insured’s public adjuster when he asked for them.

My Answer:
Nothing in New York insurance laws or regulations requires an insurer to provide copies of its adjuster’s and/or expert’s report either with the insurer’s denial or upon the insured’s request. If the DFS is saying there is such a requirement, they’re wrong, and I would insist that they provide the legal authority for such a statement. Only copies of written estimates of damages prepared by or for the insurer must be provided to insureds upon request. New York Insurance Law § 3407-a provides:

No property/casualty insurance policy or contract shall be issued or issued for delivery on a risk located or resident in this state insuring against damage to the insured's real property unless it contains in substance the following provision or a provision which is equal or more favorable to the insured:  a provision that in the event of a pending claim for damage to real property, upon request, the insurer shall furnish to the insured's representative, designated in writing, or if none has been designated, to the insured, a copy of any written estimate or estimates of the cost of damages to real property resulting from the loss which the insurer has independently prepared for its own purposes, or had prepared on its behalf for its own purposes, specifying all appropriate deductions, within thirty days after the request or preparation, whichever is later, of such estimate or estimates.  An insurer shall not be required to provide an estimate on claims for damages to real property unless it has independently prepared one or had one prepared on its behalf for the insurer's own purposes.

Some public adjusters take the position that if the insurer’s or independent adjuster’s damages estimate is based, even in part, on an expert’s report, the insurer is obligated by extension under § 3407-a to disclose a copy of the expert’s report with the estimate. I disagree. I don’t think 3407-a, which is very clear in its reference to “any written estimate or estimates of the cost of damages to real property”, can be read to also include expert reports.

Of course, if the coverage denial is litigated, the insured will be entitled to discover any non-privileged materials the insurer relied upon to reach its coverage and indemnity decisions. Given that, some PAs, policyholder attorneys, and DFS examiners argue that if the insurer eventually will be required to disclose its adjuster and expert reports, it should disclose them prior to litigation. This is another argument I don’t agree with, and it certainly doesn’t find any support in statutory, regulatory, or case law.

Your Answer:
In the comments, please.

~~Editor's Note July 20, 2020 

LinkedIn Poll Results:
Here are the results of the LinkedIn poll I ran on this question:

Answer                             # Votes                %
YES.                                      5                   14%
NO.                                       16                  46%
IT DEPENDS.                       14                  40%

When Did the New York Courts Reopen?

A client asked me today when the New York courts “reopened” from their COVID-19 shutdown.

After speaking with that client I determined he was really asking about when the New York state courts were again accepting filings of new, “non-essential” cases, such as personal injury or insurance coverage actions.

From a number of press releases and memoranda of the New York courts, I compiled and now share with you readers a list of the dates, by counties and regions, when the New York state courts were again "open of  business" (i.e., accepting filings of new civil lawsuits):

BY COUNTY

May 18, 2020
Broome, Chemung, Chenango, Delaware, Fulton, Genesee, Herkimer, Livingston, Monroe, Montgomery, Oneida, Ontario, Orleans, Otsego, Schoharie, Schuyler, Seneca, Steuben, Tioga, Tompkins, Wayne, Wyoming, Yates

May 20, 2020
Clinton, Essex, Franklin, Hamilton, Jefferson, Lewis, St. Lawrence

May 21, 2020
Allegany, Cattaraugus, Chautauqua, Erie, Niagara

May 25, 2020
Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Sullivan, Ulster, Westchester

May 26, 2020
Albany, Columbia, Greene, Rensselaer, Saratoga, Schenectady, Warren, Washington

BY REGION

Source:  https://www.nycourts.gov/whatsnew/pdf/AO-114-20.pdf

There.  All in one place.

For Whom the New York Prescribed Procedural Limitations Period Tolls -- New York Executive Order 202.48

Just shy of 9:00 PM tonight (July 6, 2020), someone using a Ricoh IM C6000 (show Document Properties) scanned  Governor Andrew Cuomo's Executive Order 202.48, "continuing" for another 30 days through August 5, 2020, the tolling of "any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to *** the civil practice law and rules,  *** or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof[.]"

Those who have been keeping track will recall that it was Executive Order 202.8, issued on March 20, 2020, when New York was shutting down to prevent the spread of COVID-19, that first

temporarily suspend[ed] or modif[ied], for the period from the date of this Executive Order through April 19, 2020 the following: 

• In accordance with the directive of the Chief Judge of the State to limit court operations to essential matters during the pendency of the COVID-19 health crisis, any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to the criminal procedure law, the family court act, the civil practice law and rules, the court of claims act, the surrogate's court procedure act, and the uniform court acts, or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof, is hereby tolled from the date of this executive order until April 19, 2020[.]

What followed through 9:00 PM tonight has been a series of executive orders "continuing" the tolling provision of Executive Order 202.8:

• on April 7, 2020, Executive Order 202.14 "continue[d] the suspensions and modifications of law, and any directives, not superseded by a subsequent directive, made by Executive Order 202 and each successor Executive Order to 202, for thirty days until May 7, 2020"; 


• on May 7, 2020, Executive Order 202.28 "continue[d] the suspensions and modifications of law, and any directives, not superseded by a subsequent directive, made by Executive Order 202 and each successor Executive Order up to and including to Executive Order 202.14, for thirty days until June 6, 2020"; and 


• on June 6, 2020, Executive Order 202.38 "continue[d] the suspensions and modifications of law, and any directives, not superseded by a subsequent directive, made by Executive Order 202 and each successor Executive Order up to and including to Executive Order 202.14, as continued as contained in Executive Order 202.27 and 202.28 until July 6, 2020[.]"

The tolling provision of Executive Order 202.8. as continued by 202.14, 202.28, 202.38 and 202.48, now runs "though August 5, 2020".

What this means, in effect, is that "any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to *** the civil practice law and rules,  *** or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof" is tolled through at least August 5, 2020.

In essence, any time limitation falling within the scope of EO 202.8, as continued, froze on March 20, 2020.  How much additional time the party will have to commence, file or serve will depend on whether the otherwise applicable procedural limitations period expired during or after the tolling period.

Procedural limitation period expiring DURING the tolling period:

>>  Count the number of days from and including March 20, 2020 to and including the original limitations period's expiration date and add that number of days to the date on which the tolling expires.

For example, if a plaintiff's applicable statute of limitations period to commence a personal injury action based on negligence was set to expire on March 31, 2020, that plaintiff will have 12 days (include March 20th as one tolled day) after the expiration of the current tolling period to commence that action.  If the August 5, 2020 expiration date is not again "continued", that plaintiff will have until August 17, 2020 (12 days after August 5th) to commence her personal injury action.

Procedural limitation period expiring AFTER the tolling period:

>>  Count the number of days from and including March 20, 2020 to the end date of the COVID-19 tolling period and add that number of days to the prescribed limitations period after the tolling expires.

For example, if the current August 5, 2020 tolling end date is not again continued,  a plaintiff whose limitations period is set to expire after August 5, 2020 will have 139 days after August 5, 2020 or by December 14, 2020 (December 13 is a Sunday) to commence her action.

Question:  Does this tolling apply to the two-year contractual suit limitations period of a property insurance policy?

Answer:  Unclear, but probably.  EO 202.8 refers only to time limits "as prescribed by the procedural laws of the state, including but not limited to *** the civil practice law and rules,  *** or by any other statute, local law, ordinance, order, rule, or regulation[.]"  Technically speaking, a contractual suit limitations period is not one "prescribed by the procedural laws of the state".  New York Insurance Law § 3404(e) does not "prescribe" a two-year suit limitations period, and Insurance Law § 3404(f)(1)(A) mandates that a New York policy that insures against fire contain, "with respect to the peril of fire, terms and provisions no less favorable to the insured than those contained in the standard fire policy [§ 3404(e)].

Before testing this question in litigation,  however, consider giving me or your favorite New York first-party property coverage counsel a call to discuss the arguments that can be made for and against tolling of a property insurance policy's suit limitations period.  And/or read the Appellate Division, Fourth Department's 2010 decision in Dail v. Merchants Mut. Ins. Co. (74 AD 3d 28 [4th Dept. 2010])("the 'death toll' in CPLR 210(a) is applicable to an action against an insurer where the policy at issue contains the two-year limitations period contained in Insurance Law § 3404 (e)").  If statutory tolls apply to a contractual limitations period, a strong argument can be made that the administrative COVID-19 toll will apply, as well.

Prying Open the Elusive Door of Motive in Fraud Cases -- Free Webinar Presented by FAZ Forensics and Mura & Storm, PLLC

WDNY Reiterates That Under New York Law, Direct Physical Loss Means Some Form of Actual, Physical Damage to the Insured Property

COMMERCIAL PROPERTY – AMMONIA LEAK – DIRECT PHYSICAL LOSS – EQUIPMENT BREAKDOWN – EQUITABLE ESTOPPEL
SatisPie, LLC v. Travelers Prop. Cas. Ins. Co.of Amer.
(WDNY, decided 3/25/2020)

Insured makes and sells unbaked frozen pies.  After a "major ammonia leak" occurred inside the insured's cold-storage area, where upwards of $800,000 of the insured's product was stored, the insured disposed of what was then thought to be contaminated product, allegedly having been told by his broker that Travelers had advised that the insured could "dispose of the contaminated products."

After learning that its policy afforded only $25,000 in coverage for ammonia contamination, the insured claimed and argued that the pies were not contaminated, and that Travelers owed coverage for them because (1) it had said the pies could be discarded and (2) had issued a denial of coverage for the discarded product based only on the policy's food spoilage exclusion.

In granting Travelers' summary judgment motion with respect to the insured's breach of contract claim, District Judge Elizabeth A. Wolford of the Western District of New York held:

The Court agrees with Defendant that Plaintiff cannot demonstrate a breach of contract under the circumstances of this case. To the extent the pies in question were contaminated by the ammonia leak, it is clear that the Policy entitled Plaintiff to recover only $25,000. Plaintiff does not dispute this point in its papers, and Plaintiff's counsel confirmed at oral argument that Plaintiff was not contesting that if the pies were rendered unfit for human consumption by the ammonia leak, the $25,000 limit would apply. Instead, Plaintiff argues that the $25,000 limit is a red herring because the pies were not contaminated by ammonia and were in fact still fully edible. (See Dkt. 35 at 17 ("SatisPie's expert ... is of the opinion that the shrink-wrapped and sealed boxed pies ... were never damaged.")). 

Plaintiff's argument is logically inconsistent and proves too much. Accepting Plaintiff's position that the pies were not damaged by the ammonia leak and were instead fully intact and edible when Plaintiff disposed of them, Plaintiff cannot show that it suffered a loss that is covered by the Policy. The Policy covers "direct physical loss of or damage to Covered Property" from a "Covered Cause of Loss." (Dkt. 31-2 at 19). "Covered Cause of Loss" is further defined as "risks of direct physical loss," unless subject to an exclusion or limitation. (Id. at 36). 

"It is well established under New York law that a policyholder bears the burden of showing that the insurance contract covers the loss." Morgan Stanley Group, Inc. v. New England Ins. Co., 225 F.3d 270, 276 (2d Cir. 2000). This is true even for "all-risk" policies—"labeling the policy as `all-risk' does not relieve the insured of its initial burden of demonstrating a covered loss under the terms of the policy." Roundabout Theatre Co. v. Cont'l Cas. Co., 302 A.D.2d 1, 6 (1st Dept. 2002). Under New York law, the phrase "risks of direct physical loss" has been interpreted to mean "some form of actual, physical damage" to the insured property. Newman Myers Kreines Gross Harris, P.C. v. Great N. Ins. Co., 17 F. Supp. 3d 323, 331 (S.D.N.Y. 2014). In this case, it is Plaintiff's position that there was no physical damage to its pies. (See Dkt. 35-4 at ¶ 34, ¶ 36 (statements by Michael Pinkowski that "I can definitively say that none of the pies or pie product that were in the freezer ever spoiled" and "the pie product was perfectly edible"))[2]. Accordingly, Plaintiff cannot show that coverage under the Policy was ever triggered, and therefore also cannot show any breach by Defendant in failing to pay. In other words, according to Plaintiff's logic, the loss was caused by its disposal of product that was not contaminated—but if that is the case, it constitutes a loss that is not covered by the Policy. 

Plaintiff argues that Defendant denied coverage on the pie loss claim due to the Policy's exclusion for food spoilage and that it cannot now "change horses in midstream" and argue that a different exclusion applies. (See Dkt. 35 at 16-17). However, the New York Court of Appeals has held that "a disclaimer of liability, based on specified exclusions..., does not effect a waiver of an insurer's defense (in other words, no preclusion obtains) that the claim was outside the scope of the insuring clause of the policy." Cent. Gen. Hosp. v. Chubb Grp. of Ins. Companies, 90 N.Y.2d 195, 201 (1997). In other words, Defendant's reliance on the food spoilage exclusion to deny Plaintiff's claim does not now prevent it from arguing that if, as Plaintiff maintains, the pies were not damaged when Plaintiff disposed of them, coverage was never triggered in the first instance. 

In sum, there are two possible scenarios presented by the record: (1) Plaintiff's pies were rendered unfit for human consumption by ammonia and the $25,000 limit applies; or (2) the pies were, as Plaintiff claims, undamaged, and no covered loss occurred. Under either set of facts, Defendant has not failed to comply with its contractual obligations. For these reasons, the Court agrees with Defendant that no reasonable jury could find for Plaintiff on its express breach of contract claim. Accordingly, the Court grants Defendant's motion for summary judgment as to Plaintiff's claim that Defendant breached the express terms of the party's contract.

The court did, however, deny Travelers' motion with respect to the insured's breach of the implied covenant of good faith and fair dealing and equitable estoppel claims, holding:

The Court further finds that there are genuine issues of material fact regarding whether Defendant breached the implied covenant of good faith and fair dealing. As noted above, in the context of insurance contracts, the implied covenant encompasses a duty to investigate claims in good faith. In this case, construing the evidence in the light most favorable to Plaintiff, Defendant (through its employee Rempel) told Plaintiff that it would send out an adjuster to inspect the damage (including the damage to the pie products) but then never did so. Instead, it sent out Fischer, who did not inspect the pies but nonetheless told Plaintiff to proceed with disposing of them so that the equipment could be repaired. 

The Court agrees with Defendant that the evidence of record demonstrates that Defendant and its agents told Plaintiff only to dispose of contaminated product. In particular, the Court notes that the email from Viksjo states that Defendant had confirmed that Plaintiff could dispose of contaminated products. (Dkt. 31-9 at ¶¶ 10-11; Dkt. 35-1 at ¶¶ 10-11). Pinkowski's follow-up email to Defendant stated that Plaintiff's employees would "remove damaged products." (Dkt. 31-9 at ¶ 12; Dkt. 35-1 at ¶ 12). Further, Fischer's claim investigation report refers to removal of "damaged product." (Dkt. 35-3 at 44). However, these facts are not determinative, because there still remains an open question as to whether Defendant, through its conduct, caused Plaintiff to believe that it conducted an investigation and determined that the pies and product were contaminated and should be destroyed. Regardless of the Court's views as to how a jury will likely answer that question, it must resolve that disputed issue of fact in Plaintiff's favor. See Medeiros v. Pratt & Whitney Power Sys., Inc., 272 F. App'x 78, 80 (2d Cir. 2008) ("On a motion for summary judgment, a district court must consider the evidence in the context of whether any reasonable finder of fact—not merely the district court itself—could return a verdict in favor of the non-moving party.").  

 *  *  *  *  *

The Court finds that there are genuine issues of material fact regarding Plaintiff's equitable estoppel claim. As discussed above, a reasonable factfinder who considered all evidence in the light most favorable to Plaintiff could conclude that Defendant's conduct misled Plaintiff into thinking that Defendant had inspected the pies and concluded that they were contaminated. There is also evidence to support the conclusion that Defendant's agent Fischer knew that he had not inspected the pies, yet nonetheless communicated that Plaintiff should move forward with disposing of them so that repair of the damaged equipment could begin. A reasonable factfinder could further conclude that Plaintiff then detrimentally changed its position, in reliance on Defendant's actions, by disposing of the pie products. By no means is the Court suggesting that this is a likely outcome— particularly since evidence in the record exists supporting the conclusion that Plaintiff intended to dispose of the pie product prior to the visit from Fischer—but on this record, Defendant has not demonstrated that it is entitled to judgment as a matter of law on Plaintiff's equitable estoppel claim.

Lastly, the insured's negligence claim against Travelers was dismissed:

The Court agrees with Defendant that Plaintiff cannot establish the existence of a duty outside the contract in this case. The only duty suggested by Plaintiff is a duty to have tested the pie products before "directing and ordering that they be disposed of by [Plaintiff]." (Dkt. 31-18 at 26 (quoting Dkt. 1-2 at ¶ 41)). However, as discussed above, under New York law, the duty to perform a good faith investigation into claims is inherent in an insurance contact. See Those Certain Underwriters at Lloyds, London v. Gray, 49 A.D.3d 1, 4 (1st Dept. 2007) (noting that insurer has the obligation to conduct a prompt, diligent investigation into claims). Thus, Defendant's alleged duty to inspect the pie products is not separate from its contractual obligations. There is no evidence in the record before the Court to support a finding of any other independent duty by Defendant. Accordingly, the Court grants Defendant's motion with respect to Plaintiff's negligence claim.

New York State Courts in 30 Upstate Counties to Re-Open for Business

Beginning next week, New York State court system judges and chambers staff, along with designated clerks and support staff, will be returning to their courthouses in the following counties:

On Monday, May 18, 2020:

 Broome
 Chemung
 Chenango
 Delaware
 Fulton
 Genesee
 Herkimer
 Livingston
 Montgomery
 Monroe
 Ontario
 Orleans
 Oneida
 Otsego
 Schoharie
 Seneca
 Schuyler
 Steuben
 Tioga
 Tompkins
 Wayne
 Wyoming
 Yates

On Wednesday, May 20, 2020:

Clinton
 Essex
 Franklin
 Hamilton
 Jefferson
 Lewis
 St. Lawrence

 The NYS courts' press release announcing these courts' reopenings adds:

Importantly, new cases may be filed in these counties electronically.

That means new civil actions will be filed in those counties, folks.  Count on it.

Yesterday's press release states that "[c]ourthouse areas that will be used in this first phase include judges’ chambers, clerks’ offices and back offices."  Courtrooms aren't on that list.  That means no trials yet.

Social distancing and other steps restricting courthouse traffic will be enforced to protect the health and safety of judges and staff, attorneys, litigants and members of the public. Among other safety measures: 

• Non-employee court visitors will be required to undergo COVID-19 screening before entering the courthouse. 

• All staff who interact with court visitors must wear a mask. 

• Anyone entering the courthouse will be required to wear a mask, with masks available for those who need one. 

• Courtroom and other areas will be carefully marked to ensure proper physical distancing. 

• Court facilities will be regularly sanitized.

• Hand sanitizer dispensers will be available throughout the courthouse.

• Acrylic barriers and other safety features will be installed in courthouse areas as needed.

For law firms like mine that litigate civil matters, this is welcome news.

Statute of Limitations for Actions Brought by New York State for Recovery of Costs of Cleanup/Removal of Discharged Petroleum

Question:  What is the statute of limitations for an action brought by New York State against a property owner to recover cleanup and removal costs for a petroleum spill/discharge?

Two cases provide the rule:

• State v. Stewart’s Ice Cream Co., Inc., 64 NY2d 83 (New York Court of Appeals 1984)

“When the State has expended moneys from the New York Environmental Protection and Spill Compensation Fund for the cleanup and removal of discharged petroleum, an action for common-law indemnity lies against any party who caused the discharge. Such an action is governed by a six-year Statute of Limitations and accrues upon any related expenditure by the State.”

From the first expenditure or from each expenditure?

• State of New York v. Speonk Fuel, 307 AD2d 59 (Appellate Division, 3rd Dept., 2003)

From each expenditure.  “Thus, State of New York v Ackley (supra) clearly ruled that plaintiff's cause of action for indemnification accrues—and the six-year limitations period commences—each time the Fund makes a payment for cleanup and removal costs.”

Any costs expended within six years before the action’s commencement date are timely sued; any costs expended more than six years before the recovery action’s commencement date are time-barred.  The SOL is, in effect, sliding from each expenditure of cleanup/removal costs.

Dropping this here so I (and we) can find this SOL rule again.

No-Fault Insurer's Denial Based on Rate Evasion Upheld in Arbitration

NO-FAULT – RATE EVASION – AAA ARBITRATION DECISION

Matter of Classic Medical Diagnostic Rehab, P.C.  aao SI and State Farm Fire & Cas. Co.
(AAA Case No. 17-18-1095-2802, issued 1/7/2020)

Here's another AAA award/decision that upholds our client's denial of no-fault benefits based on the assignor's proven rate evasion:

In its written submission, Respondent submitted the following evidence and made the following contentions in support of its position: 

* * * * *  

6. Assignor appeared for an EUO on 12/11/17 at which she testified that she lived in Albany, New York with her three children, two of whom attend school in Brooklyn, but that she could not remember if they had a different residence listed for their school in Brooklyn. Assignor testified that she moved to Albany in 2015 but that she and her children commute to Brooklyn four or five days per week and that they drive about 2 1/2 hours "coming and going." Assignor testified that she presently works full-time in Brooklyn, and that her previous jobs were also located in Brooklyn. The Albany address which she provided in her application for insurance benefits and at which she stated she lived in her deposition is a home owned by her aunt to whom she pays rent. Assignor testified that the home is in the middle of the block, she could not recall its color, and stated that there was a covered porch in the front of the house. Respondent revised her testimony on the errata sheet to reflect that the house is on the corner and that there is no porch. Assignor could not fully describe the route she takes from Brooklyn to Albany on her commute. Assignor is registered to vote at her old address in Brooklyn and voted in the last election at a school in Brooklyn.

At the hearing of this matter, counsel for Applicant asserted that the EUO transcript alone is not sufficient to substantiate the alleged discrepancies contained therein without additional information, and further asserted that Assignor stated that she was in fact living in Albany New York. I am not convinced by Applicant's position, however.  Assignor provided sworn testimony under oath. Assignor subsequently amended her testimony with respect to the location of the house in which she purportedly resides in Albany, and whether it had a porch. Respondent submitted a form NF 2 executed by Assignor which lists her address in Brooklyn, New York. Likewise, the Assignment of Benefits form executed by Assignor on 10/24/17 lists an address in Brooklyn, New York. In addition, I find that Applicant's testimony that she drives 4 to 5 days per week from Albany to Brooklyn to get to her job in Brooklyn and to bring her children to school in Brooklyn is not credible, given the distance such a commute would involve, as described in Respondent's submission.

Upon consideration of the arguments of counsel and upon a review of the evidence submitted in this case, I find that Respondent has submitted sufficient evidence to meet its burden of demonstrating that Assignor made material misrepresentations in the procurement of the underlying automobile insurance policy. Applicant's claims for reimbursement are therefore denied. 

In this case, the assignor's EUO, which my office conducted, proved to be key in supporting the insurer's rate evasion-based denial of first-party benefits.

Do you know the color of your home and where it sits on its street/block?

Insurance Circular Letter No. 11 (2019) -- RE: New York State Child Victims Act and Related Insurance

Yesterday the New York State Department of Financial Services issued Circular Letter No. 11 (2019) RE: New York State Child Victims Act and Related Insurance.  If you're wondering why New York's insurance regulator thought it necessary to tell insurance licensees in the state of New York what the DFS "expects" (x4) and "encourages" (x13) its licensees to do with CVA-related insurance claims, read on.  

Insurance Circular Letter No. 11 (2019)

September 12, 2019

TO:	All Authorized Property/Casualty Insurers, Licensed Insurance Producers, Adjusters, and Reinsurers
RE:	New York State Child Victims Act and Related Insurance

STATUTORY AND REGULATORY REFERENCES:   N.Y. Financial Servs. Law; N.Y. Ins. Law §§ 1303, 2110 and 2601; 11 NYCRR Parts 216 (Insurance Regulation 64) and 243 (Insurance Regulation 152); Chapter 11 of the Laws of 2019.

I. Purpose

The purpose of this circular letter is to inform all authorized property/casualty insurers, licensed insurance producers, adjusters, and reinsurers (collectively, “Addressees”) that the Department of Financial Services (“Department”) expects Addressees to cooperate fully with the intent of the Child Victims Act (“CVA”).

II. Discussion

Governor Andrew M. Cuomo signed the CVA into law on February 14, 2019 as Chapter 11 of the Laws of 2019. Among other things, the CVA extended the time for victims of sexual abuse to commence a civil action and reopened previously time-barred legal claims for a one-year window beginning August 14, 2019. Victims may sue or employ alternative dispute resolution methods to pursue legal claims against alleged perpetrators, the organizations that employed the alleged perpetrators at the time of the acts, and other persons or organizations that may have responsibility for the acts or liability for the harm done (collectively, “potential defendants”).

All of the Addressees that issued policies to potential defendants (hereinafter “Insurers”) are therefore on notice that legal claims may arise for which Insurers may have liability under those policies.  Additionally, over time, some Insurers have been acquired by, or merged into, other companies.  In such cases, the successors-in-interest to the Insurers that issued the policies with such exposures may have assumed such liabilities and are similarly on notice.  Addressees who assumed business from such Insurers similarly should assess their exposures and act in good faith to address their liabilities, as should retrocessionaires.

The Department expects Addressees to cooperate fully with the intent of the CVA.  This includes when insurance coverage applies to CVA-related claims.  The CVA highlights the importance of victims’ claims being timely reviewed by courts, alternative dispute resolution entities, or other tribunals, to reach appropriate resolutions and provide remedial benefits to victims.

Accordingly, the Department encourages all Addressees with potential exposure to CVA-related legal claims to act promptly and in utmost good faith and to exercise best practices with their prior and current policyholders, and their respective claimants, including properly performing any and all duties to defend CVA-related claims.

Further, in the case of lost policies, the Department encourages all Addressees with relevant records to act in utmost good faith to preserve and provide any relevant records to policyholders and other entitled persons, whether in connection with any lawful discovery process or otherwise. 

Certain minimum standards set by the New York State Insurance Law (“Insurance Law”) and accompanying regulations that are generally applicable to Insurers are set forth below, the violation of which may result in fines or other disciplinary actions, but this Department encourages Insurers to do more than the minimum required.  Similarly, all other addressees should be mindful of their obligations under the Insurance Law, including without limitation Insurance Law Article 21 and related regulations, and strive to do more than the minimum required.  For example, Section 2110 of the Insurance Law provides that those licensed under Article 21 may have their licenses suspended or revoked, including, without limitation, on the grounds that such licensees intentionally misrepresented the terms of an actual or proposed insurance contract or demonstrated untrustworthiness.

III. Fair Claims Practices

Pursuant to § 216.0 of 11 NYCRR Part 216 (Insurance Regulation 64), Insurers are required to comply with the following principles when handling CVA-related insurance claims:

1. Have as your basic goal the prompt and fair settlement of all claims.
2. Assist the claimant in the processing of a claim.
3. Do not demand verification of facts unless there are good reasons to do so. When verification of facts is necessary, it should be done as expeditiously as possible.
4. Clearly inform the claimant of the insurer's position regarding any disputed matter.
5. Respond promptly, when response is indicated, to all communications from insureds, claimants, attorneys, and any other interested persons.

There are also strict time limits for Insurers to respond to communications from policyholders, to commence investigations, to notify policyholders of coverage decisions, and to respond to inquiries from the Department.  See, e.g., 11 NYCRR § 216.4.

In the case of CVA-related insurance claims, the Department encourages Addressees to act in utmost good faith and to take the initiative to be cooperative so that victims may be compensated, including that Addressees should:

1. act promptly, not extending unnecessarily to the maximum time periods permissible;
2. exert diligence to seek out copies of relevant policies of current and prior policyholders that the addressee knows or has reason to know may be subject to CVA-related legal claims;
3. fairly review such policies, interpreting such contracts so as to resolve any ambiguities in the policyholders’ favor;
4. assess the applicable coverage, including any applicable exclusions or other limitations;
5. affirmatively contact the relevant policyholders with such assessments promptly (even before a claim is filed, whenever possible) to assist policyholders in considering their coverage, such that the addressee and policyholders can cooperate in addressing complaints as they are filed; and
6. perform on its duties to defend policyholders.

IV. Unfair Claims Practices

In addition to the affirmative duties set forth above, Insurance Law § 2601 and Insurance Regulation 64 both prohibit Insurers from engaging in unfair claims settlement practices; the Department may subject an Insurer to disciplinary action if it engages in such actions without just cause and with such frequency as to indicate a general business practice.  See, e.g., Insurance Law § 2601(a); 11 NYCRR Part 216.  Examples of unfair claims practices include, but are not limited to:

1. knowingly misrepresenting to insurance claimants pertinent facts or policy provisions relating to the coverage at issue; and
2. not attempting in good faith to effectuate prompt, fair and equitable settlements of insurance claims submitted in which liability has become reasonably clear.

V. Records

The Department reminds Addressees of their legal obligation to maintain records relevant to policies and related legal claims.  For CVA-related legal claims that were previously time-barred, the Department encourages Addressees and any other parties with potentially relevant records to maintain ALL such records until the full resolution of such legal claims.  Certain minimum records retention requirements are noted below.

Insurance Regulation 152 provides, among other things, that except as otherwise required by law or regulation, each Insurer shall maintain a policy record (the details to reconstruct any policy it issued or an actual copy) until the later of:  (a) six calendar years after the date the policy is no longer in force; or (b) until after the filing of the report on examination in which the record was subject to review.  11 NYCRR § 243.2(b).  For producer Addressees, the Department has previously issued guidance that they should maintain records at least until the expiration of the applicable statute(s) of limitations, and where an action or claim is pending, for such period of time until the matter is resolved.  Office of General Counsel Opinion No. 07-05-13 (May 23, 2007).  For CVA-related claims, the CVA revised the applicable statute of limitations, which has the effect of extending the applicable records retention requirements for producer Addressees.

For potential pending litigation, such as lawsuits being filed or that could be filed due to the CVA’s opening a one‑year window for previously time-barred claims and extending the statutes of limitations, the Department encourages Addressees to keep all relevant records until the later of the above-referenced time periods and the full resolution of all possible claims that could be covered under policies an Insurer issued.  The Department encourages Addressees not to cite the minimum requirements set forth in the Insurance Law and regulations as a basis for destroying potentially relevant records, when they know or have reason to know they have potential liability with respect to CVA-related claims.

Rather, the Department encourages all Addressees to act promptly and in good faith with their prior and current policyholders, and the related claimants, so that victims are appropriately compensated for the harms they have suffered.  Accordingly, Insurers must act in accordance with the principles in Insurance Regulation 64 described above, and all Addressees should act in good faith to work with policyholders to preserve and reconstruct prior records and data.

The Department understands that some policyholders and former policyholders with potential exposures to CVA-related legal claims might not have copies of their policies from the applicable time (years, or even decades, ago).  In such cases, the Department encourages Addressees to act in good faith and apply their best efforts to locate and provide copies of policies to policyholders.  Where no copy is available or can be reconstructed, an Insurer and any other party that was involved in the issuance of a relevant policy (including, but not limited to, the marketing/solicitation/sale/administration of such policy) should provide any other relevant records (such as declaration pages, letters or other correspondence, certificates of insurance, or any other documents describing the relevant coverage).  The Department encourages all Addressees to preserve and produce such records to policyholders when needed.  The Department also encourages Addressees to give due consideration to similar other records that a policyholder may be able to produce as a demonstration of good faith. 

VI. Loss and Loss Expense Reserves

The Department expects all Addressees with exposures to CVA-related legal claims promptly to assess their exposures and adjust their loss and loss expense reserves accordingly pursuant to Insurance Law § 1303 if they have not already done so, as should all reinsurers, and retrocessionaires.  The Department encourages such Addressees to apply appropriate legal, actuarial, and accounting principles and standards to estimate such reserves in good faith, including with the assistance of professionals with specialized expertise when appropriate, and then regularly to update their reserves as claims develop.

VII. Conclusion

The Department expects Addressees to cooperate fully with the intent of the CVA and with any other applicable laws and regulations and encourages Addressees to exceed the minimum standards described in this Circular Letter in dealing with actual and potential CVA-related insurance claims. 

Please direct any questions regarding this circular letter by mail to Child Victims Act Inquiries, c/o Consumer Assistance Unit, New York State Department of Financial Services, One State Street, New York, NY 10004 or by email to cva@dfs.ny.gov.

Very truly yours,

_______________________________
Linda A. Lacewell
Superintendent of Financial Services

<><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><><>

The Department divided this circular letter into seven sections:

I.  Purpose
II.  Discussion
III.  Fair Claims Practices
IV.  Unfair Claims Practices
V.  Records
VI.  Loss and Expense Reserves
VII.  Conclusion

My thoughts and observation on each section:

I.  Purpose

The purpose of this circular letter is to inform all authorized property/casualty insurers, licensed insurance producers, adjusters, and reinsurers (collectively, “Addressees”) that the Department of Financial Services (“Department”) expects Addressees to cooperate fully with the intent of the Child Victims Act (“CVA”).

The intent of the CVA, as I understand it, was to revive time-barred claims of sexual abuse victims for money damages.  Not sure how insurance licensees can "cooperate fully" with that intent, unless the Department is suggesting that insurers should cooperate with victims' counsel to ensure the recovery of money damages.  

II.  Discussion

Accordingly, the Department encourages all Addressees with potential exposure to CVA-related legal claims to act promptly and in utmost good faith and to exercise best practices with their prior and current policyholders, and their respective claimants, including properly performing any and all duties to defend CVA-related claims.

How exactly should insurers assess any "potential exposure to CVA-related legal claims"?  Should this be done before insurers actually receive notice of any CVA-related claims?  Read on.  

III.  Fair Claims Practices

This section begins with a reiteration of Regulation 64's preamble.  For CVA-related claims in particular, the Department has added another set of what the Department now says insurers "should" do:  

In the case of CVA-related insurance claims, the Department encourages Addressees to act in utmost good faith and to take the initiative to be cooperative so that victims may be compensated, including that Addressees should:

1. act promptly, not extending unnecessarily to the maximum time periods permissible;
2. exert diligence to seek out copies of relevant policies of current and prior policyholders that the addressee knows or has reason to know may be subject to CVA-related legal claims;
3. fairly review such policies, interpreting such contracts so as to resolve any ambiguities in the policyholders’ favor;
4. assess the applicable coverage, including any applicable exclusions or other limitations;
5. affirmatively contact the relevant policyholders with such assessments promptly (even before a claim is filed, whenever possible) to assist policyholders in considering their coverage, such that the addressee and policyholders can cooperate in addressing complaints as they are filed; and
6. perform on its duties to defend policyholders.

There you have it.  Setting aside the notions that liability insurance protects only accidentally caused injury or harm, the general rule than employers are not liable for the criminal acts of their employees, and that, in some cases, the organizational defendants listed in this circular letter knew nothing about the sexual abuse or molestation, the Department nonetheless wants insurers to "take the initiative to be cooperative" to compensate victims.  Know that if you're an insurer your conduct in handling CVA-related claims will be measured not only by Regulation 64's Preamble, but by the extra set of what the Department says insurers "should" do.  

IV.  Unfair Claims Practices

Nothing new here (not surprisingly).  Conduct that would constitute an unfair claim practice can only be enumerated and prescribed by promulgated regulation. A circular letter is not a regulation.  

V.  Records

Read this section (above) again.  There's a lot here, including the letter's sole use of all caps :

For CVA-related legal claims that were previously time-barred, the Department encourages Addressees and any other parties with potentially relevant records to maintain ALL such records until the full resolution of such legal claims.

The Department again "encourages" insurers "to act promptly and in good faith with their prior and current policyholders, and the related claimants, so that victims are appropriately compensated for the harms they have suffered."  Translation: the Department wants insurers to pay CVA-related claims.  I think that's pretty clear.

On the issue of a "lost policy", the letter states:

The Department understands that some policyholders and former policyholders with potential exposures to CVA-related legal claims might not have copies of their policies from the applicable time (years, or even decades, ago).  In such cases, the Department encourages Addressees to act in good faith and apply their best efforts to locate and provide copies of policies to policyholders.  Where no copy is available or can be reconstructed, an Insurer and any other party that was involved in the issuance of a relevant policy (including, but not limited to, the marketing/solicitation/sale/administration of such policy) should provide any other relevant records (such as declaration pages, letters or other correspondence, certificates of insurance, or any other documents describing the relevant coverage).  The Department encourages all Addressees to preserve and produce such records to policyholders when needed.  The Department also encourages Addressees to give due consideration to similar other records that a policyholder may be able to produce as a demonstration of good faith. 

My next CVA-related post on this blog will be New York's common law on lost policies.

Any insurer that has not already destroyed historical records of policies issued to the "potential defendants" mentioned in this circular letter should consider the shoulds and musts of this circular letter before doing so.

VI.  Loss and Expense Reserves

This section begins:

The Department expects all Addressees with exposures to CVA-related legal claims promptly to assess their exposures and adjust their loss and loss expense reserves accordingly pursuant to Insurance Law § 1303 if they have not already done so[.]

Exposures or "potential exposures" (see Section II above)?  If the later, by what method can an insurer assess its potential exposure to CVA-related claims and reserve accordingly?  By the name or nature of its policyholders?   This section must relate to actual CVA-related legal claims that have already been presented and/or sued, right?

VII.  Conclusion

The Department expects Addressees to cooperate fully with the intent of the CVA and with any other applicable laws and regulations and encourages Addressees to exceed the minimum standards described in this Circular Letter in dealing with actual and potential CVA-related insurance claims. 

Expectation and encouragement.

Words matter, so for those who like word metrics, here's a tally for those who weren't counting:
Encourages -- 13
Legal -- 11
Good faith -- 10
Policies -- 10
Should -- 9
Exposure(s) -- 8
Minimum -- 6
Relevant records -- 6
11 NYCRR Part 216 (Regulation 64) -- 5
Expects -- 4
Intent -- 3
Cooperate -- 3
Settlement -- 3
Requirements -- 3
Unfair -- 3
Utmost good faith -- 3
Must -- 1

So this circular letter is more encouraging than cautionary in tone and substance?