Cases & Trends
Below, please find several important cases and articles of importance in the insurance defense area of the law. As you read through these materials, please do not hesitate to contact our office at (973) 285-1919 with any questions you may have.
2900 Stillwell Avenue LLC v. U.S. Underwriters Insurance Co.
New York Appellate Division (2019)
In a case decided by the Appellate Division of the New York Supreme Court, the court upheld a summary judgment secured by this firm on behalf of U.S. Underwriters in a lawsuit brought by an insured following a fire which destroyed its multi-story building. Investigation after the loss disclosed that, to the contrary of representations made in writing in the application for insurance, the insured did not, in fact, secure Certificates of Insurance from its tenant evidencing that the tenant had liability insurance. Based thereon, USLI asserted an entitlement to rescission, even though, in fact, this was a first-party fire claim.
The insured argued below that this was a fire claim and therefore a misstatement on the application for insurance relevant only as to liability because coverage was not material. That argument was rejected below and the decision below was affirmed by the Appellate Division. Because U.S. Underwriters had written underwriting guidelines, indicating that no policy could be written if an owner did not secure from its tenant Certificates of Insurance, the court accordingly upheld U.S. Underwriters’ entitlement to rescission, as a matter of law. (Had there been no underwriting guideline, no summary judgment could have been granted and the issue of materiality would have been left to a jury.)
Diaco Construction Ins. vs. Ohio Security Insurance Co., 2019 WL 3521933
New Jersey Appellate Division (2019)
This case involved an accident in which the plaintiff, an insured under a policy of insurance issued by the defendant, suffered the loss of an excavator into a river due to employee neglect and/or malfunction of the excavator. The insurance policy issued by the defendants to the plaintiff contained first party coverage for the excavator and the defendant paid the plaintiff for the loss of the excavator itself.
On the other hand, plaintiff incurred unspecified additional charges imposed by the City as a result of the removal of the excavator from the river, and then made claim against the defendant under the general liability provisions of the insurance policy. The defendant asserted that the claim was not one for “property damage” and also asserted exclusions under the policy involving damage to property on which the insured was working and damage to impaired property.
The Appellate Division, considering the grant of summary judgment to the insurer in the lower court, upheld the denial, finding that; (a) the request of the city for the removal of the excavator was not a “claim” under the policy; (b) there was no physical injury, as required by the policy, because there was no damage to the river; (c) policy exclusions, would have applied to the claim, in any event.
In re: Accutane, New Jersey Supreme Court (2018)
The New Jersey Supreme Court has recently brought the State nearly in line with the federal courts and 39 other states which apply guidance for trial judges called upon to consider the admissibility of expert testimony. In In re: Accutane, the Supreme Court dismissed consolidated cases involving that product, and in doing so, took the opportunity to clarify and change the more relaxed New Jersey standard for admissibility of expert opinions that had been followed for decades in New Jersey courts. The standard is now more in line with the Daubert standard adopted by the U.S. Supreme Court in the 1990s and periodically explained and elaborated upon since then.
Using the enhanced standard for admissibility now required in exercising its gatekeeping function, the trial court must be satisfied that the proponent of the opinion testimony has demonstrated that: (1) the scientific theory upon which the opinion is based can be tested; (2) the theory has been the subject of publication and peer review; (3) the known or potential error rate; and (4) general acceptance of the theory in the scientific community. These are non-exclusive considerations which may or may not apply to a particular theory in a particular scientific domain, and there may be other factors which a court may apply in specific circumstances.
The Supreme Court also reaffirmed that in most cases, a decision by the trial judge on the admissibility of expert opinions is subject to the abuse of discretion standard, meaning that an appellate court asked to review a trial court’s admissibility determination will give deference to the decision below.
This ratchets up the standard for admissibility of expert opinions and will make it more difficult for plaintiffs seeking to advocate for opinions at the edge of scientific acceptance to prove their cases in New Jersey. The result will be more expert opinions rejected by trial courts and a friendlier venue for defendants.
KA Together Inc. v. Aspen Specialty Insurance Company
United States District Court of the Eastern District of Pennsylvania (2019)
On January 25, 2019, Gennet, Kallmann, Antin, Sweetman & Nichols, P.C. successfully obtained Summary Judgment on behalf of Aspen Specialty Insurance Company in the United States District Court for the Eastern District of Pennsylvania. The insured, KA Together, Inc., leased certain residential property in Philadelphia to two individuals, only to find out that, when they ran out of money and abandoned the premises, they “gave” or allowed some squatters to occupy the space. When the insured’s manager confronted the squatters, he was importuned to let them stay for a little while– two weeks. At the end of the two-week period, the squatters called to request more time and the manager allowed them an additional week. A week later, one of the squatters called him, begging for three more days, to which he again acceded. When the three days had passed, the manager went to the property with a contractor to change the locks, but found the individuals to be still there, but “packing and moving things down to the street level”. Upon seeing this, he allowed them another day to vacate the property.
On their way out, and as thanks for his kindness, they stuffed rags and other objects into the sinks and bathtubs, ran the water, and disappeared.
The property insurance policy issued by Aspen to the insured bore an exclusion for dishonest or criminal acts by persons to whom the insured “entrusted property”, and we argued, on behalf of Aspen, that the property, under the circumstances, had been “entrusted” to the squatters.
The court granted summary judgment to Aspen, based on case law elsewhere in the country recognizing that even temporary “entrustment”, not requiring a formal lease, would be enough to implicate the exclusion.
Villamil v. Sentinel Insurance Company
United States District Court, District of New Jersey (2018)
This was a case involving a typical “water” exclusion, though part of the exclusion, for water backing up from sewers or drains, was replaced by an endorsement granting coverage for backup of sewers or drains if not caused by flood. The insured, indeed, incurred a loss by backup not caused by flood or surface water, but, because some of the water entering the insured’s premises was in fact water that flowed into the building from “pure” surface water, i.e., it came directly from the sky, the court upheld the insurer’s coverage denial, granting summary judgment, based upon the anti-concurrent causation verbiage which applied to what remained of the flood exclusion. The case demonstrates New Jersey’s continued recognition of anti-concurrent causation provisions in insurance policies, with the twist, here, being that it applied even though the flood exclusion itself had been eviscerated by the removal of the “backup” portion thereof.
Read Property Group LLC. v. Hamilton Insurance Co.
United States District Court, Eastern District New York (2018)
This was a dispute over a Protective Safeguard Endorsement, requiring that the insured “maintain” heat of not less than 50 degrees in the building. Of course, certain pipes froze and the insurer invoked the Endorsement to deny coverage. The insured produced evidence from its property manager that he periodically visited the building prior to the loss date and always found heat to have been maintained. The court, commencing its discussion, cited dictionary definitions of “maintain”, generally defining the term as “to keep or keep up”. The defendant argued that, obviously, heat was not “maintained” because the pipes froze, and the insured, to the contrary, argued that the court should read into the plain language of the Endorsement a “reasonable care [to maintain heat]” standard. The court rejected the plaintiff’s argument, stating that it was plain under the policy that “the existence of a temperature at or above 50 degrees, not the insured’s efforts or attempts to maintain the heat, was the issue, and granted summary judgment to the insurer. The term “maintain”, the court concluded, was not ambiguous.
Liberty Mutual Insurance Co. v. Project Tri-Force LLC (2019)
This was an action by Liberty Mutual against its insured for breach of its subrogation receipt, wherein the insured agreed to subrogate all rights it may have against a third party. When the insurer tried to recover from the third party, the third party demonstrated that the insured had separately reached agreement with it, which agreement precluded the insurer from proceeding against it. Accordingly, Liberty then brought action against its insured for return of all monies paid, and, default having been entered, was awarded a judgment in the amount of the full loss payment. While the result of the decision is the result of a defaulted case, it is hardly startling, or without precedent elsewhere. It is certainly helpful to have a New York court affirm the insurer’s right of subrogation, failing which due to the insured’s fault, the insured has to return all of the money paid.
Burden of Proof in Comparative Negligence SJ Motions
Rodriguez v. City of New York, 2018 N.Y. Slip. Op. 02287 (2018)
An important New York Court of Appeals decision has a bearing upon plaintiffs seeking partial summary judgment in a comparative negligence case. Rodriguez upends the playing field and puts the burden back (rightfully) where it belongs. The holding of the case is simply stated – – where a plaintiff seeks to obtain partial summary judgment in a comparative negligence case, it is not required to bear the burden of establishing the absence of its own comparative negligence. As one might imagine, presenting undisputed evidence to negate the allegation of comparative negligence is much harder to offer, but now, it is not needed.
There are issues beyond the scope of this summary regarding the consequences of the Court’s decision. It should suffice to say that the decision impacts cases in which no motion has been made, decisions where a motion has been made but not decided, cases in which a motion was made and decided against the plaintiff based upon the application of the prior rule and there are a host of other appellate issues which will certainly give rise to many short-term litigation cases. However, once the smoke clears, the Rodriguez decision will help to expedite the partial or complete resolution by motion of some negligence actions.