Creating a national network of law firms to share technology, information,
and best practices for the insurance and claims industry

With a focus on continued expansion and increased services to clients, Gallo Vitucci Klar LLP joins 19 other law firms across the United States in launching the website for the Themis Advocates Group.

Throughout the years, GVK has counted insurance companies, self-insureds and third-party administrators among the many clients for whom the firm provides valuable and cost-efficient services. As a founding member of Themis Advocates Group, GVK looked to help create a national network of law firms that were similar in their mission and in their openness to exploring innovative ways to better serve clients in the insurance industry. By establishing this national network of preeminent law firms that share information, procedures, technology and client feedback, GVK and the other members of Themis Advocates Group are able to provide the most skilled, aggressive and cost-efficient legal services to their vast array of clients. One of the cornerstones of the organization is the active participation of member firm clients in the numerous scheduled Themis events to support meaningful communication between members and the clients with whom they work.

To learn more about Themis Advocates Group, visit www.themisadvocatesgroup.com.

On January 17, 2013, the New York Appellate Division, First Department decided QBE Insurance Corporation v. Jinx-Proof, Inc., et al., No 114856/10, 2013 WL 174089 (1st Dept. January 17, 2013), affirming the New York County Supreme Court’s prior award of summary judgment to QBE Insurance Corporation (“QBE”) in this declaratory judgment action. The court held that QBE properly disclaimed coverage as to its insured, Jinx-Proof, Inc. (“Jinx-Proof”), under QBE’s General Liability policy’s Assault and Battery Exclusion, in connection with an underlying bodily injury action that alleged both negligence and assault and battery causes of action where “reservation of rights letters” were timely issued to Jinx-Proof specifically denying coverage for the assault and battery claims. Although QBE entitled its letters as a “reservation of rights” and a separate “disclaimer letter” was never issued, the court found that QBE’s reservations of rights letters sufficiently notified Jinx-Proof of lack of coverage under its policy’s Assault and Battery Exclusion in a timely manner, should only an assault and battery cause of action exist.

By way of background, on August 25, 2007, while a patron Jinx-Proof’s Manhattan bar, the underlying plaintiff got into a fight with the bar security guard, which escalated such that plaintiff was struck in the face by a glass thrown by the guard. Thereafter, plaintiff brought suit against the security guard as well as Jinx-Proof seeking recovery for the injuries she sustained. Jinx-Proof tendered its defense to QBE on January 28, 2008. Although the majority of claims asserted in the underlying action sounded in assault and battery, plaintiff also asserted negligence claims, which had the potential for falling within the scope of the QBE Policy.  As such, QBE responded to Jinx-Proof by letters dated January 31, 2008, and February 26, 2008, respectively. Both letters were labeled “reservation of rights,” and agreed to defend Jinx-Proof under a reservation of rights; however, at all times, QBE pointed out the lack of any coverage available for any assault and battery claims.

QBE commenced the instant action on November 15, 2008, seeking a declaration that it could deny coverage to Jinx-Proof as all claims asserted in the underlying action were rooted in intentional tortious behavior. QBE moved for summary judgment, and by Order dated August 17, 2011, the New York County Supreme Court found QBE had clearly denied coverage for all assault and battery claims in the underlying action with the requisite degree of specificity when it stated that it would “not be defending or indemnifying [Jinx-Proof] under the General Liability portion of the [QBE] policy for the underlying assault and battery allegations.” Moreover, even with the possibility Jinx-Proof could be held liable under theories of negligence, the trial court held that any potential negligence claims were outweighed by the application of the Assault and Battery Exclusion.

While four of the five justices agreed that the lower court’s decision should be affirmed, there was some difference of opinion amongst these justices, leading to two separate concurring opinions. In the first opinion, two of the justices concluded that the attendant circumstances rendered QBE’s two reservation of rights letters as effective disclaimers of coverage. The justices opined that while a reservation of rights does not typically afford an insurer the opportunity to subsequently deny coverage for a claim, the mere use of the term “reservation of rights” should not defeat the effective written disclaimer contained within its two letters to its insured. The second concurring opinion similarly concluded the QBE letters provided clear and unambiguous language that a reasonable person would not have expected coverage for assault and battery claims. Once all potentially covered claims in the underlying action were dismissed, it was clear that QBE had no further coverage obligation as the remaining claims sounded in assault and battery and, therefore, were not covered under the QBE General Liability Policy.

The one dissenting justice disagreed, finding QBE’s two letters, by their terms, nothing more than a reservation of rights. QBE did not use clear and unambiguous language as required for an effective written disclaimer of coverage; rather, both letters were deemed to be contradictory and confusing. As such, summary judgment was not appropriate as QBE had a continuing defense obligation.

As the majority ultimately affirmed the trial court finding QBE to have effectively disclaimed coverage to Jinx-Proof, a further appeal to the Court of Appeal is likely. This decision is nonetheless instructional with respect to disclaimers and reservation of rights. In sum, any basis for disclaimer must be timely asserted within the 30-day period set out by New York Insurance Law Section 3420(d) citing to the specific policy provisions.

Gallo Vitucci Klar, LLP (“GVK”) is pleased to announce that the firm has partnered with Zarwin, DeVito, Kaplan, Schaer & Toddy, PC (“Zarwin”), a Pennsylvania law firm, and Sheehy Ware & Pappas, P.C. (“Sheehy”), a Texas law firm with unparalleled experience in defending catastrophic weather claims (“CAT”), to allow the newly formed team to take a leading role in the defense of property damage litigation arising out of Superstorm Sandy in New Jersey, New York and Pennsylvania.

Unlike most firms in the New York/New Jersey/Pennsylvania area, because of its affiliation with the Texas law firm that handled so many of these claims from previous catastrophic storms, GVK and its team of affiliated law firms will be able to provide an experienced litigation team unrivaled by its competitors. After all, this region has never encountered the amount of losses that has occurred from Superstorm Sandy and as a result this region’s law firms simply have not had the hands-on experience with the massive assault of claims that will occur here. Steve Grubbs, a partner at the Texas law firm of Sheehy Ware, who spearheads its CAT Group, successfully defended almost 1500 of these lawsuits for many of the largest admitted and surplus insurers resulting from Hurricanes Dolly, Rita and Ike. When this invaluable knowledge is added to GVK’s and Zarwin’s years of litigation experience, this “team” of law firms is positioned to field a highly focused, efficient, and economical defense that can and will provide their clients with the best possible defense of these claims.

A formal announcement with more details of the affiliation is expected in the next 10 days. If you would like to know more about this program, please contact Howard P. Klar, hklar@gvlaw.com, and Richard J. Gallo, rgallo@gvlaw.com at (212) 683-7100.

On Tuesday, December 11, 2012, in a surprising 4-2 split decision, the New York Court of Appeals in Guryev v. Tomchinsky, et al., exempted “condominium related defendants,” collectively described as the condominium building (including non-contracting unit owners), the board of managers and the building manager, from liability under New York Labor Law Section 241(6). In finding that such defendants do not constitute “owners” or “agents of owners” under Section 241(6), a necessary condition to the application of this statute, the plaintiff/worker who was injured in an individual condominium unit was not entitled to recovery from the condominium related defendants, but could recover from the individual owners of the unit that contracted with the plaintiff’s employer. In the face of a scathing dissent that called for reversal of the majority decision, the court notably made a distinction between condominium defendants and cooperative corporations (“co-ops”), who are considered owners for the purposes of the statute.

In Guryev, the plaintiff was injured while engaged in the renovation of an individual condominium unit within a condominium building owned and operated by the condominium related defendants. Specifically, during the course of his employment for a contractor, retained by the individual unit owner, the plaintiff sustained injuries when he was struck in the eye by a ricocheting nail. The individual unit owner had entered into the agreement with the plaintiff’s employer for renovation work, which was approved by the board of managers, who retained the right to insist upon compliance with the Industrial Code worker safety provisions. In this case, there was no lease between the condominium related defendants and the individual unit owner.

The issue on appeal was the fine distinctions relating to ownership of the premises, as the condominium defendants did not control the injury producing work. In affirming the holding of the Appellate Division, Second Department, the Court of Appeals explained that ownership, while a “necessary condition” is “not a sufficient one” for purposes of imposing liability upon non-contracting parties, under Labor Law Section 241(6). For instance, condominiums own only the land beneath the condominium building as each unit within the condominium building is separately owned by each individual unit owner. On the other hand, cooperative corporations (“co-ops”) are considered owners of the entire building, including all individual units therein, as said units are leased by the corporation to the shareholders.

Of significance, we note the strong dissent, which requests a reversal of the majority and legislative reform finding this holding “rips a gaping hole in the Labor Law’s protective mantle.” The dissent opined that because condominiums and co-ops retain a similar proprietary interest in the alteration of each individual unit, the Labor Law must apply to condominiums in the same manner as co-ops. To treat these condominiums differently, exempting condominiums from the strict liability under Labor Law Section 241(6) would contradict the broad remedial purpose of the Labor Law.

Although not explicitly stated, it seems the Court of Appeals holding is not limited to Labor Law Section 241(6), but broadly exempts condominiums and condominium-related entities from liability as owners under Sections 200 and 240 of the Labor Law. We will follow for any legislative developments in the wake of the court’s controversial decision.

Due to Hurricane Sandy, which has caused extraordinary damage and disruption in the states of New York and New Jersey, including, but not limited to, widespread power and utility outages, extensive transportation problems, and dislocation of employees and residents, the Governor for the State of New York has extended time periods established pursuant to the New York Civil Practice Law and Rules relating to Statute of Limitations and filing of appeals; the United States District Court for the Southern District of New York to the Court of Appeals for the Second Circuit has extended its deadlines for the filing of motions and appeals; and the United States District Court for District of New Jersey has issued an Order extending its filing dates.

Andrew Cuomo, Governor of the State of New York, issued an Executive Order relating to Statute of Limitations, wherein limitation periods established under the Civil Practice Law and Rules concluding on October 26, 2012, the date the disaster emergency was declared, have been suspended until further notice.  Similarly, time periods in which to appeal established under the Civil Practice Law and Rules concluding on October 26, 2012, have also been temporarily been suspended until further notice.

The United States District Court for the Southern District of New York to the Court of Appeals for the Second Circuit has extended deadlines concluding on October 29, 2012, for the filing of any appeal from the United States District Court for the Southern District of New York to the Court of Appeals for the Second Circuit, and the filing of any paper in a case pending in this Court until November 5, 2012.

In New Jersey, the United States District Court for District of New Jersey has issued an Order extending filing dates in this Court concluding on October 29, 2012, until November 7, 2012.

We will provide you with any modifications of these Orders that may develop, as well as any new Orders that are issued in light of the aftermath of Hurricane Sandy.

On June 12, 2012, the New York Court of Appeals in Admiral Ins. Co. v. Joy Contractors, Inc., 2012 WL 2092863 (NY June 12, 2012) held that an insurer can rescind coverage to an additional insured where the named insured has made a misrepresentation in an underwriting submission that deprives the insurer of the opportunity to evaluate the risks associated with the coverage. This decision is a radical departure from prior New York decisions regarding the rescission of coverage as to additional insureds.

Prior to this decision, courts in New York universally held that a named insured’s misrepresentation could not be imputed to the additional insured (thereby divesting it of coverage) on the grounds that each insured must be treated separately. In this decision, the Court of Appeals changed that rule and for the first time held that a named insured’s alleged misrepresentation may result in a rescission of the policy for all insureds. Gallo Vitucci Klar LLP represented the additional insured construction manager in this litigation and argued that the Court of Appeals should have followed the long-standing precedent in New York – i.e., that the named insured’s alleged misrepresentation in an underwriting submission cannot serve as a basis to rescind coverage to an additional insured.

By way of background, on March 15, 2008, Joy Contractors, Inc. (“Joy”) operated a tower crane that collapsed during the construction of a high-rise condominium at 303 East 51st Street in Manhattan, killing seven people and damaging several buildings. During the applicable policy period, Joy had primary and excess comprehensive general liability (CGL) coverage in place. The policies issued to Joy had named Reliance Construction Ltd. d/b/a RCG Group Ltd. (“RCG”), the construction manager on the project, as an additional insured. On March 27, 2008, Admiral Insurance Company (“Admiral”), Joy’s excess CGL carrier, issued a reservation of rights of letter to Joy warning that there might be no coverage based on inaccuracies in Joy’s underwriting submission that could render the excess policy void. Specifically, Admiral contended that: (i) Joy had represented that it was an interior drywall contractor that did not conduct exterior work; and (ii) Joy, in actuality, was the structural concrete contractor, performing work on the building’s entire exterior with a tower crane.

On June 8, 2008, Admiral filed an action against Joy, RCG and others seeking a declaration of no coverage. On June 25, 2009, the New York Supreme Court dismissed the rescission cause of action against RCG and opined that Joy’s alleged misrepresentations would have no effect on the additional insureds’ coverage. On February 17, 2011, the First Department affirmed the lower court’s holding. The Court of Appeals reversed the First Department’s ruling on the rescission issue and found that RCG may not be entitled to excess coverage from Admiral as an additional insured as a result of Joy’s purported misrepresentation. The Court of Appeals in its analysis accepted Admiral’s allegations about Joy’s misrepresentations to be true (as it must on motions for summary judgment). In reaching its holding, the Court of Appeals reasoned that Admiral evaluated a risk and collected a premium for providing excess coverage to a company and additional insureds that it thought were respectively an interior drywall contractor and other contractors associated with performing interior drywall work when in actuality it was issuing a policy for an entirely different risk – i.e., an exterior construction contractor that used a tower crane at a height many stories above street level and other insureds that assisted in the performance of same. The Court of Appeals concluded that dismissing the rescission cause of action against all the additional insureds would mean that the additional insureds would be allowed to rely on the terms of an insurance contract that may be deemed never to have existed.

This decision is generally a mixed bag for insurers. On the one hand, it permits carriers to rescind coverage to all insureds based on the misrepresentation of the named insured in an underwriting submission. On the other hand, it is a caveat to the insurers of building owners, general contractors and others that are routinely additional insureds on a subcontractor’s policy. Based on the Court of Appeals’ ruling, in the event a named insured subcontractor makes a misrepresentation in an underwriting submission, additional insureds may have their additional insured coverage vitiated, which means that the policies issued to the owners and general contractors may be exposed or reached earlier on the risk. We will monitor the effects that this decision will have on the lower courts in New York.

VerdictSearch recently compiled a useful chart of verdicts in New York in 2011 awarded in Construction Accident cases. The chart lists the name of the case, date of verdict, court, the type of action and injuries, the name of plaintiff’s counsel and amounts of the verdicts, which range from $19.5 million to $125,000. Out of the 91 verdicts listed, 59 were over $1 million, with an average verdict in the amount of $3 million. Attached is a copy of the Construction Accident Verdict chart for your reference. The cases are predominantly actions prosecuted under the New York State Labor Law, meant to protect construction workers by holding construction companies, owners and contractors liable for unsafe workplace practices where regulations under this set of laws have been violated and workers injured. The attached Construction Accident Verdict chart provides a quick reference to gauge the trend in verdicts awarded by jurors in trial courts throughout New York and highlights notable plaintiff’s attorneys in New York specializing in the litigation and trial of Construction Site Accidents. Should any of these verdicts be of particular interest to you and you require additional information regarding the facts of the case, please contact us and we will attempt to obtain more details.

Click here (PDF | XLS) to view the Construction Accident Verdict chart.

Super Lawyers has named two Gallo Vitucci Klar LLP (“GVK”) attorneys, Kalliopi P. Kousis, Of Counsel; and Martha Vasquez, Associate, practicing out of GVK’s New Jersey office, to the New Jersey Super Lawyers and Rising Stars lists.

The lists were included in the 2012 Super Lawyers and Rising Stars magazine published in April 2012.

The Super Lawyers list includes only the top 5% of the lawyers in the state. To be selected as a Super Lawyer, an attorney must be nominated by a lawyer who has observed the candidate in action. Once a list of candidates is developed, each candidate is examined for “12 indicators of peer recognition and professional achievement — things like experience, verdicts and settlements, transactions, clients, honors and awards.” The candidates are then reviewed by a panel of their peers within their area of practice.

To be considered for the Rising Star accolade, attorneys must be nominated by other lawyers — opposing counsel, co-counsel or through firsthand courtroom observation. The list is comprised of the best attorneys who are 40 or under or who have been practicing for 10 years or less. No more than 2.5 percent of the lawyers in the state are named to the list of rising stars.

Congratulations to both of GVK’s Super Lawyers for this well-deserved honor.

On February 29, 2012, 36 individuals, including ten doctors, two acupuncture practitioners, two chiropractic practitioners and three lawyers, were charged with the largest single no-fault insurance fraud scheme in history. The defendants indicted were responsible for defrauding insurance companies of more than $279 million under New York’s no-fault automobile insurance law, whereby drivers and passengers can obtain as much as $50,000 in benefits for accident-related injuries, regardless of fault.

Charges in the indictment include conspiracies to commit racketeering, health-care fraud and money laundering. The ring, run by a group of mostly Russian-born United States residents, used at least 100 “medical clinics” to bill fraudulent charges to no-fault automobile insurers. Attorneys would then file fraudulent personal injury claims and suits to make additional money. The ring would recruit people who had been in accidents for the clinics, then billed insurers for unneeded treatments and procedures that were never performed. Doctors would prescribe physical therapy, acupuncture and other treatments to every patient no matter their condition for up to five days a week. According to Janice Fedarcyk, the FBI’s New York director, the accidents were real, but the injuries that were claimed were not.

Doctors that were indicted in this fraud ring, include: Sergey Gabinsky, Tatyana Gabinskaya, Joseph Vitoulis, Lauretta Grzegorczyk, Eva Gateva, Zuheir Said, David Thomas, Billy Geris, Mark Shapiro and Robert Della Badia. Acupuncture practitioners indicted include Michelle Glick and Pavel Poznansky. Chiropractic practitioners indicted include Chad Greenshner and Constantine Voytenko. Attorneys indicted include Matthew Conroy, Maria Diglio and Sol Naimark.

It is highly recommended that carriers and their SIU Departments investigate whether any of the above-named medical providers received any payments through your respective no-fault departments since 2007. If so, according to this indictment, the claimants either never received treatment that was billed for or they received treatment that was unnecessary.

We expect reforms to be made to the no-fault system as a result of this massive no-fault scheme. For example, Brooklyn District Attorney Charles Hynes and State Senator Martin Golden stated that they want to make it a felony to stage an accident and act as a “runner” by steering “patients” to no-fault medical clinics in exchange for payments. They would also like for there to be a ban on any medical provider convicted of no-fault fraud from receiving payments under the no-fault system, as well as fine them. They would also allow for more time for investigations of specific claims, require arbitration of disputed no-fault claims and require health-care providers to document medical necessity for services billed.

We will continue to keep you advised of developments if any additional details emerge concerning the no-fault ring, or legislation is enacted as a result of the no-fault ring.

On February 14, 2012, New York’s highest court, the Court of Appeals, in an effort to preserve the legislative intent and the integrity of a plain reading of the language of Administrative Code of the City of New York Section 27-1031(b) (1) (“the Code”), decided in consolidated appeals, Yenem Corp. v. 281 Broadway Holdings, et al. and Randall Co. v. 281 Broadway Holdings, et al., that strict liability will be imposed upon those performing excavation work more than ten feet in depth who cause damage to adjoining property where a violation of the Code is found. The court’s holding is consistent with its interpretation of the Code’s predecessor state law, which imposed a standard of strict liability, and ensures that those who undertake excavation work in New York City should bear the risks associated with such work should harm result to the property of the neighboring landowner.

The Administrative Code of the City of New York Section 27-1031 (b)(1) addressed in both Yenem and Randall provides:

When an excavation is carried to a depth of more than ten feet below the legally established curb level the person who causes such excavation to be made shall, at all times and at his or her own expense, preserve and protect from injury any adjoining structures, the safety of which may be affected by such part of the excavation as exceeds ten feet below the legally established curb level provided such person is afforded a license to enter and inspect the adjoining buildings and property.

The Code provision originated from an 1855 statute reenacted in 1882. Its purpose was to protect adjoining landowners against harm from excavation work on neighboring property, thereby imposing strict liability upon the excavator when a violation of the statute was found. The statute was recodified as a municipal ordinance under the New York City Building Code in 1899. In 1985, the ordinance became section 27-1031 (b)(1) set forth above and its language is virtually identical to its state law predecessors.

In Yenem, a commercial tenant was forced to vacate its premises and close its business as a result of excavation work that was being conducted on an adjoining lot. The excavation work occurred at a depth of 18 feet below curb level causing damage to the adjoining premises, which resulted in the Department of Buildings deeming the premises unsafe for occupancy. Yenem commenced an action against the owner of the adjoining lot and the entity it hired to perform the excavation work under the Code, claiming that the defendants were negligent and strictly liable for causing damage to the premises resulting in Yenem’s loss of business profits. Plaintiff Randall, the owner of the premises occupied by Yemen, commenced a separate action against the same parties asserting similar claims. Both plaintiffs eventually moved for summary judgment on their claims.

In the Yenem action, the trial court rejected plaintiff’s argument that because section 27-1031 (b)(1) was originally enacted as a state law imposing absolute liability, it should continue to be so construed. The Yenem court found that violation of the Code did not result in strict liability but constituted some evidence of negligence. In the Randall action, a different trial court judge granted Randall’s motion for partial summary judgment and held that defendants were strictly liable under the Code. In consolidated appeals, a divided Appellate Division, First Department, upheld the Order denying plaintiff’s motion for summary judgment in the Yenem action and reversed the order granting plaintiff summary judgment in the Randall action. The Appellate Division found that as a municipal ordinance, the Code provision was an “unsuitable candidate for elevation to the status of a state statute imposing per se liability.” The issue of what liability standard to apply under the Code was granted review on appeal by the New York Court of Appeals.

Finding no reason to depart from interpretation of the original state law and defeat the legislation’s goal of shifting the risk of injury from the injured property owner to the excavator of adjoining land, the Court of Appeals held that the Code, having its origins in state law, imposes strict liability where a plaintiff demonstrates that a violation of the provision proximately caused injuries to plaintiff’s property.

As a result of the court’s holding in Yenem and Randall, excavators who dig more than 10 feet below curb level causing damage to an adjoining property and the owners of the property where the excavation work is performed will be held strictly liable for such damages pursuant to the Administrative Code of the City of New York Section 25-1031 (b)(1). By confirming a standard of strict liability, the court’s holding certainly increases the risk undertaken by insurance carriers providing property damage coverage to its insureds for excavation work in New York City.