New York Insurance Coverage Law Update

July 1, 2015

New York’s Top Court Rules On Evidence Medical Provider Must Submit To Obtain Judgment Against No-Fault Insurer

The New York Court of Appeals ruled that a medical provider demonstrated prima facie entitlement to summary judgment in a no-fault insurance action by submitting evidence that payment of no-fault benefits was overdue, and that proof of its claim, using the statutory billing form, was mailed to and received by the no-fault insurer. The Court further explained that proof evidencing the mailing must be in admissible form, including by meeting the business records exception to the hearsay rule where applicable. Two judges dissented, stressing that, in their view, neither the statutory and regulatory no-fault scheme nor the Court’s cases concerning the “preclusion” doctrine obviated the health care provider’s burden to also demonstrate entitlement to the benefits sought. The dissent believed that the Court’s ruling increased the risk that insurers will be required to pay fraudulent claims. [Viviane Etienne Med. Care v. Country-Wide Ins. Co.,2015 N.Y. Slip Op. 04787 (N.Y. June 10, 2015).]

New York Court of Appeals Decides That Bond Insuring Against Computer Systems Fraud Did Not Cover Losses From Authorized Users’ Fraudulent Acts

Universal American Corp.’s computerized billing system allowed health care providers to submit claims directly to its system. Universal typically paid the claims automatically, without manual review. After discovering that some claims it paid were for unprovided services, Universal sought to recover its losses under a financial institution bond that insured it against certain losses resulting from computer systems fraud. The New York Court of Appeals decided that the bond did not cover Universal’s losses, reasoning that the bond applied to losses incurred from un-authorized access to Universal’s computer system and not to losses resulting from fraudulent content submitted to the computer system by authorized users.  [Universal Am. Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2015 N.Y. Slip Op. 05516 (N.Y. June 25, 2015).]

CIO’s Fraud Conviction Ends D&O Insurer’s Duty To Pay For His Continued Defense

A company’s chief investment officer (“CIO”) was convicted by a federal jury on charges of bank, mail, and wire fraud; conspiracy to commit bank, mail and wire fraud; and false statements. After the conviction, the insurance company that had issued a directors & officers insurance policy to the company contended that it was no longer obligated to pay for the CIO’s continued defense, particularly the appeal of his conviction. The court agreed with the insurer, noting that the policy contained an exclusion for acts of fraud that was triggered upon a “final judgment” against the insured. The court ruled that once the final judgment for fraud was entered against the CIO, the insurer’s obligation to defend him from those claims ceased, even though an appeal ensued.  [Dupree v. Scottsdale Ins. Co.,2015 N.Y. Slip Op. 05405 (App. Div. 1st Dep’t June 23, 2015).]

Insurer May Not Object To SUM Arbitration Where It Sent Letter Directing Insured Not To Settle To Wrong Law Firm

An insured who was involved in an automobile accident sued the alleged tortfeasor whose insurer offered to settle for the full amount of his policy. The insured, through his attorney, notified his insurer about the offer. The insurer wrote a letter requesting additional information and directing the insured not to settle, but it sent the letter to the wrong law firm. The insured settled with the alleged tortfeasor and then demanded that his own insurer arbitrate his claim for supplementary uninsured/underinsured motorist benefits. The insurer sought to stay the arbitration, arguing that the insured had improperly settled his action against the alleged tortfeasor without its consent, as required by his policy. The court concluded that the insurer’s incorrectly addressed letter was not a timely response to the settlement offer and, accordingly, the insurer was not entitled to a stay of the arbitration. [Matter of Government Empls. Ins. Co. v. Arciello, 2015 N.Y. Slip Op. 05477 (App. Div. 2d Dep’t June 24, 2015).]

Assault And Battery Exclusion Bars Coverage For Negligence Claim Brought Against Bar By Patron Allegedly Hit By Bar Stool During Fight

The plaintiff alleged that she was injured at a bar when an unknown individual struck her in the face with a bar stool during an altercation involving several other patrons. She sued the bar and the property owner for negligence in failing to provide suitable security and continuing to serve alcoholic beverages to visibly intoxicated patrons. The defendants’ insurer disclaimed coverage based upon the policy’s assault and battery exclusion. The court agreed with the insurer, finding that the plaintiff’s claims arose out of the assault and, therefore, fell within the exclusion. That the bar stool allegedly made physical contact with the plaintiff and not the intended target did not negate the conclusion that the act was done with the intent to commit an assault or a battery, the court ruled. [Parler v. North Sea Ins. Co., 2015 N.Y. Slip Op. 05166 (2d Dep’t June 17, 2015).]

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