August 17, 2020

New York: Insurance Coverage

NEW YORK: Insurance Coverage
by Robert A. Fitch and Derek E. Barrett

On July 10, 2010, Wieslaw Kantorowicz was injured when he fell from a roof on which he was working at a project in Long Beach New York Middle School. The owner of the property—the Long Beach City School District—had hired our client, an engineering firm, as its construction manager. The plaintiff, Kantorowicz, was employed by a contractor, which had also been engaged by the School District, named Milcon Construction.

Kantorowicz sued the School District as the owner of the property and our client under the New York State Labor Law.  Section 240 of the Labor Law makes the owner and construction manager absolutely liable for plaintiff’s injury.  However, under the terms of the contract between Milcon Construction (Kantorowicz’s employer) and the District, Milcon was obligated to name both the District and its construction manager, our client, as additional insureds on its policy of insurance. The contract also required a $1 million primary policy as well as $10 million excess.

Milcon’s carrier, Ironshore Insurance, picked up the defense of the School District, which promptly dropped Milcon as a third-party defendant. On behalf of our client, we tendered its defense to Ironshore, but Ironshore never responded. We then impleaded both Milcon and Ironshore as third-party defendants.  Discovery progressed and settlement was discussed. Plaintiff’s demand was $3 million. However, because of an adverse ruling by the court, severing our client’s case against Milcon, the attorneys for School District demanded one third of the settlement from our client, or $1 million, relying on a provision in the contract between the District and our client that provided for full indemnity from it to the District if our client was found negligent. Given certain deposition testimony, this was a distinct possibility. Thus, a verdict could have resulted in our client’s professional liability carrier paying not just $1 million, but the entire amount of the judgment.

The Rawle & Henderson attorney handling the coverage issue, Derek E. Barrett, filed a declaratory judgment action against Ironshore, arguing that Ironshore did not timely respond to our client’s tender and thus, under the owner contract with Milcon it owed our client full defense and indemnity. The attorneys for Ironshore argued that Ironshore was only one of several policies available and that the court could not rule that Ironshore was responsible for our client’s defense and indemnity without analyzing the role of the other policies, including our client’s professional liability policy.

Generally, New York has followed what is called “horizontal exhaustion”; that is, all primary policies available to a party must be used before an excess policy pays.  Here, we argued that our client was entitled to all of Ironshore’s coverage. Ironshore also argued that there was a question as to our client’s active negligence, which should further preclude the court from ruling in our client’s favor.

In a sweeping decision, the court ruled that our client was entitled to full defense and indemnity by Ironshore.  In addition, the court totally rejected any claim that other policies needed to be exhausted before Ironshore paid its policies.  The court also rejected the argument that our client’s potential negligence precluded the court from ruling on Ironshore’s coverage obligation to our client. Rather, the court held that our client’s negligence, if any, was absolutely irrelevant to their right to coverage.

Indeed, the court quoted from Ironshore’s own policy, which stated that the Ironshore coverage was primary to all other coverage and that Ironshore would not look to other policies for their obligation to our client. In a subsequent judgment signed by the court, the court directed Ironshore to cover our client to the “full extent of its available coverage”, defeating any attempt by Ironshore to claim that our client was only entitled to its primary $1 million policy, if at all. 

Partner Robert A. Fitch prepared the case for trial and went to the trial court with the favorable underlying coverage decision on appeal by Ironshore, the School District arguing active negligence against our client and plaintiff’s counsel still pursuing the §240 Labor Law claim.  We took a firm position that we would win the case on liability and were entitled to the excess coverage without the professional liability policy for our client being excess over the Ironshore primary policy.  The case settled just prior to jury selection for $2.7 million, with our client’s professional liability carrier paying nothing. 

Savin Engineers P.C. v. Ironshore Specialty Insurance, Sup. Ct. Nassau County, Index Number 8611, January 29, 2013

Robert A. Fitch is the resident partner in the New York office. He concentrates his practice in the defense of architects and engineers, construction, medical and oral surgery malpractice claims, and commercial motor vehicle litigation. He received his undergraduate degree from Syracuse University and his J.D. from Syracuse University College of Law. He is admitted to practice in New York since 1974, as well as in federal courts in Southern, Eastern and Northern Districts of New York and the Second Circuit Court of Appeals. He has tried over 100 cases to verdict and is a member of the Defense Research Institute, Federal Bar Council, PIAA and Trucking Industry Defense Association. He was selected as a New York Metro Super Lawyer by the publishers of Law & Politics in 2013. He has a peer review rating by Martindale-Hubbell of AV (the highest).

Bob can be reached directly at: 212-323-7060 •

Derek E. Barrett, Counsel to the Firm in Rawle & Henderson’s New York office, is an active trial lawyer whose practice is concentrated in the areas of commercial motor vehicle litigation, construction and premises liability as well as medical and dental malpractice. Mr. Barrett obtained his law degree from New York Law School in 1991. He graduated with a B.S. degree from Queens College of the City University of New York. He is admitted to practice in New York and New Jersey, and before the U.S. District Court for the District of New Jersey and the United States District Courts for the Northern and Southern Districts of New York.

Derek can be reached directly at: 212-323-7077 •

PENNSYLVANIA: Appellate—Superior Court Affirms Venue Transfer
by Carl D. Buchholz, III

In a case of significant importance to a defendant’s ability to challenge the forum non conviens filing of a plaintiff’s lawsuit in Philadelphia County that has no connection with Philadelphia, and is only filed in Philadelphia for potential inflated settlement/verdict, the Pennsylvania Superior Court recently affirmed the trial court’s transfer of a case from Philadelphia County to rural, conservative Adams County, where the trial court had found that trial in Philadelphia County would be oppressive for one of the named defendants.

Plaintiff George Stoner was injured while disassembling a pressure washer for his employer, Swope Salvage, located in Adams County, Pennsylvania.  Plaintiff was severely burned after fuel and/or vapors that had been left in the pressure washer ignited.   Plaintiff sued Penn Kleen, Inc., on the ground that it had been instructed by Swope Salvage prior to the accident to empty all fluid from the pressure washer before delivering it to Swope Salvage for disassembly and salvage.  Plaintiff also sued several entities collectively referred to as the “Nilfisk defendants” entities located in Minnesota and Denmark, which had allegedly manufactured the pressure washer.  Rawle & Henderson represented the “Nilfisk defendants.”

The evidence of record showed the following with regard to the parties:

  • The plaintiff resided in York County, Pennsylvania;
  • Defendant Penn Kleen’s principal place of business was located in York County, Pennsylvania;
  • The “Nilfisk defendants” were entities located in either Minnesota or Denmark; and
  • Defendant Penn Kleen only had four employees, all of whom resided in York County, and all of whom had information relevant to the circumstances regarding plaintiff’s allegations.

Penn Kleen filed a forum non conviens motion to transfer the case from Philadelphia to Adams County.  Under Pennsylvania law, a defendant seeking transfer from the plaintiff’s chosen forum must establish that the chosen forum is oppressive or vexatious to that defendant.  In support of its motion, Penn Kleen submitted affidavits from its four employees which alleged that trial in Philadelphia, which would be more than two hundred and five miles round trip, would force Penn Kleen to shut down its business during the trial, resulting in a loss of income to the business, as well as each employee.

The trial court considered the evidence of record and concluded that defendant Penn Kleen “had established through detailed information on the record” that plaintiff’s chosen forum was oppressive and vexatious to Penn Kleen and its employees and granted Penn Kleen’s motion to transfer the case to Adams County.

On appeal to the Pennsylvania Superior Court, plaintiff’s counsel argued that the affidavits of Penn Kleen and its employees regarding the alleged hardship that trial in Philadelphia would present only established evidence of “inconvenience”, not oppressiveness or vexatious.  Plaintiff’s counsel also argued the trial in Adams County would also cause the same disruption to the business of Penn Kleen and result in the same economic hardships to Penn Kleen and its employees.  Lastly, plaintiff argued that Adams County would be more “oppressive and vexatious” to the representatives of the Nilfisk defendants who would be needed at trial since the airport they would fly into is located in Philadelphia, making travel and trial in Adams County vexatious and oppressive to employees. 

Carl Buchholz, Chair of Rawle & Henderson’s Appellate Section, represented the Nilfisk defendants in the appeal before the Superior Court.  Most of the prior recorded decisions from the Pennsylvania Supreme Court and Pennsylvania Superior Court regarding forum non conviens transfers dealt with cases where the appellate courts found that the evidence did not establish the requisite “oppressiveness and vexatious” required to disturb a plaintiff’s chosen forum; the prior appellate opinions did not set forth what evidence was necessary to establish the necessary “detailed information on the record” to establish oppressiveness and vexation.

Following oral argument, a three-judge panel of the Superior Court issued an opinion agreeing with the trial court that the defendants’ evidence constituted “detailed information on the record” to establish the oppressiveness standard required for a forum non conviens transfer.  The Superior Court also rejected plaintiff’s contention that the alleged inconvenience of Adams County as a forum to the Nilfisk defendants was a factor to be considered where the Nilfisk defendants made no such claim of inconvenience.

Although the Superior Court’s initial Opinion was issued as “Non-Precedential” the defendants filed a joint motion for the Superior Court to reissue its Opinion as “Published” so that it could be cited as precedential authority in future cases.

Stoner v. Penn Kleen, Inc., et al., 2012 PA Super. 218 (10/5/12)

Carl D. Buchholz, III, is Chair of the Appellate, Maritime and Insurance Coverage Sections. His federal appellate practice includes an argument before the United States Supreme Court, as well as numerous arguments before the U.S. Court of Appeals for the Third Circuit. His state appellate practice includes seven arguments before the Pennsylvania Supreme Court, as well as numerous arguments before the Pennsylvania Superior Court and Commonwealth Court. In 2006, the Pennsylvania Supreme Court appointed Carl to the Disciplinary Board of the Supreme Court of Pennsylvania. In 2010, the Pennsylvania Supreme Court designated Carl as Chair of the Disciplinary Board. He graduated from Muhlenberg College in 1967 and Villanova Law School in 1970 where he was a member of the Villanova Law Review and graduated with honors.

Carl can be reached directly at:  (215) 575-4235 •

The Old One – Philly firm’s history dates back to Ben Franklin

The February 2014 issue of the ABA Journal includes a feature story on  Rawle & Henderson, recognizing us as the oldest law practice in the United States. “The Old One: Philly firm’s history dates back to Ben Franklin” chronicles Rawle & Henderson’s history, which dates back to 1783.  The ABA Journal article is available on Rawle & Henderson’swebsite.


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