This and That by Dennis Wade
Obstreperous is an adjective, meaning “noisy and difficult to control.” Some key synonyms are disorderly, undisciplined and disruptive.
Defense counsel and claim professionals confront obstreperous adversaries every day. So what is the best way to deal with uncivil conduct in litigated matters? I can say for sure responding in kind only makes matters worse and lessens your chances of achieving your goals. Worse yet, it risks creating a “record” that may prove embarrassing when your case is later judged by a jurist. Virtually every legal publication, in every other issue, contains an essay stressing the importance of “Civility in the Practice of Law” – – and most judges take civility seriously.
But responding civilly to an obstreperous adversary is easier said than done. But my general rule is this: Disarm with Charm.
The other day, for example, while attempting to conduct an Examination Under Oath – – and before my first question – – the policyholder’s attorney felt compelled to make a speech on the record, explaining what he viewed as the purpose of the proceeding. I listened quietly to his diatribe which I viewed as wholly improper. When he was finished, I began my questioning with a simple, “You stole my thunder.” I then began to go through the preliminaries with the policyholder, giving credit to his attorney if he had rightly characterized the nature of the proceeding. That simple beginning lowered the temperature in the room and allowed me to develop facts relevant and necessary to an ultimate coverage determination.
Likewise, at depositions, I like to think that all of my questions are proper (i.e., not compound, not confusing and the like). But often the obstreperous attorney asserts ill-founded objections. Rather than argue propriety with an adversary looking for a fight, I often say, “You’re right that question came out badly, let me re-frame it.” By acknowledging potential merit in the objection, the adversary is thus disarmed and invariably the re-framed question is allowed – – and you get the information you want.
Disarming with charm is not akin to weakness. Rather it calls to mind Napoleon who purportedly said that in order to rule, “You must put an iron hand in a velvet glove.” It has since become a shorthand phrase for a person who appears civil but is determined, focused and has a hard fist of iron within.
And that’s it for this This and That. If you have any strategies for dealing with the obstreperous adversary, please call or email Dennis.
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In construction, premises, products, in just about every matter that comes across our desks as coverage or defense counsel, our first question is this: “How can we spend OPM?” OPM, you ask? It’s an acronym for “OTHER PEOPLE’S MONEY.”
The first question is does the insured or insurer have indemnification from some other entity. An indemnity agreement is a promise to pay on behalf of someone else for the defense, settlement, judgment or any other obligation.
The next critical question is does the “OP” have insurance to back-up the promise to pay. And, as a corollary, another is whether our client had the good sense to require an Additional Insured Certificate from the OP? But quality risk management requires a further step: Demand sight of the OP’s policy under which the AI Certificate has been issued. What good is it to be an AI if the underlying OP policy has an exclusion for the very risk at issue?
The next question is to analyze the scope of the indemnity. In other words, what triggers the indemnity obligation. This question turns on how the matter is pleaded and is highly fact-specific and way beyond the scope of this post.
Finally, when we press indemnity obligations to OPs, I am always reminded of the classic dialogue from the Godfather in which Consigliere Tom Hagen is trying to persuade fictional producer Jack Woltz to cast the “Frank Sinatra” character into what was to become the film From Here To Eternity:
Tom Hagen:
Mr. Woltz, I’m a lawyer, I have not threatened you.
Jack Woltz:
I know almost every big lawyer in New York, who the hell are you?
Tom Hagen:
I have a special practice. I handle one client. Now you have my number. I’ll wait for your call. By the way, I admire your pictures very much.
Press those tenders. But do so with professional civility (no “horsing” around).
And that’s it for this This and That.
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Fuzzy slippers. Ugly sweaters. You can secure a design copyright or trademark registration for just about anything. Just pay the registration fee. And that is precisely why the insurance industry over, say, the last 15 to 20 years has tried to tighten-up the broad form Advertising Injury Coverage in the standard CGL policy. Have insurers succeeded by excluding “pure” infringement claims and better defining “advertising” in the coverage grant? Well, the answer, as with most attempts to limit the scope of coverage in the modern era, is “yes” and “no.” I have long maintained that– in the age of the internet and desktop publishing–Advertising Injury Coverage is often a trap for the unwary, exposing insurers to millions, literally, millions of dollars in defense fees.
A recent decision by the Second Circuit (December 19, 2018), High Point Design, LLC v. LM Insurance Corporation, Liberty Mutual Insurance Company, Liberty Insurance Corporation nicely illustrates my concern about the meaning of “advertising” in the age of the internet and modern media. In High Point, the Second Circuit recognized merely offering an infringing item for sale may not constitute “advertising” so as to trigger coverage. But, equally, the Circuit recognized that most modern retailers, save perhaps for some mom and pop bodegas, use the internet and other forms of media to market what they are “offering for sale,” and thus, almost by definition, “advertising” is implicated, and thus a duty to defend may be triggered and owing.
Now let’s get to the facts. The Liberty CGL policy defined “personal and advertising injury” to include an “injury…arising out of…[i]nfringing upon another’s copyright, trade dress or slogan in [High Point’s] advertisement.” “Advertisement” was defined as “a paid announcement that is broadcast or published in the print, broadcast or electronic media to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters.” The Liberty CGL wording excluded coverage for:
“Personal and advertising injury” arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights or out of securities fraud. Under this exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your “advertisement.”
However, this exclusion does not apply to infringement, in your “advertisement,” of copyright, trade dress or slogan.
As my opening suggests, the product at issue was fuzzy footwear. Buyer’s Direct manufactured “Snoozie” slippers and they sent High Point a cease and desist letter claiming that High Point’s sale of “Fuzzy Babba” slippers infringed their patented design. High Point then brought a declaratory judgment action seeking a ruling that no infringement had taken place. And here is where the trouble began. Buyer’s Direct asserted a counterclaim against High Point contending the infringement also involved the very “offering for sale” of the infringing footwear.
With the service of the counterclaim, High Point sought a defense from Liberty premised on the notion that the “offering for sale” language in the counterclaim triggered a defense obligation. Liberty refused to pick-up the defense, reasoning that the wording of the counterclaim only alleged injury for infringement, not advertising. The District Court ruled against Liberty, finding that Advertising Injury coverage was indeed triggered because of the “offered for sale” language coupled with discovery demands in the underlying litigation in which Buyer’s Direct sought discovery of the advertising materials High Point used in connection with the slippers. The District Court (Katherine B. Forest, J.) ruled that Liberty owed High Point a defense from day one of the litigation.
The Second Circuit agreed with Judge Forest. Yet, the Circuit found that the defense obligation was triggered only after High Point received discovery demands aimed at determining how the offending slippers were advertised. As Judge Newman put it in his concurring opinion:
From the universe of all such claims, it covers only claims for slipper advertising that infringes another product’s trade dress. It is arguable that Liberty’s liability for defense costs began not when Liberty became aware of [Buyer’s Direct] document demand, but only later when High Point assembled its response to the document request and brought to Liberty’s attention particular ads depicting the Fuzzy Babba slippers. Such ads, viewed in light of the Policy’s coverage of liability for trade dress infringement in an advertisement, would have shown Liberty that its insured faced at least a reasonable risk of liability to [Buyer’s Direct].
The takeaway from this bitterly fought slipper contest is that insurers must be wary of bottoming decisions on the pleadings alone in IP contests. Claims for the sale of infringing products in the modern era rarely involve the simple act of “offering for sale.” Care must be taken to ascertain whether the offending product was “advertised” within the meaning of the policy definition–with an awareness that the advertising definition will be liberally construed.
And that’s it for this This and That. If you admit to wearing fuzzy slippers or simply wish to discuss this troubling case further, please call or email Dennis.
Read MoreUncharted Waters – Hurricane Coverage Issues
With Harvey, Irma, and Maria roiling the insurance markets, we attach an article, first published by the New York State Bar Association, addressing the vexing wind and water issues that arise from such catastrophes. WCM is available to answer any questions you may have related to the weather calamity that is 2017. Please call Dennis or Mike with any queries. Read MoreThis and That by Dennis Wade
What do Amazon and Insurance have in common? The answer, I suggest, is this: Everything and Nothing.
But first I digress. For many years, the desk staff at my Manhattan apartment building really had but one job: To be pleasant and sometimes helpful to tenants coming and going. Now the desk staff has become servants of Amazon as each day UPS drivers dump hundreds of packages at the front desk: Shoes, toys, diapers, clothing, furniture…everything “brick and mortar” retail once sold. And now that Amazon has moved into fresh produce and groceries with the purchase of Whole Foods, the anxiety of the desk staff has increased measurably.
With that digression in mind, recently, I attended an international insurance conference in Rome, Italy. There, one panel of insurance brokers and underwriters discussed how the marked preference of millennials for internet shopping has changed and is changing the way insurance is sold.
With the advent of online insurance applications, the brokers are worried about becoming irrelevant; and, the underwriters are worried that fraud, already a $40 billion dollar industry problem, will rise to even greater levels. But some panelists argued that Watson-like cyber brains and sophisticated algorithms would eventually solve short-term blips in online insurance applications and claim service.
Needless to say, save for the inevitability of change in the way insurance is sold and claims resolved, no clear answers emerged. The only consensus seemed to be this: Routine risks such as auto and basic homeowners would increasingly be written and resolved over the internet; while sophisticated commercial and high net worth risks require and will always require human judgment to assess whether the risk ought to be accepted and if so at what premium. And, of course, boots on the ground and perhaps lawyers would be required for complicated matters.
The theme that ultimately emerged from the discussion is that human expertise in risk assessment and claim service still matter and add value no cyber network, however sophisticated, can match. But even with that positive realization, the clear message to insurance professionals and lawyers alike was to embrace technology to achieve greater efficiency and profitability. In sum, the promise of the mantra– “There’s an App for that”–may soon become more than Silicon Valley hype in the insurance world. And we have to be ready to meet it.
And that’s it for this This and That. If you have any thoughts (or gripes) about how the internet has changed the way insurance is produced, claims are managed, or lawyers employed in our digital world, please call or email Dennis.
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On October 31, 2017, Halloween, at about 3:15 p.m., I left our Maiden Lane office to walk to the World Financial Center where I was scheduled to meet with a client. About ten minutes into my walk, my paralegal Suzi called me, “Dennis, be careful, I saw on the news scroll something about a “mass shooting near Chambers Street.” “Thanks, I’m fine,” and I kept walking west. When I reached West Street (the Westside Highway to New Yorkers), I saw a white delivery van splayed across the Southbound lane with its front end crushed to the windshield. Helicopters, sirens, EMTs, all traffic in every direction, stopped. I crossed the highway and continued to my appointment perhaps 400 yards from where, I later learned, a terrorist had ended his murderous rampage down the Westside Esplanade, a delightful path along the Hudson for all to enjoy. But those 400 yards seemed a world away from the carnage I would later see on the evening news. I think New Yorkers have found the best way to fight terror. It is RESILIENCE; a will to keep going in the face of adversity. Although by 5:00 p.m. most of New York knew what had happened, life went on, undaunted. In my neighborhood, literally blocks from where the attack took place, parents took their costumed children trick-or-treating; the fabled Halloween parade took place as scheduled; and all seemed strangely normal. In the ancient world, the proudest boast was “civis Romanus sum” (I am a Citizen of Rome). In essence, the phrase was a declaration that the individual was entitled to the full protection of the Empire if their liberty was challenged. After the events of this Halloween, I proudly boast “I am a Citizen of New York.” And that’s it for this This and That. Read MoreThis and That by Dennis Wade
In American parlance a “cake walk” is an absurdly or surprisingly easy task. But this December when the United States Supreme Court hears Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission, the challenge will be anything but a “cake walk.” In fact, to decide the case, SCOTUS may have to decide whether a “cake” qualifies as a work of art. The legal fight started when Colorado baker Jake Phillips refused to create a specialty cake for a same sex couple’s forthcoming marriage, claiming such a task would be contrary to his deeply held religious beliefs. This refusal led to a complaint before the Colorado Civil Rights Commission charging discrimination based on sexual orientation, a clear violation of the Colorado’s anti-discrimination law. The Commission agreed with the aggrieved couple and so did the intermediate Appellate Court, finding that supplying a cake did not constitute a “message” in relation to the propriety of same sex marriage. It was, well, like selling a hamburger or some other commodity. The Colorado Supreme Court refused to hear the case but, after much discussion, SCOTUS agreed to hear the matter. The case, which has a cake at its center, pits the 14th Amendment (equal protection under the law) against the 1st Amendment (the sanctity of religious belief and expression). On the surface, it would seem, regardless of the high court’s spectrum, from liberal to conservative, that there is no right to refuse to sell a product in a public place premised on bias or discriminatory animus. But here, the baker, Jake Phillips, contends that his cakes are works of art, and that he ought not be compelled to create a work of art, a specialty cake, that violates his religious beliefs. Anything else in the bakery, already made, is up for sale to anyone, Phillips claims. But the line Phillips wants to draw is the right to refuse to create a work of art, a cake. Scores of amicus briefs have been submitted aimed at proving that a cake can indeed be a work of art. One brief is filled with vivid color photos of custom cakes in various exotic shapes. So what does the Masterpiece cake have to do with insurance issues, the usual subject of my blog? It vividly illustrates how important decisions often turn, not on legal principles, but on vexing questions, bordering on the metaphysical (Is a loss fortuitous? And, yes, can a cake qualify as a work of art?). My prediction: SCOTUS will somehow “ice over” (ouch!) the cake as art issue and affirm the ruling below 5/4, with Justice Anthony Kennedy writing the majority opinion. And that’s it for this This and That. And to the bakers of the world, amateur and professional, art aside, I like chocolate, lots of it. Read MoreDennis Wade Speaks at Federal Bar Association's Art Law & Litigation Day
Dennis Wade is co-chair of the Federal Bar Association’s Art Law & Litigation Seminar in Miami, Florida on December 6, 2017 (to coincide with the launch of Art Basel). Dennis’s panels include Protecting the Art Market: Fakes, Forgeries & Freeports and Wynn’s Elbow: The Art of Dealing With Damage to Art. Read MoreThis and That by Dennis Wade
Of late, insurers who write crime and fidelity coverage have been “spooked” by “spoofing” scams in which bad guys use spoofed emails to trick company executives to wire transfer funds to phony accounts. Curious about this phenomenon, I Googled “How do you spoof an email?” It’s shockingly easy as I learned from watching You Tube how-to videos and reading scores of articles that popped from my simple query. And the very ease of spoofing is at issue in Medidata Solutions, Inc. v. Federal Insurance Company, a matter about to be heard in the Second Circuit. In that case, Federal wrote “Funds Transfer Fraud” and “Computer Fraud” coverage. In 2014, Medidata sustained a loss when it wire transferred close to $5 million dollars from its account at Chase Bank to an account in a Bank in China that proved to be the account of a fraudster and not the party that Medidata thought it was paying. In the coverage contest in the District Court, both sides agreed that spoofed emails, seemingly coming from the plaintiff’s CEO, tricked authorized employees to trigger the wire transfers. Federal argued its coverage was limited to third party hacking or otherwise a physical intrusion into the company’s computer system or bank account. But Federal contended that simple spoofing scams – – resulting in authorized transfers by the insured itself – – did not fit within the embrace of its coverage. The District Court disagreed with Federal’s reading of the coverage grant, finding the wording wide enough to embrace a scheme in which a spoofed email prompted an employer to trigger a wire transfer. That this issue is central to Crime and Fidelity insurers is made plain by the amicus brief submitted by The Surety & Fidelity Association of America (SFAA), an organization that drafts fidelity and crime insurer policy forms. See, Medidata Solutions, Inc. v. Federal Insurance Company, Brief of Amicus Curiae Supporting Reversal. In essence, SFAA argued that if the Circuit accepts the ruling below – – that a simple spoofed email scam triggers computer fraud coverage – – the availability of such coverage will likely either become too expensive or too burdensome because of cyber security requirements likely to be imposed by insurers. The outcome of this contest, whether for against Federal, will no doubt prompt wording revisions in crime and fidelity policies – – and so it is a case well worth following. But as I reflect on this post, I find it a bit scary that a simple Google search explained in great detail how to perpetrate a fraud. I thought more “phishing” would be required. Look that term up if you are curious or if you want more information on how to commit a cyber-crime. And that’s it for This and That.”Read MoreThis and That by Dennis M. Wade
As a student of appellate advocacy, I love to argue, attend, watch, and listen to oral arguments because I am convinced they do in fact shape the outcome of the ultimate decision. The Supreme Court heard oral argument in Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission on December 5, 2017. The argument lasted for more than an hour and consumed 108 pages of transcribed cut and thrust. In my post of November 9, 2017, I predicted that SCOTUS would somehow “ice over” the cake as art issue and affirm the ruling of the Colorado Civil Rights Commission which ruled that baker Jake Phillips’s refusal on religious grounds to create a specialty cake for a same sex couples’s forthcoming marriage violated Colorado’s anti-discrimination law. The argument, with sharp questions coming from both liberal and conservative justices, I believe, proves the accuracy of my prediction. Phillips’s lawyer was asked to draw fine distinctions between, for example, a baker, a florist, a make-up artist, and a chef. But I thought the most telling question came from Justice Alito, followed by Justice Breyer. And it was a question central to the warning I give to all of my colleagues who are preparing for oral argument: Be Wary Of The Concessions You Are Asked To Make. Because Justice Alito’s question with its implicit request for a concession is so telling, I quote it in full below.With one question – – and with the concession made, it seems to me that Phillips’s lawyer revealed, albeit unintentionally, that his client’s refusal to bake a specialty cake for a same sex couple had to do with the identity of the same sex couple – – and not the artistry or the message in the cake he was asked to create. In other words, having conceded that an architect under Colorado’s law could not refuse to create a design for a same sex couple, the credibility of the argument collapsed like a cake for want of the proper amount of yeast, especially when the Court baked Michelangelo and Mies van der Rohe into the cleverly designed query. In sum, having read all of the briefs and having studied the argument, I do not think SCOTUS is going to use this controversy to decide what constitutes a protected message under the First Amendment or indeed whether a cake may qualify as art. And that’s it for this This and That – – and for 2017. Best wishes for a Joyous Holiday Season and a Happy & Healthy New Year.Read More“Justice Alito: What would you say about an architectural design; is that entitled to – – not entitled to First Amendment protection because one might say that the primary purpose of the design of a building is to create a place where people can live or work?
Ms. Waggoner: Precisely. In the context of an architect, generally that would not be protected because buildings are functionable, not communicative.
Justice Alito: You mean an architectural design is not protected?
Ms. Waggoner: No. Architect – – generally speaking, architectural would not be protected.
Justice Breyer: So in other words, Mies [van der Rohe, a famous modernist architect] or Michelangelo or someone is not protected when he creates the Laurentian steps, but this cake baker is protected when he creates the cake without any message on it for a wedding? Now, that – – that really does baffle me, I have to say… “[bracketed reference, mine].”