In the ancient times (i.e. before email), there was little doubt about how a person evidenced their intent to be bound by a written agreement – he or she manually signed the document. This resulted in what is known as a “wet signature” (the wet part being the ink from a pen, as signing in pencil, crayon or blood had, over the years, become frowned upon in the legal community). Then along came email, and while it has been in general use for two decades or so by now, courts today are still resolving its application to the law.

In a recent case, In re Misty G. O’Connor (BK 18-11779), the US Bankruptcy Court for the Western District of New York was presented with a case requiring it to determine whether an email could be “signed” by the sender without the existence of any wet signature (either an original or a PDF or other electronic version).

In December 2016, Misty O’Connor formed a new company, Misty Shores Events, LLC, to operate a wedding venue then under construction on the misty shores of Lake Erie. On the (what turned out to be) erroneous assumption that the facility would soon be ready to begin sending newlyweds off in wedded bliss, the LLC started scheduling wedding dates and accepting deposits, including a $1,000 deposit from Craig Markham, whose daughter booked the venue for her June 16, 2018 wedding.

Unfortunately for all concerned, the venue that Misty Shores Events planned to open never saw the light of day, and, to make matters worse, failed to return any of the ten deposits it received. In March of 2018, in an effort to make amends, Ms. O’Connor sent an email to Ms. Markham, in which she wrote that she was “personally trying to pick up the pieces of my business not opening” and that she “agreed to pay each couple monthly payments until their full deposited amount is paid in full.” As the reader can likely surmise from the very existence of this blog article, Ms. O’Connor failed to return Mr. Markham’s deposit.

A couple of months after sending the email, Ms. O’Connor filed for personal bankruptcy. The Chapter 7 trustee later issued a notice to Ms. O’Connor’s creditors that he had recovered assets and set a deadline for filing proofs of claim. Mr. Markham timely filed his claim for $1,000. Notwithstanding that Ms. O’Connor included the customers who paid deposits to LLC (including Mr. Markham) in her personal schedule of unsecured creditors, the trustee rejected Mr. Markham’s claim, taking the position that the return of the deposit was the obligation of the LLC (which had no assets) and not Ms. O’Connor (who did).

This brings us to the point of this blog article. The Statute of Frauds, as set forth in New York General Obligations Law, requires certain matters to be in writing in order to be enforceable, including guaranties. The relevant part of the law provides:

“Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking . . . [i]s a special promise to answer for the debt, default or miscarriage of another person.”

In particular, the law requires not only that the promise be in writing, but that it be subscribed (signed) by the party to be charged. Was Misty’s email a writing signed by her, such that she was personally bound by it? Or would the absence of her actual signature on any document prevail? In this case, the Court had little difficulty in finding that the email satisfied the Statute of Frauds.

The first issue to decide was whether the email constituted a “writing.” Back in the early days of email (namely 2000), New York adopted the Electronic Signatures and Records Act (the “Act”). Under the Act, an electronic record, such as an email, “shall have the same force and effect as those records not produced by electronic means.”  As a result, the Court held that “the email enjoys the same status of a writing in the form of a letter etched with ink on paper.”

Having quickly disposed of the “is it a writing” issue, the Court then turned to the “was it subscribed” issue. In this respect, the manner in which Ms. O’Connor concluded her email made this a particularly easy call for the Court.

Those of you who recall the days when people sent letters will be familiar with the process of manually signing your name at the end of the letter, either by itself or above your typed name. In this case, Ms. O’Connor provided the electronic equivalent of a wet signature – she typed her first name above her full name at the end of the email. This quite easily satisfied the requirements of the Act, which provides that “unless specifically provided otherwise by law, an electronic signature may be used by a person in lieu of a signature affixed by hand. The use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand.” The Act defines an electronic signature as one “an electronic sound, symbol, or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record.” By typing “Misty” above her full name, Ms. O’Connor cut through the fog of whether the email was subscribed by her, and the Court overruled the trustee’s objection to Mr. Markham’s claim.

There are a number of lessons that can be learned from this case. First, above all else, be very careful when booking one of your children’s most meaningful days at a location that hasn’t opened for business. Someone has to be the first event at a new venue, but it doesn’t necessarily have to be you. Second, if you’re dealing with a start up business, make sure someone with some resources has agreed, at the outset, to at least return any deposits and other sums paid if your event doesn’t happen. And third, if you’re going to go through the trouble of forming a venture for the purposes of protecting yourself from personal liability, don’t provide after the fact guarantees if you can help it.



Email is great, isn’t it? You can save paper and tons of time. But did you know that a simple click of the “send” button may bind you to a settlement?  Litigants and their counsel learned the hard way this month when the First Department reversed the lower court’s decision in Matter of Phila. Ins. Indem. Co. v. Kendall.

In Matter of Phila. Ins. Indem. Co. (Sup. Ct. N.Y. Cty., Index No. 657200/19), an individual plaintiff brought a claim under the Supplemental Underinsured Motorist (SUM) benefit provision in her employer’s automobile policy with Philadelphia Insurance Indemnity Company. The claim went to arbitration and, after a hearing, the arbitrator found in the individual’s favor to the tune of $975,000. However, neither counsel received the arbitrator’s decision. So, they continued to negotiate.

A few days later, the insurance company offered $400,000 to settle. The individual’s counsel responded, and that email ended with a salutation, followed by his name and contact information. But it was unclear whether this information was typed purposefully or generated by a prepopulated block.

Before the individual signed the settlement documents, her counsel received the arbitrator’s decision. The parties then proceeded to court. In determining that the email acceptance of the lesser amount was not enforceable, the lower court held that: (i) it was unclear whether her attorney retyped his name on his email agreement to the settlement in satisfaction of “subscription” under CPLR 2104; and (ii) the email correspondence did not contain all of the material terms of the settlement.  This blog focuses on the “subscription” issue.

What is CPLR 2104?

CPLR 2104 provides in pertinent part that “[a]n agreement between parties or their attorneys relating to any matter in an action . . . is not binding upon a party unless it is in a writing subscribed by him or his attorney . . . .”

 Why Did the First Department Reverse the Decision?

In reversing the lower court, the First Department drew an important distinction between typed signatures and prepopulated signature blocks. Specifically, they held that the “distinction between prepopulated and retyped signatures in emails reflects a needless formality that does not reflect how law is commonly practiced today.  It is not the signoff that indicates whether the parties intended to reach a settlement via email, but rather the fact that the email was sent.” Matter of Phila. Ins. Indem. Co. v. Kendall, ___AD3d___, 2021 NY Slip Op 04284, *3 (2021).

This finding, the First Department held, was in line with relevant precedent, including  Forcelli v. Gelco Corp. (109 A.D.3d 244, 972 N.Y.S.2d 570 (2d Dep’t 2013)), which stands for the proposition that the retyping of a name is required for an email to be “subscribed” and therefore a binding stipulation under CPLR 2104.

By issuing this latest decision, the First Department then effectively clarified and updated this precedent to conform with the times. It found that the settlement at issue was valid because the transmission of the email, not whether the sender’s email signature was retyped above the sender’s prepopulated block containing contact information at the end of the email, was what determined that the settlement stipulation was subscribed for purposes of CPLR 2104.

The Court mentioned the concern raised by other courts (including the Second Department) about the casual nature of email, and how emails are sometimes sent by accident or with regret after transmission.  However, it left that issue for another day, since the Court was not faced with an attorney who inadvertently sent an email. (They did note that “[c]ertainly, a part of that showing will be prompt action to rectify the error, just as prompt action strengthens an assertion of inadvertent disclosure.”)

To that same end, the Court was sure to qualify its decision, stating that,“[w]hile we jettison the requirement that a party or a lawyer retype their name in email to show subscription, that does not mean that every email purporting to settle a dispute will be unassailable evidence of a binding settlement.”  Matter of Phila. Ins. Indem. Co., 2021 NY Slip Op 04284, *4.  First, an email from an attorney’s account is presumed to be authentic, but that is a rebuttable presumption.  Id.  Second, an email settlement must, like all enforceable settlements, set forth all material terms. Id.

What are the Takeaways?

According to the First Department, the Court of Appeals has not opined on whether emails can satisfy CPLR 2104.  Matter of Phila. Ins. Indem. Co., 2021 NY Slip Op 04284, *2.  Until such time it does, make sure you type (or retype) your name at the end of the settlement stipulation email even if you have a prepopulated contact block; remember that intentionally transmitting an email containing the material terms of the agreement will likely determine that the settlement was subscribed for purposes of CPLR 2104; and be sure to update the arbitrator (or the court) when you are continuing settlement negotiations while a decision is pending.



As we settle into the new “normal”, the body of case law concerning commercial rent defaults during the COVID-19 pandemic continues to grow. This blog discusses just some of those cases as they relate to commercial tenants’ reliance on impossibility of performance as a defense to paying rent under their leases because of COVID-19 related economic downturns.

One such recent decision was rendered by Hon. James P. McCormack, J.S.C. (Supreme Court, Nassau County), in C&B Realty #3, LLC v. Sunstar Salon Services, Inc., d/b/a Cactus Salon, et al. (Index No. 613285/2020) on a commercial-landlord’s motion for: (1) summary judgment on the issue of defendants’ liability for breach of the lease; and (2) summary dismissal of the defendants’ counterclaim for a judgment declaring that they were excused from their monetary obligations under the lease and guaranty based on the doctrine of impossibility of performance (among others) for the period March 2020 through the end of all restrictions on their operating capacity.

We all remember that Governor Cuomo’s Executive Order 202.7 forced non-essential businesses, such as hair salons, like C&B Realty #3’s tenant, Sunstar, to close (effective March 21, 2020).  It was not until June 2020 that the salon was authorized to re-open at a limited capacity, and with the added expense of extra cleaning and sanitizing protocols.  The salon made some partial payments after re-opening but did not pay according to the terms of the lease.  Thus, in November 2020, C&B Realty #3 (the “Landlord”) commenced its breach of contract action against the hair salon tenant and the personal guarantor of the lease based on the tenant’s default on its obligations to pay rent since March 2020.  The Landlord’s motion followed.

In its decision, Judge McCormack cited a decision from the New York Supreme Court in Cab Bedford LLC v. Equinox Bedford Ave, Inc., 2020 N.Y. Slip Op. 34296(U) (Sup. Ct., N.Y. Cty. Dec. 22, 2020) (Bluth, J.) as the most relevant case the court could find, which involved a commercial landlord suing its gym tenant for breach of the parties’ lease.  There, the gym argued, among other things, that the COVID-19 pandemic rendered it impossible for the gym to pay its rent obligations under the lease since they were shut down.  Judge Bluth disagreed, finding that the doctrine of impossibility “has no applicability here and does not raise an issue of fact.  Defendants ran an ‘upscale gym’ for many years prior to the Covid-19 pandemic and, after some painful months, are not permitted to operate (although at a limited capacity).  The subject matter of the lease was not destroyed.  At best, it was temporarily hindered. That there are more hurdles to running the business is not a basis to invoke the impossibility doctrine.” Cab, 2020 N.Y. Slip Op. 34296(U) at *5.

Judge McCormack discussed another decision reached by Judge Bluth (on a motion for summary judgment) in 35 East 75th Street Corp. v. Christian Louboutin L.L.C., 2020 N.Y. Slip Op. 34063(U) (Sup. Ct., N.Y. Cty. Dec. 9, 2020) (Bluth, J.), where she found that the subject matter of the contract, the physical location of the retail store, was still intact and the tenant (a retail store) was able to sell its products. “The issue is that it cannot sell enough to pay the rent.  That does not implicate the impossibility doctrine.” 35 E. 75th St. Corp., 2020 N.Y. Slip Op. 34063(U) at*5.  Judge Bluth also noted that the lease contained a force majeure clause that specifically provided that the tenant would not be excused from having to pay rent, therefore contemplating financial disadvantage.  Instead, it purported to extend the period of performance for whatever the delay may have been.  See id.

Still, Judge McCormack felt that the case before him was different from the cases before Judge Bluth.  The C&B lease contained the following provision: “Subject to the limitations herein set forth, the Demised Premises shall be used solely as a first class, high quality hair salon and for no other use or purpose whatsoever . . . . ”  In the court’s view, this provision meant that the tenant did not just rent the space, but they rented the space with the requirement that it only run a hair salon out of it.  Due to the Executive Order’s prohibition on operations, from March until June 2020, it was impossible for the tenant to operate its hair salon, which was the only permissible use of the space under the lease.  However, once the tenant could operate the salon at 50% capacity in June 2020, its operations were no longer impossible although they may have been extremely difficult. “The impossibility of performance doctrine does not apply to ‘extremely difficult.’” Judge McCormack granted the Landlord’s motion for summary judgment on the issue of liability except for the months of March – June 2020. As to that period, Judge McCormack ruled that there were issues of fact requiring a trial as to the tenant’s impossibility of performance defense.

Another case that comes to mind is Ten W. Thirty Third Assoc. v. A Classic Time Watch Co., Inc., where on a motion to dismiss Judge Bluth held that a decline in a tenant’s business (a watch company) “does not constitute frustration of purpose or render its performance under the contract as impossible” and the court “cannot just rip up a contract because a tenant faced financial hardship due to the pandemic”.  Ten W. Thirty Third Assoc. v. A Classic Time Watch Co., Inc., 2021 N.Y. Misc. LEXIS 1589, 2021 NY Slip Op 31137 (U) (Sup. Ct., N.Y. Cty. April 9, 2021) (Bluth, J.).

It also appears that Judge Bluth considered the impact of the pandemic on landlords in her decision, stating that:

“[t]he Court recognizes that the pandemic has decimated businesses around Manhattan and throughout the country. But that does not mean that the Court can ignore defendants’ obligations. The Court must also consider the rights of the other contracting party, which must still maintain buildings and pay taxes even though the Tenant has not paid rent for months….” Id. at *3.

These decisions, as well as others, should continue to remind landlords and tenants that the terms they negotiate as part of their lease are crucial to their legal rights and remedies.  Further, in this “new” world, landlords and tenants alike should, moving forward, consider how to mitigate their damages and account for pandemics and stay-at-home orders in their leases.  However, this will come at a price and concessions will be needed on both sides.


The New York Legislature has made some recent changes to the law governing mechanics’ liens.[1] Specifically, under Section 9(7), Article 2 of the NY Lien Law, a Notice Under Mechanic’s Lien Law now requires a statement as to “whether the property subject to the lien is real property improved or to be improved with a single family dwelling or not.”[2]

The justification for this addition can be found in the legislative history. Prior to the change in law, Notices Under Mechanic’s Lien Law were not “required to distinguish between a residential or a non-residential property.”[3] However, distinguishing between residential and non-residential properties is essential since the renewal of mechanic’s liens filed against residential and non-residential properties are treated differently.

Mechanic’s liens on single family dwellings must be filed within four months[4] from the last date of work and remain valid for one year from the date of filing.[5]  “A lien on a single family dwelling may not be self-extended; it may be extended only by court order.”[6]

With respect to non-residential property, a mechanic’s lien must be filed within eight months[7] from the last date of work and remains valid for one year from the date of filing.[8]  However, with respect to non-residential property, a mechanic’s lien “may be extended for one year by the filing and service of an extension of lien within one year of the original notice of lien.”[9] Furthermore, “[i]f an additional one-year extension is needed, a lienor, upon good cause shown, may obtain an order from a court of record to continue the lien.”[10]

The Legislature determined that without requiring a mechanic’s lien to specify the type of property “has opened the door for a lien to be filed on a residential property and then the assertion to be made that the lien can be extended into a second year.”[11]  The Legislature determined that: “[r]equiring that mechanics’ liens specify whether they are on residential or non-residential propert[ies] will ensure that liens filed in New York State are filed against the correct property classification and that New York families are better protected.”[12]  As a result of this amendment, the Legislature is attempting to limit the extension of mechanic’s liens against single family dwellings and to protect New York families from mechanic’s liens.

For further information or guidance regarding mechanics’ liens and how they may affect you, please contact Christopher E. Vatter.


* This article was authored by Christopher E. Vatter, Esq., with the assistance of Mr. Michael P. Miata.

Mr. Vatter is a partner with Jaspan Schlesinger LLP and focuses his practice in the areas of complex commercial litigation, construction law, and banking litigation. He represents property owners and real estate developers in the negotiation of construction-related contracts and in litigation arising from construction projects. Mr. Vatter also has extensive experience in all phases of litigation on behalf of both public and private entities, and represents financial institutions in foreclosure actions, collection matters, and loan workouts.

Mr. Miata is a law clerk in Jaspan Schlesinger LLP’s Summer Law Clerk Program.  Michael is entering his third year at Maurice A. Deane School of Law at Hofstra University.

[1] New York Mechanic’s Lien Law allows persons such as contractors and subcontractors who provide work, labor, services, or materials, for the improvement of real property, to file a mechanic’s lien against the real property to secure their payment. See e.g., NY Lien Law § 3.

[2] NY Lien  Law § 9(7).

[3] 2019 Legis. Bill Hist. NY A.B. 4766.

[4] NY Lien Law § 10.

[5] NY Lien Law § 17.

[6] William J. Postner & Robert A. Rubin, New York Construction Law Manual § 9.32 (2d ed. 2006) citing NY Lien Law § 17; Cook v. Carmen S. Pariso, Inc., 287 A.D.2d 208 (4th Dep’t 2001).

[7] NY Lien Law § 10.

[8] NY Lien Law § 17.

[9] William J. Postner & Robert A. Rubin, New York Construction Law Manual § 9.32 (2d ed. 2006) citing NY Lien Law § 17.

[10] Id.

[11] 2019 Legis. Bill Hist. NY A.B. 4766.

[12] Id.

As you may know, the use of facial recognition technology has been growing rapidly in a wide variety of public life, such as in retail locations and entertainment venues. Accompanying the growth in the use of this technology is a rise in concern about how the information acquired by its use is stored, shared and used by those who possess it. While legislation addressing such concerns has been limited to date (Illinois, Texas and the state of Washington currently have such legislation), a new addition to the New York City Administrative Code (2021 NYC Local Law No. 3, NYC Admin. Code Sections 22-1201 – 22-1205)(the “NYC Law”) will go into effect on July 9, and similar legislation has been proposed in both houses of the New York State legislature. It is imperative that businesses that operate in New York City and use such technology become familiar with the requirements of the NYC Law, and businesses elsewhere in New York State that use such technology are advised to be aware of the likelihood that they too may be subject to similar legislation in the not too distant future. Set forth below is a short summary of the scope and terms of the NYC Law.

To What Businesses Does the NYC Law Apply?

The NYC Law applies to what are referred to as “commercial establishments” operating within New York City, namely a place of entertainment, a retail store, or a food and drink establishment. A “place of entertainment” is any privately or publicly owned and operated entertainment facility, such as a theater, stadium, arena, racetrack, museum, amusement park, observatory, or other place where attractions, performances, concerts, exhibits, athletic games or contests are held. A “retail store” is an establishment wherein consumer commodities are sold, displayed or offered for sale, or where services are provided to consumers at retail. A “food and drink establishment” is an establishment that gives or offers for sale food or beverages to the public for consumption or use on or off the premises, or on or off a pushcart, stand or vehicle.

What Type of Information is Covered by the NYC Law?

The NYC Law is concerned with “biometric  identifier  information,” which is a physiological  or  biological  characteristic  that  is  used  by  or  on  behalf  of  a  commercial establishment, singly or in combination, to identify, or assist in identifying, an individual, including, but not limited to: (i) a retina or iris scan, (ii) a fingerprint or voiceprint, (iii) a scan of hand or face geometry, or any other identifying characteristic.

Whose Biometric Identified Information is Covered by the NYC Law?

As the NYC Law does not state otherwise (such as, for example, by stating it only applies to residents of the City), it presumably applies to any individual whose biometric identifier information is collected within New York City, regardless of where they live or where their information is retained or used.

What Does the NYC Law Require?

The NYC Law has two requirements. First, any commercial establishment that collects, retains, converts, stores or shares biometric identifier information of customers must disclose such collection, retention, conversion, storage or sharing, as applicable, by placing a clear and conspicuous sign near all of its customer entrances notifying customers in plain, simple language, in a form and manner to be prescribed by the Commissioner of Consumer and Worker Protection, that customers’ biometric identifier information is being collected, retained, converted, stored or shared, as applicable (the “Notice Requirement”). A “customer” is a purchaser or lessee, or a prospective purchaser or lessee, of goods or services from a commercial establishment.

Second, the NYC Law makes it unlawful to sell, lease, trade, share in exchange for anything of value or otherwise profit from the transaction of biometric identifier information (the “Sale Prohibition”). The language of the Sale Prohibition would appear to permit sharing of biometric identifier information without consideration, such as between affiliated entities. It is unclear whether an entity located outside New York City that receives biometric identifier information without charge from an entity within New York City is subject to the NYC Law (the NYC Law could have, for example, provided that to be permitted, any such transfer would have to be made subject to an agreement by the receiving person to hold such information in accordance with the NYC Law).

Is There an Individual Right of Action to Enforce the NYC Law?

Yes, in what may prove to be a fertile new practice area for class action attorneys (given the small amount of damages available to any one individual, combined with the right to recover legal fees), the NYC Law provides that a person who is aggrieved by a violation of the law may bring an action on his or her own behalf against an offending party. At least 30 days prior to initiating any action against a commercial establishment for a violation of the Notice Requirement, the aggrieved person must give written notice to the commercial establishment setting forth such person’s claim. If, within 30 days, the commercial establishment cures the violation and provides the aggrieved person an express written statement that the violation has been cured and that no further violations will occur, no action may be initiated against the commercial establishment for such violation. If a commercial establishment continues to violate subdivision the Notice Requirement, the aggrieved person may then initiate an action against such establishment. No prior written notice is required for actions alleging a violation of the Sale Prohibition.

A prevailing party may recover damages of $500 for each violation of the Notice Requirement and each negligent violation of the Sale Prohibition, damages of $5,000 for each intentional or reckless violation of the Sale Prohibition, and, with respect to any violation, reasonable attorneys’ fees and costs, including expert witness fees and other litigation expenses. A court may also award injunctive relief and such other relief as it may deem appropriate.

Are There Any Exceptions?

Yes. First, the NYC Law does not apply to the collection, storage, sharing or use of biometric identifier information by government agencies, employees or agents.

Second, the Notice Requirement does not apply to financial institutions, which are defined as a bank, trust company, national bank, savings bank, federal mutual savings bank, savings and loan association, federal savings and loan association, federal mutual savings and loan association, credit union, federal credit union, branch of a foreign banking corporation, public pension fund, retirement system, securities broker, securities dealer or securities firm. The term “financial institution” does not include a commercial establishment whose primary business is the retail sale of goods and services to customers and provides limited financial services such as the issuance of credit cards or in-store financing to customers (for example, an auto dealership). Note, however, that the Sale Prohibition does apply to financial institutions.

Third, the Notice Requirement does not apply to biometric identifier information collected through photographs or video recordings, if: (i) the images or videos collected are not analyzed by software or applications that identify, or that assist   with   the   identification   of,   individuals based   on   physiological   or   biological characteristics, and (ii) the images or video are not shared with, sold or leased to third-parties other than law enforcement agencies. This exception permits the continued use of, for example, in-store security cameras without the need to comply with the Notice Requirement (assuming the two requirements described above are satisfied).







It goes without saying that many businesses have been devastated by the impact of the shelter-in-place orders imposed after the COVID-19 pandemic began. Yet every judge presiding over a business interruption coverage case must decide the matter based upon guiding legal principles, not the emotional response one has for business owners economically pummeled by these events. In that vein, based upon the policy language at issue and facts alleged in plaintiff’s complaint, the District Court for the Southern District of New York found that business losses arising from the COVID-19 pandemic are not afforded “Business Income” or “Extra Expenses” or “Civil Authority” or “Ingress and Egress” coverage because the losses are not due to “accidental physical loss or accidental physical damage” as required by the policies to trigger coverage.[1] The court explained it “must take care not to make or vary the contract of insurance to accomplish its notions of abstract justice or moral obligation”[2]  and concluded that because plaintiff had not alleged any “physical” loss or damage, defendant’s motion to dismiss plaintiff’s action alleging  breach of contract, breach of the covenant of good faith and fair dealing, deceptive business practices under New York law, unfair trade practices under Connecticut law, and declaratory relief should be dismissed for failure to state a claim.

Based upon the facts alleged and the policy language, the court reasoned that the plain language of the policies at issue required that plaintiff allege “physical” loss or damage for the policy to be triggered.[3] The court concluded that because no facts of “physical” loss or damage had been alleged, “the Policies do not provided coverage, and denial of coverage is not a breach of contract.”[4] For the same reason, the court also rejected plaintiff’s claims for extra expense, civil authority, and ingress or egress coverage, which also required “physical” loss or damage to trigger coverage under the policies.[5] The court explained that “[t]he requirement of physical damage is not satisfied by the mere loss of use.”[6] Specifically, the court noted that “under New York law, ‘loss’ as it is used in the Policies does not mean loss of use; instead there must be some physical damage to the premises.”[7]

Based upon the foregoing, the court rejected as “irrelevant” plaintiff’s claim that coverage should be afforded under the policies at issue because they did not contain a virus exclusion, explaining that a policy exclusion only comes into play if there is coverage under the policy, which the court had determined was not the case because plaintiffs had not alleged “physical” loss or damage.[8] And because plaintiffs failed to establish that they “were eligible for coverage, “the court rejected plaintiff’s claim for the breach of the covenant of good faith and fair dealing, deceptive business practices under New York law and unfair trade practices under Connecticut law for allegedly improperly denying coverage “based upon an inadequate investigation.”[9] However, the court granted plaintiff permission to file an amended complaint, leaving the door open to plaintiff to attempt to plead “physical” damage or loss.[10]

What does this mean for the insured?

The majority of the courts that have faced business interruption claims have found that “physical” loss or damage is required before coverage exists. The significance of this finding is that denial of coverage on this basis is not related to a policy exclusion; rather it is predicated on the scope of the insuring agreement, which provides no coverage absent actual physical damage. This case further instructs that the requirement for “physical” damage or loss cannot be satisfied by alleging only that a shelter-in-place order was issued. Finally, whether the policy at issue has a virus exclusion is irrelevant if the policy requires “physical” damage or loss and no “physical” damage is alleged. However, if a plaintiff were to allege “physical” damage in a manner that survives a motion to dismiss and the policy at issue has no virus exclusion, business interruption coverage could still be available under the court’s reasoning.

What does this mean for insurers?

New York courts have now begun weighing in on business interruption coverage and the court’s reasoning in this case that “physical” loss or damage is required to trigger coverage  is consistent with industry guidance and the history of the policy language at issue. Though the court noted that it “assumes that leave to amend would be futile,” it “nonetheless” granted plaintiff the right to try.[11] We will therefore still have to wait and see whether a plaintiff finds a way to muster up “physical” damage or loss based upon COVID-19.





[1] Rye Ridge Corp. v. Cincinnati Ins. Co., 2021 U.S. Dist. LEXIS 78493 at *1-2; 2021 WL 1600475.

[2] 2021 U.S. Dist. LEXIS 78493 at *2.

[3] Id. at *5.

[4] Id. at *5.

[5] Id. at *9.

[6] Id. at *5.

[7] Id. at *5.

[8] Id. at *5.

[9] Id. at *9.

[10] Id. at *9.

[11] Id. at *9.

In my previous blog article, Late and Out of Luck, I recently explained that New York law imposes strict requirements on insurance companies to “timely disclaim” coverage under a liability policy issued or delivered in the state [1] and that the measure of “timeliness” has been interpreted by New York courts to run from the time the insurer is put on notice of the underlying accident, not from the time the insurer receives a notice of claim.[2] In a recent case, the United States Court of Appeals for the Second Circuit found that an insurer must not only “timely” but also “effectively” disclaim coverage based upon a policy exclusion. In other words, the insurer’s reservation of rights letter must be clear.

Applying New York law, the United States Court of Appeals for the Second Circuit recently agreed with the District Court for the Eastern District of New York that an insurer’s unclear reservation of rights letter “failed to adequately disclaim coverage as required by New York law.” 20-1413-cv Philadelphia Indemnity Ins. Co. v. Yeshivat Beth Hillel of Kransa, *2.  The court stated that an insurer intending to disclaim coverage must not only “give written notice as soon as is reasonably possible of such disclaimer or liability or denial of coverage” but must also “apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated.” Id. at *4.

In determining that an insurer’s reservation of rights letter failed to meet New York’s legal standard, the Second Circuit noted that phrases such as “there is a question as to whether [the insurer] has a duty . . . to defend” and “[the] claim may qualify as an auto loss which is not covered” were indicative of “an ineffective denial of coverage.” Id. at 4-5 (emphasis in original). Further, the court  explained that such language is particularly inadequate where the insurer “knew of or should have known of all the material, relevant facts underlying the claim for which it sought to disclaim coverage” at the time the reservation of rights was issued. Id.

Based upon the foregoing, the court concluded that the insurer’s weak and unspecific language “did not adequately disclaim coverage”; failed to comply with an insurer’s statutory duty to timely disclaim coverage based upon a policy exclusion, and therefore precluded the insurer from effectively denying or disclaiming coverage for the claim. Id. at 5.

What does this mean for the insured?

As explained in my prior blog, after an insured provides a notice of an accident or a notice of claim, the insurance company has a duty to promptly investigate and issue a declination of coverage letter for any claims that are not covered under the policy as a result of policy exclusion.

Philadelphia Indemnity Ins. Co. further instructs that an insurer must also advise insureds “with a high degree of specificity of the ground or grounds on which the disclaimer is predicated.” Id. at *4. In other words, an insurer is obligated to both timely and effectively decline coverage. To satisfy the second prong of that test, the insurer must clearly apprise the insured that it is disclaiming coverage in whole or in part based upon specific facts as applied to specific policy exclusions.

What does this mean for insurers?

Philadelphia Indemnity Ins. Co. instructs that weak and ineffectual language cannot be used to effectively decline coverage under a liability policy issued or delivered in New York. Rather, insurers must use clear language that tells an insured “with a high degree of specificity” the grounds for disclaiming coverage under the policy. Further, the case reminds that it will be found that insurers knew or should have known “all the material, relevant facts underlying the claim” for which they seek to disclaim coverage[3] and insurers will be expected to incorporate those facts into any reservation of rights or declination of coverage letter in order to “effectively” disclaim coverage based upon a policy exclusion.

The takeaway for insurers is that they must “timely” and “effectively” decline coverage based upon policy exclusions. To satisfy the “effective” prong of the test, insurers should use clear language and avoid wishy-washy language in reservation of rights or declination of coverage letters. Merriam-Webster defines “wishy-washy” as (1) lacking in character or determination: ineffectual, (2) lacking in strength or flavor: weak. Synonyms of wishy-washy include ineffective, ineffectual, pliable, irresolute, and vacillating. Opposites of wishy-washy include strong, resolute, determined, and backboned. When apprising an insured of uncovered claims based upon policy exclusions in a reservation of rights or declination of coverage letter, insurers should avoid “wishy-washy” language. Instead, insurers should identify with clear and resolute language the specific facts that trigger specific policy exclusions if they intend to deny coverage of a claim in whole or in part. An insurer’s failure to either timely or effectively disclaim coverage based upon a policy exclusion could render the declination of coverage ineffective as a matter of law.

[1] See e.g., [1] N.Y. Ins. Law § 3420(d)(2); ADD Plumbing, Inc. v. Burlington Insurance Co., 2021 N.Y. App. Div. LEXIS 1580 (1st Dep’t 2021); Country-Wide Ins. Co. v. Preferred Trucking Servs. Corp., 22 NY3d 571, 575-576 (NY 2014); Travelers Inc. Co. v. Volmar Constru. Co., 300 A.D. 2d 40. 43 (1st Dep’t 2002).

[2] ADD Plumbing, Inc. v. Burlington Insurance Co., 2021 N.Y. App. Div. LEXIS 1580 (1st Dep’t 2021) at *2.

[3] 20-1413-cv Philadelphia Indemnity Ins. Co. v. Yeshivat Beth Hillel of Kransa, *4.

An Insurer’s Failure to Investigate an Accident and Decline Coverage Based Upon a Policy Exclusion Renders the Subsequent Disclaimer of a Claim Untimely as a Matter of Law

The New York legislature and courts impose strict requirements on insurance companies to  “timely disclaim” coverage under a liability policy. New York Insurance Law § 3420(d) requires that insurers disclaim coverage under a liability policy issued or delivered in New York “as soon as is reasonably possible.”[1] The New York Court of Appeals has clarified that a “timely” disclaimer is measured from the “time when the insurer first learns of the grounds for disclaimer.”[2] And New York appellate courts interpreting the phrase “as soon as reasonably practicable” have found that that, absent excuse or mitigating circumstances, “relatively short periods” are “unreasonable as a matter of law.” [3] Thus, it is well-established that an insurer in New York must swiftly decline coverage after an insured provides notice of a claim and/or requests a defense under a liability policy.

The Appellate Division, First Department recently determined that an insurer’s obligation to investigate and decline coverage based upon a policy exclusion begins ticking before receiving a notice of claim from the insured. In ADD Plumbing, Inc. v. Burlington Insurance Co., 2021 N.Y. App. Div. LEXIS 1580 (1st Dep’t 2021), the court held that the insurer’s duty to investigate and decline coverage promptly pursuant to a policy exclusion is triggered not by receiving a notice of claim but by becoming aware of the underlying accident. Specifically, the court found that where the insurance company was “on notice of the underlying accident” for “several months before it disclaimed coverage and commenced an investigation with respect to the alleged incident,” the disclaimer of coverage was “untimely as a matter of law.” Id. at *2.[4] Further, the court unanimously reversed the lower court’s finding that the timeliness of a disclaimer is not based upon the knowledge of an accident alone but by the insured’s actual notice of claim. Add Plumbing, Inc. v. Burlington Ins. Co., 2020 N.Y. Misc. LEXIS 419 at *1.

What does this mean for the insured?

After an insured provides a notice of claim, there are generally three likely responses by the insurer:

  1. Accept the claim and defense without any reservation of rights. If the accident is covered under the policy and no exclusions apply, the insurance company will be obligated to assume the policyholder’s defense subject to the insured’s cooperation and preservation of the insurance company’s rights.
  2. Decline Coverage for Claims Not Covered by the Policy. If the claim is not covered under the policy, the insurer will issue a declination of coverage letter explaining that the accident is not covered by the terms of the policy.
  3. Investigate and Defend Under a Reservation of Rights and/or Promptly Decline Coverage for Claims Barred by a Policy Exclusion. If the claim is covered in part under the policy but is subject to one or more policy exclusions, the insurer must promptly advise the insured of same and issue a clear reservation of rights delineating what is covered and what is barred under the policy. However, if the entire claim is barred by a policy exclusion, the insurer must issue a timely disclaimer letter.

ADD Plumbing relates to the third listed outcome, and the takeaway for the insured is that it may be able to successfully challenge the timeliness of an insurer’s disclaimer of coverage of a notice of claim if the insured provided prior notice of the underlying accident and the insurer failed to investigate the accident and identify the facts that would have triggered a policy exclusion prior to the insured providing an actual notice of claim.

What does this mean for insurers?

The takeaway from Add Plumbing for the insurer is that New York places a high bar on “timely” disclaiming coverage under a liability policy. The case instructs that insurer’s must promptly investigate any accident reported (regardless of whether the insured has been named in a litigation); determine the existence of any facts that trigger a policy exclusion, and “timely” decline coverage based upon same, or risk that a court will find that any delay in disclaiming coverage caused by failing to take these steps renders a subsequent declination of coverage untimely as a matter of law (in colloquial terms: late and out of luck).

[1] N.Y. Ins. Law § 3420(d)(2) provides in relevant part: “If under a liability policy issued or delivered in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant.”

[2] Country-Wide Ins. Co. v. Preferred Trucking Servs. Corp., 22 NY3d 571, 575-576 (NY 2014).

[3] Travelers Inc. Co. v. Volmar Constru. Co., 300 A.D. 2d 40. 43 (1st Dep’t 2002).

[4] The underlying court’s decision and order, which was reversed by the appellate court, framed the issue this way: “At issue in this action is whether an insurer’s knowledge of an underlying accident is sufficient to trigger an insurer’s duty to disclaim coverage under Insurance Law § 3420(d)(2).” Add Plumbing, Inc. v. Burlington Ins. Co., 2020 N.Y. Misc. LEXIS 419 at *1 (N.Y. Co.) In concluding that that the duty to disclaim had not been triggered, the lower court noted that the notice provided by the insured was marked “For Records Only”; no demand for coverage had been made; the named insured had not been sued, and the additional insured under the policy had not tendered the claim to the insurance company at the time the insurer became aware of the underlying accident. Id. at *2. Based upon these facts, the lower court reasoned that, pursuant to binding precedent “[t]he mere occurrence of an event which could potentially implicate coverage if a claim is later made does not mean that an insurer’s responsibility to timely disclaim has been triggered” and that knowledge of an accident alone “is insufficient to trigger the time to issue a disclaimer.” Id. at *2. The Appellate Division First Department unanimously reversed the lower court’s decision on the law.

As previously discussed here, Congress recently enacted the Corporate Transparency Act (the “Act”) to amend the Bank Secrecy Act by requiring businesses to file information about their beneficial ownership. Pursuant to the Act, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has until January 1, 2022 to adopt regulations and establish a private national database for information collected under the Act.

On April 5, 2021, FinCEN took one of the first steps in the process to develop the regulations by publishing an advance notice of proposed rulemaking (the “Notice”). The Notice provides the relevant portions of the Act, puts forth questions for discussion and invites the public to provide written comments to the Act in general and in response to FinCEN’s questions. The comment period is open until May 5, 2021. In a release, FinCEN “strongly encourage[s] all interested parties, particularly those that would be affected by the beneficial ownership information reporting provisions or would seek access to reported beneficial ownership information, to submit written comments.  Such written comments will help inform FinCEN’s implementation of all aspects of the beneficial ownership reporting rulemaking. ” Following the notice and comment period, FinCEN will review the submissions prior to developing the regulations.

Prior to January 1, 2022, businesses should review regulations as and when promulgated by FinCEN to understand how the Act will be implemented and how it may apply to them, including whether they must file a beneficial owner report or are eligible to file for an exemption. Additionally, companies should keep updated records of the required information for each owner and enhance their compliance processes to ensure that the required information is being collected and reported to FinCEN in accordance with the Act.

Companies should also include language in their shareholder, partnership, or operating agreements or similar documents requiring their owners to regularly provide any information required to comply with the Act and any relevant regulations. Additionally, companies may want to consider indemnification provisions in such agreement if an owner fails to timely provide required information or provides false or incomplete information. If such agreement contains a confidentiality provision, it should include an exception to permit the company to report the required information to FinCEN.

For further information or guidance on revising your policies, procedures, and operating agreement, please contact David Paseltiner.



Property lines in New York and especially in New York City are usually very close together – sometimes in what are referred to as “lot line” configurations (properties with building that abut each other with no space between them).  Often times when a property owner seeks to make improvements or repairs to their property, for development purposes or just to comply with safety rules – such as “Local Law 11” in New York City, relating to the inspection and repair of masonry – such improvements and repairs cannot be accomplished without entering directly onto or working over the premises of the adjoining property owner. Fortunately, even if the adjoining property owner refuses to voluntarily grant access, Real Property Action and Proceedings Law (“RPAPL”) § 881 provides a mechanism to allow an owner (or lessee) to obtain a temporary license to enter onto the adjoining owner’s property to make such improvements and repairs. The general situations when access is required and the requirements to obtain the necessary license are discussed below.

Situations When Access Is Needed

There are two general situations where a property owner requires access to the adjoining property owner. The first situation is when the planned construction work by the property owner cannot be done without actually obtaining access to the adjoining property owner’s property or its airspace. The other situation is where the property owner must provide safety protections to protect the public and the adjoining property.

The first situation is pretty straight forward. In such a situation, a property owner actually needs to enter onto the adjoining property owner’s property or air space to obtain access to their own property to perform the work. For example, a property owner may seek to repair or stucco the side of the building that is on the property line. In such a situation, the property owner must actually obtain access to the adjoining property to perform the work on their own building.

In addition, many times a property owner is also required to provide safety protections[1] before it can perform the construction work. Such safety protections include sidewalk sheds, roof protection or netting, vibration monitoring, underpinning and shoring protection. In such situations, a property owner requires access to the adjoining property owner’s property to install the necessary safety protections to ensure that their construction work can be performed in a safe manner. In either situation, a property owner can obtain a Court ordered temporary license to enter onto the adjoining property of a non-cooperative neighbor through a RPAPL § 881 proceeding.

Obtaining Access To Adjoining Property Owner’s Property

RPAPL § 881 allows a property owner to make improvements or repairs to their real property when such improvements or repairs cannot be made by the owner without entering the premises of an adjoining owner and permission to enter has been refused. “The statute recognizes the fact that property owners often build up to the building line, and it was enacted in furtherance of the public interest in preventing urban blight by making it possible to repair such buildings which otherwise would be inaccessible.”[2]  In particular, RPAPL § 881 provides that:

When an owner or lessee seeks to make improvements or repairs to real property so situated that such improvements or repairs cannot be made by the owner or lessee without entering the premises of an adjoining owner or his lessee, and permission so to enter has been refused, the owner or lessee seeking to make such improvements or repairs may commence a special proceeding for a license so to enter pursuant to article four of the civil practice law and rules. The petition and affidavits, if any, shall state the facts making such entry necessary and the date or dates on which entry is sought. Such license shall be granted by the court in an appropriate case upon such terms as justice requires. The licensee shall be liable to the adjoining owner or his lessee for actual damages occurring as a result of the entry.[3]

Courts routinely grant licenses, pursuant to RPAPL § 881, for the use, access, mandated protection, and temporary support which is sought by a property owner provided that the use and access meets a standard of reasonableness.[4] In considering whether to grant a license under RPAPL § 881, “the court must apply a ‘standard of reasonableness.”‘ [5]

In order to obtain a temporary license, a property owner must commence a special proceeding. Pursuant to RPAPL § 881, a license should be granted where:  (i) “permission to so enter has been denied”; and (ii) “the property owners’ real property is so ‘situated that such improvements or repairs cannot be made by the property owners . . . without entering the premises of the adjoining property owners.'”[6]

Essentially, in order to obtain a temporary license an owner must set forth the facts for making entry onto their neighbor’s property including alleging and establishing that: (a) the owner seeks to make improvements or repairs to its actual real property; (b) the repairs cannot be made without entering the premises of the adjoining property owner; (c) permission to enter the adjoining property owner’s property has been denied; and (d) the owner must also state dates that the entry is needed.  The Court shall grant a temporary licensor in appropriate cases and may impose conditions on obtaining a licensor including license and other fees.

License Fees And Costs

Pursuant to RPAPL § 881, “[t]he licensee shall be liable to the adjoining owner or his lessee for actual damages occurring as a result of the entry the party seeking.”[7] Court’s will often require the licensee to pay all reasonable costs associated with the temporary license including the reasonable fees of the neighbor’s architect incurred in reviewing the owner’s plans and making counter proposals, as well as ongoing monitoring of the work during the term of the license;[8] reasonable attorneys’ fees in negotiating the license;[9] monthly license fee;[10] and costs relating to the necessary steps the licensor takes to safeguard his property.[11]

Important Issues To Negotiate As Part of License

When negotiating a license it is important to consider the actual construction and protective work to be performed, the actual access to be provided, the duration of the access, the contact person, whether the licensor needs to retain its own architect or construction consultant to confirm that the licensee is complying with the terms of the license.

Other important issues to contemplate when negotiating a license include: license and professional fees, pre-construction inspections and surveys, providing protection and construction plans, security for the adjoining property, providing and obtaining adequate insurance coverage, indemnification for damages and post construction damage assessments.


Whether you are the property owner seeking the license or the adjoining property owner, there are numerous issues to be considered before the work can be performed. Although RPAPL § 881 provides a mechanism for obtaining a temporary license, before moving to obtain a such license, both sides must consider the costs and risks associated with the construction work.  In addition, the cost and time involved in pursuing a RPAPL § 881 Proceeding should also be evaluated, as negotiating a voluntary license with an adjoining property owner can often save time and money.

Whether you are the property owner seeking the license or the adjoining property owner and whether you seek to negotiate a voluntary license or pursue a RPAPL § 881 proceeding, Jaspan Schlesinger LLP can help you address the many issues related to construction on boundary lines and the issuance of temporary licenses to perform such work.  If you need assistance, please contact Christopher E. Vatter at or Charles W. Segal at

[1] Pursuant to New York City Department of Building Code, Chapter 33 of the Code, entitled: “Safeguards During Construction or Demolition”, expressly mandates that: “[a]djoining . . . private property . . . shall be protected from damage and injury during construction or demolition work . . . .  Protection must be provided for … skylights and roofs” (see § 3309.1), as well as protection for pedestrians (see § 3307.1), and the placement of sidewalk shed to 20 feet past the building. See § 3307.6.2. and 3301.6.3

[2] 1 NY Jur Adjoining Landowners § 5 (2) citing Sunrise Jewish Center of Valley Stream, Inc. v. Lipko, 61 Misc. 2d 673 (Sup. Ct. Nassau Cty. 1969).

[3] RPAPL § 881

[4] See e.g. Chase Manhattan Bank v. Broadway, Whitney Co., 59 Misc. 2d 1085, 1091 (Sup. Ct. Queens Cty. 1969) aff’d 24 N.Y.2d 927 (1969) (license granted as requested duration and area of access “not unreasonable.”).

[5] Matter of Rosma Dev., LLC v. South, 5 Misc. 3d 1014(A) at ***7 (Sup. Ct. N.Y. Cty. 2004), citing Mindel v. Phoenix Owners Corp., 210 A.D.2d 167, 167 (1st Dep’t 1994) (granting license under RPAPL § 881 and finding proposed license reasonable).

[6] Ponito Residence LLC v. 12th Street Apartment Corp., 38 Misc. 3d 604, 611 (Sup. Ct. N.Y. Cty. 2012); Matter of Lincoln Spencer Apts., Inc. v. Zeckendorf-68th St. Assoc., 88 A.D.3d 606 (1st Dep’t 2011) (“RPAPL 881 is the means by which a landowner seeking ‘to make improvements or repairs’ to its property may seek a license to enter an adjoining landowner’s property when those ‘improvements or repairs cannot be made’ without such entry.”).

[7]  RPAPL § 881.

[8] Matter of North 7-8 Invs. LLC v. Newgarden, 982 N.Y.S.2d 704 (Sup. Ct. N.Y. Cty. 2014).

[9] Id. (Licensee required to pay the neighbor’s reasonable attorney’s fees because the owner’s demand to make use of the neighbor’s property required the neighbor to hire an attorney to negotiate a license agreement).

[10] Id.

[11] Matter of 2225 46th St., LLC. v. Hahralampopoulos, 55 Misc. 3d 621 (Sup. Ct. N.Y. Cty. 2017) (licensee responsible for paying any costs resulting from the access, including steps necessary to safeguard licensors’ property).