New York Insurance Coverage Law Update

Insurer Precluded From Delaying Disclaimer On Valid Ground While Investigating Other Grounds

An insurer that had sufficient information to disclaim coverage on the ground of late notice issued a disclaimer on that ground nearly four months later. The Appellate Division, First Department, ruled that the disclaimer was ineffective pursuant to New York Insurance Law § 3420(d), reversing the rule it announced in 2004 that “[a]n insurer is not required to disclaim on timeliness grounds before conducting a prompt, reasonable investigation into other possible grounds for disclaimer.” The court concluded that an insurer is precluded from delaying issuance of a disclaimer on a ground that it knows to be valid while investigating other possible grounds for disclaiming. [George Campbell Painting v. National Union Fire Ins. Co. of Pittsburgh, PA, 2012 N.Y. Slip Op. 00254 (1st Dep’t Jan. 17, 2012).]

Insurer Must Defend General Contractor As “Additional Insured”

A general contractor contended that it was entitled to defense and indemnification as an additional insured under its subcontractor’s commercial general liability insurance policy in connection with an underlying personal injury action brought by an employee of the subcontractor. The policy provided that the general contractor was covered “only with respect to liability caused by [the subcontractor’s] ongoing operations performed for [the general contractor],” and that the policy did “not apply to liability caused by the sole negligence of the [additional insured].” Finding that this language did not require negligence of the subcontractor, the court ruled that the insurer was obligated to defend the general contractor in the underlying action. [W & W Glass Sys., Inc. v. Admiral Ins. Co., 2012 N.Y. Slip Op. 00307 (1st Dep’t Jan. 19, 2012).]

Exclusions Do Not Apply Where LLC Member Is Not An Employee

John Bardes, the sole member of a limited liability company, allegedly was injured when he was struck by a truck owned by the LLC and operated by an LLC employee. The insurer that had issued the LLC a business auto policy denied coverage based on the employee indemnification and fellow employee exclusions, and Barnes sued. The court found that the LLC had employees who received wages and W-2 forms, but Bardes did not receive wages, W-2 forms, or 1099 forms and, therefore, the employee indemnification and fellow employee exclusions did not apply. Therefore, the court concluded that the insurer was obligated to defend and indemnify the LLC in Bardes’ action. [Farm Family Cas. Ins. Co. v. Habitat Revival, LLC, 2012 N.Y. Slip Op. 00749 (2d Dep’t Jan. 31, 2012).]

Court Stays Arbitration Where Policy Did Not Cover Auto Accident In Mexico

An automobile accident occurred while the insured was driving a rental car in Mexico. The Appellate Division, First Department, ruled that the insurer’s motion to stay arbitration should have been granted even though it was filed after the statutory 20-day period because the insured’s automobile insurance policy did not provide benefits for accidents that occurred in Mexico and thus the parties had never agreed to arbitrate the insured’s claim. [Matter of Allstate Ins. Co. v. LeGrand, 2012 N.Y. Slip Op. 00242 (1st Dep’t Jan. 17, 2012).]

No Coverage For Fire At Rented Home

A homeowner who insured his home while he was living there later rented the house to a couple. The house was damaged in a fire and the homeowner submitted a claim. The court explained that the policy was intended and written to provide coverage to the insured where he lived. Because the insured had vacated the house years before the loss occurred, except for continuing to use the attic for storage, he did not reside there and the insurance policy did not apply, the court decided. [Zises v. New York Cent. Mut. Fire Ins. Co., 34 Misc. 3d 1208(A) (Sup. Ct. Dutchess Co. Jan. 10, 2012).]

Intentional Conduct Dooms Advertising Injury Coverage Claim

The insured asserted that it was being sued for inflicting advertising injury on another company, but the court found that the insured was being sued “exclusively for intentional conduct,” which was not covered. Explaining that all of the causes of action alleged against the insured – tortious interference with contract, tortious interference with prospective economic advantage, and conspiracy – required intentional conduct, the court concluded that the insurer had no duty to defend the insured. [International Chemical Corp. v. Nautilus Ins. Co., No. 09-CV-359S (W.D.N.Y. Jan. 6, 2012).]