New York Insurance Coverage Law Update

October 1, 2010 | Appeals | Insurance Coverage

Legal Bulletin

Insured’s Assignees May Not Bring Bad Faith Action Against Insurer Where Insured Could Not Assert That Claim

Personal injury plaintiffs obtained a judgment against a restaurant, which assigned them its rights against its insurer. The plaintiffs, as the restaurant’s assignees, then brought suit against the insurer, arguing that it had refused in bad faith to settle their personal injury action within policy limits.

The court noted that coverage to the restaurant would have been precluded because of its late notice to the insurer and, therefore, the restaurant was not in a position to maintain that the insurer had improperly refused to settle the personal injury action within the applicable policy limits. As the restaurant’s assignees, the court continued, the plaintiffs were subject to the same defenses the insurer could have asserted against the restaurant. Accordingly, the court ruled that the bad faith claim was barred. [Cirone v. Tower Ins. Co. of N.Y., 2010 N.Y. Slip Op. 06605 (1st Dep’t Sept. 21, 2010).]

Auto Exclusion Bars CGL Coverage Where Injured Person Slipped While Entering Car

The plaintiff sued a property owner for negligently allowing a parking lot to remain in an uneven, snowy and icy condition, asserting that she was injured when she slipped as she opened the door to enter her father’s car. The insurer that had issued the snow removal contractor a commercial general liability insurance policy disclaimed coverage based on the exclusion for personal injuries arising out of the use of “any auto,” whether owned by the insured or not.
The court explained that the contractor conceded that the accident had arisen out of the use of the father’s vehicle and did not contend that the exclusion was “unusual, unfair and ambiguous.” It then ruled that the insurer had no duty to defend because the exclusion barred even the potential for coverage for the underlying action. [DMP Contr. Corp. v. Essex Ins. Co., 2010 N.Y. Slip Op. 06548 (1st Dep’t Sept. 14, 2010).]

Insureds’ Claims Against Insurer’s Employees Are Dismissed

Following a fire, homeowners sued their insurance company – and three insurance company employees, including two adjusters – for breach of contract and fraud; they also sought to recover punitive damages and attorney’s fees. The three employees moved to dismiss the complaint against them, but the homeowners argued that they could be held liable because they “individually and collectively participated in a scheme to deliberately and intentionally deny” the homeowners their rights under the insurance policy.

The court ruled that the complaint should be dismissed against the employees. It explained that “agents of a disclosed principal whose actions were undertaken at the direction of the insurer” could not be held personally responsible to the homeowners. The court specifically added that the plaintiffs’ request to recover attorney’s fees was “improper” because it is “well established” that insureds may not recover expenses incurred in bringing an affirmative action against an insurer to settle their rights under a policy. [O’Keefe v. Allstate Ins. Co., 2010 N.Y. Slip Op. 32571U (Sup. Ct. Nassau Co. Sept. 16, 2010).]

Policy’s 180-Day Completion Requirement Not Barred By New York Law

Plaintiffs challenged an insurer’s practice of requiring that insured property owners suffering real property losses due to fire either replace or complete repairs of insured property within a 180-day window to receive reimbursement for the cost of replacement or repair in an amount higher than the actual cash value of the damaged property. The property owners contended, among other things, that the 180-day completion requirement violated New York law.

The court noted that New York’s standard policy does not obligate an insurer to pay more than the actual cash value in any circumstances. Accordingly, the court ruled that the policy, which had been approved by the Insurance Department and which provided at least actual cash value (and, if certain conditions were met, replacement or repair value as well), was not inconsistent with New York law. [Woodhams v. Allstate Fire and Cas. Co., 2010 U.S. Dist. Lexis 102133 (S.D.N.Y. Sept. 28, 2010).]

Amount Paid Not Billed For Covered Medical Treatment Credited Towards Policy’s Deductible

An insured brought suit against her medical insurer, arguing that the entire amount billed for a covered medical treatment should be credited towards the policy’s deductible, regardless of the amount Medicare or the insured actually paid. The court held that only the amount actually paid should be credited. [Metz v. U.S. Life Ins. Co., 2010 U.S. Dist. Lexis 96607 (S.D.N.Y. Sept. 13, 2010).]

 Reprinted with permission.  All rights reserved.

 

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