New York Insurance Coverage Update

New York Court Of Appeals Limits Scope Of Additional Insured Coverage 

An excavator contracted with the New York City Transit Authority (“NYCTA”) to perform tunnel excavation work on a subway construction project. Its excavation machine touched a live, buried electrical cable, resulting in an explosion and injury to the claimant. The claimant sued the City, which impleaded NYCTA and MTA New York City Transit. The excavator’s insurer denied additional insured coverage to NYCTA and MTA, contending that the excavator coming in contact with the cable had not been the proximate cause of the claimant’s injury and that NYCTA had been solely responsible for the accident because it had failed to identify, mark or deenergize the cable. The New York Court of Appeals agreed with the insurer and ruled that NYCTA and MTA were not entitled to additional insured coverage under the excavator’s policy, which limited additional insured coverage to “liability” for bodily injury “caused, in whole or in part,” by the “acts or omissions” of the named insured. The Court reasoned that the additional insured coverage applied to injury “proximately caused by the named insured.” The Court expressly rejected an “arising out of” or “but for” causation interpretation of the policy language and found that the lower court had “erroneously interpreted this policy language as extending coverage broadly to any injury causally linked to the named insured, and wrongly concluded that an additional insured may collect for an injury caused solely by its own negligence, even where the named insured bears no legal fault for the underlying harm.” [Burlington Ins. Co. v. N.Y.C. Transit Auth., No. 57 (N.Y. June 6, 2017).]

Insurer Had No Duty To Defend County In Civil Rights Suit, Second Department Decides 

After Dewey Bozella’s second murder conviction was overturned based on newly discovered evidence that allegedly should have been disclosed to his defense counsel by the district attorney’s office, he sued the county for allegedly violating his civil rights. The county’s insurer disclaimed coverage, and the county asked a court to declare that the insurer was obligated to defend and indemnify it in connection with Bozella’s suit. The trial court ruled in favor of the insurer, and the Appellate Division, Second Department, affirmed. The Second Department explained that Bozella alleged that the evidence had been withheld from 1977 through 2008. The court concluded that there was no coverage under the public officials liability coverage part of the policy because the alleged wrongful acts had occurred “in part” prior to the policy’s retroactive date of October 1, 1999. It also found no coverage under the policy’s law enforcement liability coverage part, as the wrongful acts allegedly had been committed prior to the policy’s effective date of October 1, 2009. [County of Dutchess v. Argonaut Ins. Co., 2017 N.Y. Slip Op. 03478 (2d Dep’t May 3, 2017).]

Assault And Battery Exclusion Precluded Coverage Of Negligence Claims Based On Alleged Assault, Federal District Court Rules 

Eduardo Rojas’ estate sued the owner, lessees, and operators of a New York City nightclub, alleging that Rojas had been killed by club patrons while waiting to enter the club and that the defendants had negligently failed to provide proper security. The club’s insurer sought a declaration that it had no duty to defend or to indemnify any of the defendants based upon the policy’s assault and battery exclusion for bodily injury arising out of any assault or battery. The United States District Court for the Eastern District of New York granted summary judgment in favor of the insurer. The court explained that the exclusion applied because the underlying negligence claim would not exist “but for” the alleged assault perpetrated against Rojas.  [Northfield Ins. Co. v. Queen’s Palace, Inc., No. 16-CV-471 (SMG) (E.D.N.Y. May 10, 2017).]

Sewage Is Pollutant For Purposes Of Pollution Exclusion, Second Circuit Rules

After Roy’s Plumbing, Inc., was sued in connection with alleged chemical contamination at Love Canal near Niagara Falls, New York, it contended that it was entitled to defense and indemnification from its insurer. The United States District Court for the Western District of New York ruled that the insurer had no such duty, and the Second Circuit affirmed. The court decided that sewage was a contaminant for purposes of the “broad definition” of “pollutant” in the policy’s pollution exclusion. The court rejected Roy’s Plumbing’s argument that the pollution exclusion was overbroad and, therefore, ambiguous. [Cincinnati Ins. Co. v. Roy’s Plumbing, Inc., No. 16-2511-cv (2d Cir. May 31, 2017).]