New York Insurance Coverage Update

December 19, 2017 | Insurance Coverage

New York Federal Court Upholds Insurer’s Decision To Void Policy For Material Misrepresentation In Application

An application submitted by the insured’s broker for insurance on an apartment building in the Bronx indicated that the building was not vacant and was not undergoing any major renovations. The policy was issued and the building was subsequently vandalized. The owner sought coverage from its insurer, which determined that the building had been vacant and undergoing major renovations at the time of the insurance application. The insurer denied the claim because of the apparent material misrepresentation.  The owner sued and the insurer moved for summary judgment. The United States District Court for the Southern District of New York granted the insurer’s motion to declare the policy void ab initio. The district court ruled that the misrepresentation was material because had the insurer known the property was vacant, it would not have issued the policy pursuant to its underwriting guidelines. The court also rejected the insured’s argument that any misrepre-sentation should be attributed to its broker because the insured retained the broker to fill out the application so “the onus for any mistakes or omissions should fall on the shoulders” of the insured, not its agent. [866 E. 164th St., LLC v. Union Mut. Fire Ins. Co., No. 16-CV-03678 (SN) (S.D.N.Y. Oct. 3, 2017).]

Second Circuit Holds Section 3420(d)(2) Does Not Apply To Claims Between Insurers

After the owner and operator of a shopping center were sued for injuries the plaintiff allegedly suffered while walking through a construction site, the general contractor’s insurer defended them as additional insureds. The general contractor’s insurer then sued a subcontractor’s insurer, contending that it had a duty to defend the shopping center’s owner as an additional insured. The subcontractor’s insurer disclaimed coverage based upon a construction exclusion. The general contractor’s insurer contended that the disclaimer was untimely under New York Insurance Law section 3420(d)(2) because it was not issued as soon as was “reasonably possible.” The United States District Court for the Southern District of New York rejected that argument, and the general contractor’s insurer appealed to the United States Court of Appeals for the Second Circuit. The Second Circuit affirmed, stressing that New York courts have “uniformly” held that section 3420(d)(2) “does not apply to claims between insurers.” The general contractor’s insurer argued that it was invoking section 3420(d)(2) on behalf of its insureds, but the Second Circuit was not persuaded. The court concluded that the insurer could not invoke the protection of section 3420(d)(2) against a co-insurer even though its insureds may be protected by the statute. [Zurich Am. Ins. Co. v. Liberty Mut. Ins. Co., No. 16-3332-cv (2d Cir. Oct. 5, 2017).]

Owner Who Did Not Reside At Two-Family Home Was Not Covered For Personal Injury Lawsuit

A personal injury lawsuit was filed against the owner of a two-family home who tendered the lawsuit to his homeowners insurer.  The insurer learned that the insured owner had not lived at the property for several years before the alleged incident and that tenants lived there. The insurer disclaimed because its policy only covered bodily injury arising out of an insured location, defined as the “residence premises” where “you reside”. The insured acknowledged that he did not live at the home at the time of the alleged incident but claimed that the insurer knew that he had moved because he had sent letters to the insurer from another address.  The trial court granted summary judgment to the insurer, reasoning that the insured mailing letters to the insurer from another address did “not create an issue of fact.” [Tower Ins. Co. of N.Y. v. Burrell, 2017 N.Y. Slip Op. 32273(U) (Sup.Ct. N.Y. Cty. Oct. 18, 2017).]

“Action Over Exclusion” Precluded Coverage For Subcontractor’s Suit Against Prime Contractor, New York Federal Court Decides

A subcontractor’s employee sued the prime contractor on a construction project for injuries he allegedly sustained when he fell from a ladder at the site.  The prime contractor sought defense and indemnification from the subcontractor’s insurer as an alleged additional insured.  The insurer disclaimed coverage under its policy’s “Action Over Exclusion,” which precluded coverage for claims arising out of bodily injury to an employee of the named insured while arising out of employment by the named insured. The United States District Court for the Southern District of New York held that the exclusion applied to preclude coverage. The district court also decided that the insurer’s disclaimer to the prime contractor was timely. The court explained that an insurer did not have to disclaim for purposes of New York Insurance Law section 3420(d) as to a particular insured until that insured had given notice of its claim. The district court concluded that the prime contractor’s tender to the sub-contractor was not sufficient to put the insurer on notice of the prime contractor’s claim for coverage as an additional insured, and that the insurer timely disclaimed  after it first received notice directly from the prime contractor. [Century Sur. Co. v. EM Windsor Constr. Inc., No. 16-Civ.-4196 (PAE) (S.D.N.Y. Nov. 29, 2017).]

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