New York Insurance Coverage Update

July 1, 2014 | Insurance Coverage

Insurer’s Disclaimer Of Bodily Injury Claims Found Timely When Earlier Notice Only Indicated Property Damage

An insurer was notified on June 30, 2008 of alleged property damage to an apartment building caused when the insureds’ employees were applying a floor finish.  A year later, on July 2, 2009, the employees’ counsel notified the insurer that the employees had suffered bodily injuries. The insurer disclaimed coverage on July 30, 2009 and brought a declaratory judgment action. The court found the disclaimer timely, explaining that because the insurer had received notice of only property damage in June 2008 and had learned of the bodily injury claims only when it received the July 2009 letter, the insurer’s July 30, 2009 disclaimer, issued after it conducted an investigation and determined that the two men were its insureds’ employees and had been injured in the course of their work, was timely. [Hermitage Ins. Co. v Evans Floor Specialist, Inc., 2014 N.Y. Slip Op. 04235 (1st Dep’t June 12, 2014).] 

Court Finds Coverage For Water Backup From Pipe Or Clogged Drain On Insured’s Property

The owner of a four-building apartment complex sought coverage for water damage when waste water allegedly entered the first-floor apartments through toilets, bathtubs, and condensation drains. The insurer disclaimed coverage based upon a “Water Damage” exclusion, which applied to loss caused by “water which backs up through sewers or drains.”  A second “Water Damage” exclusion excluded coverage for loss caused by a discharge or leakage from a plumbing system, but stated the insurer “does pay for loss caused by the accidental” discharge or leakage from a plumbing system.  Finding an ambiguity under the circumstances, the Appellate Division, Third-Department, rejected the insurer’s argument that the first “Water Damage” exclusion barred coverage so long as water backed up through a sewer or drain regardless of where the sewer or drain was located. Rather, the court found that water damage caused by a backup that originated from a pipe or clogged drain located within the insured’s property line came from the insured’s plumbing system, and would be covered by the policy.  The court remanded the case back to the trial court to determine the cause of the damage.  [Pichel v. Dryden Mut. Ins. Co., 2014 N.Y. Slip Op. 03575 (3d Dep’t May 15, 2014).]

Statutory “As Soon As Reasonably Possible” Disclaimer Standard Does Not Apply To Property Damage Claims, New York Court Of Appeals Rules

Keyspan Gas East Corporation contended in a declaratory judgment action (“DJ”) against its excess insurers that they owed Keyspan a defense and indemnity for liabilities associated with the investigation and remediation of environmental damage at certain manufactured gas plant sites. The insurers had reserved rights and then asserted late notice as an affirmative defense in the DJ.  The Appellate Division, First Department, ruled that there was a question of fact as to whether the insurers fulfilled their “obligation” to timely disclaim coverage “as soon as reasonably possible.” The New York Court of Appeals reversed, holding that the Appellate Division had wrongly applied the “strict timeliness” standard from Insurance Law § 3420(d)(2) in considering whether the insurers had waived their right to disclaim coverage. The Court explained that Section 3420(d)(2) only applies to insurance claims involving death and bodily injury arising out of a New York accident and brought under a New York liability policy. The Court stressed that an insurer is not precluded from disclaiming coverage on a property damage claim “simply as a result of the passage of time” and that such a delay must be considered under common law waiver and/or estoppel principles.  The Court remanded the case to the Appellate Division for consideration under common law waiver principles, including “whether [the insurers] clearly manifested an intent to abandon their affirmative defenses.” [KeySpan Gas E. Corp. v. Munich Reins. Am., Inc., 2014 N.Y. Slip Op. 04113 (June 10, 2014).]

Bite From Dog In Parked Car Did Not Trigger Auto Coverage, Court Decides

The insured’s niece alleged that she had been injured when a dog sitting in the insured’s parked car bit her as she walked by. The court found that there was no coverage under the insured’s auto policy because the niece’s alleged injuries had not arisen out of the “ownership, maintenance or use” of the insured’s automobile. The court reasoned that the vehicle itself had not produced the injury and that the accident had not arisen out of the inherent nature of the vehicle; rather, the vehicle had been “merely the situs of the accident,” which was insufficient to trigger coverage under the policy. [Allstate Ins. Co. v. Staib, 2014 N.Y. Slip Op. 04714 (1st Dep’t June 24, 2014).]

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