April 2026 New York Insurance Coverage Update

Second Department Finds Absolute Lead Exclusion Properly Added To Policy And Excludes Coverage For Action Alleging Injury From Lead Exposure

The owner of a residential building in Brooklyn engaged an insurance broker to procure insurance coverage for the building that included liability coverage for lead exposure. Brownstone Agency, Inc., acting as the agent for Everest National Insurance Company, provided the owner’s broker with a policy that required the following: “All lead inspection reports must be received and reviewed by our office within 30 days of binding. The lead exclusion will be added back to policy inception if the inspection is unfavorable or the 30 day period has expired.” After the lead inspection did not occur within the required time period, Everest and its agent, Brownstone, issued a change endorsement that removed lead liability coverage from the policy and added an absolute lead exclusion. Subsequently, a resident of the building filed an action against the building owner seeking damages for injuries allegedly sustained from lead exposure in the building. The owner sought coverage under its policy and Everest, through its agent, disclaimed coverage based upon the absolute lead exclusion. The building owner filed a declaratory judgment action seeking coverage under the Everest policy and Everest moved for summary judgment. The Supreme Court, Kings County, granted the motion, declaring that the absolute lead exclusion was properly added to the policy and Everest has no duty to defend or to indemnify the owner in the underlying lead exposure action because the exclusion applies to preclude coverage. The owner appealed and the Appellate Division, Second Department, affirmed. The court explained that an insurance policy is a contract and, when determining coverage, a court must “look to the language of the policy.” Moreover, “unambiguous provisions of an insurance contract must be given their plain and ordinary meaning.” The court found that the absolute lead exclusion “unequivocally excludes coverage for” bodily injury arising out of the existence of the “hazardous properties of lead, irrespective of the form or source of such lead” and the exclusion “clearly applies” to preclude coverage for the resident’s action against the building owner. The court further found that the building owner “failed to raise a triable issue of fact as to whether the absolute lead exclusion was properly added to the policy or whether the exclusion applies.” [25-01 Newkirk Avenue, LLC v. Everest Nat’l Ins. Co., 2026 N.Y. Slip Op. 01331, 2026 WL 681557 (2d Dep’t March 11, 2026).]

Fourth Department Finds Exclusions For Water And Earth Movement Apply To Preclude Coverage Beyond $10,000 Sublimit For Water Back-Up Coverage

Plaintiffs Manoel and Louise Arruda sustained damage to their home when sewage backed up into their basement through a floor drain. They sought coverage for the damage under an insurance policy issued by New York Central Mutual Fire Insurance Company that provided $10,000 in limited water back-up coverage but otherwise excluded coverage “for loss caused directly or indirectly by” water, including water which “[b]acks up through sewers or drains” and “for loss caused directly or indirectly by” earth movement, including “earth sinking, rising or shifting.” New York Central maintained that coverage for the damage was limited to $10,000. The Arrudas filed an action against New York Central alleging breach of contract and seeking full coverage under the policy. New York Central moved for summary judgment dismissing the Arrudas’ complaint and the Arrudas cross-moved to compel discovery. The Supreme Court, Cayuga County, denied New York Central’s motion on the basis that additional discovery is needed and granted the Arrudas’ cross-motion. New York Central appealed and the Appellate Division, Fourth Department, reversed, finding coverage under the New York Central policy was limited to $10,000. Relying, in part, on a report prepared by the Arrudas’ engineer that showed that the sewage back up was caused by soil erosion, the court found that the water exclusion and earth movement exclusion each apply to preclude coverage beyond the $10,000 limited water back-up coverage under the policy. The court rejected the argument that additional discovery is needed because the Arrudas failed to show “facts essential to justify opposition [to the motion] may exist but cannot then be stated.” The court pointed out that the basis for New York Central’s motion was a report issued by the Arrudas’ engineer and that, for purposes of its motion, New York Central accepted the Arrudas’ version of the facts, “leaving the only issue as the interpretation of the policy and its exclusions.” [Arruda v. New York Central Mut. Fire Ins. Co., 2026 N.Y. Slip Op. 01902, 2026 WL 850484 (4th Dep’t March 27, 2026).]