August 2026 New York Insurance Coverage Update

Second Department Finds Fact Issue On Coverage Based Upon Certificate Of Insurance And Dismisses Non-Insured’s Bad Faith Claim

Machine Tool Repair & Sales, Inc., purchased a grinder from Pride Machinery Sales, Inc., and Pride arranged for the grinder to be transported from a third-party’s warehouse to Machine’s premises. Pride also purchased a cargo policy from Tokio Marine America Insurance Company with Machine as the named insured and issued a certificate of insurance to Machine. The Tokio policy contains a “warehouse to warehouse” provision stating, “This insurance attaches from the time the goods insured leave the Warehouse … at the place named in the Policy for the commencement of the transit and continues during the ordinary course of transit…. Thereafter the insurance continues while goods insured are in transit … until delivered to final warehouse at the destination named in the Policy.” The certificate of insurance states that the grinder was “sold from Caterpillar warehouse floor … to [Machine’s] warehouse floor … warehouse floor to floor.” After the grinder reached Machine’s warehouse, it fell from a forklift while being unloaded from a truck. Machine submitted a claim to Tokio for the damage to the grinder and Tokio denied coverage. Machine then filed an action against Tokio and Pride seeking damages for breach of the Tokio insurance contract. Tokio answered and asserted crossclaims against Pride for contribution and indemnification. Pride answered and asserted crossclaims against Tokio for bad faith and violations of the New York Prompt Payment Act. Tokio moved for summary judgment dismissing Machine’s complaint and Pride’s crossclaims, arguing that its policy solely covers the grinder while being transported from warehouse to warehouse and its coverage expired when the grinder was delivered to Machine’s warehouse, before it was damaged. Machine opposed the motion, arguing that transport was not complete until the grinder was delivered to the floor of Machine’s warehouse, pointing to the “floor to floor” language in the certificate. The Supreme Court, Suffolk County, denied Tokio’s motion and Tokio appealed. The Appellate Division, Second Department, found that the typewritten “floor to floor” language in the certificate prevails over the pre-typed “warehouse” language in the policy. The court explained that the policy “lacks essential terms of the parties’ agreement, including the identity of the insured party, the goods insured, as well as the origin and destination points of the grinder’s transit, which are defined by the … certificate of insurance.” In addition, the certificate expressly states that a “bona fide” certificate holder “shall not be prejudiced by any terms of the … [policy] which are in conflict with the terms of this Certificate.” Accordingly, the court found that the policy and certificate “are inextricably intertwined” and must be read together. The court, however, found the “floor to floor” language ambiguous and, as such, triable issues of fact exist as to whether the damage to the grinder is covered. As to Tokio’s motion to dismiss Pride’s crossclaims, the Second Department found that the Supreme Court erred in denying that part of Tokio’s motion. Because Pride is not an insured under the Tokio policy, the court found “there is no basis for Pride to recover damages for [Tokio’s] alleged bad faith denial or failure to promptly pay [Machine’s] claim.” [Machine Tool Repair & Sales, Inc. v. Tokio Marine America Ins. Co., et al., 2026 N.Y. Slip Op. 04416, 2026 WL 2036012 (2d Dep’t July 15, 2026)].

Second Department Enforces Unambiguous Suit Limitation Provision

A home owned by Xue Yan Ye was damaged by fire on December 15, 2021. At the time, the home was covered by an insurance policy issued by Integon National Insurance Company. The policy provides, “No action can be brought against [Integon] unless … [it] is started within two years after the date of loss.” The insured homeowner submitted an insurance claim and Integon disclaimed coverage by letter dated March 14, 2022. The insured filed an action against Integon on February 1, 2024 seeking damages for breach of contract. Integon filed a motion to dismiss based upon documentary evidence, and the Supreme Court, Queens County, granted the motion. The insured appealed and the Appellate Division, Second Department, affirmed, finding the insured’s action was not timely filed within the required two-year suit limitation. The court explained that although the statute of limitations for a breach of contract claim is six years, parties to a contract may agree to a shorter time limit to bring an action, as here. The court rejected the insured’s argument that the phrase “date of loss” is ambiguous, finding that it refers to “the date of the catastrophe insured against.” Integon established that the action was untimely because it was filed more than two years after the fire, the date of loss. [Xue Yan Ye v. Integon National Ins. Co., 2026 N.Y. Slip Op. 04341, 2026 WL 1967000 (2d Dep’t July 8, 2026)].