December 2024 New York Insurance Coverage Law Update

Second Department Upholds Summary Judgment To Insurer Finding Assault Not Covered Even Though Labeled By Claimant As Negligence

The insured punched and kicked the Claimant, causing injuries. The Claimant sued the insured alleging that the insured assaulted him, and negligently and recklessly caused his injuries. Nationwide Mutual Fire Insurance Company filed a declaratory judgment action and moved for summary judgment declaring that it had no duty to defend or to indemnify the insured under the insured’s homeowners policy because the assault was not a covered “occurrence,” which was defined in the policy as an “accident.” The Appellate Division, Second Department, upheld summary judgment to Nationwide. The court acknowledged that an insurer’s duty to defend generally arises when the allegations in the complaint against the insured give rise to the reasonable possibility of coverage. However, the court found that the way the Claimant “labeled” his causes of action in the underlying action was not dispositive because an alleged “assault” was not a covered “occurrence” within the meaning of the policy. The court also found that the insured’s conduct was barred by the exclusions in the policy for bodily injury caused by, or resulting from, intentional or criminal acts of the insured. [Nationwide Mut. Fire Ins. Co. v. Nelson, 2024 N.Y. App. Div. LEXIS 5843 (2d Dep’t Nov. 13, 2024).]

Eastern District Finds Insurer Precluded From Relying Upon Exclusion Because of Untimely Disclaimer

In early October 2021, Midvale Indemnity Company received notice of an underlying action filed by a worker who was injured at a construction site located at 625 Halsey Street in Brooklyn, New York. In late November, Midvale reserved rights to disclaim coverage to its named and putative additional insureds (who were contractors at the site) under an exclusion for bodily injury at a construction site for a “multi-unit residential building.” After receiving a report from its investigator on December 9, 2021, Midvale disclaimed coverage on January 5, 2022, based upon “newly discovered information” that the accident occurred during the construction of a multi-unit residential building. The United States District Court for the Eastern District of New York held that Midvale was precluded from relying upon the exclusion because its disclaimer was untimely under New York Insurance Law § 3420(d). The court noted that reasonable investigations are permitted but found that Midvale’s delay was unreasonable as a matter of law because of its unexplained two-month delay between learning of the underlying action and completing its investigation, and the additional month-long delay between receiving the investigation report and its disclaimer. The court explained that Midvale offered no explanation why in the “digital age, an investigation into whether [the] address housed a multi-unit building could [not] be gleaned in short order, through public records or online map searches,” or why a “simple site visit” could not reveal the necessary information.  [Midvale Indem. Co. v. Arevalos Constr. Corp., 2024 U.S. Dist. LEXIS 199183 (E.D.N.Y. Nov. 1, 2024).]

Southern District Holds That Insured Not Covered For Fire Loss Because Three-Family Dwelling Not Covered

The insured resided on the third floor of a three-unit building he owned. He sought coverage for a fire loss at the building under his homeowners policy with Mountain Valley Indemnity Company, which covered the dwelling on the “residence premises.” The United States District Court for the Southern District of New York held that the insured was not covered because the definition of “residence premises” included one- or two-family dwellings where the insured resides, but not premises with three units. Although the Court was “sympathetic” to the insured’s “unfortunate situation,” it found “the law does not permit expansion” of the policy. The court rejected the insured’s arguments that the policy should be reformed because of a mutual mistake, reasoning that “even if [the insured] intended the [p]olicy to cover three dwelling units, there is no evidence that [the insurer] shared that intent.” [Hall v. Mt. Valley Indem. Co., 2024 U.S. Dist. LEXIS 197932 (S.D.N.Y. Oct. 30, 2024).]