February 2025 New York Insurance Coverage Law Update

Southern District Enforces New York Choice-Of-Law Provision And Holds Insured’s Late Notice Relieves Insurer Of Obligations Under Policy

The insured is a Texas-based hotel operator. A windstorm damaged one of its hotels in Texas and three months later the insured reported the loss to Mt. Hawley Insurance Company, its commercial property insurer. The policy provided that, in the event of loss or damage caused by a windstorm, the insured must “give us prompt notice of the loss or damage” and “as soon as possible” give a description of the loss or damage,” and “[i]n no event may a claim be filed” with the insurer later than one year after the date of loss or damage. Mt. Hawley investigated and denied the insured’s claim for coverage based on, inter alia, late notice of claim. The insured sued seeking breach of contract damages and attorney fees under the Texas Insurance Code. On summary judgment, the United States District Court for the Southern District of New York held that New York, not Texas, law applied, citing the New York choice-of-law provision in the policy. Applying New York law, the court held that the insured’s notice three months after it was aware of the loss was untimely and relieved Mt. Hawley of any coverage obligation under the policy. The court rejected the insured’s argument that the notice condition in the policy permitted notice up to one year from the date of loss, explaining that the insured’s interpretation would render the language requiring the insured to give “prompt” notice of loss or damage and to provide a description of the loss “as soon as possible” meaningless. The court also rejected the insured’s request for attorney fees under the Texas Insurance Code based upon its ruling that New York law applied. Likewise, the court rejected the insured’s request for attorney fees under New York law, explaining that “an insured may not recover the expenses incurred in bringing an affirmative action against an insurer to settle rights under the policy,’” and the limited exception for “bad faith” did not apply. [AMVS, Inc. v. Mt. Hawley Ins. Co., 2025 U.S. Dist. LEXIS 12370 (S.D.N.Y. Jan. 23, 2025).]

Eastern District Finds Policy Void Ab Initio Based Upon Insured’s Material Misrepresentation In Application

Roundhill Express is Union Mutual Fire Insurance Company’s authorized agent for all commercial insurance policies issued in New York. Roundhill uses a web-based platform to accept insurance applications. The application contains “Preliminary Application Questions” and if any of those questions are answered “Yes,” the platform will consider it an “unacceptable risk” and will not “quote or bind coverage.” One such question asks, “Are there any outstanding [New York City Department of Housing Preservation and Development (“HPD”)] Class C violations … at the proposed risk location?” Moshe Moskovics completed an insurance application in March 2017 via the Roundhill platform. He correctly represented that there were no HPD violations for his property and, based upon the application, Union issued a policy covering that property. Each year, Roundhill sent a renewal application and policy by electronic mail to the insured’s broker, which included a cover letter instructing the broker to review the renewal application and policy with the insured and noting that the policy was renewed based upon the insured’s answers in the application. Between November 2018 and June 2021, HPD issued violations for the property. The insured was unaware of the violations until he was sued in a personal injury action relating to a slip and fall at the property. Union then learned of the violations, denied coverage for the underlying action, and sent a notice of rescission based upon a material misrepresentation. The United States District Court for the Eastern District of New York held that the renewal policies issued beginning in March 2019 are void ab initio pursuant to Insurance Law §3105, which permits an insurer to rescind a policy “if it was issued in reliance on material misrepresentations,” even if the misrepresentation was “innocent or unintentional.” The insured argued that the policy automatically renewed and, thus, there was no misrepresentation. But the court rejected this argument noting the insured’s electronic signature on each renewal application and the initial application signed by the insured that obligated the insured to inform Union of any changes to the information provided in March 2017, among other things. The court found that the insured’s answer to the HPD question was material to the issuance of the policy because, had the question been answered “Yes,” the application would have been rejected, and the policy would not have been issued. [Union Mut. Fire Ins. Co. v. Moskovics, 2025 U.S. Dist. LEXIS 15075 (E.D.N.Y. Jan. 28, 2025).]