July 2025 New York Insurance Coverage Law Update

Southern District Finds Tenant’s Insurer Has Duty To Defend Landlord But Determination On Indemnity Is Premature

A pedestrian tripped and fell on a public sidewalk in front of a multi-unit premises owned by 1995-2003 Jerome Avenue. The injured claimant filed a bodily injury action against Jerome Avenue and Pawnit Jerome Corp., a lessee of one of the units at the premises, alleging they were both negligent in their ownership, operation, management, maintenance, and control of the leased premises. Travelers Indemnity Company, the insurer for Jerome Avenue, tendered Jerome Avenue’s defense and indemnity in the action to Underwriters at Lloyd’s, London, the insurer for Pawnit. The Underwriters policy provides additional insured coverage to Jerome Avenue (a lessor of premises) for “liability arising out of the ownership, maintenance or use of that specific part of the premises leased” to Pawnit. Underwriters denied the tender, and Travelers filed a declaratory judgment action seeking a declaration of additional insured coverage for Jerome Avenue under the Underwriters policy. Travelers and Underwriters filed cross-motions for summary judgment and the United States District Court for the Southern District of New York held that Underwriters has a duty to defend Jerome Avenue in the action, but it is premature to determine indemnity until liability in the bodily injury action is resolved. Relying upon New York cases that have found additional insured coverage under similar endorsements “for accidents that occur in areas that serve as points of ingress or egress from the leased premises,” the court held that “the sidewalk outside a premises is necessarily a point of ingress.” Accordingly, the court held that the sidewalk at issue is “by implication” “part of the premises” leased to Pawnit. The court explained that the entire sidewalk in front of the leased premises “is necessary for access to or from the [building], even though a [person] would use only a portion of the sidewalk entering or leaving ….” The court rejected Underwriters’ argument that it does not have a duty to defend Jerome Avenue because its policy excludes coverage for injury arising out of an additional insured’s “sole negligence” and “Jerome Avenue had the sole obligation” to maintain and repair the sidewalk at the leased premises. The court explained that, because the complaint in the action alleges that Pawnit was responsible for maintenance and repairs and its negligence caused the accident, there is the possibility that Jerome Avenue may be found liable for something other than its sole negligence. The court held that a determination of Underwriters’ duty to indemnify is premature and must await resolution of liability. [Travelers Indem. Co. v. Underwriters at Lloyd’s, London, No. 24-cv-734 (JMF), 2025 U.S. Dist. LEXIS 118445 (S.D.N.Y. June 23, 2025).]

First Department Holds Additional Insured Cannot Challenge Rescission Of Named Insured’s Policy

Associated Industries Insurance Company, Inc., filed an action against its insured, Joseph Farahnik, and its additional insured, Halpern & Pintel, Inc., seeking rescission of its policy based upon material misrepresentations in Farahnik’s insurance application and a declaration of no coverage for an underlying bodily injury action. Associated obtained a default judgment against Farahnik. As a result of the default, Farahnik was deemed to have admitted Associated’s allegations that he made material misrepresentations in his application, and the Associated policy was void ab initio. On summary judgment, the New York County Supreme Court held that Associated has no duty to defend or to indemnify Halpern in the underlying action. Halpern appealed and the Appellate Division, First Department, affirmed. The court explained that Halpern, as an additional insured, cannot challenge the underlying court’s finding of material misrepresentation. Instead, Halpern may only “raise equitable defenses to the recission claim” and the court found that Halpern failed to prove waiver because there is no evidence Associated accepted premium payments for the policy after learning of Farahnik’s misrepresentation. [Associated Indus. Ins. Co. v. Farahnik, 2025 NY Slip Op 03760, 2025 N.Y. App. Div. LEXIS 3823 (1st Dep’t June 24, 2025).]