New York Insurance Coverage Law Update (2nd Ed.)

Second Department Finds Questions Of Fact As To Duty To Indemnify School District And Officials In Religious Discrimination Case

Five students sued a school district and its administrators alleging that they violated the students’ civil rights by being deliberately indifferent to anti-Semitic harassment and discrimination perpetrated by other students against them. The district’s insurer provided a defense but disclaimed any duty to indemnify. After the parties agreed to settle the students’ action for $3,000,000 in compensatory damages and $1,480,000 in attorneys’ fees, the insurer asked a court to declare that it was not obligated to indemnify the defendants.  The Appellate Division, Second Department, noted that the students alleged that the defendants “deliberately ignored complaints and their own observations of student-on-student anti-Semitic harassment and discrimination or responded in an unreasonable or inadequate manner to such complaints and observations.” The court concluded that whether the alleged incidents were covered accidents presented questions of fact that could not be determined on a motion to dismiss. [Graphic Arts Mut. Ins. Co. v. Pine Bush Cent. Sch. Dist., 2018 N.Y. Slip Op. 01565 (2d Dep’t March 9, 2018).]

Fourth Department Decides That “Surface Water” Exclusion Did Not Bar Coverage For Water Damage To Home

The insureds’ home was damaged by water after a water main break on their street. Their insurer denied their claim based on the policy’s “surface water” exclusion, and the insureds sued. The trial court granted summary judgment in favor of the insurer, but the Appellate Division, Fourth Department, reversed.  The Fourth Depart-ment explained that the policy did not define the term “surface water” and stated that it meant “the accumulation of natural precipitation on the land and its passage thereafter over the land until it either evaporates, is absorbed by the land or reaches stream channels.” The Fourth Department added that the statement in the policy that the water damage exclusion applied “whether the water damage [was] caused by or result[ed] from human or animal forces or any act of nature” did not change the definition of surface water. The court concluded that the insureds had established as a matter of law that their home was not damaged by surface water. [Smith v. Safeco Ins. Co. of America, 2018 N.Y. Slip Op. 02055 (4th Dep’t March 23, 2018).]

Fourth Department Concludes That Trial Court Should Have Dismissed Doctor’s Action Against Insurer For Settling Malpractice Claim

A doctor sued her medical malpractice insurer after it settled a malpractice claim on her behalf, seeking to void her written consent to settle.  The doctor claimed that the insurer’s employees fraudulently induced her consent. The trial court denied the insurer’s motion to dismiss the complaint, but the Appellate Division, Fourth Department, reversed. The Fourth Department explained that the doctor’s claim under General Business Law Section

349 had to be dismissed because this was “merely a private contract dispute” not affecting “the consuming public at large.” It ruled that her breach of contract claim had to be dismissed because it was “undisputed” that the doctor received the benefit of the insurer “investigating the claim, negotiating the settlement, paying the settlement in full, and securing a general release.” The doctor’s fraud and negligent misrepre-sentation claims also had to be dismissed, the Fourth Department concluded, because the doctor failed to allege that she had suffered any actual pecuniary damage as a result of her insurer’s conduct. [Ullman v. Medical Liab. Mut. Ins. Co., 2018 N.Y. Slip Op. 01844 (4th Dep’t March 16, 2018).]

Court Denies Additional Insured Coverage Because No Written Contract Requiring Such Coverage

Two parties sought additional insured coverage under their contractor’s insurance policy, which covered persons or organ-izations who were required under a written contract to be named as additional insureds. The Supreme Court, New York County, ruled that they were not entitled to coverage, finding no written contract that required that they be added as additional insureds. The court noted that the word “insurance” was mentioned in a contract, but that the contract did not state what the insurance was for, who the insurance was supposed to cover, or specifically state that the two parties were to be additional insureds. The reference to the parties in a certificate of insurance was insufficient to confer coverage where the policy itself did not cover them, the court concluded. [Union Mut. Fire Ins. Co. v. Klein, 2018 N.Y. Slip Op. 30411(U) (Sup. Ct. N.Y. Co. Mar. 5, 2018).]