New York Insurance Coverage Law Update

Tenant’s Insurer Must Defend Shopping Center Owner As Additional Insured In Trip-And-Fall Suit, Eastern District Of New York Decides

The claimant allegedly tripped and fell on the sidewalk while walking into a restaurant operated by Vintage Steakhouse, LLC.  Vintage leased the restaurant, which was in a shopping center, from Amelia Associate’s Inc.  Vintage’s insurer refused to defend Amelia in the underlying action, asserting that its policy did not cover Amelia as an additional insured because the claimant allegedly fell on a sidewalk that was not part of the leased premises. Amelia’s insurer sued Vintage’s insurer, and the parties moved for summary judgment. The United States District Court for the Eastern District of New York ruled that Vintage’s insurer had to defend and to indemnify Amelia. The court reasoned that New York courts have “repeatedly” held that if a sidewalk is necessarily used for access in and out of the leased premises, it is considered by implication to be part of the leased premises.  The court added that the portion of the sidewalk on which the claimant allegedly fell was “more necessary” to the operation of Vintage’s business than it was for the other tenants in the shopping center as it was located directly in front of Vintage’s front door, not the doors of the other tenants. After noting that both insurers’ policies stated that they were “excess” with respect to the type of liability at issue in the underlying action, the court concluded that they were co-primary insurers of Amelia. [Peerless Ins. Co. v. Technology Ins. Co., No. 18-cv-1553 (BMC) (E.D.N.Y. July 25, 2019).]

Insurer’s Failure To Provide Timely Written Notice Of Disclaimer To Additional Insureds Rendered Disclaimer Ineffective, Second Department Holds

An employee of Vinny Construction Corp. was allegedly injured while working at a construction site in College Point, Queens.  The insurer for the owner and the general contractor at the site tendered a claim for additional insured coverage to Vinny’s insurer on behalf of the owner and the general contractor. Vinny’s insurer sent a disclaimer to Vinny and to the insurer for the owner and the general contractor based upon an employee exclusion in its policy. The Appellate Division, Second Department, ruled that the failure of Vinny’s insurer to provide timely written notice of disclaimer directly to the additional insureds rendered its disclaimer of coverage “ineffective” against them pursuant to New York Insurance Law § 3420(d). The Second Department rejected Vinny’s insurer’s contention that it did not have to comply with § 3420(d) until it received certain contract documents, reasoning that it did not need those documents to disclaim coverage to the additional insureds based on the employee exclusion. “An insurer may not delay issuance of a disclaimer upon a ground that the insurer knows to be valid while investigating other possible grounds for disclaiming coverage,” the Second Department concluded. [AVR-Powell C Dev. Corp. v. Utica First Ins. Co., 2019 N.Y. Slip Op. 05758 (2d Dep’t July 24, 2019).]

Contractor Entitled To Additional Insured Coverage Under Subcontractor’s Policy

A contractor working on the exterior façade of a Manhattan apartment building was sued by an apartment owner for allegedly causing water damage to the apartment.  The contractor sought additional insured coverage under its subcontractor’s policy.   The Supreme Court, New York County, found that the contractor was entitled to a defense under the subcontractor’s policy because there was an endorsement providing additional insured coverage to the contractor for damage “caused, in whole or in part, by [the subcontractor’s] work.”  Citing the New York Court of Appeals’ decision in Burlington Ins. Co. v. New York City Trans. Auth., 29 N.Y.3d 313 (2017), the court opined that there was a possibility that the subcontractor’s work caused the property damage because the subcontractor actually worked on the project while the contractor did not.  The court further opined that it was “irrelevant” that the subcontractor was not mentioned in the underlying complaint or added as a third party because the record showed that the subcontractor’s insurer had actual knowledge of facts establishing a reasonable possibility that the claim was covered.  The court concluded that the endorsement in the subcontractor’s policy made clear that the policy was “primary and non-contributory” with respect to the lawsuit against the contractor.  [American Empire Surplus Lines Ins. Co. v. Burlington Ins. Co., 2019 N.Y. Slip Op. 32221(U) (Sup. Ct. N.Y. Co. July 25, 2019).]