New York Insurance Coverage Law Update

Federal District Court Finds That Gender Discrimination And Intentional Infliction Of Emotional Distress Claims Were Not Claims For Covered “Occurrences”

Claimants sued Waiting Room Solutions alleging various causes of action arising out of an employee placing a video camera in its women’s restroom and Waiting Room’s handling of the employee’s actions.  Waiting Room’s liability insurer, Excelsior, initially agreed to defend Waiting Room under a reservation of rights.  However, after all the claims against Waiting Room were dismissed except for the claims for gender discrimination under New York’s Human Rights Law and for intentional infliction of emotional distress,  Excelsior disclaimed coverage as to the remaining claims because they did not allege a covered “occurrence,” defined in the policy as an “accident”.  Waiting Room filed a declaratory judgment action, and the United States District Court for the Southern District of New York upheld the disclaimer, reasoning that the factual allegations in the complaint in the underlying action supported a “disparate treatment” discrimination claim, which is an “intentional wrong whose resultant harm flows directly from the acts committed”.  The court rejected Waiting Room’s waiver argument because the insurer had reserved its rights to disclaim coverage. The court also rejected Waiting Room’s argument that the insurer untimely disclaimed under New York Insurance Law §3420 (d) because “this statutory waiver provision only apples to disclaimers of coverage based on exclusions or breaches of policy conditions”, not where the claim falls outside the scope of coverage.  [Waiting Room Solutions, LLP v. Excelsior Ins. Co., 2020 U.S. Dist. LEXIS 164513 (S.D.N.Y September 9, 2020).]

Fourth Department Rejects Insured’s Argument That Injury-In-Fact Occurs As A Matter Of Law From Initial Exposure To Asbestos

Carrier Corporation and Elliot Company (“Plaintiffs”) sought coverage from various insurers for lawsuits claiming personal injuries from exposure to asbestos contained in their products.  In an appeal before the New York Appellate Division, Fourth Department, Fireman’s Fund Insurance Company maintained that the trial court erred in granting Plaintiffs’ motion for partial summary judgment declaring that, as a matter of law, injury-in-fact in an asbestos case occurs from the date of first claimed exposure through death or the filing of suit, thereby triggering each policy in effect from the date of first claimed exposure.   The Fourth Department agreed, reasoning that Fireman’s Fund raised a triable issue of fact and, in particular, submitted the affidavits of two medical experts who averred that harm occurs only when a threshold level of asbestos fiber or particle burden is reached that overtakes the body’s defense mechanisms. [Carrier Corp. v. Allstate Ins. Co., 2020 N.Y. App. Div. LEXIS 5833 (4th Dep’t Oct. 9, 2020).]

Insurer’s Disclaimer Based Upon Independent Contractor Exclusion Upheld And Insured’s Equitable Estoppel Argument Rejected

A worker allegedly fell off a ladder and suffered injuries while performing renovation work for C&K 28 Realty, and he sued C&K. C&K’s insurer, Union Mutual, disclaimed coverage based upon policy provisions precluding coverage for bodily injury arising out of “work performed by independent contractors” unless they carry primary insurance with certain limits that names C&K as an additional insured.  Union Mutual retained counsel to defend C&K subject to the disclaimer, filed a declaratory judgment action, and moved for summary judgment seeking a declaration that it may withdraw from C&K’s defense based upon no coverage. The court granted summary judgment to Union Mutual because the underlying complaint, bill of particulars and claimant’s deposition testimony reflected that the claimant was an independent contractor, and there was no evidence that additional insured coverage was procured for C&K. The court also rejected C&K’s argument that Union Mutual should be equitably estopped from denying coverage because C&K could not demonstrate that it detrimentally relied upon C&K’s defense or that it was otherwise prejudiced when  Union Mutual disclaimed coverage and informed C&K that the defense provided was subject to resolution of a declaratory judgment action. [Union Mut. Fire Ins. Co. v. C&K 28 Realty Corp., 2020 NYLJ LEXIS 1614 (Sup. Ct., Kings Cnty. October 27, 2020).]