New York Insurance Coverage Law Update

December 29, 2020 | Insurance Coverage

Court Rules That Assault And Battery Exclusion Precludes Coverage For Slip And Fall On Spilled Drinks During Melee

C&S Franklin Realty (a landlord) filed a declaratory judgment action against the insurer of C&S’s tenant (a nightclub), seeking additional insured coverage for an underlying personal injury action alleging a slip and fall on spilled drinks “due to a melee which erupted within and without the club.”  The insurer, USLI, moved for summary judgment based upon an assault and battery exclusion precluding coverage both for suits “based upon any actual or alleged ‘assault’ or ‘battery’ … whether caused by or at the instigation or direction of an insured” and for bodily injury “in which the underlying operative facts constitute ‘assault’ or ‘battery’ … arising out of, directly or indirectly resulting from, in consequence of or in any way involving ‘assault’ or ‘battery’”.  C&S ar-gued that the exclusion did not apply because the bodily injury was allegedly caused by the tenant’s negligence in connection with the spillage on the floor, not an assault or battery.  The court applied a “but-for” test and held that coverage did not exist because the accident would not have occurred “but for” the melee in the nightclub (i.e., an assault or battery) which caused a puddle of spilled drinks.  The court explained that the plain language of the exclusion applied because the pleadings were “based upon” an assault or battery and the bodily injury “involv[ed]” an assault or battery.   [C & S Franklin Realty Corp. v. United States Liab. Ins. Co., 2020 N.Y. Misc. LEXIS 7647 (N.Y. Sup. Ct., Bronx Cnty Aug. 28, 2020).]

Federal District Court Holds That Insurer Obligated To Pay Reasonable Defense Costs Not Paid By Other Insurer

Value Wholesale, Inc. retained a law firm to defend Value in a trademark lawsuit, and MedPlus, Inc. retained the same firm for its defense in the same suit.   Continental Casualty agreed to defend the lawsuit and reimbursed certain past defense costs.  Value filed a declaratory judgment action against KB Insurance (which had insured Value) seeking reim-bursement of those defense costs not paid by Continental.  After finding that KB breached its duty to defend, the court held that KB owed the full amount of the defense costs being sought by Value less those costs charged solely to defend MedPlus in the total amount of $347, 800, plus pre-judgment interests at a rate of nine percent per annum. The court found that $400 – $600 per hour rates to defend a trademark infringement case were not unreasonable under the circumstances, noting that KB’s own expert in the DJ charged $550 per hour to review the invoices.  The court also declined to find that the hours spent were unreasonable noting that Value paid them, and there was no reason that it would have tolerated excessive billing. [Value Whole-sale, Inc. v. KB Ins. Co., 2020 U.S. Dist. LEXIS 203659 (E.D.N.Y. Nov. 2, 2020).]

Second Department Upholds Denial Of Coverage Under Homeowners Policy Because Claimed Loss Was Not A Covered “Collapse”

Plaintiffs made a claim with their home-owners insurer for alleged damage to their house, including decayed framing behind a brick facade due to water infiltration, and the insurer denied coverage on the grounds that the claim did not involve a “collapse” for which coverage is provided and was subject to various exclusions.  The plaintiffs filed a coverage action against their insurer. The trial court denied the insurer’s motion for summary judgment, and the insurer appealed.  The Appellate Division, Second Department, reversed and held in favor of the insurer.  The court reasoned that the insurer had met its prima facie burden on summary judgment of establishing that the claimed damage did not involve “an abrupt falling down or caving in of … any part of [the property]” which was no longer “standing”, as required to con-stitute a covered “collapse” under the policy.  In addition, the plaintiffs failed to raise a question of fact through their contractor’s affidavit, which did not in-dicate any portion of the property that was no longer standing or any specific damage that constituted a covered “co-llapse”. Accordingly, the Second De-partment concluded, the insurer should have been granted summary judgment in its favor declaring that it owed no coverage. [Parauda v. Encompass Ins. Co. of Am., 2020 N.Y. App. Div. LEXIS 6968 (2d Dep’t. Nov. 18, 2020).]

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