New York Insurance Coverage Law Update

January 29, 2021 | Insurance Coverage

Southern District Of New York Holds That Insured Not Entitled to Coverage For Losses Resulting From COVID-19

Sparks Steakhouse in New York City filed a coverage action against its insurer, Admiral Indemnity, alleging that Admiral breached its obligation to provide coverage under its all-risk commercial property policy for losses resulting from governmental orders to close restaurants due to the COVID-19 outbreak. The United States District Court for the Southern District of New York granted Admiral’s motion to dismiss and held that Sparks was not entitled to business income and extra expense coverages under the policy because the alleged suspension of Spark’s business was not “caused by direct physical loss of or damage to” Spark’s property as necessary to trigger the coverages.  The court reasoned that the plain meaning of the phrase connotes a “negative alteration in the tangible condition of property,” and New York and out-of-state case law supports the court’s holding.   The court also dismissed Sparks’ claim for civil authority coverage under the policy because Sparks did not allege two prerequisites to such coverage under the policy: (1) that there was “damage to property other than [its own]” and (2) that “action of civil authority … prohibit[ed] access” to its restaurant and the area immediately surrounding the damage.  [Michael Cetta, Inc. d/b/a Sparks Steakhouse v. Admiral Indem. Co., 2020 U.S. Dist. LEXIS 233419 (S.D.N.Y. Dec. 11, 2020), appeal docketed, No. 21-57 (2d Cir. Jan. 11, 2021).]

Court Holds Willfulness Not Required To Deny Coverage For Failure To Appear For No-Fault EUO

Country-Wide Insurance Company moved for summary judgment against Citimedical PLLC seeking a declaration that Country-Wide was not obligated to pay Citimedical’s claim under a no-fault policy.  Citimedical sought payment for treatment and medical equipment provided to Kanado Gordon for injuries he allegedly sustained in an auto accident.  Country-Wide denied coverage because Gordon failed to appear for duly scheduled Examinations Under Oath (EUO), as required under the policy.  Citimedical argued that Country-Wide failed to demonstrate that Gordon’s non-cooperation was willful.  The court found that Country-Wide met its burden of proving that the EUO notice was mailed and held that coverage was precluded, reasoning that willful non-cooperation is not necessary to deny no-fault coverage based upon the insured’s failure to appear for a properly scheduled EUO.   [Country-Wide Ins. Co. v. Gordon, 2020 N.Y. Misc. LEXIS 9895 (Sup. Ct., N.Y. Cnty Nov. 4, 2020).]


Court Denies Insurers’ Motion Seeking Declaration of No Coverage For Lead Paint Abatement Action

Several California counties sued NL Industries for the abatement of lead-based paint used in California residences, and its insurers filed a declaratory judgment action against NL Industries seeking a declaration that they were not obligated to cover NL Industries. The insurers moved for summary judgment, arguing that the abatement fund ordered in the underlying action was not an award for covered “damages” because of “property damage” under the policies, but rather, was a remedy to prevent future harm.  The Supreme Court, New York County, denied the insurers’ motion, noting that the fund was monies paid to the government, depleted by its ongoing efforts to remediate the longstanding contamination of houses and buildings by lead paint in California.  The court also denied the insurers’ argument that there was no covered “occurrence” and/or the harm was expected or intended because the company was held liable in the California action for intentionally and affirmatively promoting lead paint for interior residential use with actual knowledge of the public health hazard that it would create.  The court reasoned that there is a distinction between knowledge of the risk of the hazardous consequences of one’s actions, and the intention to cause harm.  [Certain Under-writers at Lloyd’s, London v. NL Indus., 2020 N.Y. Misc. LEXIS  10905 (Sup. Ct. N.Y. Cnty Dec. 29, 2020).]

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