New York Insurance Coverage Law Update

No Coverage For Mold Case Where Alleged Injury Outside Policy Period

The underlying plaintiff’s allegation of exposure to mold during the policy period did not trigger any duty to defend or to indemnify where the injury allegedly occurred after the policy period. As the court reasoned, New York follows the “injury-in-fact” test that “rests on when the injury, sickness, disease or disability actually began and . . . requires the insured to demonstrate actual damage or injury during the policy period.” [Downey v. 10 Realty Co., LLC, 2010 N.Y. Slip Op. 08637 (1st Dep’t Nov. 23, 2010).]

 “Verbal Understanding” Insufficient To Lead To Additional Insured Coverage

A construction manager’s verbal understanding that a subcontractor would provide additional insured coverage was insufficient to require the insurer to defend or to indemnify the construction manager. The court explained that even if a verbal understanding constituted an “agreement” to have the construction manager named as an additional insured, the additional insured endorsement required that the agreement be “executed” prior to the loss for which coverage was sought, and the agreement was neither reflected in a signed document nor fully performed by the parties. [Empire Bldrs. & Developers, Inc. v. Delos Ins. Co., 2010 N.Y. Slip Op. 08059 (2d Dep’t Nov. 9, 2010).]

Exclusions Do Not Bar Coverage For “Unknowing Or Accidental” Release Of Asbestos

After the insured performed “emergency water damage service” at a building, it was sued for allegedly causing asbestos to be dispersed throughout the property. The insurer disclaimed coverage, but the court rejected its arguments. The court found that the policy’s asbestos exclusion did not unambiguously exclude coverage for damages arising out of “the unknowing or accidental release or dispersal of asbestos.” It also opined that “asbestos” did not fall within the pollution exclusion because it was not specifically included within the definition of “pollutant,” and to exclude asbestos claims under the pollution exclusion “would render the specific asbestos exclusion meaningless.” [Great Am. Restoration Servs., Inc. v. Scottsdale Ins. Co., 2010 N.Y. Slip Op. 08067 (2d Dep’t Nov. 9, 2010).]

No Coverage Under Fiduciary Liability Policy Where Insured Did Not Act In Fiduciary Capacity

An agreement settling a class action challenging amendments to an IBM pension plan as violative of the age discrimination provisions of ERISA provided for payment by the plan of the plaintiffs’ attorneys’ fees. The court denied coverage for those fees under a fiduciary liability policy that had been issued to IBM, ruling that that policy required a “Wrongful Act” that necessitated a breach of a fiduciary duty. It reasoned that when IBM allegedly violated ERISA’s age discrimination provisions by making amendments to the pension plan, it was acting in a settlor capacity, not in a fiduciary one. Thus, the class action did not allege that IBM or the plan had committed a “Wrongful Act,” and neither IBM nor its pension plan could recover under the policy. [Federal Ins. Co. v. International Bus. Machines Corp., 2010 N.Y. Slip Op. 08061 (2d Dep’t Nov. 9, 2010).]

Failure To Notify Insurer For Years Dooms Coverage For Bodily Injury Claim

An agreement between New York University and a maintenance contractor (“ABM”) required that ABM obtain insurance naming NYU as an additional insured. An accident allegedly occurred at NYU on March 6, 2003, but NYU first gave notice to the insurer, Continental, on August 14, 2008, when it sued Continental. The court found that Continental had not received timely notice of the underlying accident and, therefore, had no obligation to defend or to indemnify NYU. The court rejected NYU’s argument that the delay resulted from being told by ABM that it had a different insurer. The court reasoned that if NYU had exercised its right under its contract with ABM to approve ABM’s insurance, it would have learned earlier that ABM’s insurer was Continental. [New York Univ. v. American Bldg. Maintenance, 2010 N.Y. Slip Op. 08800 (1st Dep’t Nov. 30, 2010).]

Finding Question About “Heart Trouble” Ambiguous, Court Orders Insurer To Pay Death Benefits

The plaintiff claimed that he was entitled to $50,000 in benefits under a life insurance policy issued to his wife. In the court’s view, the application question as to whether or not the plaintiff’s wife suffered from “heart trouble” was “ambiguous” because the term was not defined, and the answer could not be used to deny benefits or to rescind the policy. [Brondon v. The Prudential Ins. Co. of Amer., No. 09-CV-6166T (W.D.N.Y. Nov. 9, 2010).]