New York Insurance Coverage Law Update
February 28, 2022 |New York’s Comprehensive Insurance Disclosure Act Amended
On February 24, 2022, New York’s Comprehensive Insurance Disclosure Act was amended to remove some of the more controversial requirements, including that defendants, third-party defendants, and counterclaim defendants (the “disclosing party”) produce insurance applications and information about other lawsuits that may have eroded the limits of policies being produced. The amended Act now requires production of all primary, umbrella and excess insurance policies that may satisfy all or part of a judgment (and certain other insurance information) no later than ninety days after answering in cases commenced on or after December 31, 2021. Declarations can be produced instead of policies if the parties in the case agree. In addition to policies or declarations, the disclosing party must produce contact information for an assigned person responsible for adjusting the claim, and the total limits available under the policies after considering any erosion. Disclosure of limits is not an admission of coverage. The disclosing party and its counsel must certify as to the accuracy of the information provided. The disclosing party must make reasonable efforts to ensure that the information remains accurate, and to provide updated information at various time throughout the litigation. The details of the Act’s amendment may be found at https://www.nysenate.gov/legislation/bills/2021/S7882/amendment/a.
Court Holds That Claims For Faulty Workmanship Did Not Allege A Covered “Occurrence”
The owner of a brownstone townhouse in a New York City Landmarks Preservation district in Brooklyn contracted with Vema-P to restore the building’s façade consistent with the standards of the New York City Landmark Preservation Commission (Commission) and Department of Building (DOB). The Commission’s work permit prohibited the use of any coating on the building’s façade. Vema-P violated the prohibition by applying coating to the façade. Vema-P attempted to remove the coating, but it resulted in a non-uniform façade, additional construction, the presence of scaffolding allegedly diminishing the rental values, and the hiring of another contractor to return the façade to a Landmark approved condition. The owner sued and obtained a default judgment against Vema-P and then sued Vema-P’s insurer for coverage. The court granted the insurer’s motion to dismiss, reasoning that it is “well-settled” that “occurrence”-based commercial general liability policies do “not insure against faulty workmanship in the work product itself but rather faulty workmanship in the work product which creates a legal liability by causing bodily injury or property damage to something other than the work product.” Although the owner alleged that it was damaged by Vema-P’s negligent work, the court found that the “the sum and substance” of the dispute is the owner’s contention that Vema-P failed to perform the renovation work in accordance with the required standards as promised and that a “contract default under a construction contract is not transformed” into a covered “occurrence”, i.e., accident, by alleging negligent performance or construction. The court concluded that even if there was a covered “occurrence”, various uncontested ex-clusions would apply. [589 7th St. LLC v. Certain Underwriters at Lloyd’s, 2021 N.Y. Misc. LEXIS 6754 (Dec. 21, 2021, Sup. Ct. N.Y. Cnty).]
United States District Court Holds That Claim Notes Are Discoverable
LM Insurance Corporation moved to compel Cincinnati Insurance Company to produce its non-privileged claim notes, and Cincinnati opposed the motion arguing that the notes were irrelevant to Cincinnati’s denial of coverage because LM’s insured is not an additional insured under Cincinnati’s policy. The United States District Court for the Eastern District of New York held that the notes were discoverable. The court rejected Cincinnati’s argument that the notes were irrelevant because the policy language is unambiguous, reasoning that this is a “challenge that goes to admissibility, as opposed to discoverability, particularly where, as here, the district judge has yet to rule on the ambiguity or clarity of the applicable policy language.” As such, the court “exercise[d] its broad discretion” and concluded that Cincinnati failed to rebut LM’s prima facie showing of relevance. [LM Ins. Corp. v. Safety Nat’l Cas. Corp., 2021 U.S. Dist. LEXIS 228040 (E.D.N.Y. Nov. 29, 2021).]
