New York Insurance Coverage Law Update

April 28, 2022 | Insurance Coverage

Second Department Holds Landlord Covered As Additional Insured Under Tenant’s Policy Where Tenant’s Employee Injured In Freight Elevator Used By Tenant

Bed Bath & Beyond leased third-floor retail and office space at a shopping center in Queens, and its employee was injured while using a freight elevator during his employment.  The employee sued the owner of the shopping center, which sought additional insured coverage under Bed Bath & Beyond’s policy with Safety National Casualty.  The policy provided additional insured coverage to the owner for liability arising out of the ownership, maintenance or use of the leased premises.  The New York Appellate Division, Second Department, held that Safety National Casualty must defend and indemnify the owner as an additional insured, reasoning that the leased premises necessarily “included the elevator in question, which was used by Bed Bath & Beyond in the course of its business to provide it with access to the leased premises.”  [Alexander’s Rego Shopping Ctr., Inc. v. Safety Nat’l Cas. Corp., 158 N.Y.S.3d 839 (2d Dep’t Feb. 9, 2022).]

District Court Finds That Polar Bear Club Not Covered For Participant’s Accident

The Polar Bear Club holds an annual charitable event called the “Polar Bear Plunge” during which thousands of people enter the ocean in the middle of the winter to raise funds for the Make-A-Wish-Foundation.  The Polar Bear Club asks those who wish to participate to register and to submit a Hold Harmless Agreement.  The claimant was allegedly injured when he joined others in entering the ocean in Long Beach, New York, and he sued Long Beach and the Polar Bear Club.  In turn, they tendered to their insurer, Scottsdale Insurance, which disclaimed coverage on the ground that their policy excluded coverage for bodily injury to a “participant”, defined as including any person “taking part in” the event.  The Polar Bear Club and Long Beach argued that the exclusion was ambiguous as to who is a “participant” and should not include the claimant who did not formally register for the event or execute a Hold Harmless Agreement.  The United States District Court for the Eastern District of New York disagreed, stressing that “a contract is not ambiguous just because one of the parties attaches a different subjective meaning to one of its terms”.  Instead, to be ambiguous, a policy “must be reasonably interpreted in two conflicting manners when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement”.  The court also rejected the argument that the policy was illusory, reasoning that it “provides coverage for some acts and occurrences, namely bodily injury of spectators and attendees of the Polar Bear Plunge”, and the fact that there may be “wide exclusions” does not render a policy “illusory”.  [Scottsdale Ins. Co. v. Long Beach Polar Bear Club City of Long Beach, 2022 U.S. Dist. LEXIS 55936 (E.D.N.Y. Mar. 18, 2022).]

First Department Holds Insured Entitled to Coverage Under Fidelity Bonds for Loss Incurred Due to Broker

Commodity futures broker MF Global used an outside broker that traded commodities futures on the Chicago Mercantile Exchange (CME) in excess of his available margin credit.  As a Clearing Member of the CME, MF Global was obligated to meet the payment obligations of the broker and recorded the loss on its books as a bad debt.  In turn, MF Global sought coverage under its fidelity bond insurance policy and excess bonds, which covered MF Global’s “direct” financial loss as the result of any theft, fraudulent act or malicious act committed by “any other person” and excluded contractual liability loss.  MF Global sued its insurers for coverage, and the New York Appellate Division, First Department, found that MF Global was covered because, among other things, MF Global’s loss was “direct” and cannot be fairly viewed as simply satisfying a contractual liability to the CME.  [New Hampshire Ins. Co. v. MF Global Fin. USA Inc., 2022 N.Y. App. Div. LEXIS 1763 (1st Dep’t Mar. 17, 20220.]

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