New York Insurance Coverage Law Update

April 27, 2023 | Alan C. Eagle | Insurance Coverage

Second Circuit Holds That Absolute Auto Exclusion Clearly Precludes Coverage

The insureds, a country club and motorcycle group, held an annual motorcycle rally.  They were sued by two motorcycle riders who were struck by an automobile as the riders and automobile were entering the premises of the club to attend the rally.  Covington Specialty denied coverage to the insureds based upon the “Absolute Auto Exclusion” in their policy, which deleted the “standard” auto exclusion applicable to bodily injury arising out of the use of an auto “owned or operated by … any insured”, and replaced it with an exclusion for bodily injury “arising out of or resulting from the … use … of any … auto ….’  The insureds argued that the Absolute Auto Exclusion is ambiguous as to whether it applies only to autos used by the insureds and their employees because it omitted the words “any insured” from the “standard” exclusion without replacing them with “any insured or other persons”.  The United States Court of Appeals, for the Second Circuit rejected the insureds argument and found that the Absolute Auto Exclusion unambiguously precluded coverage for the suit against the insureds.  The court stressed that an exclusion cannot be rendered ambiguous by an exclusion that it deletes and replaces and, instead, must be analyzed “on its own terms.”  [Covington Specialty Ins. Co. v. Indian Lookout Country Club, Inc., 62 F.4th 748 App. LEXIS 6859 (2d Cir. March 22, 2023).]

Fourth Department Finds That Loss From Underground Water Excluded

The basement of the insured’s premises sustained water damage when an under-ground water supply line, which supplied the building’s sprinkler system, ruptured, and the water entered underground into the basement.  The insured’s property insurer, Utica National Insurance Company of Ohio, denied coverage based upon the Water Exclusion Endorsement in the insured’s policy, excluding coverage for damage caused by “[w]ater under the ground surface pressing on, or flowing or seeping through … [f]oundations, walls, floors, or paved surfaces [or] … [b]asements, whether paved or not”, and “regardless of whether [the loss] is caused by an act of nature or is otherwise caused.”  The Appellate Division, Fourth Department, held that the trial court properly determined that the exclusion precluded coverage because the loss “arose when the water from ‘under the ground’ pressed on and flowed through the building’s foundation walls into the basement.”  [Advanced Physical Medicine Rehabilitation PLLC v. Utica Nat’l. Ins. Co. of Ohio, 2023 N.Y. App. Div. LEXIS 1440 (4th Dep’t March 17, 2023).]

Eastern District Holds That General Contractor Entitled To Defense Under Policy Issued To Employer Of Injured Worker

A general contractor (GC) subcontracted with a subcontractor (Sub) to perform and supervise stucco work on a construction project.  The Sub’s employee (who was not wearing a safety harness) fell off a roof, and he sued the GC.  The GC brought a third-party action against the Sub-employer, which was insured by Travelers.  The United States District Court for the Eastern District of New York held that Travelers owed a duty to defend the GC as an additional insured under its policy issued to the Sub-employer, reasoning that the allegations of the complaint and/or other facts known to the insurer created a reasonable possibility that the acts or omissions of the Sub or those working on its behalf were a proximate cause of the accident.  The court considered the “allegations of [the employee’s] complaint, the bill of particulars, facts taken from depositions, and the non-conclusory allegations of the [GC’s] third-party complaint”, which according to the court, suggested the possibility that the Sub’s employee caused his own injuries because he walked to the edge of the roof without wearing a harness and leaned against the railing.   [Certain Underwriters at Lloyd’s v. Travelers Ins. Co. of Am., 2023 U.S. Dist LEXIS 51835 (E.D.N.Y. March 27, 2023).]

Share this article:

Related Publications

Get legal updates and news delivered to your inbox