New York Insurance Coverage Law Update

Court Rejects Claim That Non-Original Equipment Manufacturer Parts Are “Universally Inferior”

Owners of vehicles damaged in auto accidents contended in a class action lawsuit against their insurer that the estimates by their insurer’s claims adjusters were too low because the adjusters used prices for non-original equipment manufacturer (“OEM”) crash parts rather than for OEM crash parts. The owners argued that the non-OEM parts were “universally inferior” and that they were entitled to recover the difference in value between the OEM and non-OEM parts.

The court dismissed the class action, explaining that New York law explicitly permits and regulates the use of non-OEM crash parts in repair estimates. The court rejected the plaintiffs’ contention that the state regulation of the use of these non-OEM parts was mooted “by the parts’ universal inferiority.” [Patchen v. Government Employers Ins. Co., No. 10-cv-2056 (ADS)(AKT) (E.D.N.Y. Jan. 7, 2011).]

Failure To Keep Address Current With The Secretary Of State Does Not Excuse Late Notice

A corporation was sued in a personal injury action, and its insurer disclaimed coverage based upon late notice. In upholding the disclaimer, the Appellate Division, First Department, opined that service of the summons with notice on the Secretary of State, as the corporation’s designated agent, constituted receipt by the corporation. The court then found that the fact that the corporation had not subsequently received a copy of the summons, due to its failure to keep its address current with the Secretary of State, did not excuse its failure to comply with the notice requirements of its insurance policy. Accordingly, the court upheld the insurer’s disclaimer. [SP & S Assoc., LLC v. Insurance Co. of Greater N.Y., 2011 N.Y. Slip Op. 00415 (1st Dep’t Jan. 25, 2011).]

Employer’s Liability Exclusion Bars Coverage For Claim Against Property Owner By Asbestos Abatement Contractor’s Employee

A property owner sought coverage as an additional insured under a commercial general liability policy issued to an asbestos abatement contractor after an employee of the contractor brought suit against the property owner, alleging that he had fallen on the property owner’s greasy floor. The policy excluded coverage for bodily injury to an employee of any insured arising during the course of employment, but the exclusion did not apply to liability assumed by the insured contractor under an “insured contract,” i.e., a contract under which the insured assumed the tort liability of another because of bodily injury caused by the insured’s negligence. Although there was an indemnity agreement between the owner and contractor, the court noted that the complaint provided no basis for inferring that the presence of the grease resulted from the insured’s negligence. Accordingly, the court concluded that the property owner’s liability to the employee, if any, did not arise out of an “insured contract,” and the exclusion applied. [Arthur Kill Power, LLC v. American Cas. Safety Ins. Co., 2011 N.Y. Slip Op. 00268 (1st Dep’t Jan. 20, 2011).]

Title Insurer Found Obligated To Reimburse Homeowner For Diminution Of Home’s Market Value

After learning there was an issue as to whether property to be purchased included an easement on adjoining property to permit vehicle access, the purchaser obtained a rider to her title policy insuring “against loss or damage not exceeding the market value of the premises at the time of loss.” After a judicial determination that the easement was limited solely to use as a pedestrian right-of-way, the purchaser, now owner of the affected home, filed a claim under her title insurance policy. The court ruled that the title insurer was obligated to reimburse the homeowner for the diminution of the market value of her home from the date of purchase until the date the easement action was resolved, not exceeding the market value of the property as of that later date. [Appleby v. Chicago Tit. Ins. Co., 2011 N.Y. Slip Op. 00170 (2d Dep’t Jan. 11, 2011).]

Following Parties’ Settlement, Second Circuit Withdraws Certified Question Of Whether Certificate Of Insurance Estops Insurer From Denying Coverage

Last month, we reported that the United States Court of Appeals for the Second Circuit had certified the following question to the New York Court of Appeals:

In a case brought against an insurer in which a plaintiff seeks a declaration that it is covered under an insurance policy issued by that insurer, does a certificate of insurance issued by an agent of the insurer that states that the policy is in force but also bears language that the certificate is not evidence of coverage, is for informational purposes only, or other similar disclaimers, estop the insurer from denying coverage under the policy?

The parties have settled the case and the Second Circuit has withdrawn the certified question. [10 Ellicott Square Court Corp. v. Mountain Valley Indemnity Co., No 10-cv-0799 (2d Cir. Jan. 26, 2011).]

Reprinted with permission.  All rights reserved.