New York Insurance Coverage Law Update

Court of Appeals Annualizes $30 Million Limit of Three-Year Excess Policy But Refuses To Find Additional Year Of Policy Limit Because Of Two-Month Extension

Union Carbide Corporation contended that the six insurance companies that provided it with $30 million of “fifth excess layer” coverage owed it $90 million – $30 million for each year of the three-year policy period. Union Carbide argued that the policy followed form to a policy that annualized the aggregate limit. The insurers countered that $30 million was the maximum that could be paid under the policy because the follow form clause was expressly made subject to their policy’s declarations, which spoke of an “aggregate,” not an “annual aggregate,” limit of liability. The New York Court of Appeals ruled in favor of Union Carbide on this issue, rejecting the insurers’ contention that their policy unambiguously forbade “annualization.” The Court, however, ruled against Union Carbide as to its claim for coverage under another policy, finding that Union Carbide did not meet its burden on summary judgment of establishing that a two-month extension of the policy created an additional year of policy limit. [Union Carbide Corp. v. Affiliated FM Ins. Co., 2011 N.Y. Slip Op. 1317 (N.Y. Feb. 22, 2011).]

“Other Insurance” Clauses Lead Court Of Appeals To Rule That Primary Insurer Must Defend Insured Against Entirety Of Actions

Hermitage Insurance Company, Inc., which had issued a commercial general liability (“CGL”) policy to Fieldston Property Owners Association, Inc., and Federal Insurance Company, which had issued an “Association Directors and Officers Liability” policy to Fieldston, both conceded at least the possibility that the two policies covered injurious falsehood claims asserted against Fieldston in two actions and that, based upon the “other insurance” clauses, Hermitage’s policy was primary to Federal’s policy. The insurers disagreed, however, as to whether Hermitage’s primacy on the injurious falsehood claims triggered a primary duty to defend against the remaining causes of action for which Hermitage had disclaimed coverage. The New York Court of Appeals decided that, based upon the broad duty to defend, and upon the conceded possibility that Hermitage’s CGL policy covered at least one cause of action in each of the two underlying complaints, Hermitage had a duty to provide a defense “to the entirety of both complaints” without contribution from Federal. [Fieldston Property Owners Ass’n, Inc. v. Hermitage Ins. Co., Inc., 2011 N.Y. Slip Op. 1361 (N.Y. Feb. 24, 2011).]

 Cross Liability Exclusion Bars Coverage For Insured’s Employee’s Alleged Injuries

After Metropolitan Metals Corporation obtained an insurance policy from Burlington Insurance naming 385 Third Ave. Assoc., L.P. as an additional insured, one of Metropolitan’s employees allegedly was injured while working at the property. The Appellate Division, First Department, held that 385 Third Avenue was not entitled to additional insured coverage because the cross liability exclusion barred coverage for an “employee of any insured.” The court rejected the argument that a separate employer’s liability exclusion in the policy created an ambiguity because exclusions are to be “read seriatim” and cannot be “regarded as inconsistent.” [385 Third Ave. Assoc., L.P. v. Metropolitan Metals Corp., 2011 N.Y. Slip Op. 00787 (App. Div. 1st Dep’t Feb. 10, 2011).]

Issue Of Which Insurer Must Pay No-Fault Benefits Subject To Mandatory Arbitration

After an insurer denied a claim for no-fault benefits on the ground that the benefits were payable by another insurer, the claimant brought suit. The Appellate Division, First Department, decided that the issue of which insurer was the primary insurer had to be submitted to arbitration because it was a dispute between insurers “as to their responsibility for the payment of first-party benefits.” The First Department reasoned that “any controversy between insurers involving the responsibility or the obligation to pay first-party benefits . . . is not considered a coverage question and must be submitted to mandatory arbitration.” [M.N. Dental Diagnostics, P.C. v. Government Employees Ins. Co., 2011 N.Y. Slip Op. 01333 (App. Div. 1st Dep’t Feb. 22, 2011).]

Cabana Rented For Over 20 Summers Is Not “Insured Premises” Under Homeowner’s Policy

A homeowner contended that her homeowner’s policy covered a claim brought by a guest who fell at a cabana rented by the homeowner because the cabana qualified as the “insured premises,” which included “premises [she] occasionally rented.” The court pointed out that the homeowner had been renting the same cabana every summer for over 20 years and had decorated it and stored items in it during the winter. This type of systematic rental spanning decades could not be characterized as “occasional,” the court ruled. Accordingly, the court concluded that the insurer was not obligated to defend or to indemnify the homeowner in the personal injury action. [Raner v. Security Mutual Ins. Co., 2011 N.Y. Slip Op. 30369U (Sup. Ct. N.Y. Co. Feb. 14, 2011).]

 Reprinted with permission.  All rights reserved.