New York Insurance Coverage Law Update

Exclusion Did Not Bar Coverage For Third Party’s Alleged Injuries In ATV Accident On Insured’s Property

After the operator of an all terrain vehicle allegedly sustained personal injuries on property owned by Grande Stone Quarry, LLC, the property owner’s general liability insurer disclaimed coverage to the property owner based upon an exclusion for bodily injury “arising out of, caused by or contributed to . . . by ownership, non-ownership, main-tenance, use or entrustment to others of any ‘auto’ . . . ” The Supreme Court, Greene County, ruled that the insurer had no duty to defend or indemnify, but the Appellate Division, Third Department, reversed. The Third Department rejected the insurer’s contention that this exclusion precluded coverage for the use of an auto by anyone, not just by an insured on the policy. The Third Department acknowledged that the First Department appeared to have accepted the insurer’s interpretation, but the Third Department concluded that it was “not clear that the insured would realize that protection had been extinguished for claims resulting from third parties using such vehicles.” [Essex Ins. Co. v. Grande Stone Quarry, LLC, 2011 N.Y. Slip Op. 01555 (3d Dep’t March 3, 2011).]

Allegations Of Negligent Hiring And Supervision Of Attorney Who Purportedly Made Sexual Advances To Client Found To Fall Within Professional Liability Insurance Policy’s Errors And Omissions Coverage

Allegations that a law firm had negligently hired and supervised an attorney who purportedly made sexual advances to a client fell within the errors and omissions coverage of the firm’s professional liability insurance policy, the Appellate Division, First Department, has decided. The First Department added that although the allegations may not fit within the policy definition of “Personal Injury,” they did come within its definition of “Wrongful Act.” [Gladstein & Isaac v. Philadelphia Indem. Ins. Co., 2011 N.Y. Slip Op. 01691 (1st Dep’t March 8, 2011).]

Insurer May Retroactively Deny No-Fault Claims For Failure To Appear For IMEs

After the Supreme Court, New York County, determined that an insurer could deny claims on the basis of the failure of the health provider’s assignors to appear for independent medical examinations (“IMEs”) requested by the insurer, even though the insurer initially had denied the claims on the ground of lack of medical necessity, the provider appealed. The Appellate Court, First Department, affirmed, explaining that the failure to appear for IMEs requested by an insurer “when, and as often as, [it] may reasonably require” was a breach of a condition precedent to coverage under the no-fault policy. Accordingly, it concluded, when the assignors failed to appear for the requested IMEs, the insurer had the right to deny all claims retroactively to the date of loss. [Unitrin Advantage Ins. Co. v. Bayshore Physical Therapy, PLLC, 2011 N.Y. Slip Op. 01948 (1st Dep’t March 17, 2011).]

Insurer That Continued To Accept Premiums May Not Rescind Life Insurance Policy Based Upon False Representations In Application

After American General Life Insurance Company issued a life insurance policy to the Hana Family Trust on the life of Hana Salamon on the basis of an application she completed and executed, it sent her a letter purportedly rescinding the policy “due to material misrepresentations in your application for life insurance coverage.” A federal district court judge found, however, that the insurer had waived its right to rescind the policy because it had “sufficient information” that there were misrepresentations in the application but it “continued to accept payments after discovering those misrepresentations.” Rejecting the contention that the insurer’s acceptance and retention of premiums should be excused because it was inadvertent, the court concluded that the insurer’s attempt to both accept premium payments and reserve the right to rescind a contract was “unenforceable.” [American General Life Ins. Co. v. Salamon, 09-CV-5428 (KAM)(SMG) (E.D.N.Y. March 16, 2011).]

Insureds’ Delay In Notifying Insurer Dooms Coverage Claim

Building owners named in a personal injury action sought a defense and indemnity from their insurer. The court found that the building superintendent’s knowledge of the alleged accident and injuries was imputable to the building owners and, therefore, they had knowledge of the occurrence about 76 days before they notified their insurer. As such, the court found, the notice to the insurer was untimely as a matter of law. The court also rejected the owners’ contention that their failure to give timely notice should be excused because they had a good faith belief of non-liability, concluding that even if the building’s property manager believed that the injured party would not assert a claim, that belief “was not reasonable” because the insureds “did not undertake any investigation of the incident, or make inquiry regarding the property manager’s alleged belief that the injury was slight.” [Tower Ins. of N.Y. v. Amsterdam Apts., LLC, 2011 N.Y. Slip Op. 01689 (1st Dep’t March 8, 2011).]

 Reprinted with permission.  All rights reserved.