New York Insurance Coverage Law Update

Second Department Permits § 349 Claim To Proceed Against Homeowners’ Insurer

The insureds claimed that a storm caused a hillside on their property in the Village of Roslyn to collapse. Thereafter, the insureds filed suit and asserted a claim under General Business Law § 349 against the insurer that had issued a deluxe homeowners’ policy to them, contending that the insurer had purposely delayed in reaching a decision on their claim to force them to bring a lawsuit against the village under a subrogation provision in the policy before the statute of limitations had expired. The Appellate Division, Second Department, ruled that the insureds’ § 349 claim should not be dismissed. It reasoned that the conduct the insureds complained of had a “broad impact on consumers at large” because the subrogation provision was contained in every deluxe plus homeowners’ policy the insurer issued. It next decided that the insureds had pleaded conduct on the part of the insurer that was misleading in a material way, and that the insureds had alleged an injury (their attorney’s fees) as a result of the insurer’s allegedly deceptive act or practice. After concluding that the reasonableness of the insureds’ belief as to their need to file suit against the village was a question to be determined by a factfinder, the court added that the insureds also were entitled to assert claims for punitive damages and attorney’s fees in connection with their § 349 claim. [Wilner v. Allstate Ins. Co., 2010 N.Y. Slip Op. 00248 (2d Dep’t Jan. 12, 2010).]

Insurer Has Duty To Defend Town As Additional Insured After Collapse Of Town-Owned Dam Reconstructed By Named Insured

After the Kubricky Construction Corp. reconstructed a town-owned dam, the dam failed. The town was sued, and it sought a defense from Kubricky’s insurer as an “additional insured.” The Appellate Division, Third Department, held that the town was entitled to a defense. The court acknowledged that the additional insured coverage remained in effect only as long as Kubricky, the named insured, had ongoing operations at the project, and that major construction had ended before the dam’s failure. However, the court concluded, inspection of the project by the engineer, which was required before Kubricky’s work was considered completed under the contract, had not yet occurred. [Town of Fort Ann v. Liberty Mut. Ins. Co., 2010 N.Y. Slip Op. 00612 (3d Dep’t Jan. 28, 2010).]

Broad Employee Exclusion In Insured’s Policy Dooms Coverage For Suit By Contractor’s Employee

After the insured, Matthew Davis Events (“MDE”), agreed to manage a party for a customer, it contracted with United Stage Service, Inc. (“Stage”) to work the event. A Stage employee who allegedly was injured brought suit against MDE, and MDE’s insurer disclaimed coverage based upon an exclusion for bodily injury to an “employee” of an insured. The exclusion defined “employee” as including a person “hired by, liable to, leased to, contracted for, or volunteering services to the insured, whether or not paid by the insured”. MDE argued that the employee exclusion was ambiguous as to whether Stage’s employees were included. The Appellate Division, First Department disagreed, holding that the employee exclusion “clearly contemplate[d]” that an injury to a contractor or its employee was within the scope of the exclusion. [Nautilus Ins. Co. v. Matthew David Events, Ltd., 2010 N.Y. Slip Op. 00296 (1st Dep’t Jan. 14, 2010).]

Federal Court Finds That Independent Contractor Exclusion Is Unambiguous, And That Insurer Is Not Estopped From Maintaining Allegedly Untimely Disclaimer For Property Damage Claims Where No Prejudice

A plumber working in an apartment building failed to cap a leak in a gas pipe, leading to an explosion, a tenant’s death, and the destruction of the building. The building owners were sued, and their premises liability policy insurer filed a declaratory judgment action, arguing that it had properly disclaimed coverage based upon, among other things, a policy exclusion for work done by an independent contractor.

The district court found that the independent contractor exclusion was unambiguous, valid, and applicable. The court, however, ruled that the insurer’s disclaimer with respect to the personal injury and wrongful death claim against the building owners was untimely under Insurance Law § 3420(d). The court added that § 3420(d) did not apply to the claims for property damage, but that disclaimers relating to such claims were subject to common law equitable estoppel. It then found, however, that the building owner had failed to demonstrate that they had been prejudiced by the insurer’s alleged late disclaimer, as required for equitable estoppel. Accordingly, the court concluded that the insurer was entitled to a declaration of noncoverage with respect to the property damage claims against the building owners. [U.S. Underwriters Ins. Co. v. Landau, 2010 U.S. Dist. Lexis 3430 (E.D.N.Y. Jan. 19, 2010).]

 Reprinted with permission.  All rights reserved.