New York Insurance Coverage Law Update

August 1, 2011 | Insurance Coverage

No Coverage Where Building Insured As Two-Family Dwelling Had Three Apartments

An insurance company that issued an insurance policy to owners of a building asserted that they were not entitled to defense or indemnity for a personal injury action because the owners represented that the building was a two-family dwelling but the building actually contained a third apartment in the basement. The owners argued that the certificate of occupancy listed the building as a two-family dwelling and that in any event it did not matter even if it had another unit. The court found that the insurer had established that it would have charged a higher premium if it had known that there were three apartments in the building. It then concluded that the misrepresentation was material as a matter of law, and it granted the insurer’s motion for summary judgment. [Hermitage Ins. Co. v. Lafleur, 2011 N.Y. Slip Op. 31870 (U) (Sup. Ct. N.Y. Co. July 6, 2011).]

Failure To Sign Construction Agreement And Work Authorization Dooms Additional Insured Status

After the Supreme Court, New York County, found that Hard Rock Café International, Inc., was not an additional insured under an insurance policy issued to Regions Facility Services, Inc., Hard Rock appealed. The Appellate Division, First Department, affirmed. The Court explained that the policy provided coverage to additional insureds when “you have agreed, in writing” that another entity should be added as an additional insured. The appellate court noted that the construction agreement that required that Hard Rock be named as an additional insured was not signed by either Regions or Hard Rock, and the work authorization was signed only by Regions even though it included a signature line for Hard Rock. Accordingly, the First Department concluded, Hard Rock was not entitled to additional insured status. [Cusumano v. Extell Rock, LLC, 2011 N.Y. Slip Op. 05935 (1st Dep’t July 14, 2011).]

Insurer May Rescind Policy Ab Initio Where Homeowner Misrepresented Whether He Owned A Dog

When a homeowner applied for a homeowners’ insurance policy, he responded “no” to a question on the application that asked whether he had “any animals or exotic pets,” even though he owned a dog. The dog – a German Shepherd/Pit Bull mix – subsequently bit a visitor and the homeowner submitted a claim to the insurer. Thereafter, the insurer learned that the homeowner had owned the dog when he completed the application, and the insurer sought a court order that the policy was void ab initio because the homeowner had misrepresented a material fact on his application. The court first found no ambiguity in the application question, noting that the homeowner had admitted that he understood that the term “any animals” included pet dogs. The court concluded that the insurer was justified in rescinding the policy. [Security Mut. Ins. Co. v. Perkins, 2011 N.Y. Slip Op. 05848 (3d Dep’t July 7, 2011).]

Coverage Found Under D&O Policies For Investigations Even In The Absence Of Subpoenas

Following investigations into alleged accounting misstatements by MBIA, Inc., and related litigation, MBIA sought coverage under two directors and officers insurance policies which provided coverage for “Securities Claims”, defined to include a “formal or informal investigative order or similar document”. The U.S. Court of Appeals for the Second Circuit decided that the investigations by the New York Attorney General and the Securities and Exchange Commission constituted covered “Securities Claims”. The Second Circuit rejected the insurers’ argument that there was no coverage for investigations conducted by way of an oral request rather than by a subpoena or another formal process, noting that the authorities believed that MBIA would fully comply on a voluntary basis. [MBIA, Inc. v. Federal Ins. Co., No. 10-0355-cv (L) (2d Cir. July 1, 2011).]

No Coverage Where Insured Took 42 Days To Notify Insurer

An insured who was notified of an occurrence on October 22, 2008 notified its insurer on December 2, 2008. The court found that the delay doomed the insured’s coverage claim. Relying upon the Court of Appeals’ 1957 decision in Deso v. London & Lancashire Indem. Co. of America, the court held that notice was late as a matter of law. [QBE Ins. Corp. v. Illinois Union Ins. Co., 2011 N.Y. Slip Op. 31814(U) (Sup. Ct. N.Y. Co. July 1, 2011).]

Reprinted with permission.  All rights reserved.

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