New York Insurance Coverage Law Update

December 1, 2011 | Insurance Coverage

Insurer Prejudiced From Late Notice

An insurer was given notice five years after an auto accident involving its insured, two years after an action was filed against its insured, after destruction of the truck involved in the accident, and after summary judgment had been granted on the issue of liability (not damages) against its insured. The insurer disclaimed coverage based upon late notice. The court, noting that the insurer’s policy required a showing of prejudice, found that the insurer had been prejudiced as a matter of law because it was “prevented from conducting its own investigation, attempting to locate [its insured] prior to the summary judgment motion, canvassing the area for witnesses and seeking reconstruction of the accident prior to the destruction of the . . . truck [involved in the accident].” As such, the insurer had no duty to defend or to indemnify its insured in the underlying action. [Budget Rent A Car System, Inc. v. St. Paul Travelers Group, No. 09-1454 (Sup. Ct. Suffolk Co. Nov. 21, 2011).]

Late Notice After Default Judgment Prejudiced Insurer, Appellate Court Decides

An insurer disclaimed coverage on the ground that the insured had breached the insurance policy by failing to timely notify it of a lawsuit, resulting in prejudice to the insurer. The Appellate Division, Second Department, held that the insured’s failure to provide notice until after the default judgment was entered against the insured prejudiced the insurer because the insurer lost its right to appear and interpose an answer, thus requiring it to shoulder the burden of moving to vacate the default. [Vernet v. Eveready Ins. Co., 2011 N.Y. Slip. Op. 07836 (2d Dep’t Nov. 1, 2011).]

Act of Requesting An Additional Insured Be Named Is “Critical And Material”

The Appellate Division, First Department, affirmed a trial court decision that an insurance policy did not afford additional insured coverage for claims asserted in an underlying personal injury action. In a concurring opinion, Justice Nelson S. Roman explained that an endorsement amended the policy to include, as insureds, persons or organizations “as on file with company.” The act of requesting that an additional insured be named under the policy was “not a purely ministerial act whose failure should be excused,” but was a “critical and material act.” The failure to provide the insurer with notice of an additional insured deprived the insurer from exercising its right to deny coverage under the policy, Justice Roman concluded. [GJF Constr. Inc. v. Sirius Am. Ins. Co., 2011 N.Y. Slip Op. 08630 (1st Dep’t Nov. 29, 2011).]

Additional Insured’s 13 Month Delay In Providing Notice Of Occurrence To Insurer Dooms Coverage Claim

An additional insured took 13 months to notify the insurer about the underlying occurrence. The court found the delay to be untimely as a matter of law. The court rejected the additional insured’s argument that its timely notice of the underlying suit satisfied the additional insured’s duty to provide timely notice of the occurrence. The court also ruled that the additional insured’s obligation to provide timely notice of the occurrence was independent of the named insured’s obligation because its interests were adverse to those of the named insured from the moment the amended complaint was served naming them both as defendants. [City of New York v. Investors Ins. Co. of Am., 2011 N.Y. Slip Op. 07910 (1st Dep’t Nov. 10, 2011).]

No Coverage Where Homeowner Misrepresented That House Was Owner-Occupied

A homeowner was sued and sought coverage under his homeowner’s insurance policy. The court agreed that there was no coverage because the insured misrepresented in his application that he resided in the home. Moreover, the insurer would not have issued the policy had the insured been truthful because dwellings that were not owner-occupied were deemed an unacceptable risk under the insurer’s underwriting guidelines. [Interboro Ins. Co. v. Fatmir, 2011 N.Y. Slip Op. 08565 (2d Dep’t Nov. 22, 2011).]

Auto Policy Not Implicated Even If Oil That Allegedly Leaked Into Basement Had Been Transported In Covered Vehicle

A person allegedly slipped on oil in a boiler room one day after the insured’s oil delivery truck had delivered oil to the building. The court ruled that the automobile policy issued to the insured did not provide coverage for the underlying personal injury action, concluding that the argument that the automobile policy was implicated simply because the oil was transported in a covered vehicle was “unpersuasive.” [Progressive Northeastern Ins. Co. v. Penn-Star Ins. Co., 2011 N.Y. Slip Op. 08220 (1st Dep’t Nov. 15, 2011).] 

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