New York Insurance Coverage Law Update

Statute of Limitations Begins to Run When Insurer Could Seek Payment of Adjusted Premiums, Not When It Later Issued Invoices

Hahn Automotive Warehouse, Inc. obtained insurance policies that required regular adjustments of premiums based on actual claims experience. An insurer discovered in 2005 that it had not billed Hahn for years of adjusted premiums and sued. The New York Court of Appeals ruled that the statute of limitations applicable to the insurer’s breach of contract claim began to run when it had the right to demand payment from Hahn, not when it later issued invoices. Thus, the Court concluded, debts for which the insurer could have demanded payment more than six years before filing its suit were time-barred. [Hahn Automotive Warehouse, Inc. v. American Zurich Ins. Co., 2012 N.Y. Slip Op. 02344 (N.Y. Mar. 29, 2012).]

Court Rejects Suit Against Insurer To Recover Unsatisfied Judgment Against Insured Where Insured Failed to Provide Prompt Notice

An injured woman obtained a default judgment against a building owner and sued the owner’s insurer to recover the amount of the unsatisfied judgment.  The court found that the insurer was entitled to summary judgment because the injured claimant failed to exercise her independent right to notify the insurer and the insured’s notice was late based upon an affidavit from the insurer’s litigation specialist who stated that the insured had failed to provide notice of the underlying action to the insurer until more than four months after the Secretary of State had been served with process. [Konig v. Hermitage Ins. Co., 2012 N.Y. Slip Op. 01659 (2d Dep’t March 6, 2012).]

Actual Loss, But Not Consequential Damages, Covered By Title Insurance Policy

After a property owner discovered a defect in his title that allegedly prevented him from adding new stories to an existing building, he sought the full limit of the policy – $175,000 – from his title insurer. He argued that the title insurer had to pay the difference between the expected value of the property with the addition (less the cost of construction) and the value of the property with the title defect. The insurer argued that it owed the difference between the value of the property without the title defect ($609,000) and the value of the property with the title defect at the time the insured discovered it ($603,000), or $6,000. The court agreed with the insurer, explaining that the insured only was entitled to be reimbursed for his actual loss, up to the limit of the policy, and that the policy did not provide for a recovery of consequential damages. [Gomez v. Fidelity Nat’l Tit. Ins. Co. of N.Y., 34 Misc. 3d 1233(A) (Sup. Ct. Queens Co. Mar. 1, 2012).]

No Coverage For Personal Injury Suit Where Home Was Not Insured’s Primary Residence

A property owner named as a defendant in a personal injury suit sought coverage from her homeowners insurer.  The court found that the insurer had no duty to defend or to indemnify the insured where the policy was issued for a one or two family primary residence and the insured had represented in her application that she would use the property as her primary residence, but did not. [Tower Ins. Co. of N.Y. v. Khan, 2012 N.Y. Slip Op. 02409 (App. Div. 1st Dep’t Mar. 29, 2012).]

Court Rejects Insured’s Argument That Subcontractor Exception To “Damage to Your Work” Exclusion Restored Coverage

An insured contractor sought coverage for a lawsuit that alleged that it was liable for defects in a swimming pool, arguing that other jurisdictions would apply the Subcontractor Exception to the “Damage to Your Work” exclusion in this case and that New York courts should do so, too. The United States District Court for the Eastern District of New York observed that there was no covered “occurrence” under existing New York law and found “no authority” from within New York that supported the contractor’s position. Concluding that this was not a case where an insured’s work on one component of a project caused damage to property beyond its own work product – the contractor’s work product was the entire pool – the court granted judgment to the insurer. [Aquatectonics, Inc. v. The Hartford Cas. Ins. Co., 10-CV-2935 (DRH) (ARL) (E.D.N.Y. Mar. 26, 2012).]