New York Insurance Coverage Law Update

May 1, 2012 | Insurance Coverage

Insured’s Failure To Notify Insurer Of Arbitration Settlement Dooms SUM Claim

After the insured was involved in a car accident, he settled an arbitration with the alleged tortfeasor and then sought supplementary uninsured/underinsured coverage under his auto policy. The insurer denied the claim, asserting that it had not received written notice of the insured’s intention to settle or a request for its consent to settle. The Court upheld the insurer’s disclaimer, explaining that the insured’s failure to provide notice as required by the SUM policy impermissibly impaired the insurer’s subrogation rights. [Matter of State Farm Mut. Auto. Ins. Co. (Perez), 2012 N.Y. Slip Op. 02928 (3d Dep’t Apr. 19, 2012).]

Delay In Disclaiming Was “Unreasonable” Even Though Insurer Had Not Been Notified Of Accident For Nearly 4 Years

 An insurer learned about an accident involving a vehicle it insured almost four years after the accident had occurred, when the claimant who had obtained a judgment against the insured served the insurer with the judgment. The insurer completed its internal investigation and prepared disclaimer letters within two weeks, but waited another 15 days before sending them out. The Court found this “unreasonable,” declaring that the insurer could not delay issuing a disclaimer on a known ground while investigating other possible grounds for disclaiming. Accordingly, it ruled that the insurer had to provide coverage for the underlying judgment. [Matter of Matter of AIU Ins. Co. v. Veras, 2012 N.Y. Slip Op. 03116 (1st Dep’t Apr. 24, 2012).]

In Crane Collapse Case, Insurance To Property Owner As Additional Insured Deemed Primary

After a crane collapsed at a construction site in Manhattan, the property owner, the construction manager, and the subcontractor (whose employee had been operating the crane) were sued.  The property owner had its own primary insurance policy, but also was an additional insured under the primary insurance policies issued to the construction manager and subcontractor. The Court held that, pursuant to the “other insurance” provisions of the policies, the property owner’s additional insured coverage was primary to its own coverage.  The Court explained that the priority of coverage was not changed by the “Additional Insured” endorsement in the construction manager’s policy, which provided that “such insurance as is afforded by this policy for the benefit of [the owner] shall be primary insurance as respects any claim, loss or liability arising out of [the construction manager’s] operations, and any other insurance maintained by [the owner] shall be excess and non-contributory with the insurance provided hereunder.”  The Court reasoned that the term “insurance maintained by” referred to insurance actually obtained by the property owner rather than afforded it as an additional insured.  [Matter of East 51st St. Crane Collapse Litig., 2012 N.Y. Slip Op. 02433 (App. Div. 1st Dep’t Apr. 3, 2012).]

Court Rejects False Claims Act Suit Against Insurer That Sold “Artisan” Policies To Contractors

The plaintiffs sued an insurer under the New York False Claims Act, asserting that the insurer had marketed “artisan” policies to small contractors as a means of satisfying New York City’s general contractor licensing requirements.  The Court dismissed the lawsuit, finding that the policies did not contain anything false or misleading and concluding that selling and describing the policies as “commercial general liability” policies was insufficient to demonstrate liability under the Act. [State of New York, ex rel. Seiden v. Utica First Ins. Co., 2012 N.Y. Slip Op. 03117 (1st Dep’t Apr. 24, 2012).]

Federal Court Remands Auto Accident Insurance Coverage Case To State Court

After an auto accident insurance coverage case filed in a New York state court was removed to federal court, the plaintiff moved to remand the case to state court. The federal court acknowledged that the case involved the MCS-90 form, an endorsement in personal injury liability insurance policies that all commercial motor carriers are required to include by the federal Motor Carrier Act of 1980. The federal court found, however, that the case predominately was a state claim for breach of contract, and that the MCS-90 endorsement was a defense to the claim. Because federal issues arising as a defense or anticipated defense do not confer federal question jurisdiction, it remanded the case to state court. [Carlson v. American Int’l Group, Inc., No. 11-CV-874-A (W.D.N.Y. Apr. 10, 2012).]

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