New York Insurance Coverage Law Update

June 1, 2012 | Insurance Coverage

Failure To Timely Notify Insurer Dooms Effort To Recover Default Judgment

The insured did not notify its liability insurer when the claimant slipped and fell on the insured’s property in July 1999, or when she was sued in 2001, or when the insured declared bankruptcy and entered into a stipulation allowing the claimant to sue the insurer in May 2004. After the claimant placed the insurer on notice in October 2004, the insurer disclaimed coverage to the insured and copied the claimant. The claimant obtained a default judgment against the insured, was awarded over $800,000, and sought to recover that amount from the insurer. The court held that there was no coverage based upon late notice, and rejected the claimant’s arguments that the disclaimer failed to apprise her that the insurer considered her notice untimely and that her delayed notice was reasonable because of the “mistaken belief” that the insured’s bankruptcy had prevented her from suing the insurer. [Kalthoff v. Arrowood Indem. Co., 2012 N.Y. Slip Op. 03500 (App. Div. 3d Dep’t May 3, 2012).]

Additional Insured’s Notice Did Not Trigger Insurer’s Duty To Disclaim As To Named Insured

After Prana Associates filed a third-party action and obtained a judgment against Four Star, it sought to recover the judgment from Four Star’s insurer, which disclaimed coverage to Four Star based upon late notice. The court found that Prana’s earlier notice of the main underlying action to the insurer requesting coverage as an additional insured did not trigger the insurer’s obligation to timely disclaim as to Four Star, the named insured, and that insurer promptly disclaimed coverage because of Four Star’s failure to provide timely notice of Prana’s third-party action in any event. [Castro v. Prana Assoc. Twenty One, LP, 2012 N.Y. Slip Op. 03962 (App. Div. 1st Dep’t May 22, 2012).]

Insurer Entitled To Common Law Indemnification From Driver After Her Manslaughter Conviction

The driver of a leased car struck and killed a pedestrian, and was convicted of manslaughter in the second degree. The lessor’s insurer paid $100,000 to the pedestrian’s estate and sought to recover that amount from the driver, arguing that it had become subrogated to the lessor’s right to common law indemnification. The court found that collateral estoppel applied to the conviction, and that, as the lessor’s subrogee, the insurer was entitled to indemnification from the driver. [DaimlerChrysler Ins. Co. v. Jenneman, 2012 N.Y. Slip Op. 03587 (App. Div. 2d Dep’t May 8, 2012).]

Ohio, Not New York, Law Governs Timely Disclaimer Issue

Rejecting the insureds’ contention that New York’s timely disclaimer requirement applied because they had their places of business in New York and the accident occurred in New York, the court held that Ohio law governed.  Ohio was the domicile of the insureds’ parent to which the insurer had issued the policy. [FC Bruckner Assoc., L.P. v. Fireman’s Fund Ins. Co., 2012 N.Y. Slip Op. 03715 (App. Div. 1st Dep’t May 10, 2012).]

Bus Company’s Insurance Limited To Interstate Trips

The court held that there was no coverage for a personal injury action arising from a bus accident because the accident occurred on a trip that was wholly intrastate and, therefore, the MCS-90B interstate endorsement did not apply. [Lyons v. Lancer Ins. Co., No. 10-4569-cv (2d Cir. May 21, 2012).]

No Coverage For Claims Against Additional Insured

After the trial court ruled that an insurer breached its obligation to defend and to indemnify an additional insured contractor in an underlying personal injury action, the Appellate Division, First Department, reversed. The appellate court explained that the insurer had properly disclaimed coverage based upon the Employer’s Liability exclusion in the policy, adding that although the exclusion did not apply to liability the insured assumed under an “insured contract,” the Contractual Liability Limitation endorsement deleted any reference in the definition of “insured contract” to a “contract or agreement pertaining to your business . . . under which you assume the tort liability of another party . . . .” Moreover, “even though [the additional insured] could be found actively negligent,” the appellate court observed that the Additional Insured endorsement precluded coverage for the “acts or omissions” of the additional insured.  [Total Concept Carpentry, Inc. v. Tower Ins. Co. of N.Y., 2012 N.Y. Slip Op. 03368 (App. Div. 1st Dep’t May 1, 2012).]

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