New York Insurance Coverage Law Update

January 1, 2013 | Insurance Coverage

Court Holds Insurer Was Prejudiced By Late Notice That Resulted In Lost Opportunity To Investigate

After the roof of a commercial building in New York City collapsed, the second floor and roof were demolished and removed as ordered by the City.  Approximately 5½ months later, the insurer of the contractor that performed work on the roof was placed on notice by the insurer of the building owner, which filed a subrogation action against the contractor.  The contractor’s insurer disclaimed coverage and filed a declaratory judgment action, maintaining that it had no duty to defend or to indemnify the contractor because the insurer was prejudiced by the late notice.  The court held that the insurer met its burden of proving prejudice under New York Insurance Law §3420(a)(5) (i.e., that the untimely notice “materially impair[ed] the ability of the insurer to investigate or defend the claim”), noting that the late notice prevented the insurer from being able to independently investigate potential causes of the collapse. 

The court rejected the insured’s argument that others conducted an investigation and that the insurer should be required to show how the investigation may have been biased or incomplete.  Because the insurer had the “right” to conduct its own investigation and the insured and the owner denied the insurer such opportunity, the court opined that it would be “unreasonable” to require the insurer to show how it would have been advantaged by its own investigation.  The court concluded that “where the best physical evidence was available to only one side but not the other because of an unreasonable failure to provide notice, prejudice has been shown.”  [Atlantic Cas. Ins. Co. v. Value Waterproofing, Inc., No. 11 Civ. 7565 (DLC) (S.D.N.Y. Jan. 15, 2013).]

 Pedestrian Bit By Dog In Parked Car May Recover Underinsured Motorist Benefits

A dog in a car parked in a “No Parking” zone reached out of the rear window, which had been partially left open, and bit a woman walking to her car. The woman sought underinsured motorist benefits from her automobile insurer, which argued that the incident did not arise out of the use of an underinsured vehicle. The court disagreed with the insurer and ruled that the benefits were available.  [Allstate Ins. Co. v. Reyes, 2012 N.Y. Slip Op. 22361 (Sup. Ct. Dutchess Co. Dec. 10, 2012).]

Delay In Notifying Homeowner’s Insurer About Alleged Accident At Wal-Mart May Be Excused, Court Holds

About six months after her child allegedly injured a person in a Wal-Mart store, the child’s mother allegedly contacted a lawyer and learned that her homeowner’s policy might provide coverage. Her attorney allegedly notified her insurer, which disclaimed on the ground of late notice, and the mother sued. The court held that the mother had raised a triable issue of fact as to the existence of a reasonable excuse for the delay in notice. [Albano-Plotkin v. Travelers Ins. Co., 2012 N.Y. Slip Op. 08269 (App. Div. 2d Dep’t Dec. 5, 2012).]

Notice To Excess Insurer By Claimant Found Timely

The Appellate Division, Second Department, upheld a trial court’s decision in a direct action filed by the injured claimant, requiring an excess insurer to pay the unpaid portion of a $4 million judgment that the claimant obtained against the excess insurer’s insured. The court found that the claimant was “reasonably diligent” in attempting to ascertain the identity of the excess insurer and in providing notice just prior to the trial on damages in the underlying action.  The court stressed that the insured’s counsel in the underlying action did not identify the excess policy despite its discovery obligation to do so. [Golebiewski v. National Union Fire Ins. Co. of Pittsburgh, P.A., 2012 N.Y. Slip Op. 09025 (App. Div. 2d Dep’t Dec. 26, 2012).]

Second Circuit Asks New York Court Of Appeals To Decide: What Is “Vandalism”?

The U.S. Court of Appeals for the Second Circuit has certified the following question to the New York Court of Appeals:   “For purposes of construing a property insurance policy covering acts of vandalism, may malicious damage be found to result from an act not directed specifically at the covered property? If so, what state of mind is required?” [Georgitsi Realty, LLC v. Penn-Star Ins. Co., No. 11-4444-cv (2d Cir. Dec. 21, 2012).]

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