New York Insurance Coverage Law Update

New York’s Top Court Answers Two Certified Questions About “Vandalism”

The walls and foundation of the insured’s building allegedly cracked as a result of the acts of an allegedly irresponsible excavator working on neighboring property. In response to two questions certified by the Second Circuit, the New York Court of Appeals ruled that (1) a property insurance policy covering direct physical loss or damage from “vandalism,” i.e., “willful and malicious damage,” may be triggered by acts not directed specifically at the covered property, and (2) to obtain such coverage, the insured must show the perpetrator acted with malice, which the Court defined as such a conscious and deliberate disregard of the interests of others that the conduct in question may be called “willful or wanton.” [Georgitsi Realty, LLC v. Penn-Star Ins. Co., 2013 N.Y. Slip Op. 06731 (N.Y. Oct. 17, 2013).]

Court Rejects Insured’s Efforts to Vacate Arbitrator’s Award

A person injured in an automobile accident was awarded a $25,000 default judgment against the owner and driver of an uninsured vehicle. In turn, the injured person obtained and then sought to vacate a $10,000 arbitration award she obtained under a policy providing $25,000 in supplementary uninsured motorist (“SUM”) coverage.  The Appellate Division, Second Department held that the trial court erred in vacating the award on the ground that it was contradicted by the SUM endorsement because judicial review of arbitration awards is “extremely limited,” and there was nothing to indicate that the award “violated strong public policy, was irrational, or clearly exceeded” the arbitrator’s power. [Matter of Aftor v. Geico Ins. Co., 2013 N.Y. Slip Op. 07032 (App. Div. 2d Dep’t Oct. 30, 2013).]

Late Notice Dooms Lawyer’s Bid for Malpractice Coverage

A lawyer filed suit against the alleged owner of property on which the lawyer’s client was injured.  After the statute of limitations expired, the lawyer learned that he failed to sue the correct owner of the property, but the lawyer did not notify his malpractice insurer of a potential claim for about eight more months, after the client’s case was dismissed. The court found that the lawyer failed to timely comply with his policy’s “notice of circumstance” clause, precluding coverage for the ensuing malpractice action against the lawyer and his firm.  [Property & Cas. Ins. Co. of Hartford v. Levitsky, 2013 N.Y. Slip Op. 06648 (App. Div. 1st Dep’t Oct. 15, 2013).]

Appellate Court Finds Issues of Fact as to Insurer’s Delay in Issuing a Disclaimer

A trial court ruled that an insurer was obligated to defend and indemnify a contractor for an underlying personal injury action, deciding that the insurer’s disclaimer was untimely. The appellate court held that the trial court properly found the late notice disclaimer ineffective, but concluded that there were issues of fact with respect to the timeliness of the insurer’s disclaimer based upon an exclusion in the policy.  The court opined that a trier of fact had to determine whether the insurer reasonably delayed issuing its disclaimer during its investigation into the applicability of the exclusion. [Quality Bldg. Contr., Inc. v. Delos Ins. Co., 2013 N.Y. Slip Op. 06651 (App. Div. 1st Dep’t Oct. 15, 2013).]

No Coverage for Known Property Damage

There was no coverage under a general liability policy for certain underlying actions where, “[p]rior to the policy period,” the insured knew about the alleged property damage to neighboring buildings caused by construction work performed on the insured’s Manhattan garage. [S.T.A. Parking Corp. v. Lancer Ins. Co., 2013 N.Y. Slip Op. 06776 (App. Div. 1st Dep’t Oct. 17, 2013).]

Computer System Fraud Rider Covers Hacking Damage, Not Alleged False Claims By Authorized Users

The Appellate Division, First Department found that the “unambiguous plain meaning” of a computer systems fraud rider, covering loss from a fraudulent “entry of electronic data” or “change of electronic data” within the insured’s proprietary computer system, applied to wrongful acts in the manipulation of the computer system, i.e., hacking. Thus, the rider did not provide coverage for allegedly fraudulent content in claims by bona fide doctors and others authorized to use the system for reimbursement for services allegedly not provided. [Universal Am. Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA., 2013 N.Y. Slip Op. 06321 (App. Div. 1st Dep’t Oct. 1, 2013).]