New York Insurance Coverage Law Update

New York Appellate Division Allows Private Right Of Action Against Health Care Insurer Under Prompt Pay Law

The New York Appellate Division, Second Department, has ruled that Insurance Law § 3224-a, known as the “Prompt Pay Law,” affords claimants a private right of action to recover payment for health care services based on a violation of the statute. The Appellate Division, Second Department, rejected the argument that enforcement of the statute, which sets forth time frames within which an insurer must pay a claim, notify the claimant of the reason for denying a claim, or request additional information, was vested solely with state insurance regulators. The appellate court found, instead, that the claimant, a health care provider, could bring its own action against the insurer to recover the full amount of its claim, plus interest at the rate of 12 percent per year. [Maimonides Med. Ctr. v First United Am. Life Ins. Co., 2014 N.Y. Slip Op. 01441 (2d Dep’t March 5, 2014).]

No Coverage For Intentional Assault With A Metal Pipe, Even If Injuries Were Allegedly Unintended Or More Extensive Than Intended

The insured hit the claimant with a metal pipe, and a jury found that the insured engaged in an intentional assault.  Contrary to his testimony before the trial court, the claimant argued that his injuries were not intended by the insured and were therefore a covered “occurrence,” i.e., an accident.  The Appellate Division, First Department, rejected the argument, stressing that there is no coverage where “the harm to the victim was inherent in the nature of the act,” and “the fact that the injuries may have been more extensive” than intended “does not negate the fact that this was an intentional assault.” [Empire Ins. Co. v. Miguel, 2014 N.Y. Slip Op. 1137 (1st Dep’t Feb. 18, 2014).]

“Dishonest Acts Exclusion” Does Not Bar Coverage Of Insured’s Settlement Of Administrative Proceedings, Court Rules

Without admitting or denying fault, Bear Stearns reached monetary settlements of Securities and Exchange Commission and New York Stock Exchange administrative proceedings and related private litigation predicated upon allegations that Bear Stearns had facilitated its customers’ deceptive market timing and late trading activities. Bear Stearns sought coverage for the settlement costs under its professional liability insurance policies. The insurers contended that the policies’ dishonest acts exclusion barred coverage, but the court disagreed. The court concluded that the settlements did not constitute a “judgment or other final adjudication” in the underlying proceedings establishing that Bear Stearns was “guilty” of the excluded conduct, as necessary for the exclusion to apply. [J.P. Morgan Sec. Inc. v. Vigilant Ins. Co., 2014 N.Y. Slip Op. 50284(U) (Sup. Ct. N.Y. Co. Feb. 28, 2014).]

Title Insurers Could Not Proceed Directly Against Agency’s Professional Liability Insurer, Court Rules

Two title insurance companies sued an agency that issued policies on their behalf for breach of contract, among other things. The title insurance companies also sued the agency’s professional liability insurance carrier, asserting that they were third party beneficiaries of the agency’s policy. The agency’s insurer moved to dismiss, and the court granted the motion. The court found that the title insurers had no legal basis under New York common law to directly sue the agency’s insurance company.  Moreover, the court ruled that it need not decide if New York Insurance Law §3420(d) applies to a professional liability policy because the statute only permits a direct action after a judgment against the insured goes unsatisfied, which did not happen.  [Commonwealth Land Title Ins. Co. v. Am. Signature Services, Inc., No 13-CV-3266 (JFB) (WDW) (E.D.N.Y. Feb. 20, 2014).]

Law Firm Defrauded By Forged Cashier’s Check Loses Bid For Coverage

A law firm alleged that after it deposited a cashier’s check and wired out the funds, it discovered that the check had been forged. The District Court for the Northern District of New York rejected the law firm’s contention that its loss was covered by its insurance policy, explaining that the policy excluded from coverage any loss caused by or resulting from “[v]oluntary parting with any property” by the firm, even though the money may have been wired in reliance on misrepresentations or false pretenses.  [Martin, Shudt, Wallace, DiLorenzo & Johnson v. The Travelers Indem. Co. of Conn., No. 1:13-CV-0498 (LEK/CFH) (N.D.N.Y. Feb. 5, 2014).]