New York Insurance Coverage Law Update

December 1, 2014 | Insurance Coverage

Insurer Must Send Disclaimer To Purported Additional Insureds, New York Court Of Appeals Decides

The owner and managing agent of an apartment building hired a contractor to perform renovations. One of the con-tractor’s employees alleged that he was injured at the site and sued the owner and managing agent, who were insureds under their own policy and who were alleged additional insureds under the contractor’s policy. The insurer for the owner and managing agent tendered to the con-tractor’s insurer which responded with a written disclaimer solely to the tendering insurer. The New York Court of Appeals ruled that the disclaimer did not comply with §3420(d) of the New York Insurance Law.  The Court reasoned that because the owner and managing agent had their own interests at stake, they were entitled to a disclaimer delivered to them or to their attorney.  [Sierra v. 4401 Sunset Park, LLC, 2014 N.Y. Slip Op. 08216 (N.Y. Nov. 24, 2014).]

“Noncumulation Clause” Limits Insurer’s Liability In Lead Paint Case, New York Court of Appeals Rules

The owner of a two-family house in upstate New York was sued by a family who lived in one of the apartments and by a family who subsequently moved into the same apartment, alleging that their children had been exposed to lead paint over several policy periods. The owner’s insurer contended that, under the noncumulation clause in the policies it had issued to the owner, the families could recover no more than one policy limit. The noncumulation clause provided that “[r]egardless of the number of … injured persons, claims, claimants or policies involved,” the insurer’s total liability for one “accidental loss” is a single limit, and all bodily injury from  continuous or repeated exposure to the same general conditions” is one “accidental loss.” The New York Court of Appeals agreed with the insurer, finding that the injuries to the two families’ children had resulted from their alleged exposure to the “same general conditions” and, therefore, were part of a single “accidental loss,” subject to one policy limit. [Nesmith v. Allstate Ins. Co., 2014 N.Y. Slip Op. 08217 (N.Y. Nov. 25, 2014).]

New York Federal Court Rejects Multiple Policy Limits In Lead Paint Case

A tenant sued an apartment building’s owners, alleging that her son had been exposed to lead paint while living there over several policy periods. The parties settled for $809,000, and the owners’ excess insurer argued that the three policies that covered the building during the time when the tenant and her son lived there should be applied, resulting in $900,000 of primary coverage. A New York federal district court rejected that argument, ruling that only a single $300,000 per occurrence limit applied.  The policies contained a $300,000 per “occurrence” limit “regardless of the number of … claims made or persons injured,” defined “occurrence” as an accident resulting in bodily injury “during the policy period,” and provided that “all bodily injury from continuous or repeated exposure to substantially the same general harmful conditions” shall be considered one “occurrence.” The court found that the tenant’s son had suffered an injury from exposure to lead paint that “created a single occurrence,” and the policies limited coverage to the per “occurrence” limit on the policy in place when that injury-in-fact had occurred, “even when the exposure is ongoing.” The court concluded that the policy language “makes the exact date of the injury immaterial” because the “policies ensure that only one injury-in-fact occurred.” [Hanover Ins. Co. v. Vermont Mutual Ins. Co., No. 1:13-cv-860 (N.D.N.Y. Nov. 14, 2014).]

Healthcare Provider Need Not Submit Claims For No-Fault Benefits After Insurer Denied Coverage, Trial Court Says

A healthcare provider sued an insurer for no-fault benefits that it had been assigned by a patient who allegedly had been injured in an automobile accident. The insurer asserted that because the provider had not submitted a bill for those benefits, its suit had to be dismissed. The provider countered that it did not have to send bills because the insurer, following a medical review, had previously denied no-fault benefits for the patient.  The New York trial court ruled that the provider was excused from filing claims for no-fault benefits after the insurer’s disclaimer. [Greater Forest Hills Physical Therapy, PC v. State Farm Mut. Auto. Ins. Co., 2014 N.Y. Slip Op. 51594(U) (D.Ct. Nassau Co. Nov. 10, 2014).]

Court Finds Owner Collaterally Estopped From Suing Contractor’s Insurer

After a property owner sued a contractor, the contractor’s insurer brought a separate declaratory judgment action against the contractor and obtained a judgment declaring that it was not obligated to defend or indemnify the contractor in the owner’s action because it had not been afforded timely notice of the owner’s claim. In turn, the owner obtained a judgment against the contractor and brought a direct action against the contractor’s insurer. The court ruled that the determination in the declaratory judgment action precluded the owner from litigating coverage in the direct action. The court reasoned that the owner was in privity with the contractor for the purpose of collateral estoppel and had no greater rights against the insurer than the insured. [River View at Patchogue, LLC v. Hudson Ins. Co., 2014 N.Y. Slip Op. 08000 (2d Dep’t Nov. 19, 2014).]

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