New York Insurance Coverage Law Update

March 1, 2015 | Insurance Coverage

Claim That Home Was Damaged After Water Main Ruptured And Flooded Basement Was Precluded By Water Exclusion, New York’s Top Court Rules

Homeowners alleged that a subsurface water main abutting their home ruptured, causing water to flood into and severely damage their home’s finished basement. Their homeowners’ insurer disclaimed coverage and the homeowners sued. The trial court ruled in their favor, an intermediate appellate court affirmed, and the case reached the New York Court of Appeals. The Court reversed, holding that the claim “clearly” fell within the policy’s water loss exclusion and that the policy’s “ensuing loss” provision did not nullify the water loss exclusion or render it ambiguous. The Court concluded that applying the “ensuing loss” provision to provide coverage would “subvert the intent of the parties.”  [Platek v. Town of Hamburg, 2015 N.Y. Slip Op. 01483 (N.Y. Feb. 19, 2015).]

Damage To Building From Silica Dust Barred By Property Policy’s
Pollution And Faulty Workmanship Exclusions, Court Decides

 Broom County claimed that silica dust migrated up an elevator shaft in one of its buildings during construction of an underground parking garage and that the dust dispersed into all of the floors. The County’s property insurer disclaimed coverage and the County sued. The court first found that the policy’s pollution exclusion barred coverage, noting that silica dust was an “unhealthy or hazardous building material” as well as a “solid … irritant or contaminant.”  The court also held that the policy’s faulty workmanship clause was unambiguous and precluded coverage, noting that a “flawed process on the part of the contractors led to the loss.” [Broome County v. Travelers Indem. Co., 2015 N.Y. Slip Op. 01697 (App.Div. 3d Dep’t Feb. 26, 2015).]

Court Decides That Insured’s Material Misrepresentation That Property Was “Owner-Occupied” Voided Policy 

After the owner of a building notified his insurer that the building had been damaged by fire, the insurer disclaimed coverage on the ground that the owner had made a material misrepresentation in his insurance application when he represented that the property was his “primary residence.” The owner sued and the insurer asserted that the policy was void ab initio as a result of the owner’s misrepresentation. The court found that the insurer had demonstrated that the application contained a misrepresentation regarding whether the premises would be owner-occupied and that this misrepresentation was material. Accordingly, the court concluded, the insurer was entitled to summary judgment. [Morales v. Castlepoint Ins. Co., 2015 N.Y. Slip Op. 01618 (App. Div. 2d Dep’t Feb. 25, 2015).]

Party Seeking Coverage Has “Heavy Burden” Of Proving Whether Any Portion Of General Verdict Constitutes Covered Damages 

Homeowners hired a contractor to act as a “construction manager” for develop-ment of their home. They subsequently sued the construction manager, alleging that it materially damaged their home.  The construction manager’s insurer attempted to intervene in the lawsuit for the purpose of requesting special interrogatories to the jury to allocate damages between covered and noncovered claims, but intervention was denied.  A jury reached a general verdict in favor of the homeowners, and they sued the construction manager’s insurer for a declaration that the insurer had to indemnify the construction manager for the full judgment. 

The parties moved for summary judgment in the declaratory judgment action, and the court held that the policy’s “work-product” exclusions did not preclude the homeowners from seeking coverage for at least certain alleged damages, reasoning that property damage to the work of other contractors would not be barred from coverage by these exclusions. The court then ruled that the homeowners would have the burden of demonstrating what portion of the general verdict returned by the jury, if any, was attributable to covered claims, noting that the insurer had made the desirability of special interrogatories known to the insured.  The court stressed that the homeowners retained the “heavy burden” of establishing with a reasonable certainty the damages that were covered by the policy – a burden, the court concluded, it was “skeptical” that the homeowners would be able to meet. [Uvino v. Harleysville Worcester Ins. Co., No. 13 Civ. 4004 (NRB) (S.D.N.Y. March 4, 2015).]


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