New York Insurance Coverage Law Update

Law Regarding Certificates Of Insurance Takes Effect In New York

Effective July 28, 2015, Section 502 of the New York Insurance Law provides that a certificate of insurance (i) shall not amend, extend, or alter the coverage provided by the underlying insurance policy, and (ii) shall not confer any rights beyond those expressly provided by the policy.  The new law prohibits (i) any party from willfully requiring terms or language in a certificate that the policy provides coverage unless they are expressly included in the underlying policy, and (ii) requiring a certificate unless it is in a form issued by the insurer, a standard certificate issued by an industry standard-setting organization that has been approved by the New York Department of Financial Services (“DFS”) or another form approved by the DFS.

Court Dismisses Plaintiff’s Claims Against Insurer Where He Was Not A Party To, Or Third-Party Beneficiary Of, The Policy

The owner of a boat who leased it to a boat club sued the club, alleging that it had not made payments required under the lease and that it had negligently damaged the boat. The plaintiff also sued the insurance company that had issued a watercraft insurance policy to the club, alleging that the insurer had failed to pay for damage to the boat and had acted in bad faith. The court granted the insurer’s motion for summary judgment. The court first found that the plaintiff did not have standing to allege a breach of contract claim against the club’s insurer because the boat owner was not a party to the policy and did not claim to be a third-party beneficiary of the policy, and the policy did not indicate an intent to confer a benefit upon any entity other than the club. Then, the court rejected the boat owner’s bad faith claim both because he had not demonstrated the existence of a contract between him and the insurer, and because New York law does not recognize an independent tort of bad faith. [Rosano v. Freedom Boat Corp., No. 13-CV-842 (E.D.N.Y. July 8, 2015).]

Insured Ordered To Pay Pro Rata Share Of Settlement In Underlying Asbestos Action

In October 2011, plaintiffs sued J&S Supply Corporation, a building materials dealer that sells insulation and roofing products, alleging bodily injury from exposure to asbestos that began in the 1960s.  The insurer for J&S advised J&S that J&S would be responsible for its pro rata share for triggered periods during which it was uninsured prior to 1985, when the insurer first insured J&S. After the insurer settled the underlying suit, it requested contribution from J&S, but J&S declined to pay its pro rata share of the settlement.  The insurer sued and moved for summary judgment. The court granted the insurer’s motion, ruling that the policy unambiguously required pro rata allo-cation because the policy only provided coverage for bodily injury during the policy period. The court concluded that J&S was responsible for its pro rata share of the settlement for triggered years in which it was uninsured prior to 1985.  [Liberty Mutual Fire Ins. Co. v. J.&S. Supply Corp., No. 13-CV-4784 (VSB) (S.D.N.Y. June 29, 2015).]

Homeowner’s Negotiation of Insurer’s Check Was Not An Accord And Satisfaction Where Insurer Did Not Inform Him That It Would Settle His Coverage Suit

A homeowner sued his insurance company, alleging that it had breached the policy by failing to pay a claim he filed after a fire occurred at his home. Thereafter, the insurer’s attorney sent the homeowner a check with a letter stating that an investigation had revealed that the homeowner had misrepresented that the premises was a two-family house when the basement actually was being occupied as a third unit. The letter stated that the policy had been voided ab initio and the check represented a return of the homeowner’s premium. After the homeowner negotiated the check, the insurer moved for summary judgment dismissing the complaint, arguing that it had lawfully rescinded the policy as a matter of law and that the homeowner’s acceptance of the check constituted an accord and satisfaction. The trial court ruled in favor of the insurer but the appellate court reversed. The appellate court found that the homeowner’s negotiation of the check did not constitute an accord and satisfaction because neither the check nor the accompanying letter “clearly informed” the homeowner that his acceptance of the check would be in settlement of the pending litigation and would discharge his claim for coverage under the policy. [Caldara v. Utica Mut. Ins. Co., 2015 N.Y. Slip Op. 05902 (App. Div. 2d Dep’t July 8, 2015).]