New York Insurance Coverage Law Update

Top New York Court Finds Construction Manager Is An Additional Insured Where Named Insured’s Employee Claimed Injury

Regal Construction Corp. contracted with URS Corp., the construction manager, to work on a project at New York City’s Rikers Island. The commercial general liability (“CGL”) insurance policy obtained by Regal covered URS as an additional insured “only with respect to liability arising out of [Regal’s] ongoing operations performed for” URS. Regal’s project manager allegedly was injured while working at the site, and he brought suit. In the coverage litigation that ensued, the New York Court of Appeals ruled that the liability arose out of Regal’s work for URS, so Regal’s insurer owed additional insured coverage to URS in the project manager’s bodily injury action. The Court found that the underlying complaint’s allegation of negligence on the part of URS and not Regal was “of no consequence.” [Regal Constr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, 2010 N.Y. Slip Op. 04661 (Ct. App. June 3, 2010).]

Appellate Court Rules Hold Harmless Agreement Did Not Require Insured To Name Owner As Additional Insured

A property owner entered into a construction contract with U.S.A. Interior, LLC (“USAI”) for USAI to perform demolition work at the owner’s property. The parties’ written agreement was a one page proposal from USAI and a hold harmless agreement. The CGL insurance policy issued to USAI contained an additional insured endorsement that added as an insured “any entity the Named Insured is required in a written contract to name as an insured.” [Emphasis added].

The Appellate Division, Second Department, affirmed the trial court’s decision in favor of the insurer. The appellate court explained that although USAI had agreed in writing to indemnify the owner in the hold harmless agreement, that agreement did not contain any requirement that USAI name the owner as an additional insured under the policy. [Hargob Realty Assoc., Inc. v. Fireman’s Fund Ins. Co., 2010 N.Y. Slip Op. 04143 (2d Dep’t May 11, 2010).]

Insurer’s Declaratory Judgment Action Constituted Timely Notice Of Disclaimer, Second Department Decides

An insurer brought an action for a judgment declaring that it was not obligated to defend or indemnify the insured in an underlying personal injury action. The Supreme Court, Suffolk County, granted summary judgment against the insurer, and the insurer appealed.

The Appellate Division, Second Department, reversed. It found that the insurer’s commencement of the declaratory judgment action constituted timely “written notice … of disclaimer” under Insurance Law §3420(d). [Blue Ridge Ins. Co. v. Empire Contr. & Sales, Inc., 2010 N.Y. Slip Op. 04326 (2d Dep’t May 18, 2010).]

Bad Faith Action Against Insurer Failed Where There Had Been No Pre-Litigation Settlement Demand Within Policy Limits

After a lawsuit against a medical diagnostic laboratory was settled for more than the limits in the laboratory’s malpractice insurance policy, the laboratory sued the insurer, arguing that it had acted in bad faith by refusing to enter into pre-litigation settlement discussions with the underlying plaintiff’s counsel. The trial court dismissed the action, and the laboratory appealed.

The Appellate Division, Second Department, affirmed. The appellate court reasoned that the laboratory’s bad faith claim could not stand, as there had been no pre-litigation settlement demand made within the policy limits. [CBLPath, Inc. v. Lexington Ins. Co., 2010 N.Y. Slip Op. 04128 (2d Dep’t May 11, 2010).]

Coverage Barred Under Homeowners’ Policy Where Decedent Was An Insured

A child drowned in a swimming pool at her grandparents’ home, where she lived with her mother. The child, mother, and grandparents were insured under a homeowners’ insurance policy issued to the grandparents. The father, as administrator of his daughter’s estate, filed a wrongful death action against the mother and grandparents, and the insurer disclaimed coverage pursuant to the policy provision excluding coverage for “bodily injury to an insured person . . . whenever any benefit of this coverage would accrue directly or indirectly to an insured person.”

In a case of apparent first impression in New York, the Appellate Division, Fourth Department, ruled that the insurer did not have to defend or to indemnify the insureds, finding that the policy excluded from coverage “any claim to recover for the injury or resultant death of an insured person.” The appellate court rejected the father’s contention that the derivative nature of his wrongful death action rendered the policy exclusion inapplicable, concluding that a homeowners’ insurance policy was “essentially designed to indemnify the policyholders against liability for injuries sustained by noninsureds.” [Cragg v. Allstate Indem. Corp., 2010 N.Y. Slip Op. 03976 (4th Dep’t May 7, 2010).]

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