New York Insurance Coverage Law Update

December 1, 2015 | Insurance Coverage

Named Insured’s Negligence Was Not Needed To Trigger Additional Insured Coverage, Northern District Rules

An electrician working for a subcontractor on a construction project sued the general contractor for bodily injury, alleging that he had fallen from a ladder.  The general contractor sought to be defended and indemnified as an additional insured under the subcontractor’s insurance policy. The insurer disclaimed coverage based upon its determination that the electrician’s bodily injury was not “caused, in whole or in part by [the subcontractor’s] acts or omissions” and, therefore, did not trigger the policy’s Additional Insured Endorsement.  The federal district court held that it was constrained to follow the Appellate Division, First Department, decisions holding that the existence of such additional insured coverage did “not depend upon a showing that the named insured’s causal conduct was negligent or otherwise at fault.”  As such, the district court concluded that the additional insured coverage to the general contractor was triggered because the electrician alleged that he was injured while acting as the named insured, sub-contractor’s employee in the performance of the subcontractor’s ongoing operations for the general contractor.  [HBE Corp. v. Harleysville Group, Inc., No. 7:14–CV–145 (MAD/TWD) (N.D.N.Y. Sep. 30, 2015).]

Disclaimer To Named Insured Was Not Disclaimer To Additional Insured, New York Appellate Court Finds

After an employee of CFC Contractor Group, Inc. allegedly suffered injuries in the course of his work, he sued Adelphi Restoration Corp.  Adelphi sought additional insured coverage under an insurance policy issued to CFC.  Although the policy’s employee exclusion precluded coverage to Adelphi, Adelphi contended that the insurer’s late disclaimer precluded the insurer from disclaiming coverage under N.Y. Ins. Law § 3420(d). The court agreed.  The court found that the insurer’s disclaimer to its named insured, CFC, citing the employee exclusion, did not constitute a disclaimer to the additional insured, Adelphi, even though the insurer copied the third-party administrator for the additional insured’s insurer that tendered the claim for additional insured coverage. [Endurance Am. Specialty Ins. Co. v. Utica First Ins. Co., 2015 N.Y. Slip Op. 07329 (1st Dep’t Oct. 8, 2015).]

Certificate Of Insurance Issued By Agent Might Estop Insurer From Denying Additional Insured Coverage, Eastern District Holds

An electrician working for a subcontractor on a construction project sued the site’s owner and the project’s managers, Muss Development Corp. and Tishman Construction Corp., alleging that he had been injured while working at the site.  The owner and project managers sued the subcontractor’s insurer for coverage. The district court found that Muss was covered as an additional insured but that the site’s owner and Tishman were not covered as additional insureds because the additional insured endorsement required privity of contract with the subcontractor – even though the owner may have been a third-party beneficiary to the contract between Muss and the subcontractor. However, the district court ruled that there was an issue of fact as to whether the subcontractor’s insurer was estopped from denying coverage to the owner as an additional insured based upon a certificate of insurance issued by the insurer’s agent, which named both the owner and Muss as additional insureds. The district court acknowledged a split of authority in New York but opined that at least certain New York courts have held that an insurance company that issues a certificate of insurance naming a particular party as an additional insured may be estopped from denying coverage to that party where the party proves that the agent that issued the certificate was acting on the authority of the insurer and the party reasonably relied upon the certificate of insurance to its detriment. [Muss Development, LLC v. Nationwide Ins. Co., No. 13 CV 4848 (RJD) (MDG) (E.D.N.Y. Oct. 20, 2015).]

Reversing Trial Court, Appellate Court Dismisses Bad Faith And Punitive Damages Claims Against Insurer

Homeowners sued their insurance company after it denied their claim for property damage to their home. The trial court denied the insurer’s motion to dismiss the homeowners’ bad faith and punitive damages causes of action, but the Appellate Division, Fourth Department, reversed. It explained that the allegations that the insurer had no good faith basis for denying coverage were redundant to the homeowners’ causes of action for breach of contract based upon the denial of coverage, and did not give rise to an independent tort cause of action.  The court stressed that the homeowners’ “conclusory allegation[s]” as to the insurer’s motive for its refusal to pay their claim were “insufficient.” [Miller v. Allstate Indem. Co., 2015 N.Y. Slip Op. 07134 (4th Dep’t Oct. 2, 2015).]

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