New York Insurance Coverage Law Update

February 29, 2016 | Insurance Coverage

No Coverage Under Title Insurance Policy Where Insured Settled Claim Without Insurer’s Consent

The insured settled a dispute without obtaining his title insurer’s consent and then sought coverage under the policy. The title insurer denied the claim, and the insured sued. The trial court dismissed the complaint and the insured appealed. The appellate court affirmed, reasoning that the insured had breached a policy provision obligating him to obtain the consent of the insurer before settling any claim. [Bartolomeo v. Fidelity Natl. Tit. Ins. Co. of N.Y., 2015 N.Y. Slip Op. 09649 (2d Dep’t Dec. 30, 2015).]

Insurer That Issued Untimely Disclaimer Was Obligated To Pay Default Judgment Against Its Insured

The plaintiff sued the insured, who failed to answer, and the plaintiff obtained a default judgment against the insured. Approxi-mately one year after receiving the default judgment with notice of entry, and nearly three years after learning of the plaintiff’s claim, the insurer assigned counsel to represent the insured in a hearing to determine the validity of service of the summons and complaint. After the trial court decided that the insured had been properly served, the insurer disclaimed coverage on the basis of the insured’s alleged failure to cooperate. The plaintiff sued the insurer to recover the amount of the unsatisfied judgment and moved for summary judgment. Finding that the insurer failed to adequately explain its delay in issuing its disclaimer, the court ruled that the plaintiff was entitled to summary judgment. The court opined that an insurer must issue a timely disclaimer pursuant to New York Insurance Law §3420(d) even where the insured’s own notice to the insurer was untimely. [Batista v. Global Liberty Ins. Co. of N.Y., 2016 N.Y. Slip Op. 00320 (2d Dep’t Jan. 20, 2016).]

Insurer Must Provide Defense To Hazing Lawsuit Where Allegations Did Not Fit “Solely And Entirely” Within Policy’s Exclusion

A village in upstate New York sought a declaratory judgment that its insurer was obligated to provide a defense to three volunteer firefighters sued for allegedly forcing sexual acts as part of a hazing ritual. The court granted summary judgment to the village, reasoning that the underlying lawsuit’s allegations did not fit “solely and entirely” within the policy’s sexual abuse exclusion. The court found that some of the allegations could be “reasonably read” to fall within policy’s definition of “sexual harassment,” which was carved out of the sexual abuse exclusion. [Village of Piermont v. American Alternative Ins. Corp., No. 14 Civ. 5172 (ER) (S.D.N.Y. Dec. 17, 2015).]

No Coverage Despite Untimely Disclaimer Where There Was Lack Of Coverage In The First Instance

A subcontractor’s employee alleged that he was injured while demolishing a chimney and sued a contractor, which filed a third-party action against the subcontractor. The subcontractor tendered its defense to its insurer. The insurer disclaimed more than two months later on the ground that demolition work was not within any of the four classifications of work covered by the policy. The subcontractor sued the insurer, and the court found that the insurer’s disclaimer was not subject to the timeliness requirement of Insurance Law §3420(d) because the insurer did not owe the subcontractor coverage due to “a lack of coverage in the first instance.” Because the alleged loss “did not arise from activities within the classifications set forth on the declarations page,” the policy did not cover the subcontractor’s alleged liability “under any circumstances,” and the court upheld the disclaimer. [Black Bull Contr., LLC v. Indian Harbor Ins. Co., 2016 N.Y. Slip Op. 00002 (1st Dep’t Jan. 5, 2016).]

Exclusions Preclude Coverage For Counterclaims Against Lawyer Stemming From Business Venture

A lawyer, who was the president of a company that sought to build and promote an international degree program in China, sued a colleague he worked with on the project. The lawyer alleged that the colleague made false representations that injured the lawyer. The colleague filed counterclaims against the lawyer, who then sued his professional liability insurer, seeking a declaration that the insurer was obligated to defend the counterclaims. The court granted the insurer’s motion for summary judgment, finding that the lawyer’s actions in his capacity as an officer, partner, and/or manager of the business venture triggered the policy’s “capacity” exclusion. It also ruled that the 49 percent equity interest the lawyer and his wife held in the venture triggered the policy’s “equity interests” exclusion, rejecting the lawyer’s attempt to “feign an issue of fact” by “contradicting prior admissions” in the underlying action. [Law Offices of Zacahary R. Greenhill, P.C. v. Liberty Ins. Underwriters, Inc., No. 2016 N.Y. Slip Op. 30078(U) (Sup. Ct. N.Y. Co. Jan. 7, 2016).]

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