New York Insurance Coverage Law Update

July 1, 2010 | Insurance Coverage

Legal Bulletin

No Coverage Where Injured Party Was Employee Of Another Insured

In this declaratory judgment action, the owner and tenant of an accident site sought coverage for a personal injury suit brought by an employee of another insured. The owner, tenant and claimant’s employer were all insureds under the policy. The Appellate Division, First Department, held that the insurer had no obligation to defend or to indemnify any of the insureds. It explained that the “Exclusion-Cross Liability” endorsement stated that the insurance did not apply to any actual or alleged bodily injury to an employee of “any insured.” That language excluded coverage “even where the injured party was an employee of another insured under the policy,” the appellate court ruled. It added that neither the policy’s general “Separation of Insureds” provision, nor the separation of insureds doctrine, rendered the exclusion ambiguous. [Drk, LLC v. Burlington Ins. Co., 2010 N.Y. Slip Op. 05698 (1st Dep’t June 29, 2010).]

No Coverage Where Insureds’ Son Had “Urged And/Or Encouraged” Alleged Assault

A lawsuit alleged that the insureds’ son had “urged and/or encouraged” others to beat two people with a bat. After the negligence claim was dismissed, the court agreed that the insurers had no duty to defend or to indemnify the son because the policies did not cover the remaining causes of action, which, the court said, involved “intentional torts (concerted action in perpetrating an assault and aiding and abetting an assault).” Specifically, there was no “occurrence” and the “expected or intended” exclusion operated to preclude coverage. Although the insureds’ son had not committed the alleged assault, the court found that the alleged injuries “would not have been ‘unexpected and unintended’ from [the son’s] point of view.” [Travco Ins. Co. v. Donaghy, No. 14846/2009 (Sup. Ct. Queens Co. June 16, 2010).]

Bad Faith Claim Fails Where Insured Had Not Lost Opportunity To Settle After His Liability Was Clear

A jury awarded damages to plaintiffs in excess of the insured’s insurance coverage. Then, as the insured’s assignees, the plaintiffs brought suit against the insurer, seeking damages in the amount of the difference between the verdict and the policy limit. The trial court granted judgment for the insurer, and the plaintiffs appealed. Over a two judge dissent, the Appellate Division, Fourth Department, affirmed. It found that the insurer had demonstrated that the insured had not lost an actual opportunity to settle the claim at a time when all serious doubts about his liability had been removed and it was clear that the potential recovery exceeded the insurance coverage. Thus, the appellate court concluded, the insurer had not acted “with gross disregard” of the insured’s interests. [Doherty v. Merchants Mut. Ins. Co., 2010 N.Y. Slip Op. 05206 (4th Dep’t June 11, 2010).]

No Coverage Under Homeowner’s Policy For Assault While Deer Hunting

The insured shot the plaintiff while they were deer hunting and then pleaded guilty to assault in the third degree. The plaintiff conceded that the shooting fell within the homeowners policy’s criminal act exclusion, but argued that the exclusion should not be applied “because the prohibited act involve[d] little culpability or seem[ed] minor relative to the consequent forfeiture of coverage.” The Appellate Division, Fourth Department, rejected that argument, reasoning that assault in the third degree required “criminal negligence,” which was “not synonymous” with common law negligence. [Gruninger v. Nationwide Mut. Ins. Co., 2010 N.Y. Slip Op. 05069 (4th Dep’t June 11, 2010).]

Coverage Barred For Auto Accident Involving Car Owned By Insured’s Daughter, A College Student

The insured’s son was involved in an accident while driving his sister’s car. After judgments against the siblings, the plaintiffs sought to recover under the insured’s automobile insurance policy. The trial court dismissed the complaint and the Appellate Division, Fourth Department, affirmed. It explained that the sister’s car was not a covered “non-owned car” because that term excluded a car owned by a relative residing in the insured’s household. The sister, the court concluded, was a relative of the insured who resided in the insured’s household even though she was living at college at the time of the accident. [Konstantinou v. Phoenix Ins. Co., 2010 N.Y. Slip Op. 05175 (4th Dep’t June 11, 2010).]

Bar Owner’s Five-Month Delay In Notifying Insurer Following Bar Fight Dooms Claim

The owner of a bar became aware about one week after an incident that a patron of his bar had potentially assaulted another patron on his premises, but he did not notify his insurer for five months. The Appellate Division, First Department, found that delay “unreasonable as a matter of law.” The court also rejected the insured’s claimed belief of nonliability on the basis that none of his employees had been involved in the incident, ruling it was “not reasonable under the circumstances.” [Tower Ins. Co. of N.Y. v. Miles, 2010 N.Y. Slip Op. 04635 (1st Dep’t June 1, 2010).]

  Reprinted with permission.  All rights reserved. 

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