New York Insurance Coverage Law Update

July 29, 2016 | Insurance Coverage

Insurer Must Provide “Specific Objective Justification” For EUO Request Upon Provider’s Timely Inquiry

Avalon Radiology P.C. submitted no-fault claims to Ameriprise Insurance Company, and the insurer noticed an examination under oath (“EUO”) for Avalon. Avalon responded with a letter asking for the good faith, objective reason for Ameriprise’s request for an EUO pertaining to Avalon’s incorporation and licensure, as well as the basis for suspecting it had engaged in fraudulent behavior. Ameriprise stated that it was not required to provide the justification for its request. Avalon failed to appear at the EUO, its claims were denied, and it sued Ameriprise. The court granted summary judgment to Avalon, reasoning that Ameriprise failed to comply with the no-fault regulations requiring that it provide “the specific objective justification for the EUO request.” [Avalon Radiology, PC. v. Ameriprise Ins. Co., 2016 N.Y. Slip Op. 26182 (Dist. Ct. Suffolk Co. June 8, 2016).]

Second Department Revisits Its Prior Ruling Regarding Calculation Of SUM Benefits

After her husband was killed in a car accident, Maria Sherlock received the $50,000 policy limits from an insurance policy covering the driver of the other car as well as $425,000 from a village’s insurance company. Sherlock also sought supple-mental uninsured/underinsured motorist (“SUM”) benefits under her auto policy, which had a per person liability limit of $250,000. The insurer denied her claim, asserting that the SUM coverage had been entirely offset by the payments she already had received. The trial court, relying upon a 2012 decision by the Appellate Division, Second Department, ruled in favor of the insurer. Sherlock appealed, contending that Condition 11 (“Non-Duplication”) in her auto policy only applied to a duplicate recovery for the same injury.  The Second Depart-ment agreed with her, concluding that, to the extent its 2012 decision required the amount of SUM coverage to be reduced without regard to the actual value of bodily injury damages that had been suffered, it should no longer be followed. [Matter of Government Empls. Ins. Co. v. Sherlock, 2016 N.Y. Slip Op. 04414 (2d Dep’t June 8, 2016).]

Second Department Rejects Application of “Insured Versus Insured” Exclusion

Boro Park Land Co., LLC, leased property to the operator of a nursing home, which obtained an insurance policy that listed Boro Park as an additional insured, as required by the lease. An employee of the nursing home who alleged that she was injured in its parking garage sued Boro Park for negligently maintaining the property. After Boro Park’s insurer denied coverage to Boro Park based on the policy’s “Insured Versus Insured” exclusion, Boro Park sued. The trial court ruled that the insurer had to defend and indemnify Boro Park, and the Appellate Division, Second Department, affirmed. The appellate court reasoned that the “Insured Versus Insured” exclusion at issue was ambiguous under the circumstances as it was not clear from the exclusion’s language whether or not the nursing home’s employee was an “insured,” and interpreted the exclusion against the insurer. [Boro Park Land Co., LLC v. Princeton Excess Surplus Lines Ins. Co., 2016 N.Y. Slip Op. 04684 (2d Dep’t June 15, 2016).]

Insurers’ Failure To Identify Specific Ground For Disclaiming Did Not Result In Coverage

After heavy rains caused water damage to a commercial property in Nyack and a retaining wall collapsed, the insurers disclaimed coverage and the property owner sued. The trial court, relying upon policy exclusions concerning flood and surface water, ruled in favor of the insurers. The owner appealed, arguing that the insurers did not identify the exclusions in their letter disclaiming coverage, so they could not rely upon them in the coverage action. The Second Department affirmed. The court first ruled that N.Y. Insurance Law § 3420(d) did not apply because the owner’s insurance claim did not arise out of an accident involving bodily injury or death.  It then decided that the insurers’ failure to specifically identify the flood and surface water exclusions in the disclaimer letter did not result in a waiver because “the failure to disclaim based on an exclusion will not give rise to coverage that does not exist.” Finally, the insurers were not estopped from relying upon policy exclusions not detailed in their disclaimer letter because the owner failed to show that it had been prejudiced. [Provencal, LLC v. Tower Ins. Co. of N.Y., 2016 N.Y. Slip Op. 02644 (2d Dep’t April 6, 2014).]

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