New York Insurance Coverage Law Update

January 31, 2017 | Insurance Coverage

“Contractual Privity” Not Required For Project Consultant To Be “Additional Insured,” New York Trial Court Rules

Rockefeller Group Development Corp-oration, as an agent for 1221 Avenue Holdings LLC, contracted with A. Best Contracting Co., Inc. (“Abestco”) to have Abestco perform construction work at 1221 Avenue of the Americas in Manhattan. The contract allegedly required that Abestco name Gordon H. Smith Corporation (“GHS”), the project consultant, as an additional insured on Abestco’s general liability policy. An employee of Abestco alleged that he was injured while working at the construction site, and he sued GHS. GHS’s insurer sought a declaration that GHS was an additional insured under Abestco’s policy, which provided additional insured coverage to any entity Abestco was “required under a written contract with [Abestco] to name as an additional insured.”  Abestco’s insurer moved to dismiss because the contract was not between Abestco and GHS, but the court denied the motion, reasoning that the policy did not restrict additional insured coverage to an entity “in contractual privity with Abestco.”  [Valley Forge Ins. Co. v. Arch Specialty Ins. Co., 2016 N.Y. Slip Op. 32320(U) (Sup.Ct. N.Y. Co. Nov. 22, 2016).

No SUM Benefits For Person Injured Walking To Parked Car, Second Department Decides

The plaintiff alleged that he was walking across the street to his parked car; he remotely unlocked it; and he was “half a step” away when he was struck by a vehicle driving by. He sought supplementary uninsured/underinsured benefits. The insurer denied his claim, reasoning that he was a pedestrian and was not occupying the insured vehicle at the time of the accident. The Appellate Division, Second Department, affirmed summary judgment to the insurer, reasoning that the accident occurred as the plaintiff was walking back across the street and had not yet reached the insured vehicle. His “mere intent to enter” the insured vehicle was deemed insufficient to show that he had been an “occupant” at the time of the accident, the Second Department concluded. [J. Lawrence Constr. Corp. v. Republic Franklin Ins. Co., 2016 N.Y. Slip Op. 08349 (2d Dep’t Dec. 14, 2016).]

No Coverage For Insured Who “Created” Loss By Wiring Funds To Settlement Agent Who Allegedly Misappropriated Them, Second Department Declares

The insured sought coverage under a title insurance policy for losses it allegedly suffered when a settlement agent misappropriated funds he had been directed to use to pay off a prior mortgage. The title insurer denied the claim based upon a policy exclusion for any loss “created, suffered, assumed or agreed to by the Insured Claimant.” The Appellate Division, Second Department, upheld the denial. The court held that the insured created the loss because it had wired funds to its settlement agent, whose acts in allegedly misappropriating the funds were imputed to the insured. [Plaza Home Mtge., Inc. v. Fidelity Nat’l Title Ins. Co., 2016 N.Y. Slip Op. 08890 (2d Dep’t Dec. 28, 2016).]

Statutory Damages Paid To Settle FCRA Action Were Compensatory, Not A Penalty, First Department Holds

Insureds settled a putative class action that alleged that their business practices had violated provisions of the Fair Credit Reporting Act (“FCRA”). Their insurer argued that the statutory damages that the insureds had paid to settle the action constituted a penalty, rather than compensatory damages, and were excluded from their insurance policy. The Appellate Division, First Department, rejected that argument, finding it was “clear” that Congress intended the statutory damages provided for by the FCRA to be compensatory, not a penalty. [Navigators Ins. Co. v. Sterling Infosystems, Inc., 2016 NY Slip Op 08941 (1st Dep’t Dec. 29, 2016).]

Auto Insurer Could Not Retroactively Rescind Auto Policy Under Georgia Or New York Law, Second Department Says

A health care provider sued an automobile insurer, seeking to recover assigned first-party no-fault benefits. The insurer contended that it had retroactively rescinded the policy under Georgia law after discovering that the assignor had lived in Brooklyn and had garaged the vehicle there, not in Georgia. The Appellate Division, Second Department, rejected the insurer’s arguments, ruling that both Georgia and New York prohibited the retroactive rescission of an automobile insurance policy issued to a natural person for a private passenger vehicle. [JCC Med., P.C. v. Infinity Group, 2016 NY Slip Op 26439 (2d Dep’t Dec. 16, 2016).]

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