New York Insurance Coverage Law Update

July 28, 2017 | Insurance Coverage

No Additional Insured Coverage Where Alleged Accident Occurred Off Leased Space

An employee of Linea 3 allegedly was injured in the parking lot while walking from his car to space Linea leased in a building owned by Atlantic Ave. Sixteen AD, Inc. The employee sued Atlantic, which sought additional insured coverage under Linea’s policy. The Appellate Division, Second Department, held that Atlantic was not covered as an additional insured, reasoning that the additional insured coverage was for “liability arising out of the ownership, maintenance or use of that part of the premises” leased to Linea. The court added that Linea leased only a portion of the building from Atlantic, not the parking lot where the accident allegedly occurred, and that Linea had no duty to maintain the parking lot. As such, the court concluded, there was no causal relationship between the alleged injury and the risk for which additional insured coverage had been provided to Atlantic. [Atl. Ave. Sixteen AD, Inc. v. Valley Forge Ins. Co., 2017 N.Y. Slip Op. 04243 (2d Dep’t May 31, 2017).]

Court Severs Insurance Coverage Action From Main Liability Action

After a worker sued for injuries he allegedly sustained at a construction project, one of the defendants filed a third-party insurance coverage action seeking a declaration that an insurer had a duty to defend and to indemnify it in the main liability action. The trial court granted the insurer’s motion to sever the third-party coverage action from the main liability action, holding that it would be “prejudicial” to the insurer to have the issue of insurance coverage litigated with the underlying liability claims. [Hlinko v. Gold Star Builders, Inc., No. 607749-16 (Sup. Ct. Suffolk Cty. May 12, 2017).]

Despite Hazardous Materials Exclusion, Fourth Department Finds Duty To Defend Complaint Alleging Foul Odors

The operators of a recycling facility were sued for allegedly allowing hazardous materials and substances to contaminate the surrounding neighborhood. The operators also allegedly “caused a malodorous condition.”  The operators’ insurer contended that its policy’s hazardous materials exclusion precluded coverage for the claims asserted against the operators. The Appellate Division, Fourth Department, found a duty to defend based on a “reasonable possibility of coverage.”  The court reasoned that the alleged foul odors were “not always caused by the discharge of hazardous materials.” [Hillcrest Coatings, Inc. v. Colony Ins. Co., 2017 N.Y. Slip Op. 04613 (4th Dep’t June 9, 2017).]

Agreement To Name Party As Additional Insured Was Not Agreement To Assume Liability In Tort For That Party, Fourth Department Says

Several employees of J.M. Pereira & Sons, Inc., were allegedly injured or killed while working with waterproofing products produced by RPC, Inc. The injured employee and the estates of the two deceased employees sued RPC, which in turn commenced a third-party action against J.M. J.M.’s insurer disclaimed coverage to J.M. based upon an exclusion for bodily injury to J.M. employees.  The insurer maintained that the exception to the exclusion for liability assumed by J.M. “under an insured contract” did not apply because there was no contractual indemnity agreement between RPC and J.M where J.M. assumed the tort liability of RPC.  The Appellate Division, Fourth Department, agreed with the insurer.  Although J.M. and RPC had submitted evidence that there was a contract between them requiring J.M. to name RPC as an additional insured on J.M.’s insurance policies, the court found that an agreement to name a party as an additional insured was “not an agreement to assume liability in tort for that party.” [Erie Ins. Exch. v. J.M. Pereira & Sons, Inc., 2017 N.Y. Slip Op. 05329 (4th Dep’t June 30, 2017).

Second Department Rules That Policy Properly Canceled and not “Divisible”

Antonio Garcia was injured by a vehicle owned by Jeanne Rakowski and obtained a judgment against her. He sought to recover the unsatisfied portion of the judgment from a personal umbrella policy that had been issued to Rakowski, but the insurer contended that the policy had been canceled before the accident for nonpayment of premium. Garcia argued that the $1 million of coverage for which Rakowski had paid a premium was in effect at the time of the accident, and that only the additional $1 million of coverage she had sought, but had not paid for, had been canceled.  The Appellate Division, Second Department, disagreed, reasoning that Rakowski’s payment of only a portion of her premium for her policy resulted in the insurer’s valid cancellation of the policy after the prorated period covered by her partial premium payment had expired.  The court concluded that because there was no ambiguity in what Rakowski had contracted for – $2,000,000 in coverage before the policy term began – there likewise was no ambiguity in the insurer’s notice of cancellation, which “could only have pertained to Rakowski’s coverage of $2,000,000, which was the only coverage the policy provided for the policy period.” [Garcia v. Government Empls. Ins. Co., 2017 N.Y. Slip Op. 05202 (2d Dep’t June 28, 2017).]

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