New York Insurance Coverage Law Update

January 28, 2018 | Alan C. Eagle | Insurance Coverage

General Contractor Obtains Additional Insured Coverage Under Policy Issued To Subcontractor That Was “Proximate Cause” Of Damage

A fire occurred on the Throgs Neck Bridge while the roadway deck was being replaced. The general contractor sought additional insured coverage under an insurance policy issued to its subcontractor and maintained that the fire damage was “caused, in whole or in part” by the subcontractor’s “acts or omissions”. The subcontractor’s insurer asserted that the general contractor was not entitled to coverage as an additional insured because the fire had been caused by the general contractor’s employees who were doing torch work on the bridge and ignited the fire.  The court held that the general contractor was covered as an additional insured because the subcontractor was the “proximate cause” of the loss based upon a report by the New York City Fire Marshal.  The report concluded that the general contractor might have prevented the initial fire by installing fire treated wood, but the severity of the fire and resulting damage was caused by the explosion of gas that was improperly stored by the subcontractor, not the small fire started by the general contractor.   [E.E. Cruz & Cty., Inc. v. Axis Surplus Ins. Co., 2017 N.Y. Slip Op. 32706(U) (Sup. Ct. N.Y. Cty. Dec. 20, 2017).]

No Additional Insured Coverage For Suit By Subcontractor’s Employee In Absence Of Contract For His Work 

A subcontractor’s employee alleged that he was hurt while installing exterior finishing known as EIFS at a construction project in Long Island City. He sued the property owner, the original construction manager, and the guarantor replacement manager. They sought additional insured coverage under the subcontractor’s insurance policy which provided additional insured coverage “as required by contract” for “liability arising out of” the subcontractor’s work for the additional insured.   The subcontractor’s insurer moved for summary judgment, contending that the work leading to the employee’s accident was outside of the parties’ contract and, therefore, not covered. The court granted the insurer’s motion, reasoning that there was no contract executed prior to the loss pertaining to the subcontractor’s EIFS work. [Pavarini McGovern, LLC v. Geiger Constr. Co., Inc., 2017 N.Y. Slip Op. 51909(U) (Sup. Ct. N.Y. Cty. Dec. 18, 2017).]

New York Court Of Appeals Rules That “Per Occurrence” Limit In Reinsurance Contract Does Not Necessarily Cap Reinsurer’s Obligations 

The New York Court of Appeals, in response to a question certified by the United States Court of Appeals for the Second Circuit, has ruled that there is neither a rule of construction nor a presumption under New York law that a “per occurrence” liability limitation in a facultative reinsurance contract caps all obligations of the reinsurer, such as payments made to reimburse the reinsured’s defense costs. Rather than adopting a “blanket rule,” the Court held that a facultative reinsurance contract that is “complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.”  The Court concluded that a court must “look to the language of the policy” above all else. [Global Reinsurance Corp. of Am. v. Century Indem. Co., 2017 N.Y. Slip Op. 08711 (N.Y. Dec. 14, 2017).]

Excess Policy Not Triggered, Second Department Decides 

Fordham University was sued after a contractor’s employee had a fatal accident while working on Fordham’s roof. Fordham filed a third-party action against his employer, the contractor, seeking, among other things, common law and contractual indemnification. The contractor was covered under a primary general liability policy for the contractual indemnity claim and a worker’s compensation /employer’s liability policy for the common law claim.   The excess insurer argued that its excess policy could not be triggered because the worker’s compensation/employer’s liability policy provided unlimited liability coverage, and the excess policy was expressly excess to the underlying general liability policy and “other insurance.” The Appellate Division, Second Department, agreed with the excess insurer that its excess policy was not triggered. [Arthur Vincent & Sons Constr., Inc. v. Century Surety Ins. Co., 2017 N.Y. Slip Op. 09110 (2d Dep’t Dec. 27, 2017).]

Claimant Loses Bid For SUM Benefits Under Same-Sex Partner’s Policy 

A claimant injured in a motor vehicle accident sought supplementary uninsured/underinsured motorist (“SUM”) benefits under a policy issued to her same-sex partner. The insurer maintained that  she was not a “resident relative” of the insured’s household on the date of the accident and, therefore, she was not entitled to SUM benefits under that policy. The court agreed with the insurer, reasoning that the claimant and the named insured under the policy were not legally married when the accident occurred. [Matter of Gov’t  Employees Ins. Cty. v. Minton, 2017 N.Y. Slip Op. 27407 (Sup. Ct. Suffolk Cty. Dec. 7, 2017).]

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