New York Insurance Coverage Law Update

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

Appellate Division Remands Case To Determine If § 3420(d) Triggered By Insured’s “Substantial Business Presence” In New York

A subcontractor’s employee sued the general contractor for alleged injuries sustained while working on a New York City subway station construction project. The subcontractor’s insurer disclaimed additional insured coverage to the general contractor based on an exclusion, and the general contractor sought a declaration that the insurer owed it a defense and indemnity. The general contractor asserted that the insurer failed to disclaim within a reasonable time, as required by New York Insurance Law § 3420(d)(2). In response, the insurer argued that § 3420(d)(2) only applies to insurance policies “issued or delivered in New York” and that its policy was not “issued or delivered” in New York because it was a New Jersey insurer and the general contractor was a New Jersey company. The Supreme Court, Bronx County, agreed with the insurer, and the general contractor appealed. The Appellate Division, First Department, reversed. The First Department, citing the New York Court of Appeals’ decision in Carlson v. American International Group, Inc., 30 N.Y.3d 288 (2017), opined that the applicability of § 3420(d)(2) in the case depended on (1) whether the policy covers risks in New York, as it did in this case, and (2) whether the insured was located in New York, which required that the insured have a “substantial business presence” in New York. The First Department remanded the case to the trial court to determine whether the subcontractor had a “substantial business presence” in New York. [Vista Engineering Corp. v. Everest Indemnity Ins. Co., 2018 N.Y. Slip Op. 03730 (1st Dep’t May 24, 2018).]

Court Finds Additional Insured Entitled To Defense, But Indemnity Decision Premature

A contractor was hired to renovate the second floor of a Brooklyn office building for Touro College. The contractor obtained a commercial general liability insurance policy that named Touro as an additional insured.  Touro hired another company to upgrade the security system on the building’s second floor. An employee of the security company sued Touro, alleging that he was injured while at the site when improperly stored drywall fell on him. Touro contended that it was entitled to coverage as an additional insured under the contractor’s insurance policy because the claimant’s alleged injury was “caused, in whole or in part, by” the contractor’s acts or omissions. The court ruled that Touro was entitled to a defense as an additional insured under the contractor’s insurance policy because the employee’s allegations suggested “a reasonable possibility of coverage.” However, the court held that it could not resolve whether the insurer had to indemnify Touro until it was determined whether the employee’s injuries had been caused in whole or in part by the contractor’s “negligence or some other act or omission.”  [Touro College v. Arch  Specialty Ins. Co., 2018 N.Y. Slip Op. 30912(U) (Sup.Ct. N.Y. Co. May 8, 2018).]

Court Holds Pollution And Asbestos Exclusions Did Not Preclude A Duty To Defend Suits For Injuries Sustained During World Trade Center Clean-Up

The owner of a building in lower Manhattan that was damaged on 9/11 was sued by workers for injuries they allegedly sustained in the World Trade Center clean-up. A primary insurer for the building’s owner disclaimed any duty to defend on the ground that coverage was barred by pollution and asbestos exclusions. An excess insurer defended the building owner and sued the primary insurer, seeking reimbursement. The court granted the excess insurer’s motion for summary judgment. The court found that the primary insurer had not met its “heavy burden” of proving that the dispersal of pollutants “alone” caused the claimants’ injuries and ruled that the total pollution exclusion in its policy did not bar coverage in the “unprecedented” situation involving the attack on the World Trade Center. The court also found that the primary policy’s asbestos exclusion did not bar coverage, reasoning that the allegations against the building owner asserted exposure to things other than asbestos. Accordingly, the court concluded that the primary insurer had a duty to defend the building owner in the underlying actions.  [National Union Fire Ins. Co. of Pittsburgh, PA v. Burlington Ins. Co., 2018 N.Y. Slip Op. 30741(U) (Sup.Ct. N.Y. Co. April 27, 2018).]

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