New York Insurance Coverage Law Update

Court Rules That Series Of Dishonest Acts Allegedly Committed By Insured’s Employee Constituted One “Occurrence” Under Policy Language

The insured company alleged that, between 2012 through 2017, a bookkeeper stole about $500,000 by making unauthorized purchases with company credit cards, making unauthorized withdrawals from the company’s line of credit, and taking company inventory for personal use. The insured submitted a claim for its loss to its insurer under its “employee dishonesty” coverage. The insurer, relying on policy language stating that any loss “[i]nvolving a single act or series of acts” was one occurrence, deemed the bookkeeper’s course of dishonest acts to be one occurrence subject to the $15,000 policy limit applicable to losses arising from employee dishonesty. The insured sued, contending that, under the so-called “unfortunate event” test used to resolve whether a set of circumstances amounted to one or multiple occurrences, the bookkeeper’s separate and distinct acts of theft committed over a multi-year period constituted multiple occurrences. The court disagreed, granting the insurer’s motion for summary judgment. The court reasoned that the unfortunate event test applied only where the policy was silent on how to treat separate incidents to determine the number of occurrences, but that the policy in this case addressed that issue. According to the court, the policy clearly intended to aggregate into a single “occurrence” all losses resulting from the bookkeeper’s “series of [dishonest] acts” over a multi-year period, notwithstanding that they involved several different methods of theft. Finally, the court decided that the policies’ “anti-stacking” provisions barred the insured from allocating its total losses among the various policies that were in effect at the time of the losses, and capped the insured’s recovery at $15,000. [Dan Tait, Inc. v. Farm Family Casualty Ins. Co., 2018 N.Y. Slip Op. 28205 (Sup. Ct. Albany Co. July 2, 2018).]

Policy Did Not Cover Fire Damage To House Where Owner Did Not “Reside” There

After a fire at his house in Washingtonville, New York, the owner sought coverage for the damage from his insurer. The insurer denied the claim on the ground that the owner did not reside at the house, as required by the policy. The owner sued, contending that he was “at” the property “on a regular basis, including most weekends,” and that he “performed construction work” and “stored personal items, fixtures and furniture” there. The court ruled against the owner, reasoning that the standard for determining residency required “something more” than temporary or physical presence and “at least some degree of permanence and intention to remain.” The court noted that the owner vacated the house approximately eight years before the loss, leased it to tenants, began a cosmetic renovation project after the tenants’ departure, and began using the garage area for storage on an unspecified date. The court pointed out that the owner did not claim that he resided, lived, ate or slept at the house.   The court concluded that the owner’s “mere future intention” to reside at the house was “insufficient” to satisfy the policy’s resi-dence premises requirement. [Aschmoneit v. Adirondack Ins. Exch., 2018 N.Y. Slip Op. 31909(U) (Sup.Ct. N.Y. Co. Aug. 7, 2018).]

Third Department Finds Coverage For House Fire, Citing Exception To Business Pursuits Exclusion

Several residents were killed in a fire in a house used as a certified respite home for elderly and special needs adults, and the owners of the house were sued. Their homeowners insurer disclaimed coverage, relying on the policy’s business pursuits exclusion.  Default judgments were entered against the owner insureds, and the plaintiffs sued the insurer under Insurance Law §3420(a)(2). The New York Appellate Division, Third Department, found coverage based on an exception to the business pursuits exclusion for bodily injury resulting from “activities in conjunction with business pursuits which are ordinarily considered non-business in nature.” The court reasoned that the impetus for the fire was the act of the insureds’ son and other children playing with a gas grill lighter and accelerants. The court opined that the fire would have occurred regardless of the insureds’ operation of a respite home and, therefore, the decedents’ deaths were not caused solely by acts that fell within the business pursuits exclusion. [Waddy v. Genessee Patrons Coop. Ins. Co., 2018 N.Y. Slip Op. 05794 (3d Dep’t Aug. 16, 2018).]