New York Insurance Coverage Law Update

February 28, 2019 | Alan C. Eagle | Insurance Coverage

First Department Finds Additional Insured Coverage Under Policy Issued To Claimant’s Employer

United Interior Renovations contracted with and obtained additional insured coverage for All State Interior Demolition under United’s policy for bodily injury caused, in whole or in part, by United’s acts or omissions. United’s employee was allegedly injured and sued All State, but did not sue his employer, United.  The employee’s complaint “implicate[d] United’s demolition actions” and was “incorporate[d]” into All State’s third-party complaint against United.  The Appellate Division, First Department, held that United’s insurer had a duty to defend All State as an additional insured because “it failed to establish that there is no possibility that it will be obligated to do so.”  [All State Interior Demolition Inc. v. Scottsdale Ins. Co., 2019 N.Y. Slip Op. 00574 (1st Dep’t Jan. 29, 2019).]

Second Circuit Rejects Insurer’s Late Notice Defense Based On “Generalized” Assertion Of Prejudice 

A milk delivery company was sued because its delivery of contaminated milk allegedly damaged its customer’s factory.   The milk delivery company’s general liability insurer defended and settled the customer’s suit and sought reimbursement from the insured’s auto insurer which disclaimed coverage. The auto insurer argued that it was not provided with timely notice and that it was prejudiced because it was “deprived of the opportunity to participate in the phases of the litigation” against its insured, “including discovery and summary judgment briefing.” The Second Circuit opined that “[s]uch a generalized assertion of prejudice is insufficient to establish” that the insurer was “materially impair[ed] in its ability to defend” the insured. The court concluded that although the insurer “need not show that there would have been a different outcome, it must identify some-thing it could have done differently in discovery, at summary judgment, or at mediation; or identify different defenses or strategies it could have pursued.”  [Harleysville Worcester Ins. Co. v. Wesco Ins. Co., No. 18-1300 (2d Cir. Feb. 1, 2019).] 

Defendants Were Not Covered As Additional Insureds Under Contractor’s Policy Where Contractor Deemed Not Negligent 

An electrical contractor’s employee alleged that he was injured while working on a construction project. He sued Verizon and Tishman Construction for negligence, and they brought a third-party claim against the contractor. The trial court granted summary judgment in favor of the contractor, finding that the employee’s injuries had not been caused by any negligence of the contractor. Verizon and Tishman Construction brought a declaratory judgment action seeking additional insured coverage from the contractor’s insurer, which moved for summary judgment. The court granted the motion, reasoning that the policy’s “additional insured” coverage was limited to liability for bodily injury caused in whole or in part by the acts or omissions of the contractor. [Verizon Communications, Inc. v. Starr Indemnity & Liability Co., No. 656855/2017 (Sup. Ct. N.Y. Co. Dec. 5, 2018).]

Insurer That Failed To Seek Stay Of Arbitration Waived Right To Litigate Whether Petitioner Was Covered Under Auto Policy, Second Department Decides 

Marvin Banegas was allegedly injured when a hit-and-run vehicle struck the vehicle in which he was a passenger. He demanded arbitration of his uninsured motorist claim, and the insurer did not move to stay arbitration. The arbitrator allowed the insurer to call a witness to demonstrate that Banegas was not covered because he was not occupying the covered vehicle at the time of the accident. In turn, the arbitrator denied Banegas’ claim. The Appellate Division, Second Department, ruled that the insurer never moved to stay the arbitration and, therefore, waived its right to litigate whether Banegas was a covered person under the policy. The Second Department vacated the arbitrator’s denial of Banegas’ claim, and ordered a new hearing on the issues of whether Banegas sustained a serious injury as a result of the negligence of the operator of the hit-and-run vehicle and, if so, the amount of damages to which he was entitled. [Matter of Banegas v. GEICO Ins. Co., 2018 N.Y. Slip Op. 08644 (2d Dep’t Dec. 19, 2018).]

Second Department Concludes That Insurer Demonstrated That SUM Claimant Was “Occupying” Uninsured Vehicle When He Was Allegedly Injured

Davon Rice alleged that he was injured when he put his hand into his vehicle’s partially opened window to unlock the door and it moved forward and dragged him along the road. He sought supplementary underinsured/uninsured motorist (“SUM”) benefits under his mother’s insurance policy. The Second Department ruled that Rice was not entitled to SUM benefits because the SUM endorsement did not apply to “bodily injury to an insured incurred while occupying a motor vehicle owned by that insured.” The policy defined “occupy-ing” as “in, upon, entering into, or exiting from a motor vehicle.” [Matter of GEICO Ins. Co. v. Rice, 2018 N.Y. Slip Op. 08651 (2d Dep’t Dec. 19, 2018).]

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