New York Insurance Coverage Law Update

Owner Deemed Additional Insured Under Subcontractor’s Insurance Policy 

The owner of a construction project was sued for injuries allegedly suffered by a subcontractor’s employee.  The general contractor’s contract with the subcontractor obligated the subcontractor to obtain additional insured coverage for the owner.  The court held that the owner was covered as an additional insured under the subcontractor’s insurance policy even though it was not in privity of contract with the subcontractor because the policy provided additional insured coverage to any “organization to whom the named insured [subcontractor] has agreed by written contract to provide coverage”.  The court reasoned that the words “to whom” as opposed to “with whom” reflected “an intent” to provide additional insured coverage so long as the named insured has agreed to provide such coverage in a contract.  [115 Kingston Avenue LLC v. Mt. Hawley Ins. Co., 2019 N.Y. Slip Op. 30052(U) (Sup. Ct. N.Y. Co. Jan. 3, 2019).]

Two Insurers’ “Other Insurance” Clauses Cancel Out, Providing Co-Insurance

An employee of a contractor working on a project owned by the New York City Housing Authority (“NYCHA”) was allegedly injured.  The worker sued the NYCHA, which sought additional insured coverage under two commercial general liability insurance policies.  The “other insurance” clauses of each policy stated that it was excess as to the other insurance.  Accordingly, the court held that the “other insurance” clauses canceled each other out, and that the insurers had to share equally in the costs of defending NYCHA.  The court opined that an endorsement in one of the policies that said that the insurer would “not seek contribution from any other insurance available to a contractor” did “not vitiate NYCHA’s rights” as an additional insured under the other policy.  [Endurance Am. Specialty Ins. Co. v. Harleysville Worcester Ins. Co., 2019 N.Y. Slip Op. 30217(U) (Sup. Ct. N.Y. Co. Jan. 22, 2019).]

Second Department Finds No Coverage For Business Income Loss Due To Telephone Service Disruption After Superstorm Sandy

After the insured’s telephone service was disrupted by flooding at a service provider’s lower Manhattan switch center during Superstorm Sandy, the insured sought coverage for loss of business income.  The Appellate Division, Second Department, held that the loss was not covered.  The court explained that the policy covered loss of business income due to the necessary suspension of operations caused by direct physical loss or damage by a covered cause of loss to “dependent property,” which was defined to exclude property that delivered communication services to the insured.  [Cohen & Slamowitz, LLP v. Zurich Am. Ins. Co., 2019 N.Y. Slip Op. 00417 (2d Dep’t Jan. 23, 2019).]

Negligent Retention Claim Alleged An Occurrence, Triggering Duty To Defend

Hulk Hogan sued a talent and literary agency for alleged emotional distress, among other things.  Hogan alleged that the agency negligently retained an employee when it “knew or should have known” that the employee was “predisposed to committing wrongs.”  The court found that the alleged injury, from the agency’s point of view, was unexpected, unusual and unforeseeable.  As such, the court ruled that the negligent retention cause of action alleged an “occurrence,” triggering the insurer’s duty to defend.  [Zurich Am. Ins. Co. v. Don Buchwald & Associates, Inc., 2018 N.Y. Slip Op. 33325(U) (Sup. Ct. N.Y. Co. Dec. 21, 2018).]

Building Was Not “Insured Location” Because Neither Owner Resided There

A resident of a Brooklyn apartment building was killed when a planter box located underneath a front window came loose and fell on him, and his estate sued the building owners.  The building owners’ insurer disclaimed based on, among other things, an exclusion for bodily injury arising out of premises rented to others by the insured that is not an “insured location.”  The insurer maintained that the building was not an “insured location” as it did not qualify as a “residence premises” because the owners of the building did not reside there.  The court agreed, reasoning that the definition of “residence premises” was “unambiguous” and required an insured to reside at the property when the loss occurred.  [Integon Nat. Ins. Co. v. Chen, 2019 N.Y. Slip Op. 30286(U) (Sup. Ct. N.Y. Co. Feb. 6, 2019).]

Equitable Estoppel Could Not Be Used To Create Coverage, First Department Rules

An insurer asked a court to stay the claimant’s arbitration seeking to recover supplementary uninsured/underinsured motorist benefits. The claimant argued that the insurer was equitably estopped from denying coverage.  The Appellate Division, First Department, held that the claimant was not insured under the policy, and equitable estoppel could not be invoked to create coverage. [Matter of U.S. Specialty Ins. Co. v. Navarro, 2019 N.Y. Slip Op. 00841 (1st Dep’t Feb. 5, 2019).]