New York Insurance Coverage Law Update

Third Department Affirms Dismissal Of Coverage Case Filed More Than 24 Months After Loss

After a building in the city of Troy was burglarized, the building owner sought coverage for the damage.  On September 18, 2014, the insurer denied the claim because of the policy’s lack of coverage for theft and water damage.  On October 19, 2016, the owner sued the insurer, alleging breach of contract.  The Appellate Division, Third Department, affirmed the trial court’s dismissal of the action because it was not filed within 24 months “after inception of the loss” as required by the policy.  [Anderson v. Allstate Ins. Co., 2019 N.Y. Slip Op. 02768 (3d Dep’t April 11, 2019).]

Second Department Finds Coverage For Fire Damage By Virtue Of Ensuing Loss Exception To Faulty Workmanship Exclusion

The owners of a two-family home damaged by fire submitted a claim for coverage to their insurer. The insurer disclaimed coverage based upon the policy’s faulty workmanship exclusion, maintaining that “improper conditions” regarding a junction box “were the direct cause of the fire and instant loss”. The owners sued. The Appellate Division, Second Department, held that the owners were entitled to summary judgment based on the ensuing loss exception to the faulty workmanship exclusion. The Second Department reasoned that the fire occurred two years after the alleged faulty workmanship related to the junction box, and that the fire caused ensuing loss to property “wholly separate from the defective property itself.”  The court distinguished cases where an insured sought coverage under an ensuing loss exception for the cost of correcting the faulty or defective work.  [Fruchthandler v. Tri-State Consumer Ins. Co., 2019 N.Y. Slip Op. 02502 (2d Dep’t April 3, 2019).]

Second Department Rules That Payment Under Tortfeasor’s Policy Precluded Insured’s Recovery Of SUM Benefits

Three occupants of a vehicle injured in an automobile accident received a total of $100,000 under the tortfeasor’s automobile insurance policy, which they split equally. One of the three then sought supplemental uninsured/underinsured motorist (“SUM”) benefits under his own automobile insurance policy.  The Appellate Division, Second Department, ruled that the insured was not entitled to SUM benefits.  The court explained that Condition 6 of the SUM endorsement stated that the maximum SUM payment was the difference between the SUM limit (in this case, $100,000) and bodily injury liability insurance payments received from or on behalf of the tortfeasor.  The Second Department concluded that the total received by all three vehicle occupants ($100,000) had to be offset against the SUM limit under the insured’s policy, thereby precluding any recovery of SUM benefits by the insured under his policy. [Matter of Farm Family Cas. Ins. Co. v. Gonzalez, 2019 N.Y. Slip Op. 02868 (2d Dep’t April 17, 2019).]

Insurer Failed To Cancel Life Insurance Policy Properly, Second Department Rules

After the insured died, his beneficiary sought the proceeds under the insured’s $1 million life insurance policy.  The insurer disclaimed coverage on the ground that the policy was cancelled for nonpayment of the premium prior to the insured’s death. The beneficiary sued, asserting that the insurer failed to give notice of the premium due as required by Insurance Law § 3211 and, therefore, the policy was in effect when the insured died. The Appellate Division, Second Department, ruled in favor of the beneficiary. The court found that the insurer was aware that the insured had changed his address but failed to send a notice of premium due to that address at least 15 days prior to the day when the payment became due. Consequently, the court concluded, the policy remained in effect for one year after the premium due date and was in effect on the date of the insured’s death. [Bradley v. William Penn Life Ins. Co. of N.Y., 2019 N.Y. Slip Op. 02054 (2d Dep’t March 20, 2019).]

Court Denies Insurer’s Motion To Dismiss Where Allegations Against Insured Might Not Implicate Subsidence Exclusion

A building owner sued a contractor working on an abutting property, alleging that its property was damaged by the contractor’s negligence. The contractor’s insurer disclaimed, citing the policy’s subsidence exclusion, and the contractor sued. The Supreme Court, New York County, denied the insurer’s motion to dismiss, reasoning that the contractor was alleged to have caused damage not solely due to excavation activity which fell within the subsidence exclusion, but also due to “any construction activity it might be proven to have engaged in.” The court found that it was “conceivable” that the building owner may prove that its damage was caused solely by the contractor’s construction activity, if any, which would fall outside the subsidence exclusion. “Given that possibility,” the court denied the insurer’s motion to dismiss. [UMF Contracting Corp. v. Arch Specialty Ins. Co., 2019 N.Y. Slip Op. 30661(U) (Sup. Ct. N.Y. Co. March 11, 2019).]

Southern District Of New York Finds Duty To Defend Property Owner As Additional Insured

Two claimants allegedly tripped and fell at a site in Brooklyn and sued the property owner and the general contractor at the site for negligence. The owner sued the general contractor’s insurer for additional insured coverage under the general contractor’s policy. The court granted the owner’s motion for summary judgment on the duty to defend, explaining that the insurance policy provided additional insured coverage to the owner for bodily injury “caused, in whole or in part,” by the acts or omissions of the general contractor, or those acting on its behalf at the site. The court concluded that the allegations in the lawsuits against the owner suggested a “reasonable possibility” that the general contractor’s negligence was a proximate cause of the alleged injuries.  Specifically, both of the underlying claimants alleged that the general contractor was responsible for the condition of the sidewalk, scaffolding and metal plates at the site, and that its negligence caused them to trip and fall. [Kingsway Realty, LLC v. Gemini Ins. Co., No. 18-cv-1700 (AJN) (S.D.N.Y. March 8, 2019).]

Tenant’s Insurer Had To Defend Building Owner As Additional Insured, Southern District Of New York Rules

The claimant allegedly tripped and fell on a sidewalk adjacent to a building in the Bronx and sued the building owner and tenant for negligence. The owner’s insurer sued the tenant’s insurer, contending that the tenant’s insurer had to defend the owner as an additional insured under the tenant’s insurance policy. The United States District Court for the Southern District of New York granted summary judgment in favor of the owner’s insurer. The court found that the tenant’s insurance policy listed the owner as an additional insured and extended coverage to the owner for liability “caused, in whole or in part, by [the tenant’s] acts or omissions . . . in the performance of [its] ongoing operations for [the owner] at the [Bronx] location(s) designated above.”  The court reasoned that the underlying complaint left open the “reasonable possibility” that the sidewalk where the claimant allegedly was injured was used for access in and out of the insured’s building and, therefore, was “part of the premises.”  The court noted that the lease made clear that the tenant had some obligations with respect to the sidewalk and, therefore, its negligent conduct or omissions could be a proximate cause of the injury.  The court also observed that the claimant’s underlying complaint alleged that all of the defendants – including the tenant – caused his injuries through their “negligen[t] . . . ownership, leasing, operation, maintenance, control and management of their respective premises.”  As such, the court concluded that it was “reasonably possible” that the injuries were “caused, at least in part, by” the tenant’s conduct.  [Kookmin Best Ins. Co., Ltd. (U.S. Branch) v. Foremost Ins. Co., No. 18-cv-782 (PAE) (S.D.N.Y. March 5, 2019).]

General Contractor And Building Owner May Be Covered As Additional Insureds Under Insurance Policy Of Subcontractor, The Claimant’s Employer

A subcontractor’s employee allegedly injured at a New York City construction site sued the project’s general contractor as well as the building’s owner, and they filed a third-party action against the subcontractor.  The general contractor and owner sued the subcontractor’s insurer for additional insured coverage.  The insurer moved to dismiss the complaint on the basis that the additional insured coverage was limited to injury proximately caused by the sub-contractor.  Although the employee’s com-plaint did not allege that his employer was negligent, the court denied the insurer’s motion to dismiss, reasoning that discovery is still proceeding in the underlying action and, therefore, it was premature to declare that the employer was not a proximate cause of the accident. [American Empire Surplus Lines Ins. Co. v. Arch Specialty Ins., 2019 N.Y. Slip Op. 30909(U) (Sup. Ct. N.Y. Co. March 21, 2019).]

Owner May Be Covered As An Additional Insured Under Insurance Policy Issued To Claimant’s Employer, First Department Holds

A contractor’s employee allegedly injured at a worksite sued the building owner.  The owner sought additional insured coverage under the contractor’s policy, which provided coverage where required by contract for injury caused in whole or in part by the contractor, the claimant’s employer.  The Appellate Division, First Department, found a question of fact as to whether the contract between the owner and contractor required additional insured coverage and remanded the case back to the trial court to decide.  The First Department opined that the insurer has a duty to defend if the contract required additional insured coverage because allegations and facts known to the insurer “suggest a reasonable possibility of coverage, i.e., a reasonable possibility that the underlying injury was caused, in whole or in part, by [the contractor’s] acts or omissions.”  The court noted that the insurer “submitted evidence that demonstrates that the acts or omissions of [the contractor], which directed and controlled the underlying plaintiff’s work, were a proximate cause of the plaintiff’s injuries.”  [M&M Realty of N.Y., LLC v. Burlington Ins. Co., 2019 N.Y. Slip Op. 01513 (1st Dep’t March 5, 2019).]