New York Insurance Coverage Update

June 1, 2014 | Insurance Coverage

Second Circuit Finds Policy Issued to Hospital Was Excess To Policy Issued To Nurse

A nurse who worked at the Westchester Medical Center (“WHC”) settled a medical malpractice suit. The court ruled that the policy that WCH had obtained for itself and its staff was excess to the nurse’s professional liability policy because the WCH policy specifically provided that it was excess to any policy provided to a nurse, whether such other insurance is stated to be “primary, contingent [or] excess,” while the nurse’s policy provided that “other insurance must pay first” without an “explicit statement about its position with respect to other excess policies.” [WCHCC (Bermuda) Ltd. V. Granite State Ins. Co., 2014 U.S. App. Lexis 8383 (2d Cir. May 5, 2014).]

 “Occurrence” Does Not Include Faulty Construction That Only Damaged Insureds’ Own Work, Court Explains 

After a piece of the exterior wall on an office building under construction in New Jersey fell to the street, the building’s owner sued the general contractor and the sub-contractor that had designed and was building the wall. The court ruled that the defendants’ insurer was not obligated to cover the owner’s claims because they did not amount to an “occurrence.”  It explained that, under both New York and New Jersey law, there was no occurrence where faulty construction only damaged the insureds’ own work. The court rejected the defendants’ argument that an amended definition of “occurrence” including an “accident, event or happening” encom-passed faulty workmanship, concluding that the requirement of a “fortuitous loss” was a necessary element of a covered occurrence. [Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Turner Constr. Co., 2014 N.Y. Slip Op. 03607 (1st Dep’t May 15, 2014).]

“Employer’s Liability” Exclusion Bars Coverage For Additional Insureds For Suit By Insured’s Employee

A trade contractor on a construction project in Brooklyn was insured under a policy that added other parties to the project as additional insureds. An employee of the contractor was allegedly injured and sued the additional insureds. The court found that the policy’s Employer’s Liability exclusion that excluded coverage for bodily injury to “an employee of any insured” operated to exclude coverage for the additional insureds for damages arising out of bodily injury sustained by the insured’s employee in the course of his employment. [Bayport Constr. Corp. v. BHS Ins. Agency, 2014 N.Y. Slip Op. 03220 (2d Dep’t May 7, 2014).]

Subcontractor Was Not An Employee Entitled To Coverage Under Plumbing Company’s Policy, Court Declares

A plumber working for a plumbing company sought coverage for an underlying tort action from the plumbing company’s insurer. The court found that the plumber was not entitled to coverage under that policy because it only covered the company’s “employees” and he was a subcontractor rather than an employee. The court observed that the company did not provide the plumber with health insurance or other employee benefits, and did not withhold taxes or pay social security or unemployment taxes on his behalf. Moreover, the court added, the plumber determined his own hourly rate, submitted invoices to the company, received a Form 1099-MISC for miscellaneous income as opposed to a W-2 wage statement, and had his own liability coverage. [Dryden Mut. Ins. Co. v. Goessl, 2014 N.Y. Slip Op. 03363 (4th Dep’t May 9, 2014).]

Court Finds Lead Exclusion Not Ambiguous Or Void As Against Public Policy, But Finds Question Of Fact As To Application Because Insurer Did Not Show Insured Had Notice Of It

An insurance company sought a declaration that it was not obligated to defend and to indemnify a property owner in an action alleging injuries based upon exposure to lead paint at his property. The court rejected the argument that the lead exclusion was void as against public policy and ambiguous. However, it held that the insurer was not entitled to a judgment declaring that it had no obligation to defend its insured, finding a question of fact as to whether the insured had notice of the exclusion.  The court observed that the insurer did not violate any legal obligation by destroying its policy records after six years.  However, the court ruled that the insurer failed to meet its burden of proving that the exclusion was mailed to the insured and that the insured raised an issue of fact as to whether the policy included the lead exclusion by submitting evidence that “at least some policies at the time did not contain the exclusion.” [North Country Ins. Co. v. Raspante, 2014 N.Y. Slip Op. 03364 (4th Dep’t May 9, 2014).]

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