New York Insurance Coverage Update

August 1, 2014 | Insurance Coverage

“Other Insurance” Clause Bars Primary OCPL Insurer’s Contribution Claims Against Contractor’s Other Carriers

Erie Painting & Maintenance, Inc. contracted with the New York State Thruway Authority to perform painting work. An Erie employee alleged that he was injured while working on the project, and he sued the Authority. Arch Insurance Company, which had issued a New York Owners and Contractors Protective Liability (“OCPL”) Policy to the Authority at Erie’s request, settled the claim and sought contribution from the insurer that issued a commercial general liability insurance policy to Erie and from the insurer that issued a commercial automobile policy to Erie. The Authority was named as an additional insured on both of those policies. The court ruled against Arch, stressing that its OCPL policy’s “other insurance” clause provided that Arch’s insurance was “primary insurance” and will not seek contribution from any other insurance available to Erie unless the insurance is provided by a contractor other than the “designated contractor.” Because Erie was the designated contractor, the court concluded that Arch could not seek contribution. [Arch Ins. Co. v. Harleysville Worcester Ins. Co., 2014 U.S. Dist. Lexis 91928 (S.D.N.Y. July 7, 2014).]

Court in Hurricane Sandy Case Dismisses Extra-Contractual Claims Against Insurer 

The owner of commercial property in Brooklyn sued its insurer after the insurer denied the owner’s claim for property damage from Hurricane Sandy.  Upon the insurer’s motion, the court dismissed the insured’s claim for breach of the implied covenant of good faith and fair dealing, explaining that New York does not recognize an independent cause of action for bad faith denial of insurance coverage. The court also dismissed the insured’s unjust enrichment claim, declaring that the insured could not recover in “quasi contract” because the parties had a valid, enforceable insurance contract that governed the same subject matter as the claim. Next, the court dismissed the insured’s punitive damages claims, finding that it had failed to plead that the insurer’s conduct was actionable as a tort that was independent of the asserted breach of contract. However, the court concluded that the insured’s allegations were sufficient to support its demand for consequential damages on its breach of contract claim. [Sikarevich Family L.P. v. Nationwide Mutual Ins. Co.,2014 U.S. Dist. Lexis 92254 (E.D.N.Y. July 3, 2014).]

Where Insurers’ Counsel Were Engaged in Claims Handling, Documents Were Not Protected From Disclosure, Court Rules

A special referee decided that the majority of documents that insurers sought to withhold from pre-trial discovery were not protected by the attorney-client privilege or the work product doctrine as material prepared in anticipation of litigation. The insurers appealed, but the appellate court affirmed, concluding that the insurers had to disclose certain documents that pre-dated the insurer’s denial of the insureds’ claims. The appellate court found that the insurers’ counsel New “were primarily engaged in claims handling.” The appellate court concluded that documents prepared in the ordinary course of an insurer’s investigation were not privileged and did not become so “merely because [the] investigation was conducted by an attorney.” [National Union Fire Ins. Co. of Pittsburgh, Pa. v. TransCanada Energy USA, Inc., 2014 N.Y. Slip Op. 05606 (App.Div. 1st Dep’t July 31, 2014).]

Driver’s Policy With $300,000 SUM Limits Was Triggered Where Alleged Tortfeasor’s Policy Had Per Person Limits of $100,000

A passenger injured in a two-car accident obtained the $100,000 per person limits from the other, offending car’s insurer and then demanded arbitration for supplementary underinsured motorist (“SUM”) coverage under the policy covering the car in which he was a passenger, which had SUM limits of $300,000 per person and $300,000 per accident. The SUM insurer moved to stay arbitration, arguing that because both policies provided aggregate liability limits of $300,000 per accident, the driver of the offending car (the alleged tortfeasor) was not an underinsured motorist. The court ruled against the insurer, reasoning that the SUM coverage was triggered because the per-person bodily injury liability limits of the alleged tortfeasor’s policy were less than the per-person limits of the SUM coverage. [Matter of Government Empls. Ins. Co. v. Lee, 2014 N.Y. Slip Op. 05642 (App.Div. 2d Dep’t Aug. 6, 2014).]

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