New York Insurance Coverage Update

December 1, 2013 | Insurance Coverage

Court Rules Reservation of Rights Did Not Satisfy Insurer’s Timely Disclaimer Obligation

In 2006, the insurer reserved rights as to the insured’s claim for coverage for an accident, but the insurer did not disclaim until 2009, one year after its insured was sued and the insurer was provided with a copy of the complaint.  The insurer maintained that its duty to disclaim was not triggered until it received the complaint.  The Appellate Division, First Department, held that the disclaimer was late, stating that the insured had an obligation to disclaim as soon as reasonably possible after it had “sufficient knowledge of facts entitling it to disclaim” and that, even assuming the duty to disclaim was not triggered until it received the complaint, the insurer failed to explain why it did not disclaim until one year later.  The court rejected the insurer’s contention that its reservation of rights letter was sufficient as it “failed the essential purpose of a disclaimer: to timely and clearly inform the insured of where the insurer stands on the issue of coverage for the action, and why, so that the insured can promptly consider appropriate alternatives.”  [Hartford Underwriting Ins. Co. v. Greenman-Pederson, Inc., 2013 N.Y. Slip Op. 07842 (App. Div. 1st Dep’t Nov. 26, 2013).]

 Insured’s Failure to Prove Physical Contact with Unidentified Hit-and-Run Vehicle Dooms SUM Claim

A bicycle rider alleged that he was injured in a hit-and-run accident involving an unidentified car in a parking lot and sought supplementary uninsured/underinsured motorist benefits under his own automobile insurance policy. The trial court ruled in favor of the insured, but the Appellate Division, Second Department, reversed. The appellate court decided that the insured had not demonstrated that his alleged loss had been caused by physical contact with an unidentified hit-and-run vehicle, noting that he had told the hospital that he had flown off his bicycle and had landed on a parked vehicle. [Matter of Progressive Specialty Ins. Co. v. Lubeck,2013 N.Y. Slip Op. 07976 (App. Div. 2d Dep’t Nov. 27, 2013).]

Jewelry Store’s Policy Was Properly Cancelled for Its Failure to Pay a Monthly Premium Under a Premium Financing Agreement

The court found that the insurer properly cancelled a jewelry store policy before the loss in accordance with the request of the premium finance company because the store had failed to pay a monthly premium. The court rejected the jewelry store’s contention that the insurer should have “called upon” the premium finance company to see that the policy had remained in effect by drawing down the necessary sums for premiums, concluding that the premium finance agreement imposed no express requirement on the insurer to take such action. [Honeymoon Diamonds v. International Jewelers Underwriters Agency Ltd., 2013 N.Y. Slip Op. 07434 (App. Div. 1st Dep’t Nov. 12, 2013).]

Lead Exclusion Added to Landlord’s Policy at Renewal Deemed Enforceable

The owner of a home who was sued by a tenant for bodily injury allegedly sustained as a result of lead poisoning sought coverage under his landlord’s insurance policy. The insurer maintained that a lead exclusion added to the policy after it initially had been written excluded coverage for the tenant’s claims. The court agreed with the insurer, finding that the exclusion had been properly added to the policy and that the insured had been notified of the amendment. [Preferred Mut. Ins. Co. v. Donnelly,2013 N.Y. Slip Op. 07283 (App. Div. 4th Dep’t Nov. 8, 2013).]

Court Dismisses Insured’s GBL § 349 Claim Against Its Insurer in Absence of Allegations of “Consumer-Oriented” Misconduct

After the Colgate-Palmolive Company was sued for injuries allegedly arising out of exposure to asbestos in its talc products, its insurance company disclaimed and brought a declaratory judgment action. Colgate-Palmolive asserted a counterclaim against the insurer under New York General Business Law § 349, which generally prohibits “[d]eceptive acts or practices” in consumer-oriented transactions.  The court dismissed the claim, reasoning that it did “not present the type of consumer-oriented misconduct the statute was enacted to prevent.” [OneBeacon America Ins. Co. v. Colgate-Palmolive Co., No. 651193/2011 (Sup.Ct. N.Y. Co. Nov. 1, 2013).] 

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