New York Insurance Coverage Law Update 2010 Summary

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2 TABLE OF CONTENTS Page Additional and Named Insureds... 1 Town of Fort Ann v. Liberty Mut. Ins. Co., 69 A.D.3d 1261 (3d Dep t 2010) (Insurer Has Duty To Defend Town As Additional Insured After Collapse Of Town Owned Dam Reconstructed By Named Insured). Village of Brewster v. Virginia Sur. Co., Inc., 70 A.D.2d 1239 (3d Dep t 2010) (Court Orders Insurer To Reimburse Additional Insured s Legal Fees After Finding Additional Insured s Own Coverage Was Excess). Majawalla v. Utica First Ins. Co., 71 A.D.3d 958 (2d Dep t 2010) (Question of Fact As To Whether Building Owner Covered Even Though Not An Insured). Regal Constr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, 15 N.Y.3d 34 (2010) (Top New York Court Finds Construction Manager Is An Additional Insured Where Named Insured s Employee Claimed Injury). Hargob Realty Assoc., Inc. v. Fireman s Fund Ins. Co., 73 A.D.3d 856 (2d Dep t 2010) (Appellate Court Rules Hold Harmless Agreement Did Not Require Insured To Name Owner As Additional Insured). Skanska USA Bldg Inc. v. Burlington Ins. Co., 2010 N.Y. Slip Op (U) (Sup. Ct. N.Y. Co. July 15, 2010) (No Coverage For Construction Manager That Did Not Have Written Contract With Insured Providing It Would Be Named An Additional Insured). W&W Glass Sys., Inc. v. Admiral Ins. Co., 2010 N.Y. Slip Op (U) (Sup. Ct. N.Y. Co. July 29, 2010) (Allegations Sufficient To Find Obligation To Defend Additional Insured Under Caused By Provision). Lehr Constr. Co. v. Continental Cas. Co., 2010 N.Y. Slip Op (U) (Sup. Ct. N.Y. Co. Aug. 13, 2010) (Court Finds Additional Insured Coverage Under Policy of Claimant s Employer). Empire Bldrs. & Developers, Inc. v. Delos Ins. Co., 2010 N.Y. Slip Op (2d Dep t Nov. 9, 2010) ( Verbal Understanding Insufficient To Lead To Additional Insured Coverage). Conditions Precedent/Late Notice... 2 American Transit Ins. Co. v. Hashim, 68 A.D.3d 618 (1st Dep t 2009) (Insurer That Could Have Moved To Vacate Default Judgment And For Leave To File Late Answer Failed To Demonstrate Prejudice, First Department Rules). Tower Ins. Co. of N.Y. v. Miles, 74 A.D.3d 410 (1st Dep t 2010) (Bar Owner s Five Month Delay In Notifying Insurer Following Bar Fight Dooms Claim). Hunter Roberts Constr. Group, LLC v. Arch Ins. Co., 75 A.D.3d 404 (1st Dep t 2010) (Four Month Delay In Disclaiming For Failure To Notify As Soon As Practicable Deemed Unreasonable). New York Univ. v. American Bldg. Maintenance, 2010 N.Y. Slip Op (1st Dep t Nov. 30, 2010) (Failure To Notify Insurer For Years Dooms Coverage For Bodily Injury Claim). Coverage Grant... 3 Richner Communications, Inc. v. Tower Ins. Co. of N.Y., 72 A.D.3d 670 (2d Dep t 2010) (No Coverage For Alleged Fall At Property Not Listed As A Designated Premises ). Downey v. 10 Realty Co., LLC, 2010 N.Y. Slip Op (1st Dep t Nov. 23, 2010) (No Coverage For Mold Case Where Alleged Injury Outside Policy Period). Exclusions... 3 Frydman v. Fidelity National Title Ins. Co., 68 A.D.3d 622 (1st Dep t 2009) (Title Insurer Need Not Defend Homeowner In Adverse Possession Case Involving Allegedly Misplaced Fence Where Policy Had Specific Exclusion For Fences). i

3 Nautilus Ins. Co. v. Matthew David Events, Ltd., 69 A.D.3d 457 (1st Dep t 2010) (Broad Employee Exclusion In Insured s Policy Dooms Coverage For Suit By Contractor s Employee). U.S. Underwriters Ins. Co. v. Landau, 679 F.Supp. 2d 330 (E.D.N.Y. 2010) (Federal Court Finds That Independent Contractor Exclusion Is Unambiguous, And That Insurer Is Not Estopped From Maintaining Allegedly Untimely Disclaimer For Property Damage Claims Where No Prejudice). Drk, LLC v. Burlington Ins. Co., 74 A.D.3d 693 (1st Dep t 2010) (No Coverage Where Injured Party Was Employee Of Another Insured). Travco Ins. Co. v. Donaghy, No /2009 (Sup. Ct. Queens Co. June 16, 2010) (No Coverage Where Insureds Son Had Urged And/Or Encouraged Alleged Assault). DMP Contr. Corp. v. Essex Ins. Co., 76 A.D.3d 84 (1st Dep t 2010) (Auto Exclusion Bars CGL Coverage Where Injured Person Slipped While Entering Car). Metalios v. Tower Ins. Co. of N.Y., 77 A.D.3d 471 (1st Dep t 2010) (Insurer Must Defend Restaurant Owner In Suit Following Fight At Party). Nahshon Aaron Council v. Utica First Ins. Co., 77 A.D.3d 1433 (4th Dep t 2010) (Assault and Battery Exclusion Dooms Coverage For Nightclub Fight). Great Am. Restoration Servs., Inc. v. Scottsdale Ins. Co., 2010 N.Y. Slip Op (2d Dep t Nov. 9, 2010) (Exclusions Do Not Bar Coverage For Unknowing Or Accidental Release Of Asbestos). Auto/Uninsured/Underinsured Motorist... 5 Progressive Cas. Ins. Co. v. Harco Natl. Ins. Co., 70 A.D.3d 1495 (4th Dep t 2010) (No Coverage From Car Dealer s Insurer For Accident Involving Loaner Car To Customer). NGM Ins. Co. v. Blakely Pumping, Inc., 593 F.3d 150, (2d Cir. 2010) (Accident That Occurred While Employee Was Driving His Own Truck While Working Is Not Covered By Employer s Policy). RLI Ins. Co. v. Smiedala, 71 A.D.3d 1553 (4 th Dep t 2010) (Employee Driving His Own Leased Car While Working Is Not An Insured Under Employer s Auto Insurance Policy). Konstantinou v. Phoenix Ins. Co., 74 A.D.3d 1850 (4 th Dep t 2010). (Coverage Barred For Auto Accident Involving Car Owned By Insured s Daughter, A College Student). Matter of Liberty Mut. Fire Ins. Co. v. Malatino, 75 A.D.3d 967 (3d Dep t 2010) (Parked Truck Was Being Used To Transport Sheet Metal That Allegedly Cut Insured). Central Radiology Servs., P.C. v. MVAIC, 28 Misc.3d 1376 (2d Dep t 2010) (Assignor s Failure To Timely File Claim With MVAIC Dooms Its Action). Allstate Ins. Co. v. Etienne, No. 09 CV 3582 (E.D.N.Y. Oct. 26, 2010) (Court Refuses To Dismiss Insurer s RICO Claims Against Medical Providers In Alleged No Fault Fraud Case). First Party Property... 6 Adamowicz v. North Country Ins. Co., 70 A.D.3d 47 (3d Dep t 2009) (Insurer s Demand For Sworn Proof Of Loss Sent To Homeowner s Attorney, Which Homeowner Allegedly Never Received, Deemed Insufficient). Lattimore Rd. Surgicenter, Inc. v. Merchants Group, Inc., 71 A.D.3d 1379 (4th Dep t 2010) (Water Exclusion Bars Coverage For Damages From Ruptured Water Main That Ruptured Sewer Lateral In Building). Fabozzi v. Lexington Ins. Co., 601 F.3d 88 (2d Cir. 2010) (Second Circuit Opines That Limitations Period Begins To Run When Insureds Claim Against Homeowner s Insurer Accrues). Jeune v. Peerless Ins. Co., 72 A.D.3d 1444 (3d Dep t 2010) (Court Finds Factual Questions As To Whether Plaintiffs Had Falsely Represented They Would Occupy House Later Damaged By Fire). Page ii

4 Cragg v. Allstate Indem. Corp., 74 A.D.3d 90 (4 th Dep t 2010) (Coverage Barred Under Homeowners Policy Where Decedent Was An Insured). Gruninger v. Nationwide Mut. Ins. Co., 74 A.D.3d 1762 (4 th Dep t 2010) (No Coverage Under Homeowner s Policy For Assault While Deer Hunting). Villa v. Sterling Ins. Co., 28 Misc.3d 90 (2d Dep t 2010) (Homeowner s Policy Deemed Ambiguous As To Limitations Period For Actions Seeking Additional Living Expenses). Schindler v. Travelers Companies, Inc., No (Sup. Ct. N.Y. Co. Aug. 12, 2010) (Court Upholds One Year Time Limit For Suit Against Homeowners Insurer). Woodhams v. Allstate Fire and Cas. Co., 2010 U.S. Dist. Lexis (S.D.N.Y. Sept. 28, 2010) (Policy s 180 Day Completion Requirement Not Barred By New York Law). Bad Faith/Extra Contractual... 8 Wilner v. Allstate Ins. Co., 71 A.D.3d 155 (2d Dep t 2010) (Second Department Permits 349 Claim To Proceed Against Homeowners Insurer). Gallaher v. Republic Franklin Ins. Co., 70 A.D.3d 1359 (4th Dep t 2010) (Volunteer Firefighter Allegedly Injured Outside Truck While Directing Traffic At Accident Site Not Entitled to SUM Coverage). Cooper v. New York Cent. Mut. Fire Ins. Co., 72 A.D.3d 1556 (4th Dep t 2010) (Appellate Court Rejects Bad Faith, Fraud, Breach Of Contract, And Punitive Damages Claim). CBL Path, Inc. v. Lexington Ins. Co., 73 A.D.3d 829 (2d Dep t 2010) (Bad Faith Action Against Insurer Failed Where There Had Been No Pre Litigation Settlement Demand Within Policy Limit). Doherty v. Merchants Mut. Ins. Co., 74 A.D.3d 1870 (4 th Dep t 2010) (Bad Faith Claim Fails Where Insured Had Not Lost Opportunity To Settle After His Liability Was Clear). Cirone v. Tower Ins. Co. of N.Y., 76 A.D.3d 883 (1st Dep t 2010) (Insured s Assignees May Not Bring Bad Faith Action Against Insurer Where Insured Could Not Assert That Claim). Miscellaneous... 9 Bausch & Lomb Inc. v. Lexington Ins. Co., 679 F.Supp. 2d 345 (W.D.N.Y. 2009) (Thousands Of Claims Arising From Consumers Use Of Contact Lens Solutions Deemed Separate Occurrences). Schad v. Stamford Health System, Inc., 358 Fd. Appx. 242 (2d Cir. 2009) (Failure To File Evidence Of Insurability To Qualify For A Requested Benefits Increase Precludes Life Insurance Claim). Barnes v. American Int l Life Assur. Co. of N.Y., 2010 U.S. Dist. LEXIS 9503 (S.D.N.Y. Feb. 4, 2010) (Court Finds Coverage Under Group Accidental Death And Dismemberment Insurance Policy For Woman Who Died After Elective Surgery). Severino v. Brookset Hous. Dev. Fund Corp., 71 A.D.3d 607 (1st Dep t 2010) (Court Denies Insurer s Motion To Intervene In Third Party Action Against Employer Upon Finding That Contention That Its Rights Were Not Being Protected Was Speculative ). Doe v. Blue Cross Blue Shield of Massachusetts, Inc., 2010 U.S. Dist. Lexis (S.D.N.Y. Apr. 12, 2010) (Court Upholds Denial Of Coverage For Donor Egg Procedure). Blue Ridge Ins. Co. v. Empire Contr. & Sales, Inc., 73 A.D.3d 959 (2d Dep t 2010) (Insurer s Declaratory Judgment Action Constituted Timely Notice Of Disclaimer, Second Department Decides). Fruit & Vegetable Supreme, Inc. v. The Hartford Steam Boiler Inspection & Ins. Co., 28 Misc.3d 1128 (Sup. Ct. Kings Co. 2010) (Spoilage And Resulting Loss Of Income Allegedly Due To Blackout Are Not Recoverable Under Equipment Breakdown Insurance Policy). Desai v. Provident Mut. Life Ins. Co. of Phila., 2010 N.Y. Slip Op (U) (Sup. Ct. N.Y. Co. Aug. 2, 2010) (In House Counsel May Invoke Attorney Client Privilege In Medical Doctor s Suit Seeking Payment Of Disability Claims). Page iii

5 O Keefe v. Allstate Ins. Co., 2010 N.Y. Slip Op U (Sup. Ct. Nassau Co. Sept. 16, 2010) (Insureds Claims Against Insurer s Employees Are Dismissed). Metz v. U.S. Life Ins. Co., 2010 U.S. Dist. Lexis (S.D.N.Y. Sept. 13, 2010) (Amount Paid Not Billed For Covered Medical Treatment Credited Towards Policy s Deductible). Ruiz v. Frog Co., LLC, 77 A.D.3d 513 (1st Dep t 2010) (Law Firm Can Withdraw When Policy s Per Occurrence Limit Is Reached). Hunter v. OOIDA Risk Retention Group, Inc., 2010 N.Y. Slip Op (2d Dep t Oct. 5, 2010) (Insurer Not Entitled To Inter Company Loss Transfer Arbitration, Court Rules). Federal Ins. Co. v. International Bus. Machines Corp., 2010 N.Y. Slip Op (2d Dep t Nov. 9, 2010) (No Coverage Under Fiduciary Liability Policy Where Insured Did Not Act In Fiduciary Capacity). Brondon v. The Prudential Ins. Co. of Amer., No. 09 CV 6166T (W.D.N.Y. Nov. 9, 2010). (Finding Question About Heart Trouble Ambiguous, Court Orders Insurer To Pay Death Benefits). Page iv

6 Additional and Named Insureds Insurer Has Duty To Defend Town As Additional Insured After Collapse Of Town Owned Dam Reconstructed By Named Insured After the Kubricky Construction Corp. reconstructed a town owned dam, the dam failed. The town was sued, and it sought a defense from Kubricky s insurer as an additional insured. The Appellate Division, Third Department, held that the town was entitled to a defense. The court acknowledged that the additional insured coverage remained in effect only as long as Kubricky, the named insured, had ongoing operations at the project, and that major construction had ended before the dam s failure. However, the court concluded, inspection of the project by the engineer, which was required before Kubricky s work was considered completed under the contract, had not yet occurred. [Town of Fort Ann v. Liberty Mut. Ins. Co., 69 A.D.3d 1261 (3d Dep t, Court Orders Insurer To Reimburse Additional Insured s Legal Fees After Finding Additional Insured s Own Coverage Was Excess After the Village of Brewster contracted with a construction company for new water distribution and wastewater collection systems, the company obtained a comprehensive general liability ( CGL ) insurance policy from Virginia Surety Company that named the village as an additional insured; the village also had a CGL insurance policy from New York Municipal Insurance Reciprocal ( NYMIR ). During the course of the contractor s work, a water main broke. Thereafter, two residents sued the village and the company for property damage. With respect to the priority of coverage, the court explained that each policy generally provided primary coverage. However, NYMIR s other insurance clause provided that its coverage was excess where NYMIR was added as an additional insured on another policy. Accordingly, the court found NYMIR s coverage was excess to Virginia Surety s coverage, and Virginia Surety had to reimburse NYMIR for the legal fees and costs it had incurred in defending the village in the underlying actions. [Village of Brewster v. Virginia Sur. Co., Inc., 70 A.D.2d 1239 (3d Dep t, Question of Fact As To Whether Building Owner Covered Even Though Not An Insured Yashi Associates owned a building that it leased to Glendale Convenience Store. A woman allegedly fell in the parking lot and sued Glendale and Yashi. The lease required Glendale to maintain an insurance policy that named Yashi as an additional insured, but the policy obtained by Glendale did not do so. The insurer disclaimed coverage for Yashi, which brought suit against the insurer. The Appellate Division, Second Department, acknowledged that Yashi was not an insured. Contrary to the policy language, however, the court opined that there was a question of fact precluding summary judgment. The policy excluded coverage to an insured for bodily injury assumed under a contract, except this did not apply to an incidental contract, which included leases. Although the court acknowledged that the provision did not expressly provide coverage to Yashi, it found a triable issue of fact as to whether the insurer was obligated to defend and to indemnify Yashi by operation of the policy and lease. [Majawalla v. Utica First Ins. Co., 71 A.D.3d 958 (2d Dep t Top New York Court Finds Construction Manager Is An Additional Insured Where Named Insured s Employee Claimed Injury Regal Construction Corp. contracted with URS Corp., the construction manager, to work on a project at New York City s Rikers Island. The commercial general liability ( CGL ) insurance policy obtained by Regal covered URS as an additional insured only with respect to liability arising out of [Regal s] ongoing operations performed for URS. Regal s project manager allegedly was injured while working at the site, and he brought suit. In the coverage litigation that ensued, the New York Court of Appeals ruled that the liability arose out of Regal s work for URS, so Regal s insurer owed additional insured coverage to URS in the project manager s bodily injury action. The Court found that the underlying complaint s allegation of negligence on the part of URS and not Regal was of no consequence. [Regal Constr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, 15 N.Y.3d 34 ( Appellate Court Rules Hold Harmless Agreement Did Not Require Insured To Name Owner As Additional Insured A property owner entered into a construction contract with U.S.A. Interior, LLC ( USAI ) for USAI to perform demolition work at the owner s property. The parties written agreement was a one page proposal from USAI and a hold harmless agreement. The CGL insurance policy issued to USAI contained an additional insured endorsement that added as an insured any entity the Named Insured is required in a written contract to name as an insured. [Emphasis added]. The Appellate Division, Second Department, affirmed the trial court s decision in favor of the insurer. The appellate court explained that although USAI had agreed in writing to indemnify the owner in the hold harmless agreement,

7 that agreement did not contain any requirement that USAI name the owner as an additional insured under the policy. [Hargob Realty Assoc., Inc. v. Fireman s Fund Ins. Co., 73 A.D.3d 856 (2d Dep t No Coverage For Construction Manager That Did Not Have Written Contract With Insured Providing It Would Be Named An Additional Insured A project s construction manager was sued in a personal injury action allegedly arising from the project. The manager sought coverage as an additional insured under an insurance policy that had been issued to a subcontractor which had been hired to perform steel work on the project. The court observed that, for the manager to qualify as an additional insured, the subcontractor must have agreed in writing with the manager to add it as an additional insured on the policy, but the court found that no such agreement existed. The court ruled that, contrary to the manager s contention, the contract between the general contractor and subcontractor was not such an agreement because the manager was not a party to it. [Skanska USA Bldg Inc. v. Burlington Ins. Co., 2010 N.Y. Slip Op (U) (Sup. Ct. N.Y. Co. July 15, Allegations Sufficient To Find Obligation To Defend Additional Insured Under Caused By Provision An employee of Metal Sales Company, Inc., who was working on the construction of the Manhattan Family Court building, brought a personal injury suit against the project s general contractor, which then brought a third party action against Metal Sales and W&W Glass Systems, Inc. The general contractor alleged that, in the event the general contractor was held liable for the injuries to the Metal Sales employee, such liability was caused by the negligence of W&W and/or Metal Sales, rendering these third party defendants liable to the general contractor. The insurance policy obtained by Metal Sales included an additional insured endorsement providing coverage with respect to liability caused by your ongoing operations performed for that insured. W&W claimed to be an additional insured under the endorsement. The court held that the allegations of the third party complaint were sufficient to trigger the insurer s duty to defend W&W. [W&W Glass Sys., Inc. v. Admiral Ins. Co., 2010 N.Y. Slip Op (U) (Sup. Ct. N.Y. Co. July 29, Court Finds Additional Insured Coverage Under Policy of Claimant s Employer An electrician alleged that he was injured when he tripped while exiting the restroom at a construction project. He brought suit against the general contractor which sought coverage as an additional insured under the general liability policy of the electrician s employer. The policy provided additional insured coverage where required by contract for liability arising out of the employer s work. The court noted that its earlier decision, saying that the provision in the purchase order regarding contractual indemnification is void against public policy, is not determinative of the validity and enforceability of the insurance procurement provision. The court held that the claimant s injury arose out of the employer s work on the project and, therefore, the general contractor qualified as an additional insured. [Lehr Constr. Co. v. Continental Cas. Co., 2010 N.Y. Slip Op (U) (Sup. Ct. N.Y. Co., Aug. 13, 2010)..] Verbal Understanding Insufficient To Lead To Additional Insured Coverage A construction manager s verbal understanding that a subcontractor would provide additional insured coverage was insufficient to require the insurer to defend or to indemnify the construction manager. The court explained that even if a verbal understanding constituted an agreement to have the construction manager named as an additional insured, the additional insured endorsement required that the agreement be executed prior to the loss for which coverage was sought, and the agreement was neither reflected in a signed document nor fully performed by the parties. [Empire Bldrs. & Developers, Inc. v. Delos Ins. Co., 2010 N.Y. Slip Op (2d Dep t Nov. 9, Conditions Precedent/Late Notice Insurer That Could Have Moved To Vacate Default Judgment And For Leave To File Late Answer Failed To Demonstrate Prejudice, First Department Rules After allegedly being injured in a car accident, the injured party timely notified the alleged tortfeasor s insurer of his injuries and claim. In turn, the injured party filed an action against the alleged tortfeasor insured and moved for default when the insured failed to answer. The insurer disclaimed coverage, stating that its receipt of the default judgment motion was its first notification of any legal action against its insured. The court entered a default judgment against the insured and ordered that he pay $250,000 in damages. The insurer filed a declaratory action against the insured. The Appellate Division, First Department, opined that the insurer could disclaim coverage for untimely notice of the underlying action only if it could show prejudice given that it had received timely notice of claim. It then ruled that the insurer had not demonstrated prejudice, noting that the insurer could have appeared, opposed the [default] motion, and filed for leave to file a late answer. A dissenting justice stated that the insurer should only be obligated to defend and/or to indemnify the insured if the defendant consented to vacatur of the default judgment so that the insurer could file an answer, but the majority upheld the lower court s grant of summary judgment against the insurer. [American Transit Ins. Co. v. Hashim, 68 A.D.3d 618 (1st Dep t 2009).] 2

8 Bar Owner s Five Month Delay In Notifying Insurer Following Bar Fight Dooms Claim The owner of a bar became aware about one week after an incident that a patron of his bar had potentially assaulted another patron on his premises, but he did not notify his insurer for five months. The Appellate Division, First Department, found that delay unreasonable as a matter of law. The court also rejected the insured s claimed belief of nonliability on the basis that none of his employees had been involved in the incident, ruling it was not reasonable under the circumstances. Tower Ins. Co. of N.Y. v. Miles, 74 A.D.3d 410 (1st Dep t Four Month Delay In Disclaiming For Failure To Notify As Soon As Practicable Deemed Unreasonable An electrical contractor obtained liability coverage naming a construction manager as an additional insured. An employee of the contractor allegedly was injured at the construction site in March 2007 and brought suit against the manager on November 21, 2007; the manager notified the insurer on January 7, On January 25, 2008, the insurer stated it would investigate whether the manager was covered and whether the notice was timely. The insurer disclaimed coverage on May 8, and the manager brought suit. The court explained that the insurer s contention that the manager had not notified it as soon as practicable would have been apparent upon examination of the manager s January 7, 2008 tender. Accordingly, it concluded, the insurer s four month delay in disclaiming on this ground was unreasonable as a matter of law pursuant to 3420(d) of the New York Insurance Law. [Hunter Roberts Constr. Group, LLC v. Arch Ins. Co., 75 A.D.3d 404 (1st Dep t, Failure To Notify Insurer For Years Dooms Coverage For Bodily Injury Claim An agreement between New York University and a maintenance contractor ( ABM ) required that ABM obtain insurance naming NYU as an additional insured. An accident allegedly occurred at NYU on March 6, 2003, but NYU first gave notice to the insurer, Continental, on August 14, 2008, when it sued Continental. The court found that Continental had not received timely notice of the underlying accident and, therefore, had no obligation to defend or to indemnify NYU. The court rejected NYU s argument that the delay resulted from being told by ABM that it had a different insurer. The court reasoned that if NYU had exercised its right under its contract with ABM to approve ABM s insurance, it would have learned earlier that ABM s insurer was Continental. [New York Univ. v. American Bldg. Maintenance, 2010 N.Y. Slip Op (1st Dep t, Nov. 30, Coverage Grant No Coverage For Alleged Fall At Property Not Listed As A Designated Premises An individual allegedly injured at a site in Nassau County brought suit against Richner Communications, Inc. After Richner s insurer disclaimed on the ground that the Nassau property was not covered under the policy, Richner brought suit. The Supreme Court, Queens County, denied the insurer s summary judgment motion, and the insurer appealed. The Appellate Division, Second Department, reversed. The appellate court explained that the policy contained an endorsement that expressly limited coverage to certain Designated Premises, and that, at the time of the alleged accident, the Nassau property was not listed. Given the endorsement, the appellate court rejected Richner s contention that the policy was ambiguous because it stated that it applied to bodily injury caused by an occurrence that took place in the coverage territory. Richner Communications, Inc. v. Tower Ins. Co. of N.Y., 72 A.D.3d 670 (2d Dep t No Coverage For Mold Case Where Alleged Injury Outside Policy Period The underlying plaintiff s allegation of exposure to mold during the policy period did not trigger any duty to defend or to indemnify where the injury allegedly occurred after the policy period. As the court reasoned, New York follows the injury in fact test that rests on when the injury, sickness, disease or disability actually began and... requires the insured to demonstrate actual damage or injury during the policy period. [Downey v. 10 Realty Co., LLC, 2010 N.Y. Slip Op (1st Dep t Nov. 23, Exclusions Title Insurer Need Not Defend Homeowner In Adverse Possession Case Involving Allegedly Misplaced Fence Where Policy Had Specific Exclusion For Fences A complaint for adverse possession against homeowners was based upon the location of a fence that allegedly varied from the actual boundary line. The title insurer relied upon an exclusion in the title insurance policy that excluded fences... [that] vary with the record lines. The homeowners argued that the pre policy certificate of title and the marked title report revealed an intention to cover claims based upon a fence that varied from the actual boundary line. The Appellate Division, First Department rejected the homeowners argument, finding that any such intention did not survive issuance of the policy. [Frydman v. Fidelity National Title Ins. Co., 68 A.D.3d 622 (1st Dep t, 2009).] Broad Employee Exclusion In Insured s Policy Dooms Coverage For Suit By Contractor s Employee After the insured, Matthew Davis Events ( MDE ), agreed to manage a party for a 3

9 customer, it contracted with United Stage Service, Inc. ( Stage ) to work the event. A Stage employee who allegedly was injured brought suit against MDE, and MDE s insurer disclaimed coverage based upon an exclusion for bodily injury to an employee of an insured. The exclusion defined employee as including a person hired by, liable to, leased to, contracted for, or volunteering services to the insured, whether or not paid by the insured. MDE argued that the employee exclusion was ambiguous as to whether Stage s employees were included. The Appellate Division, First Department disagreed, holding that the employee exclusion clearly contemplate[d] that an injury to a contractor or its employee was within the scope of the exclusion. [Nautilus Ins. Co. v. Matthew David Events, Ltd., 69 A.D.3d 457 (1st Dep t Federal Court Finds That Independent Contractor Exclusion Is Unambiguous, And That Insurer Is Not Estopped From Maintaining Allegedly Untimely Disclaimer For Property Damage Claims Where No Prejudice A plumber working in an apartment building failed to cap a leak in a gas pipe, leading to an explosion, a tenant s death, and the destruction of the building. The building owners were sued, and their premises liability policy insurer filed a declaratory judgment action, arguing that it had properly disclaimed coverage based upon, among other things, a policy exclusion for work done by an independent contractor. The district court found that the independent contractor exclusion was unambiguous, valid, and applicable. The court, however, ruled that the insurer s disclaimer with respect to the personal injury and wrongful death claim against the building owners was untimely under Insurance Law 3420(d). The court added that 3420(d) did not apply to the claims for property damage, but that disclaimers relating to such claims were subject to common law equitable estoppel. It then found, however, that the building owner had failed to demonstrate that they had been prejudiced by the insurer s alleged late disclaimer, as required for equitable estoppel. Accordingly, the court concluded that the insurer was entitled to a declaration of noncoverage with respect to the property damage claims against the building owners. [U.S. Underwriters Ins. Co. v. Landau, 679 F.Supp. 2d 330 (E.D.N.Y. No Coverage Where Injured Party Was Employee Of Another Insured In this declaratory judgment action, the owner and tenant of an accident site sought coverage for a personal injury suit brought by an employee of another insured. The owner, tenant and claimant s employer were all insureds under the policy. The Appellate Division, First Department, held that the insurer had no obligation to defend or to indemnify any of the insureds. It explained that the Exclusion Cross Liability endorsement stated that the insurance did not apply to any actual or alleged bodily injury to an employee of any insured. That language excluded coverage even where the injured party was an employee of another insured under the policy, the appellate court ruled. It added that neither the policy s general Separation of Insureds provision, nor the separation of insureds doctrine, rendered the exclusion ambiguous. [Drk, LLC v. Burlington Ins. Co., 74 A.D.3d 693 (1st Dep t No Coverage Where Insureds Son Had Urged And/Or Encouraged Alleged Assault A lawsuit alleged that the insureds son had urged and/or encouraged others to beat two people with a bat. After the negligence claim was dismissed, the court agreed that the insurers had no duty to defend or to indemnify the son because the policies did not cover the remaining causes of action, which, the court said, involved intentional torts (concerted action in perpetrating an assault and aiding and abetting an assault). Specifically, there was no occurrence and the expected or intended exclusion operated to preclude coverage. Although the insureds son had not committed the alleged assault, the court found that the alleged injuries would not have been unexpected and unintended from [the son s] point of view. [Travco Ins. Co. v. Donaghy, No /2009 (Sup. Ct. Queens Co. June 16, Auto Exclusion Bars CGL Coverage Where Injured Person Slipped While Entering Car The plaintiff sued a property owner for negligently allowing a parking lot to remain in an uneven, snowy and icy condition, asserting that she was injured when she slipped as she opened the door to enter her father s car. The insurer that had issued the snow removal contractor a commercial general liability insurance policy disclaimed coverage based on the exclusion for personal injuries arising out of the use of any auto, whether owned by the insured or not. [DMP Contr. Corp. v. Essex Ins. Co., 76 A.D.3d 84 (1st Dep t Insurer Must Defend Restaurant Owner In Suit Following Fight At Party A restaurant employee fatally stabbed a guest and injured another person at a party hosted at the restaurant by the owner. The Appellate Division, First Department, agreed with one insurer that it had no duty to defend or to indemnify the restaurant owner based upon the assault and battery exclusion in the commercial lines policy it had issued. However, it rejected the other insurer s argument that it had no duty to defend or to indemnify the owner under the homeowners policy it had issued. The court noted that there was an exception to the business pursuits exclusion in the policy for activities which are ordinarily incident to non business pursuits. The court found that the party was ordinarily incident to a 4

10 non business pursuit and concluded that even if the restaurant owner s motivation was, in part, to boost employee morale, the party fell under the exception to the exclusion. [Metalios v. Tower Ins. Co. of N.Y., 77 A.D.3d 471 (1st Dep t Assault and Battery Exclusion Dooms Coverage For Nightclub Fight Contending that he had been injured during a fight at a nightclub, the plaintiff argued that the nightclub s insurer had to indemnify the nightclub because its bouncer had been negligent. The Appellate Division, Fourth Department, ruled in favor of the insurer. It explained that the record demonstrated that the plaintiff had been subjected to an assault, which, it decided, fell within the insurance policy s assault and battery exclusion. [Nahshon Aaron Council v. Utica First Ins. Co., 77 A.D.3d 1433 (4th Dep t 2010). Exclusions Do Not Bar Coverage For Unknowing Or Accidental Release Of Asbestos After the insured performed emergency water damage service at a building, it was sued for allegedly causing asbestos to be dispersed throughout the property. The insurer disclaimed coverage, but the court rejected its arguments. The court found that the policy s asbestos exclusion did not unambiguously exclude coverage for damages arising out of the unknowing or accidental release or dispersal of asbestos. It also opined that asbestos did not fall within the pollution exclusion because it was not specifically included within the definition of pollutant, and to exclude asbestos claims under the pollution exclusion would render the specific asbestos exclusion meaningless. [Great Am. Restoration Servs., Inc. v. Scottsdale Ins. Co., 2010 N.Y. Slip Op (2d Dep t Nov. 9, Auto/Uninsured/Underinsured Motorist No Coverage From Car Dealer s Insurer For Accident Involving Loaner Car To Customer Jason Webb s son was involved in an accident while driving a loaner vehicle Jason had obtained from a car dealer. A lawsuit was filed and the Webbs sought coverage under a garage liability policy issued to the dealer by Harco National Insurance Company. The Harco policy provided coverage to a customer of the dealer if the customer had other available insurance less than the minimal required limits. After determining that the Webbs insurer was the primary insurer, the court ruled that the Webbs were excluded from coverage under the Harco policy because the liability limits in their policy exceeded the minimum statutory requirements. [Progressive Cas. Ins. Co. v. Harco Natl. Ins. Co., 70 A.D.3d 1495 (4th Dep t Accident That Occurred While Employee Was Driving His Own Truck While Working Is Not Covered By Employer s Policy Brian Blakely was driving his pickup truck in the course of his work for Blakely Pumping, Inc., when he was involved in an accident. After a lawsuit was filed, Blakely Pumping requested a defense under its insurance policy for Businessowners Liability Coverage, relying upon an endorsement that extended coverage to bodily injury arising from the use of a Hired Auto or a Non Owned Auto by the company or one of its employees. The U.S. Court of Appeals for the Second Circuit rejected that argument, finding that those terms were defined in such a way that an employee s or officer s vehicle, such as Blakely s pickup truck, could never be covered. Moreover, the court concluded, because there was no coverage, the timely disclaimer requirement of 3420(d) of the New York Insurance Law did not apply. [NGM Ins. Co. v. Blakely Pumping, Inc., 593 F.3d 150 (2d Cir. 5 Employee Driving His Own Leased Car While Working Is Not An Insured Under Employer s Auto Insurance Policy While driving his own leased car to the bank to make a deposit for his employer, Regional Integrated Logistics, Michael Hale was involved in an accident. The insurer that had issued a commercial automobile insurance policy to Regional asserted that it had no obligation to defend or to indemnify Hale, and the Appellate Division, Fourth Department, agreed. The court explained that Hale was an insured under the policy only if he was using, with Regional s permission, an automobile owned, hired, or borrowed by Regional. The court found that the automobile that Hale was driving did not meet those criteria. After noting that it was not owned or hired by Regional, the court declared (over the dissent of two justices) that only an unnatural or unreasonable construction of the policy provision supported an interpretation that Hale s personal vehicle had been borrowed by Regional and then used by Hale with Regional s permission. [RLI Ins. Co. v. Smiedala, 71 A.D.3d 1553 (4 th Dep t Coverage Barred For Auto Accident Involving Car Owned By Insured s Daughter, A College Student The insured s son was involved in an accident while driving his sister s car. After judgments against the siblings, the plaintiffs sought to recover under the insured s automobile insurance policy. The trial court dismissed the complaint and the Appellate Division, Fourth Department, affirmed. It explained that the sister s car was not a covered non owned car because that term excluded a car owned by a relative residing in the insured s household. The sister, the court concluded, was a relative of the insured who resided in the insured s household even though she was living at college at the time of the accident. [Konstantinou v. Phoenix Ins. Co., 74 A.D.3d 1850 (4 th Dep t

11 Parked Truck Was Being Used To Transport Sheet Metal That Allegedly Cut Insured An employee returning to work after taking a break in her employer s parking lot allegedly was injured when she walked into a piece of sheet metal extending beyond the tailgate of a co worker s parked truck, which the co worker had planned to deliver to a junkyard after work. Thereafter, the employee demanded arbitration as a named insured under her insurance policy s supplemental underinsured motorists provisions. The insurer contended that the woman s injuries did not arise out of the ownership, maintenance or use of the co worker s truck, and it asked the court to stay the arbitration. The court ruled that although the truck was not being operated at the time of the accident, it was being used by the co worker to transport the sheet metal to the junkyard after work. The court denied the application to stay arbitration, concluding that the employee s claim fell within the scope of the insurance policy. [Matter of Liberty Mut. Fire Ins. Co. v. Malatino, 75 A.D.3d 967 (3d Dep t Assignor s Failure To Timely File Claim With MVAIC Dooms Its Action After a health care provider brought suit against the Motor Vehicle Accident Indemnification Corp. (MVAIC) to recover assigned first party no fault benefits, MVAIC moved for summary judgment on the ground that there was no coverage due to the failure of the provider or its assignor to file a timely notice of claim. The court explained that the filing of a timely affidavit providing MVAIC with notice of intention to file a claim was a condition precedent to the right to payment from it. Because the submissions in support of MVAIC s summary judgment motion showed that the provider s assignor had failed to timely file a notice of claim, and given that the provider failed to demonstrate that its assignor had sought leave to file a late notice of claim, MVAIC was entitled to summary judgment, the court concluded. [Central Radiology Servs., P.C. v. MVAIC, 28 Misc.3d 1376 (2d Dep t Court Refuses To Dismiss Insurer s RICO Claims Against Medical Providers In Alleged No Fault Fraud Case A no fault insurer brought suit in federal court against 20 defendants involved in the medical testing and treatment of various insureds involved in automobile accidents. The insurer alleged that the defendants had engaged in a series of interrelated fraudulent schemes through which they submitted or caused to be submitted thousands of fraudulent charges. Various defendants moved to dismiss the insurer s RICO and RICO conspiracy claims, but the court refused to do so. The court first found that the complaint properly pled the RICO counts. It also rejected the defendants contention that the insurer s complaint lacked sufficient specificity under Federal Rule of Civil Procedure 9(b), finding that the complaint alleged specific facts describing each fraudulent scheme, the role of each of the defendants and the elements of fraud with respect to each defendant. These allegations were sufficient to meet the particularity requirements of Rule 9(b), the court concluded. [Allstate Ins. Co. v. Etienne, No. 09 CV 3582 (E.D.N.Y. Oct. 26, First Party Property Insurer s Demand For Sworn Proof Of Loss Sent To Homeowner s Attorney, Which Homeowner Allegedly Never Received, Deemed Insufficient A homeowner sought reimbursement from her insurer after her home was damaged by fire. The parties settled, except for the homeowner s claim for additional living expenses. The insurer sent a letter to the homeowner s attorney asking for a sworn proof of loss as to the claim for additional living expenses. When it was not received, the insurer disclaimed coverage. The Appellate Division, Third Department, found that although the insurer had mailed the letter to the homeowner s attorney, the homeowner had not received it, as required by Insurance Law 3407(a). The court held, therefore, that the insurer s summary judgment motion should have been denied. [Adamowicz v. North Country Ins. Co., 70 A.D.3d 47 (3d Dep t 2009).] Water Exclusion Bars Coverage For Damages From Ruptured Water Main That Ruptured Sewer Lateral In Building The rupture of a water main near an ambulatory surgical center ruptured a portion of a sewer lateral that carried wastewater from the center. The remaining portion of the sewer lateral then served as a conduit for water that escaped from the water main and entered the center through a drain, causing damage to the center. The commercial property insurance policy that had been issued to the center contained an exclusion for damage caused by water and expressly provided that the insurer will not pay for loss or damage caused directly or indirectly by water that, among other things, backs up or overflows from a sewer, drain or sump. The insurer disclaimed coverage based upon, among other things, the water exclusion. The Appellate Division, Fourth Department, agreed that the exclusion precluded coverage for the loss as it arose from water that backs up or overflows through a sewer, irrespective of any other concurrent or subsequent contributing cause or event. [Lattimore Rd. Surgicenter, Inc. v. Merchants Group, Inc., 71 A.D.3d 1379 (4th Dep t Second Circuit Opines That Limitations Period Begins To Run When Insureds Claim Against Homeowner s Insurer Accrues The insureds filed a claim with their homeowner s insurer after their house 6

12 began to collapse. The insurer denied coverage, and the insureds sued. The insurer maintained that the limitations period had expired, relying upon a policy provision that required suit to be commenced within two years after the date of loss. A federal court agreed, and dismissed the suit. The United States Court of Appeals for the Second Circuit vacated that decision, opining that the contractual limitations period did not begin to run until the insureds claim against their insurer had accrued. It then remanded the case for the district court to consider when the insureds claim had accrued. [Fabozzi v. Lexington Ins. Co., 601 F.3d 88 (2d Cir. Court Finds Factual Questions As To Whether Plaintiffs Had Falsely Represented They Would Occupy House Later Damaged By Fire The insureds home was damaged by fire weeks after they took title. The insurer disclaimed coverage, asserting that the insureds had falsely represented that they would occupy the property. The court acknowledged that the insureds had not yet moved into the house when the fire had occurred, but noted that they testified that they had intended to do so within 120 days of taking title. It added that the insureds had electric and telephone service activated in the house prior to the fire and that their aunt, while living in a trailer on the property, had used the facilities. This evidence, the court concluded, created questions of fact as to whether the insureds had made any material misrepresentations in their insurance application. [Jeune v. Peerless Ins. Co., 72 A.D.3d 1444 (3d Dep t Coverage Barred Under Homeowners Policy Where Decedent Was An Insured A child drowned in a swimming pool at her grandparents home, where she lived with her mother. The child, mother, and grandparents were insured under a homeowners insurance policy issued to the grandparents. The father, as administrator of his daughter s estate, filed a wrongful death action against the mother and grandparents, and the insurer disclaimed coverage pursuant to the policy provision excluding coverage for bodily injury to an insured person... whenever any benefit of this coverage would accrue directly or indirectly to an insured person. In a case of apparent first impression in New York, the Appellate Division, Fourth Department, ruled that the insurer did not have to defend or to indemnify the insureds, finding that the policy excluded from coverage any claim to recover for the injury or resultant death of an insured person. The appellate court rejected the father s contention that the derivative nature of his wrongful death action rendered the policy exclusion inapplicable, concluding that a homeowners insurance policy was essentially designed to indemnify the policyholders against liability for injuries sustained by noninsureds. [Cragg v. Allstate Indem. Corp., 74 A.D.3d 90 (4 th Dep t No Coverage Under Homeowner s Policy For Assault While Deer Hunting The insured shot the plaintiff while they were deer hunting and then pleaded guilty to assault in the third degree. The plaintiff conceded that the shooting fell within the homeowners policy s criminal act exclusion, but argued that the exclusion should not be applied because the prohibited act involve[d] little culpability or seem[ed] minor relative to the consequent forfeiture of coverage. The Appellate Division, Fourth Department, rejected that argument, reasoning that assault in the third degree required criminal negligence, which was not synonymous with common law negligence. [Gruninger v. Nationwide Mut. Ins. Co., 74 A.D.3d 1762 (4 th Dep t Homeowner s Policy Deemed Ambiguous As To Limitations Period For Actions Seeking Additional Living Expenses After a fire in the insured s home rendered it uninhabitable, the insurer reimbursed the insured for some, but not all, of her claims for additional living expenses, and she filed suit to collect the balance. The insurer contended that the action was time barred because it had not been filed within two years after the loss. The court ruled that the term loss was ambiguous as to the applicable limitations period respecting actions seeking additional living expenses. Accordingly, the court found the insured s action was not time barred. [Villa v. Sterling Ins. Co., 28 Misc.3d 90 (2d Dep t Court Upholds One Year Time Limit For Suit Against Homeowners Insurer A homeowner brought suit on March 26, 2010 to recover benefits under a homeowners insurance policy with respect to an alleged theft from her home on January 5, The insurer maintained that the action was time barred because it had not been brought within one year as required by the policy. In finding for the insurer, the court explained that the parties to an insurance contract may agree to a shorter limitations period than that proscribed by law, and that a 12 month limitations period in a policy has been found to be reasonable, valid and enforceable. The court rejected the homeowner s contention that the insurer had misled her into delaying institution of her suit. The court also rejected the homeowner s contention that her bad faith claim survived. [Schindler v. Travelers Companies, Inc., No (Sup. Ct. N.Y. Co. Aug. 12, Policy s 180 Day Completion Requirement Not Barred By New York Law Plaintiffs challenged an insurer s practice of requiring that insured property owners suffering real property losses due to fire 7

13 either replace or complete repairs of insured property within a 180 day window to receive reimbursement for the cost of replacement or repair in an amount higher than the actual cash value of the damaged property. The property owners contended, among other things, that the 180 day completion requirement violated New York law. The court noted that New York s standard policy does not obligate an insurer to pay more than the actual cash value in any circumstances. Accordingly, the court ruled that the policy, which had been approved by the Insurance Department and which provided at least actual cash value (and, if certain conditions were met, replacement or repair value as well), was not inconsistent with New York law. [Woodhams v. Allstate Fire and Cas. Co., 2010 U.S. Dist. Lexis (S.D.N.Y. Sept. 28, Bad Faith/Extra Contractual Second Department Permits 349 Claim To Proceed Against Homeowners Insurer The insureds claimed that a storm caused a hillside on their property in the Village of Roslyn to collapse. Thereafter, the insureds filed suit and asserted a claim under General Business Law 349 against the insurer that had issued a deluxe homeowners policy to them, contending that the insurer had purposely delayed in reaching a decision on their claim to force them to bring a lawsuit against the village under a subrogation provision in the policy before the statute of limitations had expired. The Appellate Division, Second Department, ruled that the insureds 349 claim should not be dismissed. It reasoned that the conduct the insureds complained of had a broad impact on consumers at large because the subrogation provision was contained in every deluxe plus homeowners policy the insurer issued. It next decided that the insureds had pleaded conduct on the part of the insurer that was misleading in a material way, and that the insureds had alleged an injury (their attorney s fees) as a result of the insurer s allegedly deceptive act or practice. After concluding that the reasonableness of the insureds belief as to their need to file suit against the village was a question to be determined by a factfinder, the court added that the insureds also were entitled to assert claims for punitive damages and attorney s fees in connection with their 349 claim. [Wilner v. Allstate Ins. Co., 71 A.D.3d 155 (2d Dep t Volunteer Firefighter Allegedly Injured Outside Truck While Directing Traffic At Accident Site Not Entitled to SUM Coverage A volunteer firefighter sought supplementary uninsured motorist ( SUM ) coverage for injuries he allegedly suffered when he was directing traffic away from the scene of a motor vehicle accident. The court first found that the firefighter was not entitled to coverage as the named insured ( you ) because the fire company was the named insured. It then ruled that the firefighter was not entitled to SUM coverage on the ground that he had been occupying the fire truck, concluding that his conduct in directing traffic was unrelated to the fire truck and not incidental to his exiting it. [Gallaher v. Republic Franklin Ins. Co., 70 A.D.3d 1359 (4th Dep t Appellate Court Rejects Bad Faith, Fraud, Breach Of Contract, And Punitive Damages Claims The insured brought suit against her insurer after it denied her claim for property damage to her home. After the Supreme Court, Erie County, denied the insurer s motion to dismiss a variety of claims, the insurer appealed. The Appellate Division, Fourth Department, ruled that the causes of action for the insurer s alleged bad faith in refusing to settle the claim should have been dismissed because they did not allege conduct constituting gross disregard of the insured s interests. The Fourth Department also ruled that the causes of action for fraud should have been dismissed because they merely restated the cause of action for breach of contract. In addition, the appellate court held that the cause of action for violation of General Business Law 349 should have been dismissed inasmuch as this was a private contractual dispute, unique to the parties, and 349 was not intended to supplant an action to recover damages for breach of contract between parties to an arm s length contract. Finally, it concluded, the punitive damages claim should have been dismissed given that there was no indication that the insurer s alleged conduct had been activated by evil or reprehensible motives. [Cooper v. New York Cent. Mut. Fire Ins. Co., 72 A.D.3d 1556 (4th Dep t Bad Faith Action Against Insurer Failed Where There Had Been No Pre Litigation Settlement Demand Within Policy Limits After a lawsuit against a medical diagnostic laboratory was settled for more than the limits in the laboratory s malpractice insurance policy, the laboratory sued the insurer, arguing that it had acted in bad faith by refusing to enter into pre litigation settlement discussions with the underlying plaintiff s counsel. The trial court dismissed the action, and the laboratory appealed. The Appellate Division, Second Department, affirmed. The appellate court reasoned that the laboratory s bad faith claim could not stand, as there had been no pre litigation settlement demand made within the policy limits. [CBL Path, Inc. v. Lexington Ins. Co., 73 A.D.3d 829 (2d Dep t Bad Faith Claim Fails Where Insured Had Not Lost Opportunity To Settle After His Liability Was Clear A jury awarded damages to plaintiffs in excess of the insured s insurance coverage. Then, as the insured s assignees, the plaintiffs brought suit against the insurer, seeking damages in the amount of the 8

14 difference between the verdict and the policy limit. The trial court granted judgment for the insurer, and the plaintiffs appealed. Over a two judge dissent, the Appellate Division, Fourth Department, affirmed. It found that the insurer had demonstrated that the insured had not lost an actual opportunity to settle the claim at a time when all serious doubts about his liability had been removed and it was clear that the potential recovery exceeded the insurance coverage. Thus, the appellate court concluded, the insurer had not acted with gross disregard of the insured s interests. [Doherty v. Merchants Mut. Ins. Co., 74 A.D.3d 1870 (4 th Dep t Insured s Assignees May Not Bring Bad Faith Action Against Insurer Where Insured Could Not Assert That Claim Personal injury plaintiffs obtained a judgment against a restaurant, which assigned them its rights against its insurer. The plaintiffs, as the restaurant s assignees, then brought suit against the insurer, arguing that it had refused in bad faith to settle their personal injury action within policy limits. The court noted that coverage to the restaurant would have been precluded because of its late notice to the insurer and, therefore, the restaurant was not in a position to maintain that the insurer had improperly refused to settle the personal injury action within the applicable policy limits. As the restaurant s assignees, the court continued, the plaintiffs were subject to the same defenses the insurer could have asserted against the restaurant. Accordingly, the court ruled that the bad faith claim was barred. [Cirone v. Tower Ins. Co. of N.Y., 76 A.D.3d 883 (1st Dep t Miscellaneous Thousands Of Claims Arising From Consumers Use Of Contact Lens Solutions Deemed Separate Occurrences After consumers asserted thousands of claims for alleged injuries arising from their use of contact lens solutions, Bausch & Lomb argued that its umbrella insurance policies should be construed to provide that the claims arose from a single occurrence. The federal district court found that there was no evidence of a problem with the manufacturing process and that, under New York s unfortunate events test, it was the individual exposure to the solutions, and not their manufacture, distribution, or sale, that caused the injury and constituted the occurrence. Ruling in favor of the insurer, the court added that the occurrences could not be combined under the provisions grouping exposure to substantially the same general conditions where there is no single incident that can be identified as the event resulting in injury to the numerous claimants. [Bausch & Lomb Inc. v. Lexington Ins. Co., 679 F.Supp. 2d 345 (W.D.N.Y., 2009).] Failure To File Evidence Of Insurability To Qualify For A Requested Benefits Increase Precludes Life Insurance Claim The beneficiary of a group life insurance policy covering his deceased wife brought suit against the insurer after it determined that she had not qualified for increased benefits. The district court found that the insurer had reasonably determined that the wife had been required to submit Evidence of Insurability ( EOI ) to qualify for an increase in benefits, and the U.S. Court of Appeals for the Second Circuit agreed. The Second Circuit decided that the insurer s interpretation of the plan to require the filing of an EOI in these circumstances an interpretation consistent with the express notice provided on the enrollment form was not arbitrary and capricious. [Schad v. Stamford Health System, Inc., 358 Fd. Appx. 242 (2d Cir. 2009).] Court Finds Coverage Under Group Accidental Death And Dismemberment Insurance Policy For Woman Who Died After Elective Surgery During elective orthopedic surgery, a catheter was apparently inserted improperly into the insured s chest, puncturing a vein and leading to her death. After the insured s husband submitted a claim under a group accidental death and dismemberment insurance policy, the insurer contended that the policy was an accident only policy and did not cover sickness or disease. The insured s husband brought suit, and the court ruled that he was entitled to benefits under the policy for the accidental death of his wife. In the court s view, the insured s death was not caused by any sickness or disease but rather because a catheter had been improperly placed into her chest, rupturing a vein and causing internal bleeding and the entry of fluids into her chest cavity. The court concluded that this was an unintentional, unexpected, unusual, and unforeseen event an accident. [Barnes v. American Int l Life Assur. Co. of N.Y., 2010 U.S. Dist. LEXIS 9503 (S.D.N.Y. Feb. 4, Court Denies Insurer s Motion To Intervene In Third Party Action Against Employer Upon Finding That Contention That Its Rights Were Not Being Protected Was Speculative After a construction site s owners and general contractors were sued by a construction worker, a third party action was commenced against the construction worker s employer. The employer s workers compensation and liability insurer moved to intervene in the third party action, arguing that its rights were not being adequately represented because the employer s counsel, who was being paid by the 9

15 insurer, faced a potential conflict if asked by the insurer to move to have the common law indemnification claims dismissed, given that that would risk the loss of coverage afforded by the employer s liability policy. The Appellate Division, First Department, concluded that the insurer s theory that counsel may decide that the employer would be harmed if the common law claims against it were dismissed was speculative, noting that the insurer s own moving papers indicated that other coverage was available to the employer. [Severino v. Brookset Hous. Dev. Fund Corp., 71 A.D.3d 607 (1st Dep t Court Upholds Denial Of Coverage For Donor Egg Procedures The insureds brought suit against their healthcare insurer for insurance coverage for donor egg procedures. The court found that the insurer had reasonably interpreted the policy term medically necessary to extend coverage to only those members... for whom fertility would be naturally expected, because aging was not an illness. Finding support in both medical literature and the insurer s consulting physicians opinions, the court granted summary judgment in favor of the insurer. [Doe v. Blue Cross Blue Shield of Massachusetts, Inc., 2010 U.S. Dist. Lexis (S.D.N.Y. Apr. 12, 2010). ] Insurer s Declaratory Judgment Action Constituted Timely Notice Of Disclaimer, Second Department Decides An insurer brought an action for a judgment declaring that it was not obligated to defend or indemnify the insured in an underlying personal injury action. The Supreme Court, Suffolk County, granted summary judgment against the insurer, and the insurer appealed. The Appellate Division, Second Department, reversed. It found that the insurer s commencement of the declaratory judgment action constituted timely written notice of disclaimer under Insurance Law 3420(d). [Blue Ridge Ins. Co. v. Empire Contr. & Sales, Inc., 73 A.D.3d 959 (2d Dep t Spoilage And Resulting Loss Of Income Allegedly Due To Blackout Are Not Recoverable Under Equipment Breakdown Insurance Policy An insured fruit and vegetable store in New York City asserted claims under its equipment breakdown insurance policy. The insurer acknowledged that coverage existed for damage to the insured s refrigeration units and other systems caused by a power surge. However, the repair of the equipment was halted by an unrelated power outage at the premises, and the insurer denied coverage for the spoilage and loss of income resulting from the power outage. The court sustained the denial, explaining that coverage required an accident to covered equipment, and the policy excluded tripping off line from the definition of accident. The court found that the electric company s equipment had tripped off line as a result of its automatic relay protection systems responding to a grid disturbance. Accordingly, the court ruled that the insured was not entitled to coverage for spoilage and loss of income. [Fruit & Vegetable Supreme, Inc. v. The Hartford Steam Boiler Inspection & Ins. Co., 28 Misc.3d 1128 (Sup. Ct. Kings Co. In House Counsel May Invoke Attorney Client Privilege In Medical Doctor s Suit Seeking Payment Of Disability Claims Before his medical license was revoked, a medical doctor filed disability claims with a number of insurance carriers. The insurers denied the claims and the doctor filed suit. He deposed the in house counsel for one of the insurers and objected when the outside law firm representing the insurer invoked the attorney client privilege. The doctor contended that the attorney waived the privilege by answering some of the questions posed to him. The court rejected that argument, explaining that a blanket invocation of the privilege would have been improper and the insurer was required to invoke it question by question. The court also rejected the doctor s assertion that the in house counsel was working as a non lawyer, finding that, viewing the lawyer s role in the case and judging by his sworn testimony, he had been consulted and provided services as an attorney, not as a non attorney. [Desai v. Provident Mut. Life Ins. Co. of Phila., 2010 N.Y. Slip Op (U) (Sup. Ct. N.Y. Co. Aug. 2, Insureds Claims Against Insurer s Employees Are Dismissed Following a fire, homeowners sued their insurance company and three insurance company employees, including two adjusters for breach of contract and fraud; they also sought to recover punitive damages and attorney's fees. The three employees moved to dismiss the complaint against them, but the homeowners argued that they could be held liable because they individually and collectively participated in a scheme to deliberately and intentionally deny the homeowners their rights under the insurance policy. The court ruled that the complaint should be dismissed against the employees. It explained that agents of a disclosed principal whose actions were undertaken at the direction of the insurer could not be held personally responsible to the homeowners. The court specifically added that the plaintiffs request to recover attorney s fees was improper because it is well established that insureds may not recover expenses incurred in bringing an affirmative action against an insurer to settle their rights under a policy. [O Keefe v. Allstate Ins. Co., 2010 N.Y. Slip Op U (Sup. Ct. Nassau Co. Sept. 16, 10

16 Amount Paid Not Billed For Covered Medical Treatment Credited Towards Policy s Deductible An insured brought suit against her medical insurer, arguing that the entire amount billed for a covered medical treatment should be credited towards the policy s deductible, regardless of the amount Medicare or the insured actually paid. The court held that only the amount actually paid should be credited. [Metz v. U.S. Life Ins. Co., 2010 U.S. Dist. Lexis (S.D.N.Y. Sept. 13, Law Firm Can Withdraw When Policy s Per Occurrence Limit Is Reached The plaintiff allegedly was injured at work. The employer s liability carrier provided coverage up to $6,000 per occurrence, including defense costs. While the litigation was pending, the insurer advised the employer that it would no longer pay to defend or to indemnify the case because the $6,000 limit had exhausted. The law firm representing the employer then moved to withdraw. The Appellate Division, First Department, explained that although a motion for withdrawal by counsel was generally an improper vehicle to test an insurer s disclaimer of coverage, the insurer here had not disclaimed coverage. Rather, the First Department pointed out, the contractually agreed to limitation on defense costs had been exhausted and, under these circumstances, the law firm should not be compelled to continue representation without compensation. [Ruiz v. Frog Co., LLC, 77 A.D.3d 513 (1st Dep t Insurer Not Entitled To Inter Company Loss Transfer Arbitration, Court Rules After the plaintiff, driving a truck registered in New York, was involved in a motor vehicle accident in Connecticut with a car that was registered in Connecticut, the OOIDA Risk Retention Group paid certain first party benefits to the plaintiff. Thereafter, the Appellate Division, Second Department, considered whether OOIDA was entitled to so called inter company loss transfer arbitration pursuant to Insurance Law 5105(a) to recoup those benefits from the insurer that had issued a Connecticut policy to the non New York tortfeasors. The court ruled that such arbitration was not mandated. It explained that 5105(a) did not provide for intercompany loss transfer under the circumstances presented in this case because it cannot be said that the alleged tortfeasors would have been liable, but for the provisions of Insurance Law Article 51. [Hunter v. OOIDA Risk Retention Group, Inc., 2010 N.Y. Slip Op (2d Dep t Oct. 5, No Coverage Under Fiduciary Liability Policy Where Insured Did Not Act In Fiduciary Capacity An agreement settling a class action challenging amendments to an IBM pension plan as violative of the age discrimination provisions of ERISA provided for payment by the plan of the plaintiffs attorneys fees. The court denied coverage for those fees under a fiduciary liability policy that had been issued to IBM, ruling that that policy required a Wrongful Act that necessitated a breach of a fiduciary duty. It reasoned that when IBM allegedly violated ERISA s age discrimination provisions by making amendments to the pension plan, it was acting in a settlor capacity, not in a fiduciary one. Thus, the class action did not allege that IBM or the plan had committed a Wrongful Act, and neither IBM nor its pension plan could recover under the policy. [Federal Ins. Co. v. International Bus. Machines Corp., 2010 N.Y. Slip Op (2d Dep t Nov. 9, Finding Question About Heart Trouble Ambiguous, Court Orders Insurer To Pay Death Benefits The plaintiff claimed that he was entitled to $50,000 in benefits under a life insurance policy issued to his wife. In the court s view, the application question as to whether or not the plaintiff s wife suffered from heart trouble was ambiguous because the term was not defined, and the answer could not be used to deny benefits or to rescind the policy. [Brondon v. The Prudential Ins. Co. of Amer., No. 09 CV 6166T (W.D.N.Y. Nov. 9, 2010 New York Insurance Coverage Law Summary is published by This publication is purely informational and not intended to serve as legal advice. Your feedback is welcomed. Rivkin Radler LLP 926 RXR Plaza, Uniondale NY Rivkin Radler LLP. All Rights Reserved. This publication is provided for informational purposes only and is not intended to serve as legal advice. For more information, please contact Alan Eagle, Esq. at or [email protected]. Your comments are welcomed. Naturally, the particular facts and circumstances of each claim will determine the impact of the cases discussed in this Summary. 11