New York Insurance Coverage Law Update

Auto Exclusion Bars Coverage For Injuries Resulting From Employer’s Auto Driven By Employee During Crime Spree

After an employee who used a company car during a crime spree injured a police officer, a jury found that the company was negligent in hiring the employee and entrusting a vehicle to him. The company sought coverage for the damages awarded to the officer under its commercial general liability policy, but the court ruled that coverage was barred by the policy’s auto exclusion. The court rejected the argument that “negligent hiring” was a “non auto” theory of liability to which the exclusion did not apply, and noted that the exclusion excluded claims resulting from “entrustment” of an automobile. [IBA Molecular North America, Inc. v. St. Paul Fire and Marine Ins. Co., No. 11 Civ. 1862 (S.D.N.Y. Sept. 27, 2012).]

Pro Rata Allocation Ordered For Asbestos Bodily Injury Claims

In a declaratory judgment action for insurance coverage for bodily injury claims resulting from exposure to asbestos, the court decided that there should be pro rata allocation of defense and indemnity costs across all primary, umbrella and excess  general liability policies issued to Corning Inc. from 1962 through 1985, with allocation determined based upon time on the risk. [Mt. McKinley Ins. Co. v. Corning Inc., No. 602454/02 (Sup. Ct. N.Y. Co. Sept. 7, 2012).]

City Covered As Additional Insured For Liability Arising Out Of Contractor’s Ongoing Operations

A pedestrian sued New York City and a City contractor for injuries that allegedly arose out of their negligence in maintaining “traffic and pedestrian control devices” at an intersection. The commercial general liability insurance policy obtained by the contractor covered the City as an additional insured for liability arising out of the contractor’s ongoing operations. The court held that the insurer had a duty to defend the City, rejecting the insurer’s contention that the record established that the contractor’s operations at the intersection had been completed and thus were no longer ongoing at the time of the accident. [City of New York v. Endurance American Ins. Co., 2012 N.Y. Slip Op. 06361 (App. Div. 1st Dep’t Sept. 27, 2012).]

No Coverage Where Named Insured Had Falsely Listed A New York Address On Application But Lived In New Jersey

The named insured and his wife resided in an apartment in Cliffside Park, New Jersey, which address they listed on their tax returns. The court found that the named insured had “fraudulently obtained insurance coverage” by falsely listing a Pearl River, New York house owned by his father as his residence on the insurance application. Accordingly, the court dismissed the insured’s no-fault first-party benefit claim filed against the insurer.  [Cliffside Park Imaging v. Preferred Mut. Ins. Co., 2012 N.Y. Slip Op. 51754(U) (App. Term 1st Dep’t, Sept. 11, 2012).]

“Prior Pending Exclusion” In Professional Liability Policy Precludes Coverage

The Appellate Division, First Department, held that a professional liability policy’s “prior pending” exclusion applied to a letter to the insured complaining that the insured had caused delays and cost overruns by failing to meet its responsibilities in implementing a hotel’s design, and demanding $18,294,500 in damages. Because the demand letter was “pending” when the policy incepted, the exclusion precluded coverage for the litigation that followed the letter. [Executive Risk Indem., Inc. v. Starwood Hotels & Resorts Worldwide, Inc., 2012 N.Y. Slip Op. 06183 (App. Div. 1st Dep’t Sept. 18, 2012).]

No Coverage Under Pollution Policy Where Pollutant Had Not Escaped Confinement

A petrochemical company claimed that it had purchased contaminated fuel oil that it sold and distributed. The company sought coverage under a Pollution and Remediation Legal Liability Insurance Policy. The court rejected the company’s claim, finding that “the only plausible reading” of the policy was that it provided coverage if a pollutant was discharged into land, structures, the atmosphere, or water, but not when, as here, the pollutant remained contained in vessels where it was intended to be kept. [Colonial Oil Industries, Inc. v. Indian Harbor Ins. Co., No. 11 Civ. 5018 (DAB) (S.D.N.Y. Sept. 10, 2012).]