New York Insurance Law Update

No Additional Insured Coverage For School District Under Named Insured’s Policy Where Named Insured Did Not Cause Its Employee’s Injury, 4th Department Rules

An employee of a company that contracted to provide janitorial services to a school district was allegedly injured when she slipped on snow or ice in the school parking lot. The injured worker sued the district, which filed a third-party action against the worker’s employer. The district sought additional insured coverage under the employer’s policy. The Appellate Division, Fourth Department, held that the employer’s insurer did not have a duty to defend or to indemnify the district as an additional insured because the employee’s injury was not proximately caused, in whole or in part, by the named insured/employer’s conduct. The court reasoned that the employer was not responsible for clearing snow and ice from the parking lot and if the contractor told its employee what door to use to exit the school, the instructions “merely furnished the occasion for the injury” but did not cause it. [Pioneer Central Sch. Dist. v. Preferred Mut. Ins. Co., 2018 N.Y. Slip Op. 06682 (4th Dep’t Oct. 5, 2018).]

Court Rejects Insured’s Bad Faith Claim Seeking Consequential Damages

The insured’s manufacturing plant was destroyed in a fire. Its insurers asked a New York trial court to declare that coverage for the insured’s business interruption loss was limited to $15.1 million. The insured counterclaimed for breach of the covenant of good faith and fair dealing, and sought actual and consequential damages including attorneys’ fees. The court ruled that the insured was not entitled to recover consequential damages or attorneys’ fees. The court noted that the insurers paid the insured’s business interruption claims up to the policy limits, and that the valuation of the insured’s property damage claim was submitted to an appraisal proceeding. The court found it was “fatal” to the insured’s claim for extra-contractual consequential damages that the insured alleged only conclusory facts that the insurers failed to investigate its claims honestly and pay promptly. [Certain Underwriters at Lloyd’s, London v. Bioenergy Dev. Group LLC, 2018 N.Y. Slip Op. 32704(U) (Sup. Ct. N.Y. Co. Oct. 17, 2018).]

Second Circuit Vacates Decision Awarding Summary Judgment To Insurer In Superstorm Sandy Case

After the insured’s business was damaged by storm surges caused by Superstorm Sandy, it made a claim under its business property policy. The insurer denied most of the claimed amount, reasoning that storm surge damage was excluded by the policy’s flood exclusion. The United States District Court for the Eastern District of New York granted summary judgment to the insurer, and the insured appealed, contending that “windstorm” was a covered peril under the policy and that the anti-concurrent causation (“ACC”) clause in the policy’s windstorm endorsement encompassed losses caused by storm surge, a wind-driven peril. The United States Court of Appeals for the Second Circuit vacated the district court’s decision and remanded the case to the district court to assess whether the ACC clause conflicted with or otherwise created an ambiguity vis-à-vis the policy’s flood exclusion. The Second Circuit stated that, in making this determination, the district court should “be mindful of well-established precedents” requiring exclusions to be set out in “clear and unmistakable language” and to be accorded a “strict and narrow construction.” [Madelaine Chocolate Novelties, Inc. v. Great Northern Ins. Co., No. 17-3396-cv (2d Cir. Oct. 23, 2018).]

Policy Did Not Cover Fire Damage Where Insured Breached Concealment Or Fraud And Cooperation Conditions

After a fire damaged a two-unit residence in Lancaster, New York, the insured sought coverage for the damage from his insurer. The insurer moved for summary judgment, arguing that the insured breached the policy’s Concealment or Fraud and Cooperation conditions by misrepresenting his ownership and financial interest in the property. The court granted the motion, reasoning that the insured misrepresented material facts regarding the deed and mortgage in connection with his claimed loss with the intent to defraud his insurer. [D’Andrea v. Encompass Ins. Co. of Am., No. 15-CV-467-MJR (W.D.N.Y. Aug. 28, 2018).]