Remediation of Collapsed Retaining Wall Excluded by Owned Property Exclusion

Castle Village Owners Corp. v. Greater New York Mut. Ins. Co.--- N.Y.S.2d ----, 2009 WL 1186692N.Y.A.D. 1 Dept.,2009.

This recent insurance opinion arose out of the collaspse of the retaining wall adjacent to the West Side Highway in New York, which caused a large quantity of debris, including dirt, benches, boulders and other objects, to fall onto an adjacent sidewalk and roadway.

The City of New York responded by issuing an emergency order to the owner of the property, Castle Village, to remediate the condition. The remediation work was eventually performed and a settlement for the cost of the work was reached between the City and Castle Village's primary and excess carrier. The excess carrier, contributed to the settlement, but reserved its right to disclaim coverage for further claims resulting from the incident, based on the "owned property" exclusion in the excess policy, which essentially excluded coverage for:

“property you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another's property;”

After the remediation had stabilized the situation, the City ordered Castle Village to perform permanent repairs to the wall including regrading the remaining portion of the wall and slopes, and stabilizing the surrounding soil. Upon notice of this liability, the defendant excess carrier disclaimed coverage based on the "owned property" exclusion.

Helen Freedman found for Greater New York Mutual and Castle Village appealed to the First Department and argued that since the policy affords coverage for sums the insured is obligated to pay as a result of liability imposed by law, the effect of the City declaration was to render inapplicable the “owned property” exclusion, since the emergency declaration required it to repair the wall.

In an interesting decision, the Court acknowledged that there are "circumstances where an “owned property” exclusion may not be enforceable because of a legal obligation to prevent damage to another's property." In particular, where there is a fuel spill and the insured is ordered to clean it up in order to prevent harm to adjacent land owners. See State of New York v. New York Cent. Mut. Fire Ins. Co. (147 A.D.2d 77 [1989]. The Court noted however, that central to these cases, was the seepage being a condition hazardous to the property of others, and the condition being an ongoing and continuing one.

The Court distinguished these cases from Castle Village, since in this case, "after the initial wall collapse and remedial measures, the hazardous condition was significantly mitigated. The possibility of a future collapse presented the need for permanent ameliorative measures, but, unlike those situations involving an oil spill, an imminent, continuing danger no longer existed."

The Court also found that Greater New York was under no duty to disclaim until the primary policy had been exhausted (see Wilson v. Galicia Contr. & Restoration Corp., 36 AD3d 695, 697 [2007], affd 10 NY3d 827 [2008] ) and found no basis for finding defendant was estopped from disclaiming on the basis of its participation in initial settlement with the city.