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New York Crane & Equipment v. Zurich American Insurance Co., Index No: 603218/09 (J. Feinman, 11/11/11).
In a recent decision by Judge Paul G. Feinman, New York Supreme Court, this writer recently obtained a declaratory judgment that the owner of a tower crane that collapsed in 2008, was entitled to $11 million of insurance coverage from the insurance carrier of the crane lessee/operator with respect to the various wrongful death, personal injury and property damage claims.
Zurich American Insurance Co. (“Zurich”), the carrier for the crane lessee Sorbara Construction (“Sorbara”), disclaimed coverage on the grounds that the additional insured coverage for NY Crane only existed to the extent that the accident occurred as a result of Sorbara’s work for NY Crane. Zurich argued that Sorbara was operating the crane for the general contractor, not NY Crane and thus, there was no coverage for NY Crane. Zurich relied on a 2011 First Department decision, Admiral v. East 51st Street, which involved an identical situation involving another Manhattan crane collapse in 2008. Notwithstanding, this decision appeared to be exactly on point, I was able to distinguish it on the grounds that the “working for” requirement in the Zurich endorsement only applied where the accident arose out of the work of an entity working for the named insured. Here, because Sorbara itself was operating the crane, the “working for” condition was inapplicable. The argument involved a comparative analysis of the Zurich additional insured endorsement and the Admiral endorsement and turned on the precise punctuation and indentation in the Zurich endorsement.
The Court also granted NY Crane’s motion to strike Zurich’s attempted reservation of rights based on the expected/intended acts exclusion that was set forth as an affirmative defense in an amended answer served after the District Attorney secured an indictment based on the collapse. I argued that the amended answer was procedurally defective since it was served without leave of court. I also argued that the assertion of the exclusion was untimely as a matter of law based on Insurance Law Section 3420(d).
Finally, the court agreed that the $11 million of Zurich’s excess coverage would contribute on a pro-rata basis with NY Crane’s own excess coverage even though the lease only required the lessee to provide $5 million in coverage.
Unfortunately, the court would not declare that NY Crane was entitled to be indemnified under the Zurich policy, holding this was an issue that required resolution by the trier of fact. The court found it was pre-mature to determine that the accident occurred, in part, due to the acts or omissions of Sorbara, notwithstanding that Sorbara was operating the crane at the time of the incident. I anticipate the the matter will go up on appeal and if so, NY Crane may cross appeal this finding.
Showing posts with label "additional insured coverage". Show all posts
Showing posts with label "additional insured coverage". Show all posts
Tuesday, November 22, 2011
Tuesday, June 1, 2010
Third-Party Coverage Through Supplementary Payments Provision in CGL Policy?
Hargob Realty Associates, Inc. v. Fireman's Fund Ins. Co.--- N.Y.S.2d ----, 2010 WL 1912249
N.Y.A.D. 2 Dept.,2010.
In this recent case, the Second Department reviewed some well worn concepts of insurance coverage law, but with a creative wrinkle thrown in. Here, Hargob Realty entered into a construction contract with a demolition contractor pursuant to a one-page proposal that contained a hold harmless agreement.
The defendant issued a CGL policy to the demolition contractor with an additional insured endorsement providing coverage to “any entity the Named Insured is required in a written contract to name as an insured….”
Plaintiff brought an action against Fireman’s seeking additional insured coverage based on the one page proposal along with a certificate of insurance provided by the demolition contractor. The Second Department hewing closely to the wording of the policy rejected plaintiff’s claim noting that the hold harmless agreement did not contain any requirement that plaintiff be named as an additional insured. With respect to the certificate of insurance, the Court noted it was “insufficient to alter the language of the policy itself, especially since the certificate recited that it was for informational purposes only, that it conferred no rights upon the holder, and that it did not amend, alter, or extend the coverage afforded by the policy ( see School Constr. Consultants, Inc. v. ARA Plumbing & Heating Corp., 63 AD3d 1029; Home Depot U.S.A., Inc. v. National Fire & Mar. Ins. Co., 55 AD3d 671, 673; Metropolitan Heat & Power Co., Inc. v. AIG Claims Servs., Inc., 47 AD3d 621).
The wrinkle in this case was plaintiff’s argument that the supplementary payments provision of the policy, which obligates the defendant insurer to defend an indemnitee of the named insured when certain specified conditions are met, provided it with liability coverage. The Second Department rejected this contention, finding that the “supplementary payments provision did not demonstrate an intent by the defendant insurer to afford the plaintiff coverage solely on the basis that it is an indemnitee of the named insured, in the absence of the plaintiff's addition as “an insured” under Section II of the subject policy pursuant to the additional insured endorsement ( see Stainless, Inc. v. Employers Fire Ins. Co., 69 A.D.2d at 33). Liability coverage under the policy is afforded by Section I, not the supplementary payments provision.”
Thus, the Court found that plaintiff was not entitled to liability coverage under the subject policy pursuant to the supplementary payments provision.
N.Y.A.D. 2 Dept.,2010.
In this recent case, the Second Department reviewed some well worn concepts of insurance coverage law, but with a creative wrinkle thrown in. Here, Hargob Realty entered into a construction contract with a demolition contractor pursuant to a one-page proposal that contained a hold harmless agreement.
The defendant issued a CGL policy to the demolition contractor with an additional insured endorsement providing coverage to “any entity the Named Insured is required in a written contract to name as an insured….”
Plaintiff brought an action against Fireman’s seeking additional insured coverage based on the one page proposal along with a certificate of insurance provided by the demolition contractor. The Second Department hewing closely to the wording of the policy rejected plaintiff’s claim noting that the hold harmless agreement did not contain any requirement that plaintiff be named as an additional insured. With respect to the certificate of insurance, the Court noted it was “insufficient to alter the language of the policy itself, especially since the certificate recited that it was for informational purposes only, that it conferred no rights upon the holder, and that it did not amend, alter, or extend the coverage afforded by the policy ( see School Constr. Consultants, Inc. v. ARA Plumbing & Heating Corp., 63 AD3d 1029; Home Depot U.S.A., Inc. v. National Fire & Mar. Ins. Co., 55 AD3d 671, 673; Metropolitan Heat & Power Co., Inc. v. AIG Claims Servs., Inc., 47 AD3d 621).
The wrinkle in this case was plaintiff’s argument that the supplementary payments provision of the policy, which obligates the defendant insurer to defend an indemnitee of the named insured when certain specified conditions are met, provided it with liability coverage. The Second Department rejected this contention, finding that the “supplementary payments provision did not demonstrate an intent by the defendant insurer to afford the plaintiff coverage solely on the basis that it is an indemnitee of the named insured, in the absence of the plaintiff's addition as “an insured” under Section II of the subject policy pursuant to the additional insured endorsement ( see Stainless, Inc. v. Employers Fire Ins. Co., 69 A.D.2d at 33). Liability coverage under the policy is afforded by Section I, not the supplementary payments provision.”
Thus, the Court found that plaintiff was not entitled to liability coverage under the subject policy pursuant to the supplementary payments provision.
Monday, December 21, 2009
Where An Owner is an Additional Insured on Multiple Policies Is One Excess to the Other?
William Floyd School Dist. v. Maxner
--- N.Y.S.2d ----, 2009 WL 4852416
N.Y.A.D. 2 Dept., 2009.
This Second Department case involves a interesting question of priority of coverage as between two policies which both insured a school district as an additional insured.
The school district had contracted with a general contractor (“GC”) to build a new middle school. The contract required the GC to provide the school district with primary insurance coverage. The GC had a policy with QBE Insurance Corp. (hereinafter QBE), and provided the school district with a certificate of liability insurance listing it as an additional insured on the QBE policy. The GC subcontracted with a sub-contractor ("Sub") to supply kitchen equipment, which required the Sub to provide the GC and the school district with insurance. The Sub held a policy with Royal Insurance Company of America, (hereinafter Royal)which contained an additional insured endorsement.
An employee on the job was injured and brought suit against the school district and the GC. The school district and their insurer, Transportation Insurance Company commenced a DJ action, seeking a judgment declaring that the school district was an additional insured under the GC’s policy with QBE. The GC and QBE then commenced a third-party action against Royal, seeking a judgment declaring that the school district and GC were additional insureds under the sub’s policy with Royal, and that Royal’s policy was primary to the QBE policy.
After motions, the Supreme Court granted the school district’s motion declaring that QBE and Royal were co-insurers of the school district. On appeal the Second Department reversed finding that the QBE policy was excess to the Royal policy.
After a discussion confirming the status of the school district and the GC as additional insureds on the Royal policy pursuant to the terms of the sub-contract, the Court addressed the issue of priority between the policies.
The Royal policy provided:
“When an additional insured is added under this provision, and the written contract, written agreement or written permit requires the insurance to be primary and noncontributory, then this insurance is primary except when the Excess Provision under condition 4. Other Insurance in Section IV Commercial Liability Conditions applies. If this insurance is primary our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the Method of Sharing provision under condition 4.”
The Court found Royal’s coverage to be primary pursuant to the terms of the above provision and the subcontract which required the additional insured coverage be primary.
The QBE policy issued to Aurora provided:
“4. Other insurance
If other valid and collectible insurance is available to the insured for a loss we cover ... our obligations are limited as follows: ...
“ b. Excess Insurance
This insurance is excess over: ...
“(2) Any other insurance, whether primary, excess, contingent or any other basis that is valid and collectible insurance available to you as an additional insured under a policy issued to:
(a) A contractor performing work for you.”
While it was clear that this provision made the QBE policy excess with respect to the GC, it was not altogether clear whether this provision was applicable to an additional insured, such as the school district. Royal and the school district argued that the other insurance provision did not apply because the additional insured endorsement by its own terms, provided that it was primary, not excess coverage.
While not addressed by the Court, there were other more substantial arguments which were presumably made by Royal and the school district. They also presumably argued that the term “you” in the “other insurance” provision, refers to the named insured. The term "your work" refers to the work of the named insured, not the additional insured. Further, Royal and the school district had on their side the Court of Appeals’ decision General Motors Acceptance Corp. v. Nationwide Ins. Co., 4 NY3d 451 (2005). In General Motors, the Court of Appeals declined to find that one primary policy excess over another, in part because both insurers “could reasonably have expected to share the expense of the defense.” 4 NY3d at 457. Further, as pointed out by this author in First Department Decisions in Conflict Over ‘Other Insurance’ Provisions, NYLJ, July 13, 2009, p. 4 col. 1, the Court of Appeals in General Motors, commented that the limiting language from the “other insurance” provision was directed at the obligation to contribute to a settlement or judgment, not the duty to defend. Thus, a convincing multi-faceted argument could have been presented to the Court for the proposition that the other insurance provision should not apply to additional insureds. 4 NY3d at 457.
The Second Department however, rejected this contention, citing to the well-worn boiler-plate that an additional insured “enjoy[s] the same protection as the named insured.” (Pecker Iron Works of N.Y. v. Traveler's Ins. Co., 99 N.Y.2d at 393). The Court rightly held that the language in the additional insured endorsement providing for primary coverage needed to be read together with the “other insurance” provision. The Court concluded that “since the school district…and [GC] are additional insureds under the Royal policy issued to a subcontractor, the QBE policy provides them with coverage excess to that provided to them under the Royal policy.
The Court however, neither addressed the fact that the other insurance provision appears to be specifically directed at the named insured, nor did it address the Court of Appeals’ decision in General Motors. It is noteworthy, that now both the First and Second Departments have ignored the Courts of Appeals’ statement in General Motors that the "other insurance" provision does not apply to the obligation to defend -- the subject case, William Floyd, v. Maxner, as well as the recent SportRock Intern., Inc. v. American Cas. Co., 65 A.D.3d 12, 878 N.Y.S.2d 339 (1st Dep’t 2009) and Fieldston Prop. Owners, Assn., Inc. v. Hermitage Ins. Co., Inc., 873 NYS2d 607 (1st Dep’t 2009).
--- N.Y.S.2d ----, 2009 WL 4852416
N.Y.A.D. 2 Dept., 2009.
This Second Department case involves a interesting question of priority of coverage as between two policies which both insured a school district as an additional insured.
The school district had contracted with a general contractor (“GC”) to build a new middle school. The contract required the GC to provide the school district with primary insurance coverage. The GC had a policy with QBE Insurance Corp. (hereinafter QBE), and provided the school district with a certificate of liability insurance listing it as an additional insured on the QBE policy. The GC subcontracted with a sub-contractor ("Sub") to supply kitchen equipment, which required the Sub to provide the GC and the school district with insurance. The Sub held a policy with Royal Insurance Company of America, (hereinafter Royal)which contained an additional insured endorsement.
An employee on the job was injured and brought suit against the school district and the GC. The school district and their insurer, Transportation Insurance Company commenced a DJ action, seeking a judgment declaring that the school district was an additional insured under the GC’s policy with QBE. The GC and QBE then commenced a third-party action against Royal, seeking a judgment declaring that the school district and GC were additional insureds under the sub’s policy with Royal, and that Royal’s policy was primary to the QBE policy.
After motions, the Supreme Court granted the school district’s motion declaring that QBE and Royal were co-insurers of the school district. On appeal the Second Department reversed finding that the QBE policy was excess to the Royal policy.
After a discussion confirming the status of the school district and the GC as additional insureds on the Royal policy pursuant to the terms of the sub-contract, the Court addressed the issue of priority between the policies.
The Royal policy provided:
“When an additional insured is added under this provision, and the written contract, written agreement or written permit requires the insurance to be primary and noncontributory, then this insurance is primary except when the Excess Provision under condition 4. Other Insurance in Section IV Commercial Liability Conditions applies. If this insurance is primary our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the Method of Sharing provision under condition 4.”
The Court found Royal’s coverage to be primary pursuant to the terms of the above provision and the subcontract which required the additional insured coverage be primary.
The QBE policy issued to Aurora provided:
“4. Other insurance
If other valid and collectible insurance is available to the insured for a loss we cover ... our obligations are limited as follows: ...
“ b. Excess Insurance
This insurance is excess over: ...
“(2) Any other insurance, whether primary, excess, contingent or any other basis that is valid and collectible insurance available to you as an additional insured under a policy issued to:
(a) A contractor performing work for you.”
While it was clear that this provision made the QBE policy excess with respect to the GC, it was not altogether clear whether this provision was applicable to an additional insured, such as the school district. Royal and the school district argued that the other insurance provision did not apply because the additional insured endorsement by its own terms, provided that it was primary, not excess coverage.
While not addressed by the Court, there were other more substantial arguments which were presumably made by Royal and the school district. They also presumably argued that the term “you” in the “other insurance” provision, refers to the named insured. The term "your work" refers to the work of the named insured, not the additional insured. Further, Royal and the school district had on their side the Court of Appeals’ decision General Motors Acceptance Corp. v. Nationwide Ins. Co., 4 NY3d 451 (2005). In General Motors, the Court of Appeals declined to find that one primary policy excess over another, in part because both insurers “could reasonably have expected to share the expense of the defense.” 4 NY3d at 457. Further, as pointed out by this author in First Department Decisions in Conflict Over ‘Other Insurance’ Provisions, NYLJ, July 13, 2009, p. 4 col. 1, the Court of Appeals in General Motors, commented that the limiting language from the “other insurance” provision was directed at the obligation to contribute to a settlement or judgment, not the duty to defend. Thus, a convincing multi-faceted argument could have been presented to the Court for the proposition that the other insurance provision should not apply to additional insureds. 4 NY3d at 457.
The Second Department however, rejected this contention, citing to the well-worn boiler-plate that an additional insured “enjoy[s] the same protection as the named insured.” (Pecker Iron Works of N.Y. v. Traveler's Ins. Co., 99 N.Y.2d at 393). The Court rightly held that the language in the additional insured endorsement providing for primary coverage needed to be read together with the “other insurance” provision. The Court concluded that “since the school district…and [GC] are additional insureds under the Royal policy issued to a subcontractor, the QBE policy provides them with coverage excess to that provided to them under the Royal policy.
The Court however, neither addressed the fact that the other insurance provision appears to be specifically directed at the named insured, nor did it address the Court of Appeals’ decision in General Motors. It is noteworthy, that now both the First and Second Departments have ignored the Courts of Appeals’ statement in General Motors that the "other insurance" provision does not apply to the obligation to defend -- the subject case, William Floyd, v. Maxner, as well as the recent SportRock Intern., Inc. v. American Cas. Co., 65 A.D.3d 12, 878 N.Y.S.2d 339 (1st Dep’t 2009) and Fieldston Prop. Owners, Assn., Inc. v. Hermitage Ins. Co., Inc., 873 NYS2d 607 (1st Dep’t 2009).
Thursday, August 20, 2009
Erie Supreme Court Fumbles Coverage Decision - Reversal Seemingly Imminent
McCabe v. St. Paul Fire and Marine Ins. Co.
--- N.Y.S.2d ----, 2009 WL 2516860
(N.Y.Sup., August 19, 2009).
Supreme Court, Erie County, New York.
This Erie County Supreme Court case provides an interesting discussion on the applicability of Insurance Law 3420(a) and 3420(d)to a malpractice claims-made policy, but, after laboring to break into the open field, the court fumbles at the goal line, setting itself up for a reversal by the Fourth Department.
The case arose out of a fire that destroyed the plaintiffs’ home. They retained attorney David E. Fretz (“Fretz”) to handle their claim under their homeowners policy. Due to severe depression Fretz allowed the plaintiffs’ claim to lapse. Plaintiff wrote Fretz a letter in January 2007 complaining of his failure to return calls, noting the closure of their case due to his negligence. The letter stated that plaintiffs intended to notify the Attorney Grievance Committee and that “[w]ith or without you we are going forward”. An issue in the case was whether this constituted a "claim" within the policy period.
Thereafter in March 2007 plaintiffs commenced a legal malpractice action against Fretz, after their attorney made several unsuccessful attempts to communicate with Fretz or convince him to provide notice to his carrier or provide his carrier’s contact information. Fretz also failed to report the claim to his malpractice carrier St. Paul Fire and Marine Insurance Company (St.Paul), which held a $1 million claims-made policy. This lead to a default judgment against him for $700,000.
Plaintiffs obtained a court order directing Fretz to provide his insurance information. On June 22, 2007, after plaintiffs provided St. Paul with notice of the claim, advising St. Paul that the claim had been first presented to Fretz on January 2, 2007, without enclosing a copy of the January 2, 2007 letter.
St. Paul accepted on faith that the January 2007 letter constituted a "claim" under the policy, and disclaimed on the alternative ground that the claim was not reported to St. Paul within the time period allowed under the policy. Several months after St. Paul had answered the DJ complaint, St. Paul issued a supplemental disclaimer that the January 2007 letter did not constitute a “claim” within the policy period. Although never explained, St. Paul presumably argued the letter did not request monetary damages, but merely asserted the intent to file a grievance complaint.
The court acknowledged that timely notice of the claim was not provided to St. Paul under the terms of the policy, and that the disclaimer would have to be upheld unless plaintiffs could establish that notice was timely pursuant to Insurance Law 3424(a), which provides in pertinent part that insurance policies “insuring against liability for injury to person...[must] contain[]… [a] provision that notice given… on behalf of the injured person…shall be deemed notice to the insurer.
Section 3420(a) also provides that late notice provisions in such policies “shall not invalidate any claim made by…an injured person…if it shall be shown not to have been reasonably possible to give such notice within the prescribed time and that notice was given as soon as was reasonably possible thereafter.”
St. Paul argued that 3420(a) had no applicability to the case since it only applied to policies that covered “injury to persons” and thus did not apply to malpractice actions. Although the St. Paul policy excluded claims “[a]rising out of bodily injury ‘or property damage’, it did cover claims for damages that “arise out of error, omission, negligent act or personal injury', in the rendering or failure to render legal services'….”
St. Paul cited to several cases for the proposition that malpractice insurance policies are not subject to the provisions of Insurance Law § 3420(d). Plaintiffs countered that the scope of § 3420(d) was narrower than § 3420(a), and cited to the Fourth Department's decision in Romano v. St. Paul Fire and Marine Ins. Co. (65 A.D.2d 941 [4th Dept 1978], for the proposition that § 3420(a) applied to malpractice insurance.
The court agreed with plaintiffs recognizing that the policy was subject to § 3420(a), since it clearly covered claims of “personal injury,” notwithstanding its exclusion for claims of “bodily injury.” The court correctly noted that in the parlance of insurance coverage “personal injury”, as opposed to "bodily injury", refers to false arrest or imprisonment, malicious prosecution, wrongful eviction, defamation, slander or invasion of privacy. Thus, even though plaintiff’s claim against Fretz was not for “personal injury”, Fretz’s policy provided such coverage and thus, was subject to § 3420(a).
Having determined § 3420(a) was applicable, the court was able to conclude as a matter of law that the plaintiffs had provided timely notice after a lengthy recitation of the efforts undertaken by plaintiffs to give notice.
All that was left for the court to do was determine whether St. Paul’s purported disclaimer based on the absence of a claim during the policy period was valid. Here, the court’s analysis suffers a complete break down.
Notwithstanding spilling a large amount of ink on the issues up to this point, the court’s pen and analysis suddenly goes silent. While St. Paul presumably argued that it should not have been foreclosed from adding a second basis to disclaim since § 3420(d) does not apply to malpractice insurance policies, the court fails to even allude to such an argument and simply ignores that § 3420(d) was not applicable. In the absence of § 3420(d), the only way St. Paul could have lost the right to supplement its disclaimer was through either a finding of common law waiver (intention relinquishment of a known right) or through estoppel. Neither of these is addressed by the court.
The court also ignored St. Paul’s reliance on the well settled doctrine that waiver cannot create insurance coverage that never existed. This seems pretty straight forward. If there was no claim during the policy period, coverage would never have been triggered in the first instance. If the policy never covered the claim, then waiver could not have created such coverage. Instead of addressing either of these arguments, the court incredibly, merely concluded its decision with the statement “St. Paul's belated attempt to supplement its disclaimer…cannot avail for obvious reasons, both procedural and substantive.”
I would ask that if anyone out in the blogosphere can discern what these “obvious reasons” are, to please leave a comment to enlighten the rest of us.
--- N.Y.S.2d ----, 2009 WL 2516860
(N.Y.Sup., August 19, 2009).
Supreme Court, Erie County, New York.
This Erie County Supreme Court case provides an interesting discussion on the applicability of Insurance Law 3420(a) and 3420(d)to a malpractice claims-made policy, but, after laboring to break into the open field, the court fumbles at the goal line, setting itself up for a reversal by the Fourth Department.
The case arose out of a fire that destroyed the plaintiffs’ home. They retained attorney David E. Fretz (“Fretz”) to handle their claim under their homeowners policy. Due to severe depression Fretz allowed the plaintiffs’ claim to lapse. Plaintiff wrote Fretz a letter in January 2007 complaining of his failure to return calls, noting the closure of their case due to his negligence. The letter stated that plaintiffs intended to notify the Attorney Grievance Committee and that “[w]ith or without you we are going forward”. An issue in the case was whether this constituted a "claim" within the policy period.
Thereafter in March 2007 plaintiffs commenced a legal malpractice action against Fretz, after their attorney made several unsuccessful attempts to communicate with Fretz or convince him to provide notice to his carrier or provide his carrier’s contact information. Fretz also failed to report the claim to his malpractice carrier St. Paul Fire and Marine Insurance Company (St.Paul), which held a $1 million claims-made policy. This lead to a default judgment against him for $700,000.
Plaintiffs obtained a court order directing Fretz to provide his insurance information. On June 22, 2007, after plaintiffs provided St. Paul with notice of the claim, advising St. Paul that the claim had been first presented to Fretz on January 2, 2007, without enclosing a copy of the January 2, 2007 letter.
St. Paul accepted on faith that the January 2007 letter constituted a "claim" under the policy, and disclaimed on the alternative ground that the claim was not reported to St. Paul within the time period allowed under the policy. Several months after St. Paul had answered the DJ complaint, St. Paul issued a supplemental disclaimer that the January 2007 letter did not constitute a “claim” within the policy period. Although never explained, St. Paul presumably argued the letter did not request monetary damages, but merely asserted the intent to file a grievance complaint.
The court acknowledged that timely notice of the claim was not provided to St. Paul under the terms of the policy, and that the disclaimer would have to be upheld unless plaintiffs could establish that notice was timely pursuant to Insurance Law 3424(a), which provides in pertinent part that insurance policies “insuring against liability for injury to person...[must] contain[]… [a] provision that notice given… on behalf of the injured person…shall be deemed notice to the insurer.
Section 3420(a) also provides that late notice provisions in such policies “shall not invalidate any claim made by…an injured person…if it shall be shown not to have been reasonably possible to give such notice within the prescribed time and that notice was given as soon as was reasonably possible thereafter.”
St. Paul argued that 3420(a) had no applicability to the case since it only applied to policies that covered “injury to persons” and thus did not apply to malpractice actions. Although the St. Paul policy excluded claims “[a]rising out of bodily injury ‘or property damage’, it did cover claims for damages that “arise out of error, omission, negligent act or personal injury', in the rendering or failure to render legal services'….”
St. Paul cited to several cases for the proposition that malpractice insurance policies are not subject to the provisions of Insurance Law § 3420(d). Plaintiffs countered that the scope of § 3420(d) was narrower than § 3420(a), and cited to the Fourth Department's decision in Romano v. St. Paul Fire and Marine Ins. Co. (65 A.D.2d 941 [4th Dept 1978], for the proposition that § 3420(a) applied to malpractice insurance.
The court agreed with plaintiffs recognizing that the policy was subject to § 3420(a), since it clearly covered claims of “personal injury,” notwithstanding its exclusion for claims of “bodily injury.” The court correctly noted that in the parlance of insurance coverage “personal injury”, as opposed to "bodily injury", refers to false arrest or imprisonment, malicious prosecution, wrongful eviction, defamation, slander or invasion of privacy. Thus, even though plaintiff’s claim against Fretz was not for “personal injury”, Fretz’s policy provided such coverage and thus, was subject to § 3420(a).
Having determined § 3420(a) was applicable, the court was able to conclude as a matter of law that the plaintiffs had provided timely notice after a lengthy recitation of the efforts undertaken by plaintiffs to give notice.
All that was left for the court to do was determine whether St. Paul’s purported disclaimer based on the absence of a claim during the policy period was valid. Here, the court’s analysis suffers a complete break down.
Notwithstanding spilling a large amount of ink on the issues up to this point, the court’s pen and analysis suddenly goes silent. While St. Paul presumably argued that it should not have been foreclosed from adding a second basis to disclaim since § 3420(d) does not apply to malpractice insurance policies, the court fails to even allude to such an argument and simply ignores that § 3420(d) was not applicable. In the absence of § 3420(d), the only way St. Paul could have lost the right to supplement its disclaimer was through either a finding of common law waiver (intention relinquishment of a known right) or through estoppel. Neither of these is addressed by the court.
The court also ignored St. Paul’s reliance on the well settled doctrine that waiver cannot create insurance coverage that never existed. This seems pretty straight forward. If there was no claim during the policy period, coverage would never have been triggered in the first instance. If the policy never covered the claim, then waiver could not have created such coverage. Instead of addressing either of these arguments, the court incredibly, merely concluded its decision with the statement “St. Paul's belated attempt to supplement its disclaimer…cannot avail for obvious reasons, both procedural and substantive.”
I would ask that if anyone out in the blogosphere can discern what these “obvious reasons” are, to please leave a comment to enlighten the rest of us.
Friday, July 24, 2009
First Department Discusses Scope of Arising Out Of Lanaguage In Additional Insured Endorsement
Regal Const. Corp. v. National Union Fire Ins. Co. of Pittsburgh
--- N.Y.S.2d ----, 2009 WL 2015419
N.Y.A.D. 1 Dept.,2009.
This First Department case nicely illustrated the breadth of the language in additional insured endorsements requiring that the property or bodily injury claim “arise out of” the work of the named insured for the additional insured. In Regal, the plaintiff, an employee of the general contractor (“GC”), slipped on plywood that he claimed was recently painted by an employee of the construction manager (“CM”). The CM sought additional insured coverage from the GC’s carrier, who took over the defense under a reservation of rights, but then instituted a declaratory judgment action seeking to disclaim on the grounds that the injury did not arise out of the work of the GC, since the complaint alleged the CM was negligent. Not surprisingly, the complaint did not allege any negligence against the employer GC.
The First Department held for the CM and its carrier, finding that notwithstanding the specific allegations of the complaint, the accident arose out of the work of the GC. To support its conclusion the Court noted that the GC “had responsibilities that encompassed all of the demolition and construction work to be done.” It noted that the plaintiff had “testified that it would have been [the GC’s] responsibility to paint the floor…if instructed to do so by [the CM].” Therefore, the Court found a causal connection between the injury and the GC’s work as the prime contractor, the risk for which coverage was provided.
The Court distinguished the the Court of Appeals’ decision in Worth Constr. Co., Inc. v. Admiral Ins. Co. (10 NY3d 411 [2008]), relied upon by the dissent, where involved a plaintiff who was injured on a staircase that had been erected by the defendant’s insured. The Court found that the defendant’s policy did not provide additional insured coverage, because the injury was due to the alleged negligence of another contractor who had applied fireproofing to the stairs. The Court held that the staircase was “merely the situs of the accident,” and ruled that there was no connection between the accident itself and [staircase erector’s] work. (id. at 416).
--- N.Y.S.2d ----, 2009 WL 2015419
N.Y.A.D. 1 Dept.,2009.
This First Department case nicely illustrated the breadth of the language in additional insured endorsements requiring that the property or bodily injury claim “arise out of” the work of the named insured for the additional insured. In Regal, the plaintiff, an employee of the general contractor (“GC”), slipped on plywood that he claimed was recently painted by an employee of the construction manager (“CM”). The CM sought additional insured coverage from the GC’s carrier, who took over the defense under a reservation of rights, but then instituted a declaratory judgment action seeking to disclaim on the grounds that the injury did not arise out of the work of the GC, since the complaint alleged the CM was negligent. Not surprisingly, the complaint did not allege any negligence against the employer GC.
The First Department held for the CM and its carrier, finding that notwithstanding the specific allegations of the complaint, the accident arose out of the work of the GC. To support its conclusion the Court noted that the GC “had responsibilities that encompassed all of the demolition and construction work to be done.” It noted that the plaintiff had “testified that it would have been [the GC’s] responsibility to paint the floor…if instructed to do so by [the CM].” Therefore, the Court found a causal connection between the injury and the GC’s work as the prime contractor, the risk for which coverage was provided.
The Court distinguished the the Court of Appeals’ decision in Worth Constr. Co., Inc. v. Admiral Ins. Co. (10 NY3d 411 [2008]), relied upon by the dissent, where involved a plaintiff who was injured on a staircase that had been erected by the defendant’s insured. The Court found that the defendant’s policy did not provide additional insured coverage, because the injury was due to the alleged negligence of another contractor who had applied fireproofing to the stairs. The Court held that the staircase was “merely the situs of the accident,” and ruled that there was no connection between the accident itself and [staircase erector’s] work. (id. at 416).
Friday, May 15, 2009
Demanding Additional Insured Coverage and Insurance Law 3420(d)
JT Magen v. Hartford Fire Ins. Co., --- N.Y.S.2d ----, 2009 WL 1326359 (1st Dept., 2009).
In Jt. Magen, the First Department revisited the issue which it first addressed in Bovis Lend Lease LMB, Inc. v. Royal Surplus Lines Ins. Co. (27 AD3d 84 [2005]), to wit, whether a letter sent from one insurance company to another on behalf of a mutual insured(s)triggers the recipient carrier's duty to disclaim within a reasonable period of time pursuant to New York Insurance Law 3420(d)?
As the reader may be familiar, 3420(d) is a unique provision of New York law that will preclude a carrier from relying upon a policy exclusion if the carrier fails to issue a disclaimer within a reasonable period of time after obtaining sufficient basis to disclaim. While there is no exact period of time, carriers are expected to respond within thirty (30) days or less to avoid problems.
The Court in JT Magen, reminded us that 3420(d) has no application to an insurance carrier's demand to another carrier to defend its own insured or for contribution. See Tops Mkts. v. Maryland Cas., 267 A.D.2d 999, 1000 [1999]; Thomson v. Power Auth of State of New York, 217 A.D.2d 495 [1995]). As a result of this rule, the defendant in JT Magen, the Hartford, claimed that the letter sent by JT Magen's carrier's on its behalf did not trigger 3420(d) since the statute did not apply to demands made by insurance companys. Also, as noted by the dissent, it is well settled that notice given by a third party is not effective to satisfy the notice requirement in an insurance policy.
The First Department rejected the Hartford's argument, citing Bovis supra as well as Bovis Lend Lease LMB Inc. v. Garito Contr., Inc., 38 AD3d 260 [2007], in which it had held that a letter sent by an insurance carrier on behalf of their insured would trigger 3420(d) with respect to the mutual insured's request for coverage.
However, the court also held that with respect to the claims of one insurance carrier against another carrier, 3420(d) would not preclude the recipient from relying on an exclusion it had failed to provide a timely disclaimer with respect to.
In Jt. Magen, the First Department revisited the issue which it first addressed in Bovis Lend Lease LMB, Inc. v. Royal Surplus Lines Ins. Co. (27 AD3d 84 [2005]), to wit, whether a letter sent from one insurance company to another on behalf of a mutual insured(s)triggers the recipient carrier's duty to disclaim within a reasonable period of time pursuant to New York Insurance Law 3420(d)?
As the reader may be familiar, 3420(d) is a unique provision of New York law that will preclude a carrier from relying upon a policy exclusion if the carrier fails to issue a disclaimer within a reasonable period of time after obtaining sufficient basis to disclaim. While there is no exact period of time, carriers are expected to respond within thirty (30) days or less to avoid problems.
The Court in JT Magen, reminded us that 3420(d) has no application to an insurance carrier's demand to another carrier to defend its own insured or for contribution. See Tops Mkts. v. Maryland Cas., 267 A.D.2d 999, 1000 [1999]; Thomson v. Power Auth of State of New York, 217 A.D.2d 495 [1995]). As a result of this rule, the defendant in JT Magen, the Hartford, claimed that the letter sent by JT Magen's carrier's on its behalf did not trigger 3420(d) since the statute did not apply to demands made by insurance companys. Also, as noted by the dissent, it is well settled that notice given by a third party is not effective to satisfy the notice requirement in an insurance policy.
The First Department rejected the Hartford's argument, citing Bovis supra as well as Bovis Lend Lease LMB Inc. v. Garito Contr., Inc., 38 AD3d 260 [2007], in which it had held that a letter sent by an insurance carrier on behalf of their insured would trigger 3420(d) with respect to the mutual insured's request for coverage.
However, the court also held that with respect to the claims of one insurance carrier against another carrier, 3420(d) would not preclude the recipient from relying on an exclusion it had failed to provide a timely disclaimer with respect to.
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