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Insurance Coverage Newsletter June 2014

Late Notice - Statutory Waiver
Policyholder's § 3420(d) Waiver Rebuttal to Insurer's Late Notice Defense is Limited to Bodily Injury Claims Arising in New York State; Inapplicable in Environmental Property Damage Dispute
KeySpan Gas E. Corp. v. Munich Reins. Am., Inc., 2014 N.Y. LEXIS 1319 (N.Y. June 10, 2014)
The New York Court of Appeals ruled that an appellate court wrongly applied the strict timeliness standard from Insurance Law § 3420(d)(2) in considering whether insurer waived its late-notice defense in an environmental property damage coverage action.
The insured, the former owner and operator of multiple gas plant facilities, brought the following action against several excess insurers seeking a declaration that these insurers owed a duty to defend and indemnify the insured for liabilities associated with the investigation and remediation of the environmental damage at its facilities.  In later 1994, the insured first notified the excess insurers of "environmental concerns" at the facilities - -though no regulatory suit had been filed nor investigation commenced - - and requested the insurers acknowledge its indemnity obligation for liabilities the insured may incur.  In response, the insurers generally reserved all rights, including its right to disclaim based on late notice, and sought documentation showing exhaustion of underlying policy limits.  Shortly thereafter, in early 1995, the New York State Department of Environmental Conservation commenced a formal investigation.
Declaratory Judgment - Fee Shifting
Court Rules Insurer Must Reimburse Policyholder's Counsel Fees Incurred in Connection with Declaratory Judgment Counterclaim
American Home Assur. Co. v Port Auth. of N.Y. & N.J., 2014 N.Y. Misc. LEXIS 2540 (N.Y. Sup. Ct. June 4, 2014)
A New York trial court applied the Mighty Midgets fee-shifting rule to a policyholder which successfully prevailed on a counterclaim in response to an insurer's affirmative declaratory judgment action, requiring the insurer to reimburse the policyholder's reasonable attorneys' fees incurred in defending against the insurer's lawsuit and in prosecuting its "mirror image" counterclaim.
An insurer initiated a declaratory judgment against its insured seeking a ruling regarding its obligations under a policy for underlying asbestos claims arising out of the construction of the original World Trade Center.  Specifically, the insurer argued it had paid its full policy limits and sought a declaration it had no further obligation to defend or indemnify its insured for any pending asbestos claim.  The insured answered and asserted four claims, one of which, was a "mirror-image declaration to the one sought by [the insurer], i.e. that [the insurer] 'is obligated to provide the [insured] with insurance coverage for the WTC Asbestos Claims pursuant to the terms of the Policy and applicable law.'"
Claims Made - Late Notice 
Notice Requirement in Claims Made Policy Strictly Enforced; Six Months' Late Notice Voids Coverage
Templo Fuente De Vida Corp. v. National Union Fire Ins. Co., 2014 N.J. Super. Unpub. LEXIS 1303 (App. Div. June 6, 2014)
The New Jersey Appellate Division strictly enforced the policy condition of a claims-made insurance policy that required the policyholder to notify the insurer of a claim "as soon as practicable" and ruled that the question of whether the insurer was prejudiced by virtue of late notice is irrelevant when considering the notice condition in a claims-made policy.
The insured failed to provide its claims-made insurer with notice "as soon as practicable" when six months elapsed between the date on which the insured was served with an underlying complaint to the date on which the insured notified the insurer of the claim. That finding alone vitiated coverage, as the "appreciable prejudice" prong of late notice analysis in New Jersey applies to occurrence policies but not claims-made ones.
Commercial Auto - Loading and Unloading Coverage
Commercial Auto Policy Extends "Loading and Unloading" Coverage Only Where Negligence Directly Results from Policyholder's Use of the Insured Auto; Not to Claims Couched in Premises Liability   
Burlington Coat Factory of N.J., L.L.C. v. Jay Dee Trucking, 2014 N.J. Super. Unpub. LEXIS 1252 (App. Div. June 2, 2014)
The New Jersey Appellate Division clarified the scope of "loading and unloading" coverage prescribed in a commercial auto policy is limited to circumstances where the insured's alleged negligence stems from loading and unloading of the insured truck or vehicle, and declined to extend coverage to claims sounding in premises liability.
In this commercial auto coverage dispute, the underlying plaintiff sued a premises owner after slipping on a piece of plywood which bridged the gap between a delivery truck and a loading dock.   In turn, the premises owner sued the insurer of the delivery truck seeking "loading and unloading" coverage under a commercial auto policy covering the delivery truck. The Appellate Division rejected the premises owner's demand for loading and unloading coverage, because the alleged negligence resulted from a condition of the premises, as opposed to the actual unloading of the truck.
Occurrence - Prior Acts Endorsement
No Coverage for Philandering Priest Under Prior Acts Counseling Endorsement
Drew v. Church Mut. Ins. Co., 2014 U.S. Dist. LEXIS 73562 (D.N.J. May 29, 2014)
A priest counseled a man in his parish to get divorced. The priest neglected to tell the parishioner that he was having an affair with the man's wife. The priest's insurer was found to have no coverage responsibility in relation to the eventual settlement pursuant to the "Prior Acts" endorsement in the policy.
A priest had sexual relations with a married parishioner in early 2009. Soon after, he counseled the woman's husband to acquiesce to her request for a divorce. The husband learned of the affair and filed suit against the priest, alleging a breach of fiduciary duty and negligent infliction of emotional distress. The priest filed a declaratory judgment action against his insurer after the latter refused to provide defense or indemnification. The underlying parties subsequently settled the suit, and the priest assigned his claim for indemnification under the policy to the husband. 


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