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Insurance Coverage Update November 2013
Duty to Defend - Additional Insured - Extrinsic Evidence
Insurer Owes Additional Insured a Duty to Defend and is Required to Reimburse Additional Insured for Fees Incurred in Defending the Underlying Action after Deposition Testimony Reveals Facts that Trigger Coverage.
UPS v. Lexington Ins. Group, 2013 U.S. Dist. LEXIS 149674 (S.D.N.Y. Oct. 16, 2013)
The Court determines that insurer wrongfully denied coverage to additional insured, insurer owed primary coverage and must reimbursed the additional insured for costs incurred in defending underlying action although four corners of complaint suggest otherwise.
An injured party, who was an employee of an independent contractor, sued the principal  following a car accident that also involved an employee of the principal.  Upon notice of the occurrence, the matter was tendered for defense and indemnification to the insurer of the independent contractor.  Prior to issue being joined, the subject insurer promptly denied coverage on the basis that the accident was the result of the sole negligence of the principal's employee.  The deposition testimony of the injured party revealed that she did not attempt to move out of the way of an oncoming danger.  The principal/purported additional insured then brought this action seeking a declaration that it was owed coverage pursuant to the insured contract provision and the additional insured endorsement of the independent contractor's insurance policy.  
Duty to Defend - Additional Insured
Court Finds Negligence by Additional Insured in an Underlying Action is Not Material to the Application of a Blanket Additional Insured Provision.
Travelers Indemn. Co. v First Mercury Ins. Co., 
2013 N.Y. Misc. LEXIS 4817 (N.Y. Sup. Ct. Oct. 15, 2013)
A New York trial court ruled that the owner and other entities were entitled to additional insured coverage, such finding was not premature, and the insurer's coverage owed to the additional insured was primary.
The owner of a project claimed status as an additional insured in connection with a lawsuit filed by an employee of a subcontractor injured at job site.  The contract between the owner and subcontractor required the subcontractor to procure commercial general liability insurance, including an endorsement naming the owner and other entities as additional insureds, and further required that the coverage obtained would be primary vis-à-vis any other available insurance to the additional insured which would apply as excess.  As a result, the subcontractor obtained a policy containing a blanket additional insured endorsement which provided coverage for "any person or organization (called 'additional insured') to whom you are obligated by valid written contract to provide such coverage, but only with respect to liability for 'bodily injury' or 'property damage' arising solely out of 'your work' on behalf of said additional insured." 
Property Insurance - Acts of "Vandalism."
New York Court of Appeals Clarifies Meaning of "Vandalism" Peril Where Not Directed at Damaged Property.
Georgitsi Realty, LLC v Penn-Star Ins. Co., 2013 N.Y. LEXIS 2857 (N.Y. Oct. 17, 2013)
The New York Court of Appeals ruled that a policyholder seeking coverage under a property insurance policy for acts of "vandalism" (1) need not show malicious damage was directed at the covered property; but (2) the insured must show malice in connection with the acts.
The Court of Appeals accepted two questions from the Court of Appeals for the Second Circuit relating to property insurance covering acts of "vandalism."  In the underlying action, the owner of a residential structure sought coverage for cracks in the walls and foundation of its building, which, according to the homeowner, was the result of excavation performed on the lot next to the building.  The homeowner complained to the Department of Buildings and obtained a temporary restraining order to prevent the contractor from continuing the excavation work but the contractor ignored both orders.  The owner initiated the present suit seeking coverage under a property insurance policy that provided coverage for "'named perils' covering 'direct physical loss or damage . . . caused by or resulting from' any of 14 kinds of events." The court noted "[t]he only peril relevant here is described in the policy as: 'Vandalism, meaning willful and malicious damage to, or destruction of, the described property.'"  
Auto Coverage - Mobile Equipment
Car Crusher Ruled "Mobile Equipment" Not an "Auto" Based on Policy Language.
First Mercury Ins. Co. v. Cholish Salvage, 2013 N.J. Super. Unpub. LEXIS 2717 (App. Div. Nov. 12, 2013)
In deciding whether a car crusher used to break used cars into scrap metal fits within the definition of an "auto" or "mobile equipment" in an auto policy, the Court concluded based on the policy language that it constitutes "mobile equipment," primarily because the crusher lacks a motor and is not legally required to be registered or insured.
The policyholder engaged in the business of breaking down used cars for resale as scrap metal. The liability that is the subject of this case arose when a third party trucking company failed to fully lower the crusher's hydraulic plate before transporting it. This failure rendered the crusher too tall to fit under an overpass on the Garden State Parkway. The resultant collision between crusher and overpass caused serious damage to the overpass, another car, and the roadway. The New Jersey Turnpike Authority filed a lawsuit seeking $5.6 million in damages from several defendants, including the policyholder. 
Auto Coverage - Cancellation/Statutory Minimum
Statutory Minimum Automobile Coverage Limits Apply Despite Voided Policy.
Citizens United Reciprocal Exch. v. Perez, 75 A.3d 1233 (App. Div. 2013)
An insurer that properly voided a policy of insurance based on the policyholder's fraud in acquiring the policy was nevertheless required to provide the minimum statutory coverage to an innocent third party injured in a traffic accident. The Court reasoned that innocent drivers have the right to expect that other drivers have minimum insurance coverage. 
The insured's live-in boyfriend was involved in a traffic accident with a third party. The third party then filed a personal injury claim against the insured's auto policy which included a $10,000 limit of liability. The insurer denied coverage in relation to the claim and retroactively voided the policy because the policyholder had not informed the insurer that her boyfriend -- who had a very poor driving record -- was a household member. The insurer then filed a declaratory action seeking an order that the policy was void abinitio as a result of the policyholder's material misrepresentation, that the policyholder and her boyfriend owed the insurer compensatory damages, and that the policy provided no liability coverage.


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