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Language of Exclusion from Coverage, Including the Phrase “Arising Out Of” Was Not Ambiguous—Insurer Was Not Obligated to Defend or Indemnify Defendants

The Second Department determined the insurance policy unambiguously excluded coverage for actions stemming from the taking of property (eminent domain) and, therefore, the insurer was not obligated to defend or indemnify the defendants:

The plaintiff is an insurance carrier that insured the Village and its officials for claims arising from public officials’ wrongful acts. However, the relevant insurance policy contained an exclusion for “[a]ny injury or damage arising out of or resulting from a taking that involves or is in any way related to the principles of eminent domain, inverse condemnation . . . or dedication by adverse use or by whatever name used.”  * * *

An insurer’s contractual duty to defend is liberally construed, and is broader than the duty to indemnify … . The duty to defend ” arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the policy'” … . “The duty to defend is not triggered, however, when the only interpretation of the allegations against the insured is that the factual predicate for the claim falls wholly within a policy exclusion” … .

Policy exclusions “are subject to strict construction and must be read narrowly” …, and any ambiguities in the insurance policy are to be construed against the insurer … . However, unambiguous provisions of insurance contracts will be given their “plain and ordinary” meaning … .

In the context of a policy exclusion, the phrase “arising out of” is unambiguous, and is interpreted broadly to mean “originating from, incident to, or having connection with” … . A “but-for” test applies to determine the applicability of an “arising out of” exclusion … . In other words, if the plaintiff in an underlying action or proceeding alleges the existence of facts clearly falling within such an exclusion, and none of the causes of action that he or she asserts could exist but for the existence of the excluded activity or state of affairs, the insurer is under no obligation to defend the action … .

Here, the plaintiff established its prima facie entitlement to judgment as a matter of law by demonstrating that the remaining claims asserted by the … defendants in the underlying federal and state-court matters all arose out of “a taking that involves or is in any way related to the principles of eminent domain, inverse condemnation . . . or dedication,” a situation that is specifically excluded from coverage by the clear and unambiguous language of the policy … . Scottsdale Indem Co v Beckerman, 2014 NY Slip Op 06071, 2nd Dept 9-10-14

 

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