Insurer Not Estopped from Disclaiming Coverage Four Years After the Claim—No Prejudice to Insured and Disclaimer Supported by Policy Exclusion

The Second Department determined summary judgment was properly granted to the insurer, despite the passage of four years between the loss of business income claim and the disclaimer.  The policy excluded coverage for business income loss related to the “enforcement of any ordinance or law regulating the construction, use, or repair of any property.”  Although the initial business interruption was caused by vandals damaging the business premises, the delay in reopening was related to the requirement that the insureds obtain a certificate of occupancy.  The lack of a certificate of occupancy was discovered when the building inspector was alerted to the damage caused by the vandalism and the insureds were told they could not reopen until a certificate of occupancy was issued. The Second Department explained that even an unreasonable delay in disclaiming coverage (four years here) will not invalidate the disclaimer unless the insured had been prejudiced.  No prejudice was demonstrated and the disclaimer was supported by the policy exclusion:

An insurer’s delay in giving notice of disclaimer of coverage, even if unreasonable, will not estop the insurer from disclaiming unless the insured has suffered prejudice from the delay … . Since the record reveals no such prejudice, nor is any such prejudice alleged by the plaintiffs, the Merchants defendants established, prima facie, that the disclaimer was effective … . In opposition, the plaintiffs failed to raise a triable issue of fact.

Moreover, the policy of insurance here clearly and unambiguously excludes coverage for losses caused directly or indirectly by the enforcement of any ordinance or law regulating the construction, use, or repair of any property. This provision excludes coverage for losses, including business income losses, caused by the enforcement of the law and, here, it was the enforcement of the Building Code by the Town’s Building Department which prevented the plaintiff from utilizing the premises to engage in their dental business without a proper certificate of occupancy … . Accordingly, the [insurer] established, prima facie, that [it] properly disclaimed, as excluded under the terms of the policy, the loss of business income claim. In opposition, the plaintiffs failed to raise a triable issue of fact. Ira Stier, DDS, P.C. v Merchants Ins. Group, 2015 NY Slip Op 03128, 2nd Dept 4-15-15