The Second Department noted that the loss at issue, the collapse of a retaining wall caused by run-off water, was the subject of a policy exclusion, an issue about which there was no dispute. Plaintiff argued the insurer’s disclaimer letter was ineffective because it did not identify the precise ground upon which the disclaimer was ultimately based. The Second Department, applying common law waiver and estoppel principles, rejected the argument because the failure to disclaim based upon an exclusion will not give rise to coverage which does not exist:
… [T]he defendants’ failure to specifically identify the flood and surface water exclusions in its disclaimer letter must be considered under common-law waiver and/or estoppel principles … .
Waiver, which is a voluntary and intentional relinquishment of a known right, does not apply here because “the failure to disclaim based on an exclusion will not give rise to coverage that does not exist” … . Under the principles of estoppel, an insurer, though in fact not obligated to provide coverage, may be precluded from denying coverage upon proof that the insurer “by its conduct, otherwise lulled [the insured] into sleeping on its rights under the insurance contract” … . Estoppel requires proof that the insured has suffered prejudice by virtue of the insurer’s conduct … . Because the plaintiff failed to make the requisite showing of prejudice, there was no basis to estop the defendants from relying on policy exclusions not detailed in their letter disclaiming coverage. Provencal, LLC v Tower Ins. Co. of N.Y., 2016 NY Slip Op 02644, 2nd Dept 4-6-16
INSURANCE LAW (FAILURE TO DISCLAIM BASED UPON AN EXCLUSION DOES NOT GIVE RISE TO COVERAGE WHICH DOES NOT EXIST)/DISCLAIMER (INSURANCE LAW, FAILURE TO DISCLAIM BASED UPON AN EXCLUSION DOES NOT GIVE RISE TO COVERAGE WHICH DOES NOT EXIST)EXCLUSIONS FROM INSURANCE COVERAGE (FAILURE TO DISCLAIM BASED UPON AN EXCLUSION DOES NOT GIVE RISE TO COVERAGE WHICH DOES NOT EXIST)