You are here: / Insurance Law
, ,

Material Misrepresentation Justified Rescission of Policy

The Second Department determined that plaintiff’s representation to the insurance carrier that the property was a two-family dwelling, when it actually was a three-family dwelling, was a material misrepresentation justifying rescission of the policy:

“To establish the right to rescind an insurance policy, an insurer must show that its insured made a material misrepresentation of fact when he or she secured the policy” … . “A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented” … . “To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application” … . * * *

…[T]he defendant submitted an affidavit from its underwriting manager and its “Homeowners Selection Rules,” which showed that it would not have issued the same policy if the application had disclosed that the subject premises was a three-family dwelling … . Lema v Tower Ins Co of NY, 2014 NY Slip Op 05162, 2nd Dept 7-9-14

 

In Absence of a “Special Relationship” Insurer Not Liable for Agent’s Negligent Misrepresentation

The Fourth Department determined the insurance carrier was entitled to summary judgment because it did not have a “special relationship” with the insured.  Plaintiff’s insurance had been cancelled for lack of payment.  After a loss, the plaintiff sued the insurer alleged that he had relied on the agent’s representation that his insurance premium had been paid.  Absent a “special relationship” suit can not be premised on such reliance:

We agree with defendant that the court erred in denying its motion for summary judgment dismissing the complaint, the gravamen of which is a claim for negligent misrepresentation. An essential element of such a claim is the “duty to use reasonable care to impart correct information due to a special relationship between the parties” … . A special relationship may arise from “a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on” … . According to plaintiff, he had a special relationship with defendant based on a course of dealing. We conclude that defendant met its burden on the motion, and plaintiff failed to raise an issue of fact concerning the existence of a special relationship … . The interactions between plaintiff and defendant on which plaintiff relies ” would [not] have put [an] objectively reasonable insurance agent[] on notice that [his or her advice] was being sought and specially relied on’ ” … , such that a special relationship was formed based on a course of conduct. Defendant therefore cannot be held liable for negligent misrepresentation based on its agent’s response to an inquiry from plaintiff concerning whether his policy premium had been paid. In view of our determination, we do not consider defendant’s remaining contentions. Majtan v Urbanke Assoc Inc, 2014 NY Slip Op 04631, 4th Dept 6-20-14

 

Breach of Covenant of Good Faith (Settlement) Can Give Rise to Consequential Damages (Loss of Earnings) Even Where Policy Excludes Loss of Earnings with Respect to the Events Covered by the Policy

The Second Department noted that consequential damages resulting from a breach of the covenant of good faith and fair dealing (loss of earnings) may be asserted in the context of the breach of an insurance contract, even where the policy excludes loss of earnings as damages related to the events covered by the policy:

“[C]onsequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting” … .

Here [the insurer] failed to establish, prima facie, that it acted in good faith in recommending that the plaintiff accept a settlement offer, and then discontinuing the payment of defense costs once the plaintiff rejected the offer … . Moreover, although the subject insurance policy contains a provision excluding coverage for “loss of earnings,” this provision plainly only applies to loss of earnings caused by a covered event under the policy, and does not preclude the recovery of consequential damages caused by [the insurer’s] alleged breach of contract … . Mutual Assn Adm’rs Inc v National Union Fire Ins Co of Pittsburgh PA, 2014 NY Slip Op 04470, 2nd Dept 6-18-14

 

Insurer of Contractor for Its (Primarily) Interior Work Was Not Entitled to Summary Judgment (Disclaiming Coverage) in Action Stemming from Building Collapse of Unknown Cause

The First Department, over a dissent, determined the insurer was not entitled to disclaim coverage as a matter of law and therefore was not entitled to summary judgment.  The insured (BCS) did (primarily) interior work (painting, carpentry, etc.) in the renovation of a building which included adding two floors.  There was a partial collapse of the building.  The insurer argued that the collapse could not be attributed to any of the specific (mainly interior-work) activities covered in the policy.  The court determined the lack of certainty about the cause(s) of the collapse precluded summary judgment:

Plaintiff issued a commercial lines insurance policy to BCS. The policy’s declarations page stated BCS’s “Business Description” as “Carpentry-Painting-Drywall-Plastering-Tile-Contractor.” Elsewhere, the work to be covered was separated into five separate “classifications,” namely, “Carpentry-Interior,” Painting-Interior-Structures,” “Dry wall or wallboard install,” “Plastering or stucco work,” and “Tile, Stone-Interior construction.” Plaintiff issued an endorsement to the policy clarifying that “[n]o coverage is provided for any classification code or operation performed by the Named Insured not specifically listed in the Declaration of this policy.” Another endorsement provided that the “policy shall not apply to [claims] arising out of operations performed for any insured by independent contractors or acts or omissions of any insured in connection with his general supervision of such operations.” * * *

Plaintiff would be entitled to summary judgment if it could establish that “there is no possible factual or legal basis upon which [it] may eventually be held obligated to indemnify [BCS] under any policy provision” … . In other words, the record before us would have to establish, as a matter of law, that the underlying claim did not arise out of any work BCS did in the areas of interior carpentry, interior painting, dry wall installation, plastering or stucco work (interior or exterior), or interior tile and stone construction. Plaintiff would have to demonstrate conclusively that all of the work out of which the claim arose was performed by an independent contractor.

This record permits no such conclusions,… . Tower Ins Co of NY v BCS Constr Servs Corp, 2014 NY Slip Op 04420, 1st Dept 6-17-14

 

In Cases Not Involving Death or Bodily Injury Arising from an Accident, Whether a Notice of Disclaimer is Timely Is Governed by Common Law Waiver and Estoppel Principles, Not by the Provisions of Insurance law 3420

The Court of Appeals, in a full-fledged opinion by Judge Abdus-Salaam, determined that the requirement that a disclaimer of coverage be made “as soon as reasonably possible after first learning of the … grounds for disclaimer” did not apply in a case involving coverage for the clean up of environmental contamination.  The Court explained that the “as soon as reasonably possible” language comes from Insurance Law 3420 and applies only to coverage for death or bodily injury arising from accidents:

By its plain terms, section 3420 (d) (2) applies only in a particular context: insurance cases involving death and bodily injury claims arising out of a New York accident and brought under a New York liability policy … . “Where, as here, the underlying claim does not arise out of an accident involving bodily injury or death, the notice of disclaimer provisions set forth in Insurance Law § 3420 (d) are inapplicable” … . In such cases, the insurer will not be barred from disclaiming coverage “simply as a result of the passage of time,” and its delay in giving notice of disclaimer should be considered under common-law waiver and/or estoppel principles… . KeySpan Gas E Corp v Munich Reins Am Inc, 2014 NY Slip Op 04113, CtApp 6-10-14

 

,

Workers’ Compensation Carrier Which Consents to Settlement of Third Party Action Is Entitled to Exercise Its Credit Against the Settlement-Recovery Upon Its Consent

The Third Department determined, where the workers’ compensation carrier has consented to claimant’s settlement in a third-party action, the carrier is entitled to exercise its credit against the recovery when the consent is given:

When a workers’ compensation carrier consents to the settlement of a claimant’s third-party action, the carrier shall have a lien on the proceeds of the recovery equal to the amount of benefits already paid, and may also assert the right to offset future compensation benefits paid until the proceeds of the recovery are exhausted (see Workers’ Compensation Law § 29 [1], [4]…). The issue before us again on this appeal is the point at which a carrier is entitled to exercise its credit. As we observed previously in this matter, “there is no reference in the statute as to when the credit shall commence” (104 AD3d at 1014; see Workers’ Compensation Law § 29 [4]). Cognizant of the fact that the statute in question was enacted in substantial part to prevent a claimant from receiving a double recovery …, we agree with the carrier that its right to exercise its credit must be available, if provided for in the consent letter, at the point at which the carrier provides its consent. To hold otherwise would result in payments made by the carrier that are not subject to either lien or credit rights, i.e., those payments made between the date of consent — at which point the amount of the carrier’s lien is fixed — and the date of actual settlement. This resulting double payment to the claimant would be contrary to the intent of the statute.  Matter of Williams v Lloyd Gunther El Serv Inc, 2014 NY Slip Op 03740, 3rd Dept 5-22-14

 

Requirements for Indefinite Tolling of 30-Day Period During Which a No-Fault Carrier Must Determine Whether to Pay or Deny a Claim Explained

The Second Department noted that a request for verification that precedes a no-fault insurer’s receipt of the N-F-5 claim form does not trigger the tolling of the 30-day period within which an insurer must determine whether to pay or deny the claim. Once the tolling of the 30-day period is triggered, the insurer has 10 days from the expiration of the 30-day period to send a follow-up request for verification inorder to invoke an indefinite tolling of its time to pay or deny:

….[T]his action is not premature[—] the 30-day period in which the defendant must pay or deny the claim has not been indefinitely tolled. “[A]; request for verification that precedes a no-fault insurer’s receipt of the prescribed N-F 5 claim form does not trigger the tolling of the 30-day period within which an insurer must determine whether to pay or deny such a claim” … . Here, the defendant sent two letters requesting verification, one dated March 15, 2010, and another dated April 15, 2010. The defendant’s verification request dated March 15, 2010, was sent after the defendant received an “interim bill” from the plaintiff, which was sent solely for the purpose of notifying the defendant of the claim, and preceded the defendant’s receipt of the N-F 5 form. Thus, the March 15, 2010, verification request did not trigger the tolling of the 30-day period within which an insurer must determine whether to pay or deny the claim. Consequently, the only effective request for verification was the one dated April 15, 2010, six days after the defendant’s receipt of the plaintiff’s N-F 5 form … .

The April 15, 2010, verification request resulted in an initial toll of the 30-day period within which to pay or deny the claim (see id.). The defendant then had 10 days from the expiration of that 30-day period to send a follow-up request for verification in order to invoke the protection of the indefinite tolling of its time to pay or deny the claim … . However, no follow-up request was issued. Since the initial toll of the 30-day period following the plaintiff’s submission of the N-F 5 form to the defendant had expired by the time this action was commenced, this action is not premature… . Mount Sinai Hosp v Dust Tr Inc, 2014 NY Slip Op 03667, 2nd Dept 5-21-14

 

Ambiguous Terms Interpreted to Give Meaning to All Terms—Here Water Damage Caused By Plumbing Backup Originating in Building Was Covered—Water Damage Caused By Plumbing Backup Originating Outside the Building Was Not Covered

The Third Department determined ambiguous terms in an insurance policy concerning whether water backing up through plumbing to cause damage was excluded were properly interpreted by Supreme Court. The ambiguous terms were interpreted to mean that damage from water backing up caused by a problem within the buildings own plumbing is covered, but similar damage caused by a backup originating outside the building (a municipal sewer system, for example) was not covered:

Where an insurer relies on an exclusion to avoid coverage, it has the burden of demonstrating “that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case” … . Moreover, we are “obligat[ed] to interpret the exclusion in a manner that gives full force and effect to the policy language and does not render a portion of the provision meaningless” … . “While [u]nambiguous provisions of a policy are given their plain and ordinary meaning, where policy language is unclear or subject to multiple reasonable interpretations, such ambiguities are resolved against the insurer” … .

In our view, when the exclusion and coverage provisions at issue here are read together, an ambiguity exists in the insurance policy as to losses resulting from a backup and/or overflow from sewers, drains and/or plumbing systems. Although the resolution of this ambiguity appears to be an issue of first impression in this state, Supreme Court’s analysis — that a plumbing system, as referenced in the coverage provision, includes drains that are on the insured’s property — is consistent with decisions in other jurisdictions that have interpreted the interplay of competing provisions similar to those in question here … . Pichel v Dryden Mut Ins Co 2014 NY Slip Op 03575, 3rd Dept 5-15-14

 

Damage to Building Caused by Faulty Workmanship Not Caused by an “Occurrence” Within the Meaning of a Commercial General Liability Policy

The First Department, in a full-fledged opinion by Justice Saxe, determined that the term “occurrence” in a policy covering building construction work did not encompass damage to the building caused by faulty workmanship.  Here, a portion of an exterior wall fell to the street.  It was determined that the cause was flaws in the way the wall was constructed:

There is no “occurrence” under a commercial general liability policy where faulty construction only damages the insured’s own work …, and faulty workmanship by subcontractors hired by the insured does not constitute covered property damage caused by an “occurrence” for purposes of coverage under commercial liability insurance policies issued to the general contractor, since the entire project is the general contractor’s work … . In Baker Residential v Travelers Ins. Co. (10 AD3d 586, 587 [1st Dept 2004]), where a developer delivered and installed defective structural beams that deteriorated from water penetration due to improper installation, flashing and waterproofing, this Court held that the damages sought by the developer did not arise from an “occurrence” resulting in damage to third-party property distinct from the developers’ own “work product.” And in Direct Travel v Aetna Cas. & Sur. Co., 214 AD2d 484, 485 [1st Dept 1995]), this Court explained that “[s]ince the claims asserted in the underlying action were for economic loss resulting from the plaintiff’s purported breach of contract, coverage was also properly disclaimed under the umbrella policy which covered only damages because of bodily injury’ [or] property damage’ . . . [c]aused by an occurrence'” … . * * *

“[T]he requirement of a fortuitous loss is a necessary element of insurance policies based on either an accident’ or occurrence'” … . As the motion court recognized, the addition of “event” or “happening” to the definition of “occurrence” did not alter the legal requirement that the “occurrence” triggering the coverage must be fortuitous. “[T]he requirement of a fortuitous loss is a necessary element of insurance policies based on either an accident’ or occurrence'” … . “[A] claim for faulty workmanship, in and of itself, is not an occurrence under a commercial general liability policy because a failure of workmanship does not involve the fortuity required to constitute an accident” … . National Union Fire Ins Co of Pittsburgh PA v Turner Constr Co, 2014 NY Slip Op 03671, 1st Dept 5-15-14

 

,

Emotional Injury Can Constitute “Serious Injury” Within the Meaning of the Insurance Law/On-coming Car Crossed Into Plaintiffs’ Lane—Plaintiffs Entitled to Summary Judgment (Re: On-coming Driver’s Negligence Cause of Action) Under the Emergency Doctrine

The Fourth Department noted a question of fact had been raised about whether post-traumatic-stress disorder constituted a serious injury within the meaning of Insurance Law 5102 (d).  Plaintiffs, husband and wife, were struck head-on when an on-coming car crossed into plaintiff’s lane.  The driver of the on-coming car was trying to avoid a deer which ran into the road. The court also determined plaintiffs were entitled to summary judgment dismissing the other driver’s negligence action based upon the emergency doctrine, even in the absence of expert evidence:

“[A] causally-related emotional injury, alone or in combination with a physical injury, can constitute a serious injury” …, and posttraumatic stress disorder (PTSD) “may constitute such an injury when it is causally related to a motor vehicle accident and demonstrated by objective medical evidence” … . Moreover, “PTSD may be demonstrated without diagnostic testing for purposes of Insurance Law § 5102 (d) by symptoms objectively observed by treating physicians and established by the testimony of the injured plaintiff and others who observe the injured plaintiff” … .

Even assuming, arguendo, that plaintiffs met their initial burden on the issue of serious injury, we conclude that defendants raised an issue of fact sufficient to defeat the motion by submitting the records of [plaintiff’s]  psychologist … . * * *

“Under the emergency doctrine, “when [a driver] is faced with a sudden and unexpected circumstance which leaves little or no time for thought, deliberation or consideration, or causes [the driver] to be reasonably so disturbed that [he or she] must make a speedy decision without weighing alternative courses of conduct, the [driver] may not be negligent if the actions taken are reasonable and prudent in the emergency context, provided the [driver] has not created the emergency” ‘ … . It is well established that a driver is not required to anticipate that [a] vehicle, traveling in the opposite direction, [will] cross over into his [or her] lane of travel’ ” … . * * * The vehicle operated by decedent entered [plaintiff’s] lane of traffic without warning, and [plaintiff]  applied his brakes and swerved to the right as soon as he saw decedent’s vehicle cross into his lane. The absence of expert evidence on this issue is of no moment inasmuch as, “[i]n a cross-over collision case, a defendant [or a plaintiff seeking dismissal of an affirmative defense] may meet the burden of establishing entitlement to summary judgment [or dismissal of the affirmative defense] under the emergency doctrine even when [t]he only evidence in the record concerning [the movant’s] conduct’ is [his or her] own [deposition] testimony” … . Hill v Cash, 2014 NY Slip Op 03058, 4th Dept 5-2-14

 

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy