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The Second Department, Appellate Division, for the Supreme Court of New York, recently held in a matter of first impression, that an insurance company with a duty to defend may not recover defense costs after a determination that no duty to indemnify or further defend exists—even though the insurer expressly reserved its right to recoup such defense costs—unless the policy explicitly provides for such recovery. See American W. Home Ins. Co. v. Gjonaj Realty & Mgt. Co., 2018-03435, 2020 WL 7767944 (2d Dept., Dec. 30, 2020).
Continue Reading New York Court Rules Duty to Defend Policies Must Explicitly Provide for Recoupment of Defense Costs

While issues of fact can preclude summary judgment in some cases involving failure to cooperate and misrepresentation, a New York federal court recently granted summary judgment to an insurer in this context. In D’Andrea v. Encompass Ins. Co. of Am., No. 15-CV-467-MJR, 2018 U.S. Dist. LEXIS 146446, 2018 WL 4095098 (W.D.N.Y. Aug. 28, 2018), the insured was seeking property insurance coverage for a fire loss that occurred at a two-unit residence purportedly owned by the insured and rented to tenants. In submitting his insurance claim, the insured provided three sworn statements in proof of loss, including one for the loss of the dwelling and one for loss of use of the dwelling. The dwelling proof of loss requested $225,000 in damages and listed the insured as the owner of the premises.
Continue Reading Failure to Cooperate and Misrepresentation: New York Federal Court Grants Summary Judgment Finding Insured Explanations for False Statements “Dubious”

Typical first party property policies include provisions that address failure to maintain heat as excluded losses. The Eastern District of New York recently analyzed a specific endorsement requiring that heat be maintained at a particular temperature.

In Read Prop. Group LLC v. Hamilton Ins. Co., No. 16-4573, 2018 U.S. Dist. LEXIS 54734 (E.D.N.Y. Mar.…

The “Water Damage” exclusion incorporated in many property insurance policies is the subject of much litigation, including the scope and applicability of the “surface water” exclusion to various water damage scenarios. The New York Appellate Division, Fourth Department recently interpreted the application of the “surface water” exclusion where the source of water was not from natural precipitation. This is the second New York decision to interpret the meaning of “surface water” in the context of a property insurance policy.
Continue Reading The Water Exclusion: New York’s Fourth Department Interprets The Definition of Surface Water

Insurers retain outside counsel during claim investigations for a variety of reasons, including, among others, providing coverage advice, assisting in reviewing and responding to communications with insureds that have legal implications, and providing settlement recommendations. When coverage disputes arise, policyholders often seek the production of these pre-suit communications, arguing that outside counsel was merely performing an investigation that the company was required to conduct as part of the ordinary course of its business, and that such communications are therefore not privileged. These arguments have routinely been rejected by courts.
Continue Reading Work Product and Attorney-Client Privilege Concerning Documents Drafted Prior To Litigation: Eastern District Of New York Finds Insurer’s Documents Are Not Discoverable

We have written on the topic of late notice a number of times. Typical property insurance policies require that the insured notify its carrier of a loss promptly. The purposes of such a provision include allowing an insurer to investigate a claim close in time to the occurrence so as to ensure that it is able to gather all the relevant facts associated with the reported loss and to ensure that it has adequate reserve funds in place. A federal court in New York recently determined that a four month delay in notifying an insurer of a loss was too late and that the insurer need not establish that it suffered prejudice as a result of the delay.
Continue Reading Late Notice in New York: Federal Court Finds No Prejudice Required In First Party Context

Two appellate courts recently examined the scope of a homeowners policy’s requirement that the insured reside at the property at the time of loss. Both cases involve claims of loss involving a house fire, and in both cases, claims were denied on the basis that the homeowner was not residing at the property at the time of loss. Both court decisions agree that where the homeowners policy requires that the homeowner reside at the property, evidence of simultaneous residence in multiple houses does not necessarily defeat the insured’s claim. However, evidence of actual residence is required.
Continue Reading The Definition of “Reside” Under Homeowners’ Policies in Michigan and New York: Two Appellate Courts Provide Further Insight

Recently, in Mallek v. Allstate Indem. Co. No. 17-CV-5949-KAM-SJB, 2018 U.S. Dist. LEXIS 42171 (E.D.N.Y. Mar. 12, 2018), a federal magistrate in New York recommended that the Court deny a plaintiff’s motion to remand and suggested that removal was proper where the plaintiff “fraudulently” joined an insurance agent. Oftentimes, coverage actions involve a plaintiff suing a national insurance company, where neither are citizens of the same state, and therefore, the case may be eligible for removal under 28 U.S.C. § 1332. However, some plaintiffs have included local agents of the insurance company—like a claims professional who handled their claim—as named-defendants, along with the insurer, in an attempt to defeat complete diversity between a local plaintiff and a national insurance carrier.
Continue Reading Eastern District of New York Magistrate Recommends Denial of a Motion to Remand and Recognizes the Application of the Fraudulent Joinder Doctrine, Even in the Face of the “Forum Defendant Rule”

Nearly five years after Superstorm Sandy, some consistent themes are beginning to emerge from the increasingly robust body of property coverage case law related to the storm. A recent decision from the Eastern District of New York addresses a topic that this Blog has covered before – the application of flood exclusions in traditional open peril policies.

The Madelaine Chocolate Company was a manufacturer of seasonal foil-wrapped chocolates insured under an “open peril” business policy issued by Great Northern Insurance Company. Purported to be one of the largest private employers in Queens, New York, Madelaine Chocolate conducted its business in three buildings located in Rockaway Beach. During Superstorm Sandy, the facility was inundated with four feet of water from both Long Island Sound to the north and the Atlantic Ocean to the south. After the storm, Madelaine Chocolate made a $40 million property damage claim and a $13.5 million business income/extra expense claim. Great Northern paid Madelaine Chocolate $4 million and denied the remainder of the claim based on the policy’s flood exclusion.
Continue Reading Eastern District of New York Upholds Flood Exclusion in Superstorm Sandy Case

Suit limitation provisions in insurance policies shorten the statutory period of time that a plaintiff may bring a suit against an insurer for certain causes of action. A New York court recently held that an appraisal award issued a few months after the suit limitation expired was unenforceable where the insured failed to file suit before the suit limitation expired. MZM Real Estate Corp. v. Tower Ins. Co. of New York, 2017 N.Y. Misc. LEXIS 1292 (Apr. 7, 2017). MZM incurred damages as a result of Storm Sandy on October 29, 2012. The Tower insurance policy contained a typical suit limitation provision stating that no one may bring action against the insurer unless suit is filed within two years “after the date on which the direct physical loss or damage occurred.” In November 2012, Tower Insurance paid $4,000, the undisputed amount of the claim. On October 28, 2013, over a year after the date of the loss, MZM demanded appraisal. On February 2, 2015, an unsigned appraisal award was issued in the amount of $170,129. Tower refused to pay the appraisal award on various grounds, including that the award included amounts that were not covered by the insurance policy.
Continue Reading Appraisal Award Unenforceable Where Suit Limitation Period Expired Prior To Filing Suit: New York County Dismisses Storm Sandy Coverage Suit