New York Insurance Coverage Law Update – May 2021 | Rivkin Radler LLP

WDNY Following Other New York Courts Finding COVID-19 Losses Not Covered

The insured operated a martial arts and fitness business in Buffalo, New York, which suffered revenue losses when his business closed due to the COVID-19 pandemic and related executive orders. The insured has requested coverage under their commercial property policy. The United States District Court for the Western District of New York found that the insured’s claims that the virus had spread and that government orders had resulted in business closures by sharply reducing the rate of death. ‘occupancy did not meet the requirements of a “direct physical loss or damage” for the insured premises to trigger the business income coverage. As for the insured’s claim for civil authority coverage, the court sympathized with the devastating impact of the pandemic on businesses, but ruled that the insured had not “provided[d] specific and non-general allegations that document a direct physical injury to property (not theirs) which gave rise to the orders of the civil authority. The court concluded that the lack of virus exclusion in the insured’s policy “does not increase the coverage available.” [Kim-Chee LLC v. Phila. Indem. Ins. Co., 2021 U.S. Dist LEXIS 78241 (WDNY April 23, 2021).]

EDNY finds that Section 3420 (d) of the New York Insurance Act did not prevent an insurer from raising a coverage defense priority against another insurer

State National Insurance Company settled an action for damages against its named policyholders and filed a declaratory action on its own behalf and as its policyholders’ subrogate against Mt. Hawley Insurance Company seeking additional insured coverage under ‘a franchise policy issued by Mt. Hawley. Mt. Hawley had denied, but did not expressly claim as a defense, that state national policy, as primary policy, had to be exhausted before Mt. Hawley’s policy came into effect. In summary judgment, the national state argued that Mt. Hawley could not rely on its defense of priority of coverage because it had not timely waived on that basis in accordance with the Insurance Act. of New York § 3420 (d). The United States District Court for the Eastern District of New York disagreed for several reasons, not least because it is “well established” that § 3420 (d) “does not apply to claims between insurers, [regardless of] whether these claims are for contribution or for full defense and indemnity. The court observed that the “plain language” of this provision refers only to “the insured and the injured party or any other claimant”, and not to another insurance company. [State Natl. Ins. Co. v. Mt. Hawley Ins. Co., 2021 U.S. Dist. LEXIS 60375 (E.D.N.Y. Mar. 29, 2021).]

Intentional Infliction of Emotional Distress Due to Cyberbullying Not a ‘Covered Event’, Judges Court

The underage son of Allstate policyholders allegedly cyber-bullied two classmates, and the classmates’ parents sued on their behalf on a variety of grounds, including neglect and intentional imposition of emotional distress. Allstate defended the policyholders and their son under their home insurance policy, but declined coverage after all claims were dismissed except the claim against the son for intentionally inflicting emotional distress. A declaratory judgment action ensued and the United States District Court for the Eastern District of New York ruled that Allstate had no obligation to defend or indemnify, finding that there was no nothing “fortuitous” about the alleged actions of the son or the harm resulting therefrom. The court further ruled that Allstate no longer had any obligation to cover under the policy exclusion for bodily injury “intended or reasonably expected to result from acts or intentional or criminal omissions of any insured person ”. [Allstate Vehicle & Prop. Ins. Co. v. Mars (2021 U.S. Dist. LEXIS 71472 (E.D.N.Y. April 12, 2021).]

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Justin D. O'Neill