Insurance Coverage Update - March 2015

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Covered in this post:

  • District Court Denies Motion to Dismiss Insurer's Declaratory Judgment Action
  • Bad Faith Component of Suit Severed from Underlying Coverage Dispute
  • Court of Appeals Declines to Interpret Exception to Exclusion as Providing Coverage Under Homeowner's Policy for Loss Caused by Flood
  • Insurer Estopped from Denying Coverage for Untimely Disclaimer

NEW JERSEY 

Estoppel - Reservation of Rights
District Court Denies Motion to Dismiss Insurer's Declaratory Judgment Action
 
N. Am. Specialty Ins. Co. v. Diantonio,
2015 U.S. Dist. LEXIS 22461 (D.N.J. Feb. 25, 2015)
 
The District Court of New Jersey denied a policyholder's motion to dismiss its insurer's declaratory judgment action, reasoning that the policyholder's position that the insurer must be estopped from denying coverage was grounded in reservation of rights letters that could not properly be at the motion to dismiss stage of the matter.

A passenger aboard a commercial charter boat slipped and sustained an injury while on the vessel. He brought suit against the boat's owner, who, in turn, sought coverage from the vessel's insurer. Although the insurer argued it did not owe coverage because the injury occurred while more passengers were on the boat than the maximum allowed by the policy, the insurer provided a defense in the underlying action pursuant to a reservation of rights. The subsequent declaratory judgment action brought by the insurer fell under the federal district Court's admiralty jurisdiction because the matter concerned a marine insurance contract.  
 
Bad Faith
Bad Faith Component of Suit Severed from Underlying Coverage Dispute
 
Wacker-Ciocco v. Government Emples. Ins. Co., 2015 N.J. Super. LEXIS 38 (App.Div. Mar. 16, 2015)
 
Appellate Division reverses trial court that failed to sever bad faith claim and attendant discovery from consideration of whether the policyholder was entitled to uninsured/underinsured motorist coverage.
 
The policyholder was seriously injured in a motor vehicle accident when she was rear-ended by another vehicle. She settled her claim with the other vehicle's driver for $99,000 ($1,000 less than the limit on his policy). Her medical expenses, though, exceeded $300,000, so she demanded $200,000 from her insurer in uninsured/underinsured motorist benefits. She also insisted that her UIM claim be arbitrated. The parties were unable to resolve their dispute. The policyholder then filed suit, asserting a claim for the UIM benefits and alleging that the insurer acted in bad faith.  

NEW YORK

Estoppel 
Insurer Estopped from Denying Coverage for Untimely Disclaimer
 
First Mercury Ins. Co. v. Masonry Servs., Inc., 2015 N.Y. Misc. LEXIS 521 (N.Y. Sup. Ct. Feb. 23, 2015)
 
The Supreme Court of New York grants Harleysville Insurance Company of New York's ("Harleysville") motion for summary judgment seeking a declaration that First Mercury Insurance Company ("First Mercury") must defend Harleysville's Named Insured, Great American Construction Corp. ("GA") in an underlying personal injury action.
 
The plaintiff in the underlying action alleges that he was injured while working on a construction project where GA was the general contractor. Masonry Services, Inc. ("MSI"), another defendant in the underlying action was the subcontractor on the project pursuant to a written agreement between MSI and GA, which required that MSI obtain additional insured coverage for GA.
    
Homeowner's Policy - Water Exclusion
Court of Appeals Declines to Interpret Exception to Exclusion as Providing Coverage Under Homeowner's Policy for Loss Caused by Flood
 
Platek v. Town of Hamburg, et al., 2015 N.Y. LEXIS 252 (N.Y. Feb. 19, 2015)
 
The New York Court of Appeals reversed the judgment of the Appellate Division and granted the insurer's motion for summary judgment finding that the damage to the policyholder's property was excluded under the applicable insurance policy.
 
The policyholder's property was damaged when a subsurface water main abutting their property ruptured, causing water to flood into their finished basement. The policyholders submitted their claim to their homeowner's insurance carrier. The applicable insurance policy specifically excluded loss to property consisting of or caused by "water...on or below the surface of the ground, regardless of its source[, including] water...which exerts pressure on, or flows, seeps or leaks through any part of the residence premises." An exception to this exclusion, however, stated that the Insurer does cover sudden and accidental direct physical loss caused by fire, explosion or theft resulting from water on or below the surface of the ground.