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

The court rejects the claims against the insurer for failure to settle in bad faith and for consequential and punitive damages

Scottsdale issued a policy to Watershed Ventures, LLC, which included directors ‘and officers’ liability coverage. Scottsdale has filed an action for declaratory judgment seeking a declaration that Patrick McGrath was not covered by the policy for a claim against McGrath. McGrath has filed counterclaims for bad faith and consequential and punitive damages, which the United States District Court for the Southern District of New York has dismissed in law. As to the allegation that Scottsdale was responsible for the failure to settle the claim in bad faith, the court noted that an “essential element of any claim for refusal to settle in bad faith” is that the insurer has assumed. defense of the insured and had “sole control” over the claim, which was not the case here. The court also dismissed the claim for consequential damages under the New York Court of Appeals Bi-economy decision, stressing that this is not a case where the insurer engaged in a “late payment in bad faith” or where it can be said that the consequential damages fell within the “reasonable consideration Of the contracting parties. Finally, the court dismissed the claim for punitive damages, finding that punitive damages are only available to “defend a public right” when the conduct amounts to “criminal indifference to civil obligations”. [Scottsdale Ins. Co. v. McGrath, 2021 U.S. Dist. LEXIS 134969 (S.D.N.Y July 19, 2021).]

The court concludes that the insurer had the obligation to defend the additional insured based on the own third party of the additional insured Party complaint

Axis Construction (Axis), a general contractor, hired American Wood In-stallers (AWI) as a subcontractor for a construction project, and the AWI employee was injured and sued Axis. Axis requested coverage under the AWI Travel Policy which covered Axis as an additional insured for injuries “caused by the acts or omissions” of AWI, but not “unrelated acts or omissions” from Axis. The United States District Court for the Eastern District of New York ruled that Travelers had a duty to defend themselves because the allegations in the action or the facts known to the insurer gave rise to the possibility that the transactions of AWI “proximately” caused the bodily harm. The court rejected the argument that Axis’ “selfish” third party complaint against AWI should not be used to trigger an obligation to defend Axis. The court also rejected the argument that the “other insurance clause” of the travelers’ policy established that it was in excess of the insurance policy of another contractor, finding that “[p]policies insuring different risks are not “other insurance” to each other. [Axis Constr. Corp. v. Travelers Indem. Co. of Am., 2021 U.S. Dist. LEXIS 166083 (E.D.N.Y. Sept. 1, 2021).]

Suffolk County Magistrates’ Court rules COVID-19 claim for loss of business income not covered

The insured, Island Gastroenterology Consultants and Island Endoscopy Center, obtained business owners’ insurance policies from the General Casualty Company of Wisconsin that covered loss of business income caused by “direct physical loss or damage. “To the Covered Property and” the Civil Authority which prohibits access “to the Covered Premises” by reason of direct physical loss or damage to the property, other than in the premises described “. Due to the COVID-19 pandemic, policyholders have not been able to perform all emergency medical interventions except a de minimis number, resulting in a substantial loss of business income. The Supreme Court of New York, Suffolk County, ruled that policyholders ‘claim for coverage against their insurer did not allege a covered claim for “direct physical loss or damage” to policyholders’ premises. The court also found the insureds’ claims insufficient to allege coverage under the provisions of the civil authority, noting that access to the premises was not prohibited due to direct physical loss or damage to neighboring properties. The court concluded that the claimed losses “also fell within the scope of the virus exclusion from the policies.” As a result, the court dismissed the insured’s complaint. [Island Gastroenterology Consultants, PC v. General Cas. Co. of Wis., 2021 N.Y. Misc. LEXIS 4582 (N.Y. Sup. Ct., Suffolk Cnty, Aug. 25, 2021).]