2015 Insurance Coverage Recap

Partner Steve Verveniotis turned in another superlative year, winning a number of significant coverage decisions for insurers across the country. A sampling of his success is set forth below:

In Netherlands Insurance Company v US Underwriters Ins Co., 14 Civ 3568 (NSR) (JSM), Judge Roman – in December 2015 – upheld, by summary judgment, a disclaimer of coverage pursuant to an exclusion for injuries to employees of a contractor as applicable to all insureds, regardless of which insured hired the contractor. The named insured under the policy was a tenant which had hired the contractor, which was the employer of the injured party who had been electrocuted while working on premises being renovated by the tenant as lessee readying a store for opening. The property owner was an additional insured under the policy. US Underwriters disclaimed coverage both to the tenant and the property owner when the worker sued both, but the property owner (through its own insurer) filed suit against US Underwriters claiming that the exclusion should not apply to the owner because it did not hire the contractor/employer of the injured party. The Judge ruled that the “any insured” language of the exclusion allows for application of the exclusion to the additional insured notwithstanding the fact that it was the named insured which had hired the contractor/employer of the injured party.

In Nationwide Mutual Ins. Co. v US Underwriters Ins. Co., Sup NY 161856/2014, Justice Reed – in November 2015 – dismissed, on res judicata and collateral estoppel grounds, an attempt by Nationwide to collect on a $952,000 judgment against the named insured of US Underwriters on a construction accident claim at a work site involving contractors insured by each of the two insurers. In a prior lawsuit, US Underwriters had obtained a ruling that it had no obligation to cover the claim based upon late notice and the employee exclusion in its policy. Since Nationwide and its insured were parties to the prior action, the Court ruled that the second action filed by Nationwide to collect on the judgment recently obtained was barred in that Nationwide could not re-litigate the prior factual finding and decisions of law as to the disclaimer based upon late notice and the employee exclusion.

In Vandanyan v United National Specialty Ins. Co., 12 Civ 4329 (FB) (JO), Judge Block – in October 2015 – dismissed a lawsuit filed by a plaintiff seeking to recover from the insurer of a property owner the balance of a judgment against the property owner in excess of $750,000. The insurer, United, had disclaimed for late notice and the plaintiff had obtained a default judgment against the insured property owner and then an assignment of rights to pursue the insurer in the insured’s position as part of a settlement with the insured. The Court ruled that the payment by the insured as part of the settlement and assignment of rights voided the plaintiff’s ability to pursue the insurance company for the balance in that the plaintiff has provided a general release to the insured and discontinued the underlying lawsuit with a satisfaction of judgment. Given the inability of the plaintiff to collect anything after settlement and release of the insured, the Court did not need to address the late notice issue and dismissed the plaintiff’s lawsuit for the $750,000 balance sought to be collected from the insurance company.

In Tower v Einhorn, the Appellate Division Second Department – in September 2015 – denied Tower the ability to enforce a denial of coverage that was challenged by plaintiffs and co-defendants from the underlying bodily injury action in that Tower had not proven the applicability of its disclaimer grounds as to the insured location by admissible evidence. The fact that Tower’s insured had defaulted in the coverage case was irrelevant to the ability of plaintiffs and co-defendants from the underlying bodily injury action to challenge Tower’s position.

In East Ramapo Central School District v New York Schools Insurance Reciprocal, Sup Nassau 600963/2013, Justice Bucaria – in June 2015 – limited the recovery of an insured school district from its insurer for defense costs as to an underlying lawsuit filed by citizens for the school district’s mismanagement of funds and violation of constitutional rights. The insurance company challenged the school district’s proofs as to payment of legal fees in excess of $2 million, and the Court agreed, ruling the billing to have been exorbitant and the payments to have been improper, limiting the school district’s recovery to $187,500 plus interest for the limited period of time that the insurer was deemed to have been obligated to afford a defense to the school district in the underlying action.

In Mt. Hawley Ins. Co. v Penn-Star Ins Co., Sup NY 161321/2014, Justice Kern – in May 2015 – dismissed a lawsuit whereby Mt. Hawley sought to collect approximately $663,000 from Penn-Star by challenging a disclaimer based upon an exclusion for injury to an employee of a contractor and a prior adjudication upholding that denial of coverage as to Penn Star’s insured. While Mt. Hawley argued that it was entitled now to re-litigate the coverage issue in a collection action as a holder of a judgment against Penn Star’s insured, the Court held that because Mt. Hawley and its insured were parties to the prior adjudication as to the coverage issues, Mt. Hawley was barred now from re-litigating those issues by operation of res judicata and collateral estoppel.

In Menser’s v Harleysville et al, Superior Court NJ, J. McMaster – in April 2015 – sustained a disclaimer of coverage premised upon property damage exclusions applicable to claims grounded upon improper work performed by insured contractor.