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


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

The insured operated a martial arts and fitness business in Buffalo, New York, which suffered loss of income when its 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 ruled that the insured’s claims that the virus had spread and that government orders had led to business closures by drastically reducing the rate. occupancy did not meet the requirements of “direct physical loss or damage” to the insured. premises to trigger the company’s income coverage. As for the insured’s civil authorities’ claim for coverage, the court sympathized with the devastating effects of the pandemic on businesses, but concluded that the insured had not “provided[d] specific and non-general allegations that document a direct physical injury to property (not theirs) that gave rise to the orders by civil authorities. The court concluded that the lack of viral 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 concludes that Section 3420 (d) of the New York Insurance Act did not preclude an insurer from prioritizing defense against another insurer

State National Insurance Company has settled a personal injury action against its named insureds and has filed a declaratory judgment action on its own behalf and as a subrogate of its insureds against Mt. Hawley Insurance Company seeking additional insured coverage under an excess policy issued by Mt. Hawley. Mount. Hawley had rejected, but did not expressly raise as a defense, that the state’s national policy, as primary policy, had to be exhausted before Mt. Hawley’s policy would apply. On summary judgment, State National argued that Mt. Hawley was unable to avail of her coverage defense priority because she had not timely waived on that basis pursuant to Section 3420 (d) of the New York Insurance Act. The United States District Court for the Eastern District of New York disagreed for several reasons, not least because it is “well established” that Section 3420 (d) “does not apply to claims between insurers , [regardless of] whether these claims are for contribution or 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 ‘Occurrence’, Says Court

The underage son of the Allstate policyholders allegedly cyber-bullied two classmates, and the classmates’ parents sued on their behalf on a variety of grounds, including neglect and intentional infliction of emotional distress. Allstate defended the policyholders and their son under their homeowners policy, but waived coverage after all claims were dismissed except for the claim against the son for intentional infliction of emotional distress. A declaratory judgment action followed 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 There was nothing “fortuitous” about the son’s alleged actions or the harm resulting therefrom. The court further concluded that Allstate no longer had an obligation to cover under the policy exclusion for bodily injury “intentional or likely to result from the intentional or criminal acts or 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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Rachel Amaral

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