New York Insurance Coverage Law Update - June 2021

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First Department Finds Exterior Work Over Two Stories Exclusion Did Not Apply To Accident From Work On Lower Floors

Adelphi University hired a general contractor for a construction project to build, from the ground up, a three-story building.  The employee of a structural steel and iron work sub-subcontractor was injured when he fell from the first floor to the ground level while performing metal work, and he sued the subcontractor.  The subcontractor was covered as an additional insured under the sub-subcontractor’s policy. The sub-subcontractor’s insurer disclaimed coverage based on an exclusion for certain activities including “[a]ny exterior work over [two] stories”.  The New York Appellate Division, First Department, held that the exclusion did not apply.  The court found that even though “the construction of the building contemplated multiple floors, at the time of the accident, the injury did not arise out of exterior work over two stories”. [Damon G. Douglas Co. v. Mt. Hawley Ins. Co., 2021 N.Y. App. Div. LEXIS 2608 (1st Dept April 27, 2021).]

Sexual Misconduct Claims Against Physician’s Assistant And Medical Practice Found Not Covered

Certain patients of Vitality Psychiatry Group sued Vitality and its physician’s assistant alleging that the physician’s assistant subjected them to unwanted sexual advances.  The United States District Court for the Southern District of New York held that Allstate was not obligated to defend or to indemnify the assistant under Vitality’s Businessowners policy because: (i) the alleged sexual advances did not occur within the scope of the assistant’s employment and, therefore, he did not qualify as an “insured”; (ii) the assistant intended the harm he allegedly caused as a matter of law and, therefore, there was no covered “occurrence” and the “expected or intended” injury exclusion applied; and (iii) the negligence and malpractice claims were barred by the   professional services exclusion.  The court also found that Allstate had no duty to defend or to indemnify Vitality or its principal because the professional services exclusion precluded coverage for the claimants’ claims against Vitality and its principal for their alleged failure to meet the required standard of medical care.  Moreover, the court found that the exclusion for “actual or threatened abuse or molestation by anyone of any person while in the care … of any insured” applied to preclude coverage for the claimants’ claims against Vitality and its principal for negligent employment, investigation and supervision.  [Allstate Ins. Co. v. Vitality Physicians Group Practice P.C., 2021 U.S. Dist. LEXIS 85292 (S.D.N.Y. May 4, 2021).]

Court Holds Anti-Assignment Clause Not Enforceable As To Transfers Made After The Insured-Against Loss

Nokia was sued in thousands of asbestos-related bodily injury lawsuits arising out of the operations of certain legacy businesses of AT&T.  In this declaratory judgment action, Nokia sought partial summary judgment to resolve whether Nokia (through its predecessor, Lucent) had the right, by assignment, to seek coverage under policies issued to AT&T for asbestos liabilities it inherited from AT&T. The Supreme Court, New York County, found that AT&T effectively assigned to Lucent (and therefore Nokia) its rights under the liability policies issued to AT&T in a Separation and Distribution Agreement.  The court opined that the provisions of the agreement, taken together, reflected the intention of AT&T to give Lucent the right to avail itself of the insurance policies for liabilities assumed from AT&T.  In turn, the court found that the anti-assignment clauses in the insurance policies did not raise triable issues of fact because, generally, under New York law “a no-transfer provision in an insurance contract is valid with respect to transfers that were made prior to, but not after, the insured-against loss.”  The court reasoned that “although insurers have a legitimate interest in protecting themselves against additional liabilities the insurer did not contract to cover, once the insured-against loss has occurred, there is no issue of an insurer having to insure against additional risk.”  [Certain Underwriters at Lloyd’s v. AT&T Corp., 2021 N.Y. Misc. LEXIS 2736 (N.Y. Sup. Ct., N.Y. Cnty. May 19, 2021).]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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