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For insurance recovery attorneys, one of the more frustrating ways for a policyholder to lose coverage for a property loss is on the basis of late notice. Property insurance policies generally require the policyholder to give the insurance company “prompt notice” of claims and potential claims. Property policies may specify a timeframe in which the policyholder must give notice, but in many cases do not. New York courts routinely hold that short delays, even as little as one to two months, suffice as a basis to deny coverage where the policy has “prompt notice” requirements. Under New York law, however, an insurance company can waive its late notice defense by not raising it explicitly when it finally disclaims coverage. Indeed, recently, a federal court in New York court rejected the insurance company’s late notice defense, even where the policyholder conceded that it did not provide prompt notice as a matter of law, because the insurance company failed to explicitly deny coverage on that ground.

Summary of recent New York federal court decision

In Mave Hotel Investors LLC v. Certain Underwriters at Lloyd’s London, the plaintiffs (“Mave”) sought coverage for property damage at its hotel following the termination of its contract with a human services organization housing formerly homeless families with children at the hotel. No. 21-cv-08743 (JSR), 2023 U.S. Dist. LEXIS 62718 (S.D.N.Y. Apr. 10, 2023). Mave alleged that its rooms were damaged while the families were living there. The insurer, Certain Underwriters at Lloyd’s London (“Lloyds”), ultimately denied coverage the ground that any damage was caused by ordinary wear and tear, an excluded cause of loss. At trial, however, Lloyd’s moved for summary judgment, arguing among other things, late notice.Continue Reading An insurance company’s generic reservation of right can lead to a Waiver of a Late Notice Defense

With the passage of New York’s Child Victim’s Act (the “CVA”) and similar revival statutes around the United States, there have been literally thousands of formerly time-barred actions commenced against institutions such as churches and other religious organizations, schools, camps, and other groups working with children for damages on account of sexual abuse by their employees, volunteers or agents allegedly occurring years or even decades in the past. When these institutions turn to their insurers seeking coverage under old insurance policies for injuries occurring during the relevant policy periods, they are often confronted with the defense that, because the institution may have been aware of an alleged perpetrator’s “propensity” to commit acts of abuse, the resulting injury was “expected and intended” and, therefore, excluded from coverage.

Abuse claims generally allege that the institution failed to use due care to protect children from abusive perpetrators for whom the institution is alleged to be responsible. Sexual abuse complaints typically allege that, as a result of the policyholder’s negligence in hiring, retention, supervision, or training, the claimants suffered bodily injury for which the policyholder is legally liable. In resisting coverage for sexual abuse claims, insurers typically assert that, if the institution knew of a perpetrator’s “proclivities” or “propensities,” then the injury arising from child abuse should not be deemed an “occurrence” because it should be considered “expected or intended” from the standpoint of the insured.

Negligent conduct is insurable

These arguments ignore the very high burden insurers must carry on such a defense. Like environmental litigation that preceded it, the insurers attempt to use a modern lens to evaluate policies and procedures adopted many decades earlier. While a church might have at one time believed that a perpetrator could be safe to return to the care of children after an intensive religious retreat and/or psychiatric treatment, one would be unlikely to find any now holding similar views. Thus, what might now seem outrageous, should be seen as negligent (and eligible for insurance coverage) in light of the understanding at the time the conduct occurred.

This is the approach adopted by New York courts. As an initial matter, New York holds that negligence in hiring or retaining an employee who commits a sexual assault can constitute an “occurrence” that is not “expected or intended” from the standpoint of the insured. See RJC Realty Holding Corp. v. Republic Franklin Ins. Co., 808 N.E.2d 1263 (N.Y. 2004). In the context of a suit against a massage parlor, the court explained that, although the assault was not an “accident” from the masseur’s point of view because he expected and intended it, the masseur’s expectations or intentions were irrelevant in determining the applicability of the insurance policy to his employer. Under New York law, the perpetrator’s abusive conduct is not imputed to his employer. Judith M. v. Sisters of Charity Hosp., 93 N.Y.2d 932 (1999). Instead, the institution is only liable for its own negligence in hiring or retaining such perpetrators. Accordingly, the court did not ascribe the masseur’s expectations or intentions to his employer in determining the applicability of the insurance policy. Id. See also Jewish Cmty. Ctr. of Staten Island v. Trumbull Ins. Co., 957 F. Supp. 2d 215, 233-34 (E.D.N.Y. 2013) (following the RJC court’s interpretation of “accident” in the context of sexual harassment and assault of children at a community center); NYAT Operating Corp. v. GAN National Insurance Co., 46 A.D.3d 287, 287-88 (1st Dep’t 2007) (“[it] does not avail [the insurer] to argue that the assault was foreseeable.”). Continue Reading Insurance coverage for sexual abuse in New York

Insurance disclosure requirements have just become far more complex and onerous for parties that face litigation in New York state courts. In our January article (updated in February), we discussed the particulars of New York’s new Comprehensive Insurance Disclosure Act as it stood when the legislation was signed into law in late December 2021 and as contemplated by amendments proposed by the governor and being considered by the legislature. In late February, many of these proposed amendments were enacted into law.

With the law now seemingly settled, defendants are just beginning to grapple with this legislation, including developing long-term strategies for managing disclosures, taking stock of insurance-related information to get ahead of disclosure obligations, and initiating conversations with insurance coverage counsel, brokers and insurers. Until New York courts provide more direction regarding the application of the law, advance preparation and planning by policyholders to satisfy the legislation’s requirements will be key.

Recent amendments

As indicated above, the Comprehensive Insurance Disclosure Act was amended shortly after its passage. Three of these amendments in particular are worth noting. First, where the original version of the law was retroactive in applying to all existing lawsuits, the law now is limited to only those lawsuits filed on or after January 1, 2022. Second, defendants now have 90, rather than 60, days after service of an Answer to disclose the insurance-related information required by the law. Third, the law is no longer confined to policies sold or delivered in New York; instead, defendants must disclose responsive policies regardless of where the policy was procured or delivered.Continue Reading Policyholders grapple with strategies for responding to New York’s new insurance disclosure law

On December 31, New York’s Governor Kathy Hochul signed into law a change to the insurance disclosure requirements that applies to all civil cases filed in New York state’s courts. CPLR section 3101(f).  The new statute by its terms applies to both pending cases and new filings, with continuing disclosure obligations through appeals, and places heavy burdens on defendants and their counsel, going far beyond the previous insurance disclosure rules for New York state courts and the rules that apply in federal courts.

In signing the statute, which had flown under the radar since being worked up by the legislature last spring, however, the governor signaled that changes were needed [Signing Memorandum], but it was unclear which of the many new requirements of the statute were the focus of her concern.  As of this week, however, we have some insights.  On January 18, the Senate Rules Committee took up Senate Bill 7882, and the Assembly’s Committee on Judiciary took up the parallel Assembly Bill 8852, containing a raft of amendments that would, if passed and signed by Governor Hochul, substantially limit the scope of the statute she signed less than a month ago.  Most significantly, the statute would no longer apply to cases pending prior to the statute’s effective date, only to those commenced on or after its effective date. S7882/A8852 section 4.

Narrowing new insurance disclosure requirements

For any potentially responsive “insurance agreement,” the statute requires production within 90 days of the defendant’s answer of:

all primary, excess and umbrella policies, contracts or agreements issued by private or publicly traded stock companies, mutual insurance companies, captive insurance entities, risk retention groups, reciprocal insurance exchanges, syndicates, including, but not limited to, Lloyd’s Underwriters as defined in section six thousand one hundred sixteen of the insurance law, surplus line insurers and self-insurance programs sold or delivered within the state of New York insofar as such documents relate to the claim being litigated;Continue Reading NY’s new comprehensive insurance disclosure law is in flux

In a promising development for policyholders, a New York state trial court recently signaled a potential end to the free pass courts often have provided to third-party claims administrators (TPAs), such as Resolute Management, Inc. (Resolute), that has enabled TPAs to act with near impunity when handling or adjusting claims on behalf of their insurer…

A recent outbreak of Legionnaires’ disease in New York has, according to published news reports, been responsible for the death of 12 people. According to those same reports, more than 100 other people have become ill as a result of the outbreak, which has been traced to a rooftop cooling tower(s).

For better or worse, when an outbreak of a disease occurs, lawsuits may soon follow. Indeed, recent news stories report that one individual who contracted Legionnaires’ disease in New York just sued the hotel where the outbreak allegedly began. According to published reports, that person is alleging that the hotel was “negligen[t], careless[], and reckless[].”

When such third-party lawsuits – relating to Legionnaires’ disease or some other disease – are filed against an insured, insurance coverage may be available under its commercial general liability (“CGL”) insurance policy(ies). CGL policies typically provide coverage for “damages” on account of “personal injuries” or “property damage.” Relying on various policy exclusions, insurers, however, may try to deny coverage for disease-related lawsuits. So, faced with such a suit, a policyholder should carefully review its policy(ies) and make sure its interests are adequately protected.

Legionnaires’ disease in particular has been at the center of a number of insurance-coverage disputes. According to the U.S. Centers for Disease Control and Prevention, “Legionnaires’ disease … is caused by a type of bacterium called Legionella …. The bacterium is named after a 1976 outbreak, when many people who went to a Philadelphia convention of the American Legion suffered from this disease, a type of pneumonia (lung infection).”
Continue Reading Host of insurance-coverage questions tied to Legionnaires’ disease