Delay, deny and defend. When it comes time to collect premiums each month, your insurance carrier is more than happy to deal with the insured. When it comes time to perform its end of the insurance contract, however, the insurance carrier stonewalls and strong-arms the insured, hoping for at least 95% of insureds to submit and give up – essentially allowing insurance carriers to receive free money (and the insured to incur double or triple the losses).
Note: most insurance policies usually contain a contractual 2-year limitation period in bringing a civil action against the insurance carrier. In other words, if it is almost two (2) years since the event or occurrence that triggered the insured’s first-party claim against the insurance carrier, the insured should take steps immediately to preserve their claims against the insurance carrier.
If you are the insured, you may feel helpless and powerless just thinking about taking an insurance carrier to court to do nothing more than enforce the terms of the policy and rights you have under the agreement. You may have already received a denial letter from the insurance carrier. Before you feel defeated, it is important to know the landscape in this area of New York law.
An insurer that wrongfully refuses to defend its insured is liable for consequential damages, including attorney litigation expenses reasonably incurred by the insured. Bi-Economy Mkt., Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 192 (2008); D.K. Prop., Inc. v. National Union Fire Ins., Co., 168 A.D.3d 505 (1st Dept. 2019).
Choice of Defense Counsel
When a conflict of interest arises between multiple insureds or additional named insured (who the insurer has a duty to defend), the insured is entitled to select an attorney of his or her choice at the expense of the insurer. Prashker v. United States Guar. Co., 1 N.Y.2d 584, 593 (1956).
When the Duty to Defend is Triggered
In Bravo Realty Corp. v. Mt. Hawley Ins. Co., 33 A.D.3d 447 (1st Dept. 2006), the Court held:
The duty to defend is “exceedingly broad” and an insurer will be required to defend its insured whenever the allegations of the complaint suggest a reasonable possibility of coverage. Here, the complaint in the underlying action seeks recovery, at least in part, on the theory that negligence on the part of plaintiff insureds proximately caused the alleged damages and, as such, alleges conduct falling within the subject policy’s coverage. The allegations of negligence are not necessarily based on violations of lease obligations, as defendant argues. That the underlying complaint also seeks recovery on theories alleging intentional conduct and breach of contract arguably not within the coverage, does not, given the allegations that do fall within the coverage, avail defendant insurer insofar as it seeks to avoid providing its insureds a defense. Nor has defendant insurer shown that the allegations of the complaint cast the pleading “solely and entirely within the policy exclusions” it invokes. (emphasis added) (internal citations omitted).
The Court of Appeals has already held, “additional insured coverage is not contingent upon a liability finding and that the obligation of an insurer to provide a defense to an additional named insured under the policy exists to the same extent as it does to a named insured.” BP Air Conditioning Corp. v. One Beacon Ins. Group, 8 N.Y.3d 708 (2007) (“If [a] complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend.”) (emphasis added). The Court of Appeals, in BP Air Conditioning Corp., went further to hold:
A duty to defend is triggered by the allegations contained in the underlying complaint. The inquiry is whether the allegations fall within the risk of loss undertaken by the insured “[and, it is immaterial] that the complaint against the insured asserts additional claims which fall outside the policy’s general coverage or within its exclusory provisions.” “The merits of the complaint are irrelevant and, [a]n insured’s right to be accorded legal representation is a contractual right and consideration upon which [a person’s] premium is in part predicated, and this right exists even if debatable theories are alleged in the pleading against the insured.” An “insured’s right to representation and the insurer’s correlative duty to defend suits, however groundless, false or fraudulent, are in a sense ‘litigation insurance’ expressly provided by the insurance contract.” Furthermore, “an insurer may be required to defend under the contract even though it may not be required to pay once the litigation has run its course.” (emphasis added) (internal citations omitted).
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Since there is a possibility that [plaintiff’s] injuries “ar[ose] out of [Alfa’s] ongoing operations performed for [BP],” One Beacon’s obligation to provide BP with a defense is triggered. (emphasis added).
“[T]here is no requirement that liability must be determined before an additional insured is entitled to a defense.” McCoy v. Medford Landing, L.P., 164 A.D.3d 1436 (2d Dept. 2018) (emphasis added). “[T]here is no merit to [insurer]’s contention that the subject policy provided only excess insurance coverage to [additional named insured]. The [insurer’s] policy was written as primary coverage for the third-party defendants and added [additional named insured] as an additional insured, which entitles [additional named insured] to the same coverage rights as the primary insured.” Id. (emphasis added).
In Stout v. 1 East 66th Street Corp., 90 A.D.3d 898 (2d Dept. 2011), the Court reiterated the incredibly low threshold for when a duty to defend the additional named insured is triggered:
The Court of Appeals has “interpreted the phrase ‘arising out of’ in an additional insured clause to mean ‘originating from, incident to, or having connection with’” (Regal Constr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d at 38, 904 N.Y.S.2d 338, 930 N.E.2d 259, quoting Maroney v. New York Cent. Mut. Fire Ins. Co., 5 N.Y.3d 467, 472, 805 N.Y.S.2d 533, 839 N.E.2d 886; see Worth Constr. Co., Inc. v. Admiral Ins. Co., 10 N.Y.3d 411, 415, 859 N.Y.S.2d 101, 888 N.E.2d 1043). For coverage to become available under such a term requires proof only of “‘some causal relationship between the injury and the risk for which coverage is provided’” (Regal Constr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d at 38, 904 N.Y.S.2d 338, 930 N.E.2d 259, quoting Maroney v. New York Cent. Mut. Fire Ins. Co., 5 N.Y.3d at 472, 805 N.Y.S.2d 533, 839 N.E.2d 886). In determining whether an injury “arose out of” an insured’s work, “the focus of the inquiry ‘is not on the precise cause of the accident but the general nature of the operation in the course of which the injury was sustained’” (Regal Constr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d at 38, 904 N.Y.S.2d 338, 930 N.E.2d 259, quoting Worth Constr. Co., Inc. v. Admiral Ins. Co., 10 N.Y.3d at 416, 859 N.Y.S.2d 101, 888 N.E.2d 1043). (emphasis added).
In W & W Glass Systems, Inc. v. Admiral Ins. Co., 91 A.D.3d 530 (1st Dept. 2012) the Court held:
Contrary to defendants’ argument that the “caused by” language in the policy is “narrower” than the “arising out of” language in BP Air Conditioning Corp. v. One Beacon Ins. Group, 8 N.Y.3d 708, 840 N.Y.S.2d 302, 871 N.E.2d 1128 , the case relied on by the motion court, the phrase “caused by your ongoing operations performed for that insured,” does not materially differ from the general phrase, “arising out of” (see Regal Constr. Corp. v. Natl. Union Fire Ins. Co. of Pittsburgh, PA, 15 N.Y.3d 34, 38, 904 N.Y.S.2d 338, 930 N.E.2d 259 ; see also QBE Ins. Corp. v. Adjo Contr. Corp., 32 Misc.3d 1231(A), 2011 WL 3505475 ). The language in the additional insured endorsement granting coverage does not require a negligence trigger (see Hunter Roberts Const. Group, LLC v. Arch Ins. Co., 75 A.D.3d 404, 407–08, 904 N.Y.S.2d 52 ), and the record demonstrates that the loss involves an employee of Metal Sales, the named insured, who was injured while performing the named insured’s work under the subcontract. It is immaterial that the complaint against the insured asserts additional claims which fall outside the policy’s general coverage or within its exclusory provisions (BP Air Conditioning, 8 N.Y.3d at 714, 840 N.Y.S.2d 302, 871 N.E.2d 1128). The duty to defend is “exceedingly broad and an insurer will be called upon to provide a defense whenever the allegations of the complaint suggest … a reasonable possibility of coverage” (id. [internal quotation marks and citation omitted]). (emphasis added).
If you have a first-party claim against your insurance carrier, or your insurance carrier has failed to provide you with a defense to third-party claims made against you, call us for a confidential and free consultation.