New York Insurance Coverage Law Update – March 27, 2024 |  Rivkin Radler LLP
New York Insurance Coverage Law Update – March 27, 2024 |  Rivkin Radler LLP

The Third Department affirms summary judgment to the insurer based on a material misrepresentation by the insured in the insurance application

The plaintiff lent money to his employee to purchase a home, the loan being secured by a mortgage. When the employee failed to pay the loan and insure the home, the plaintiff obtained a package landlord’s policy from the Erie and Niagra Insurance Association through Naccarato Insurance, a purported agent of Erie. Based on Plaintiff’s (“Erie”) representation that he was about to become the owner due to the pending foreclosure action, Naccarato’s Vice President completed Plaintiff’s insurance application indicating that Plaintiff owned and leased the property. Plaintiff signed the application in December 2013. However, Plaintiff did not own the property until he successfully foreclosed and obtained a deed to the property in July 2014. Following a fire at the property in September 2014, Plaintiff sought coverage and Erie waived based on material misrepresentations of the insured plaintiff. In support of Erie’s motion for summary judgment, Erie submitted an affidavit from its insurance manager and manager of the landlord’s package policy program reflecting that “without plaintiff’s misrepresentations that he owns the property and that the tenants live in it,” Erie would not issue a policy. In affirming Erie’s summary judgment, the Appellate Division, Third Department, reasoned that “[w]while materiality is usually a question of fact, an insurer may establish materiality as a matter of law by “present[ing] documentation regarding its underwriting practices, such as underwriting manuals, bulletins, or policies relating to similar risks, to establish that it would not have issued the same policy if accurate information had been disclosed in the application.” The court rejected the plaintiff’s argument that must not be bound by the application because he did not read it before signing, emphasizing that as a signatory he is bound “whether he chooses to read the document or not.” The court also refused to impute knowledge to Naccarato that plaintiff did not own the Erie property because Naccarato “abandoned . [any] agent role and instead, withheld information to help the plaintiff obtain insurance…” Finally, the court rejected the plaintiff’s argument that Erie should be estopped from disclaiming liability because of its untimely disclaimer, reasoning , that common law estoppel requires prejudice, and New York’s timely disclaimer statute, Insurance Law § 3420(d), applies only to claims involving personal injury or death. [Barese v. Erie & Niagra Ins. Assn., 2024 N.Y. App. Div. LEXIS 1107 (3d Dep’t Feb. 29, 2024).]

First Department Finds Prior Notice Exclusion Excludes Foreclosure Coverage Under One Policy and Issues of Fact Under Another

The defendant insurers issued insurance policies to the insured for two years, each of which covered “withdrawal or recall” as an insured event, so long as the insured gave notice “as soon as practicable, not later than 30 days” after the occurrence of an event. However, the policies excluded coverage when the insured “knew or should have known, prior to the inception of the policy” of pre-existing circumstances that “caused or could reasonably be expected to cause” an insured event. The Appellate Division, First Department, found that the exclusion excluded coverage under the insured’s second policy for seizure of its enFlow product because, among other things, the insured decided to stop using enFlow before that policy was issued. However, the court found issues of fact as to whether the insured gave timely notice under the first policy. [Vyaire Holding Co. v. Westchester Surplus Lines Ins. Co., 2024 N.Y. App. Div. LEXIS 868 (1st Dep’t Feb. 15, 2024).]

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