Fourth Department Finds That Insurer Failed To Meet Its Burden Of Proving That Insureds Failed To Cooperate
Merchants Preferred Insurance Company filed a declaratory judgment action in New York seeking a declaration that it had no duty to defend or to indemnify its insureds in an underlying Florida personal injury action arising from a motor vehicle accident in Florida. The insurer defended the insureds under their commercial auto policy, but after the underlying action was placed on the trial calendar, the insurer disclaimed based on the insureds’ failure to cooperate. The trial court denied summary judgment to the insurer, and the Appellate Division, Fourth Department, affirmed. The Fourth Department first found that New York law applied because New York had the “most significant contacts,” which generally focuses on the “principal location of the insured risk.” The court explained that the policy was issued in New York to a New York-based insured for a vehicle principally garaged in New York, and that the accident occurring in Florida was not dispositive. The court next found that New York’s timely disclaimer requirement under Insurance Law § 3420 (d) did not apply because it only applies to “accidents occurring” in New York. However, the court concluded that Merchants failed to meet its “heavy” burden of proving that coverage was precluded because of the insureds’ failure to cooperate. Although the insurer established that the insureds did not meaningfully respond to inquiries regarding the subject accident, the court found that this “inaction on its own” did not establish, as a matter of law, that the insurer acted “diligently in seeking the cooperation,” that its “efforts were reasonably calculated to obtain their cooperation,” and that the attitude of the insureds was “one of willful and avowed obstruction.” [Merchants Preferred Ins. Co. v. Campbell, 2024 N.Y. App. Div. LEXIS 4050 (4th Dep’t July 26, 2024).]
Second Department Holds That Town Not Insured Under Dissolved Village’s Policy Where Insurer Did Not Consent To Transfer
The Town of Brookhaven filed a declaratory judgment action against New York Municipal Insurance Reciprocal seeking coverage for an underlying personal injury action against the Town under a policy issued to the Village of Mastic Beach. The Town maintained that, upon the Village’s dissolution, the Town assumed the Village’s liabilities, obligations, and entitlement to insurance pursuant to New York’s General Municipal Law. The Town also argued that the insurance rights were transferred pursuant to resolutions in connection with the dissolution. However, the policy included a provision requiring written permission from the insurer to transfer rights under the policy. The Appellate Division, Second Department, affirmed summary judgment to the insurer, reasoning that the Town failed to meet its burden of demonstrating that it was an insured under the policy and, contrary to the Town’s contentions, it did not automatically obtain the policy rights under the law or resolutions. In addition, the insurer established that it never consented to a transfer of rights as required by the policy’s “explicit terms.” [Town of Brookhaven v. New York Mun. Ins. Reciprocal, 2024 N.Y. App. Div. Lexis 3489 (2d Dep’t June 20, 2024).]
Southern District Grants Summary Judgment To Insurer Based On Insured’s Failure To Submit Timely Proof Of Loss
The insured owned a home that was insured by State Farm Insurance Company. The home sustained water damage on January 15, 2022; the insured submitted a claim for coverage; and State Farm reserved rights. On July 25, 2022, the insurer’s attorney sent the insured’s attorney a letter demanding “Sworn Statements in Proof of Loss in support of any claims for damages,” and enclosed proof of loss forms. The letter also recited a provision in the policy requiring that the insured submit a “sworn proof of loss” within 60 days after a loss or damage to the premises. The insured signed completed proof of loss statements on August 2, 2022, but the insured’s counsel did not send them to the insurer until October 19, 2022. In turn, the insurer disclaimed coverage because of the insured’s failure to comply with the proof of loss condition in the policy. The United States District Court for the Southern District of New York granted summary judgment to the insurer, reasoning that the insured’s failure to submit proofs of loss within 60 days after receiving the insurer’s demand is an absolute defense absent waiver or estoppel. The court rejected the insured’s argument that the insurer’s demand for the proof of loss was defective because it was sent to the insured’s counsel instead of the insured. [Starikovsky v. State Farm Fire & Cas. Co., 2024 U.S. Dist. LEXIS 103740 (S.D.N.Y. June 11, 2024).]
