Second Department Finds Duty To Defend But No Bad Faith And That Insurer Did Not Have An Obligation To Advise Insured Of Right To Independent Counsel
The parent of an infant sued Kim Eichle for Eichle’s alleged negligence in serving alcohol to her houseguest, Jacob Russo, who allegedly assaulted the infant, and for negligence in failing to keep the sidewalk at her residence free from snow and ice. Eichle filed a third-party action against Russo alleging that the infant’s injuries were caused by Russo’s negligence or assault of the infant. State Farm agreed to defend Russo, but filed a declaratory judgment action, seeking a declaration that it had no duty to defend or to indemnify Russo because the injuries in the underlying action did not result from an “occurrence,” i.e., an accident, and were excluded by the “expected or intended” exclusion in Russo’s policy. The Appellate Division, Second Department, found that the trial court properly denied State Farm’s motion for summary judgment declaring that it had no duty to defend or to indemnify, reasoning that State Farm did not demonstrate that the incident did not arise from an “occurrence” or that the exclusion applied. The Second Department also held that State Farm’s declaratory judgment action was properly dismissed as premature because the “declaration sought by State Farm cannot be granted in advance of the trial in the underlying action.” However, the Second Department agreed with State Farm that Russo’s bad faith counterclaim should have been dismissed and that Russo’s “conflict of interest” counterclaim should have also been dismissed because State Farm “did not have an affirmative duty to advise Russo of the right to retain independent counsel.” [State Farm Fire & Cas. Co. v. Russo, 2024 N.Y. App. Div Lexis 2759 (2d Dep’t May 15, 2024).]
First Department Rejects Excess Insurer’s Disclaimer As Untimely
Admiral Insurance Company did not disclaim coverage to the New York City Housing Authority for an underlying bodily injury action until August 2018, even though Admiral knew that an exclusion in its policy provided a basis for disclaiming as early as 2016. Admiral contended that its disclaimer was timely because its duty to disclaim was not triggered until there was a reasonable possibility that its excess coverage might be reached. The Appellate Division, First Department, rejected the contention that the disclaimer was timely under this standard because Admiral had notice of “just such a reasonable possibility” no later than 2017 when it received NYCHA Counsel’s litigation plan, which “contained ample grounds to conclude that excess coverage might be triggered.” [New York City Hous. Auth. v. Admiral Ins. Co., 2024 N.Y. App. Div. LEXIS 2525 (1st Dep’t May 7, 2024).]
Second Department Holds That Trial Court Erred In Allowing Bad Faith Claim
The insured owned a house that was damaged when a refrigerator water line leaked and caused the foundation wall to collapse. Kingstone Insurance Company denied the claim for coverage, and the insured sued Kingstone for breach of their insurance contract and for bad faith in denying the claim for coverage. The Appellate Division, Second Department, held that the trial court correctly found that the claim was covered because the policy provided coverage for “loss caused by accidental leakage” of “liquids” from a “domestic appliance,” and Kingstone failed to raise a triable issue of fact as to whether the foundation damage was excluded under the earth movement or water damage exclusions. However, the Second Department found that the trial court should have dismissed the insured’s bad faith claim as “duplicative of the cause of action alleging breach of contract” because “there is no separate tort for bad faith refusal to comply with an insurance contract.” [Parisi v. Kingstone Ins. Co., 2024 N.Y. App. Div. LEXIS 2999 (2d Dep’t May 29, 2024).]
