New York Insurance Law Changes – August 26 2022 | JD Supra

Southern District Hopes to Seek Unjustly Enriched Over “Property Damage”

Homeowners in Manhattan hired Zale Contracting to renovate their homes. After the home’s sprinkler system failed, Zale, with the owner’s permission, reportedly repaired the damage and purchased and installed new equipment, resulting in an additional $280,000. When the owners refused to pay, Zale sued them for “unjust enrichment.” The owners sued their homeowners’ insurance, Executive Risk Indemnity, which denied it, and the owners filed a declaratory judgment action. The United States District Court for the Southern District of New York agreed with the insurer, holding that the case was not for “property damage.” Although the house was damaged by a sprinkler failure, the court agreed that Zale did not want the owner to do the damage. Instead, Zale’s complaint was heard only in unjust enrichment, saying that the owner was responsible for the cost of additional work and necessary equipment after the failure of the sprinkler. The court also found that even if Zale claimed property damage, the “property damage to any covered person” exclusion would apply to the bar defense. [Godfrey v. Exec. Risk Indem. Inc., 2022 U.S. Dist. LEXIS 118004 (S.D.N.Y. July 5, 2022).]

The Second Department Holds That the Limitation of Business Property Damage Policies Is Interpreted in Favor of the Insured.

After the property was stolen from an insured building, he submitted a claim for his loss to his home’s insurer, the Automobile Insurance Company of Hartford, Con-necticut. The insurer limited the insured’s compensation for damages to $12,500 based on the limits in the policy for property “used at any time or in any manner for any “business”. The insured. On appeal, the New York Supreme Court, Appellate District, Second Department, agreed, holding that any ambiguity must be construed in favor of the insured. The court held that the statute meant “business,” but did not define the word “use.” or “business purpose,” and “did not make it clear whether the term ‘at any time'” means any time during the policy period or, as the insurer stated, applies to any time during the life of the insured, including remote years. The court l stated that the language of the law may be able to define what cannot be limited to the property in question, which was a special property insured several decades ago and kept as part of the collection. [Birnkrant v. Automobile Ins. Co. of Hartford, Conn., 2022 N.Y. App. Div. LEXIS 4086 (2d Dep’t June 29, 2022).]

The Second Department Rejects Claims of Punitive Damages Based on Bad Faith

After being hit by a car, the insured filed a claim under the uninsured motorist policy in his auto policy with the New York Central Mutual Fire Insurance Company and sued the insurer for damages for the insurer’s bad faith in breach of the insurance contract. The New York Supreme Court, Second Appellate District, Second Department, reversed the trial court’s denial of the insurer’s petition to vacate the insurer’s decision to seek punitive damages. The court held that there is no separate threat of bad faith repudiation of an insurance contract under New York law; and the insureds did not plead bad faith for refusing to settle because there were no claims against the insureds to settle. And even assuming that the insured claimed an independent cause of action for refusing to settle, the insured did not claim that they have a clear interest, which requires actions that (i) “such bad character and dishonesty. as implying criminal indifference to public responsibility” and (ii) “part of the system that is provided to the general public.” [Schlusselburg v. N.Y. Cent. Mut. Fire Ins. Co., 2022 N.Y. App. Div. LEXIS 3422 (2d Dep’t June 1, 2022).]