Prejudiced Insurer
A worker was injured when he fell from a ladder while working for a subcontractor at a construction project. The injured worker sued the owner of the project, seeking damages for his injuries. The owner was defended by its insurer, Hartford Fire Insurance Company. Although the owner was aware in October 2017 of the subcontractor’s insurance coverage through Hudson Excess Insurance Company, the owner and its insurer did not notify Hudson of the worker’s lawsuit and the owner’s claim for additional insured coverage until May 2020. Hudson denied coverage to the owner based upon late notice and the owner and its insurer, Hartford, filed a declaratory judgment action seeking a declaration of coverage under the Hudson policy. The owner and Hartford moved for summary judgment and the Supreme Court, New York County, granted the motion, declaring that Hudson had a duty to defend the owner. Hudson appealed and the Appellate Division, First Department, reversed, finding that the owner’s late notice materially breached the policy and prejudiced Hudson. Because notice was more than two years late, the owner had the burden of proving Hudson was not prejudiced by the delay in notice. The court found that the owner failed to satisfy its burden because Hudson was prejudiced. The court explained that the delay in notice “prevented Hudson from examining the accident site near the time of the incident, locating and inspecting the ladder, and interviewing witnesses while their memories were still fresh.” In addition, the court explained, the owner’s counsel “did not locate, interview, or depose witnesses from [the subcontractor], including its owner and foreman” and the time to do so had expired by the time Hudson was given notice. Accordingly, the court found that notice to Hudson was late, Hudson was prejudiced by the late notice, and Hudson had no duty to defend or to indemnify the owner in the worker’s lawsuit. [Hartford Fire Ins. Co. v. Hudson Excess Ins. Co., 2025 NY Slip Op 03249, 2025 N.Y. App. Div. LEXIS 3289 (1st Dept. May 29, 2025).]
New York County Supreme Court Allows Insured’s Bad Faith And GBL § 349 Claims To Proceed
The Archdiocese of New York sought coverage from its general and excess liability insurers for close to 1700 lawsuits brought against the Archdiocese alleging sexual abuse by members of the clergy and other employees. The primary insurers agreed to defend the Archdiocese subject to a reservation of rights but later denied indemnity on the basis that the alleged abuse was expected or intended from the standpoint of the Archdiocese. The insurers filed a declaratory judgment action to resolve their coverage dispute with the Archdiocese. In the action, the Archdiocese asserted claims for damages based upon the insurers’ alleged breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of General Business Law § 349. The insurers moved to dismiss the breach of the implied covenant and GBL § 349 claims for failure to state a cause of action. The Supreme Court, New York County, denied the motion. The court found that the Archdiocese’s breach of the implied covenant claim is not duplicative of its breach of contract claim because the claims “rely on distinct factual allegations” and seek “distinct damages.” The court explained that the breach of the implied covenant claim seeks consequential damages and is premised on the Archdiocese’s detailed allegations of the insurers’ alleged bad faith handling of the underlying claims, including by employing a “wait-andsee” strategy and elevating their own financial interests above those of the insured, and alleged bad faith claim settlement practices, including by refusing to participate in underlying mediations and settlement discussions and to consent to underlying settlements. In contrast, the court explained, the breach of contract claim is premised on the insurers’ alleged breach of the policies by refusing to indemnify the Archdiocese and seeks as damages the amount of settlements and judgments allegedly covered under the policies. As to the GBL § 349 claim, the court found that the Archdiocese adequately plead a claim “by setting forth at length specific acts and practices undertaken by [the insurers] in alleged bad faith to avoid their obligations to the Archdiocese and which would tend to deceive a reasonable consumer” and alleging actual injuries from the insurers’ alleged deceptive conduct. The court also found that the “Archdiocese adequately alleges consumeroriented behavior as the subject policies are alleged to have been standard form policies ‘provided to multiple consumers’.” [Archdiocese of New York v. Century Indem. Co., No. 652825/2023, 2025 N.Y. Misc. LEXIS 3780 (N.Y. Sup. Ct., N.Y. Cnty. May 6, 2025).]
