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Court of Appeals and Appellate Practice | MONDAY, AUGUST 25, 2014 | S7

the decision will remain unchanged. .” to advise, guide, or direct a client to obtain [its insurer] was disclaiming coverage on interest on a $1,100,000 medical malprac-

Thus, in its decision in K2 on reargument, additional coverage. Thus, in the ordinary the ground of the exclusion for assault and tice judgment against the insured where
it held that the insurer was not barred from broker-client situation, a client may prevail battery.”
the liquidator of the insured’s insolvent
relying on policy exclusions as a defense in a negligence action only where it can primary professional liability insurer had
to the lawsuit against it.
establish that it made a particular request Vandalism Coverage
paid the $1,000,000 per occurrence liability
to the broker and the requested coverage limit of that policy.
Notice
was not procured.
As the court has done a number of times The court, in a unanimous memorandum
The situation is somewhat different where in recent years, this past term it answered decision, concluded that, given the policies’
The issue in KeySpan Gas East v. Munich a “special relationship” exists between a questions of insurance law certiied to it by language, the liquidator’s payment of the
Reinsurance America,was whether Insur- broker and client. In that case, a broker may the U.S. Court of Appeals for the Second primary policy’s $1,000,000 liability limit
3
ance Law §3420(d)(2), which requires that be liable, even in the absence of a speciic Circuit. In Georgitsi Realty v. Penn-Star Ins.,8 triggered the excess insurers’ duty to pay
insurance carriers disclaim coverage based request, for failing to advise or direct the the Second Circuit irst asked the court if, all remaining amounts in connection with
on late notice “as soon as reasonably pos- client to obtain additional coverage.
for purposes of construing a property insur- the judgment, including interest. It reached
sible after irst learning of the . grounds In Voss v. Netherlands Ins.5 the client ance policy covering acts of vandalism, mali- this conclusion, it said, in the absence of a
for disclaimer,” applied in this case, and the argued that the broker should have advised
cious damage could be found to result from
provision in the primary policy expressly
court ruled that it did not.
covering interest above
The court said that §3420(d)(2) applies the policy’s liability lim-
only in a particular context: insurance cases it, regulations mandating
As the court has done a number of times in recent years,
involving death and bodily injury claims aris- that the primary insurer
ing out of a New York accident and brought this past term it answered questions of insurance law certiied to it
cover additional damages
under a New York liability policy. Because the or interest beyond the
underlying claim in this case did not arise out by the U.S. Court of Appeals for the Second Circuit.
primary policy’s limit, or
of an accident involving bodily injury or death, regulations exempting the
the notice of disclaimer provisions set forth in excess carriers from the
§3420(d)(2) were “inapplicable.” Rather, the responsibility to pay all
court concluded, in this case the insurance amounts in excess of the
carrier could not be barred from disclaiming about a higher level of business interrup- an act not directed speciically at the cov- primary policy’s limit.

coverage “simply as a result of the passage tion coverage. A divided court determined ered property. Then, the circuit court asked, Finally, in Matter of Beth V. v. New York
of time,” and its delay in giving notice of dis- that the client’s complaint should not have if so, what state of mind was required?
State Ofice of Children & Family Services,11
claimer had to be considered under “com- been dismissed on the basis that no spe- In its irst decision ever to address the the court found that a workers’ compensa-
mon-law waiver and/or estoppel principles.”
cial relationship arose between the parties, meaning of the term “vandalism” in an insur- tion carrier could take a credit under §29(4)
Country-Wide Ins. v. Preferred Trucking concluding that the broker had not satisied ance policy, the court ruled that malicious of the Workers’ Compensation Law against
Services also involved a question of notice.4 its burden of establishing the absence of a damage within the coverage of a property the settlement proceeds of a civil rights
In this case, §3420(d)(2) did apply, and the material issue of fact as to the existence of insurance policy “may be found to result lawsuit brought by a recipient of worker’s
issue was whether the insurance company a special relationship.
from acts not directed speciically at the compensation beneits against her employ-
had issued a timely disclaimer based on the It should be noted that the majority opin- covered property.” The court reasoned that er and co-employees for injuries arising

insured’s failure to cooperate in the defense ion speciically reiterated that special rela- there was “no reason” that the term “van- from the same incident for which she was
of the action.
tionships in the insurance brokerage con- dalism” should be limited to acts “directed receiving beneits. The court disregarded
The court ruled that it had done so, even text “are the exception, not the norm.” Still, speciically at the covered property,” or that the form of the settlement (which, it said,
though the personal injury lawsuit against as the dissent observed, a consequence of an act of vandalism had to bring the vandals may have been structured to afford the
the insured company had been iled in March the majority decision may result in brokers in direct contact with the covered property. claimant a presumed tax advantage), and
2007 and the insurer had not disclaimed until becoming “a kind of back-up insurer.”
“Where damage naturally and foreseeably concluded that the settlement agreement
Nov. 6, 2008—about 20 months later.
Indeed, when this decision is considered results from an act of vandalism, a vandalism indicated that the settlement proceeds
The court explained that the policyholder with the court’s 2012 ruling in American clause in an insurance policy should cover it.”
were intended to compensate the work-

in this case had not cooperated with the Building Supply v. Petrocelli Group,6 hold- In response to the second certiied ques- ers’ compensation claimant for the same
insurer in the defense of the suit. The court ing that an insured’s failure to read did not tion, the court ruled that, to obtain cov- personal physical and mental injuries for
acknowledged that the insurer knew or bar its lawsuit against its broker, it appears erage under a property insurance policy, which she had been awarded compensa-
should have known in July 2008 that the pres- that the court may be cutting back on pro- the insured must show “malice,” which it tion beneits.
ident of the insured would not cooperate, tections for brokers. This certainly bears deined as “such a conscious and deliberate •••
but it also found that the insurer was not in a watching.
disregard of the interests of others that the ••••••••••••••••••••••••••
position to know that the driver of the vehi- conduct in question may be called willful 1. K2 Investment Group v. American Guarantee & Li-
cle involved in the alleged accident underly- or wanton.” In the court’s view, this test ability Ins., 22 N.Y.3d 578 (2014), reargument denied,
ing the personal injury lawsuit would not Disclaimers
would “serve to distinguish between acts Motion No.: 2014-315 (N.Y. May 6, 2014). Judge Robert S. Smith wrote the majority opinion, in which Chief Judge
Jonathan Lippman and Judges Susan P. Read and Jenny
cooperate until Oct. 13, 2008, when he told In February, the court issued an impor- that may fairly be called vandalism and Rivera concurred. Judge Victoria A. Graffeo dissented in
the insurance company’s investigator that tant memorandum decision in QBE Ins. v. ordinary tortious conduct.”
an opinion in which Judge Eugene F. Pigott concurred.
he did not care about attending a deposition Jinx-Proof.7
Judge Sheila Abdus-Salaam took no part in the case.
and, thereafter, gave no further response.
The case arose when a patron of a bar Three Cases
2. 64 N.Y.2d 419 (1985). See Evan H. Krinick, “Breach of Duty to Defend Stands Out Among Noteworthy Issues,”
Given that the driver “punctuated periods owned by Jinx-Proof sued Jinx-Proof, alleging NYLJ, Aug. 26, 2013.
of noncompliance with sporadic coopera- that she had been injured when one of its Of the last three cases, two were unani- 3. 2014 N.Y. Slip Op. 4113 (June 10, 2014). Judge Abdus-
tion or promises to cooperate,” the court employees threw a glass at her face. The bar’s mous. In Executive Plaza v. Peerless Ins.,9 Salaam wrote the opinion for a unanimous court; Chief
concluded that the insurance carrier had insurance carrier wrote it two letters that Judge Robert S. Smith wrote the opinion Judge Lippman and Judge Rivera took no part in the case.
established as a matter of law that its stated, among other things, that Jinx-Proof for the court (also in answer to a question 4. 22 N.Y.3d 571 (2014). Judge Pigott wrote the opinion for a unanimous court; Judge Abdus-Salaam took no part
in the case.
disclaimer had been made in a reason- had no coverage for the assault and battery certiied by the Second Circuit).
5. 22 N.Y.3d 728 (2014). Judge Graffeo wrote the de-
able time. The court distinguished other claims. Jinx-Proof argued that the disclaim- Here, a ire insurance policy limited the cision for the court, in which Chief Judge Lippman and
bases for disclaimer where the facts sup- ers were ineffective. A divided court ruled time in which the insured could bring suit Judges Rivera and Abdus-Salaam concurred. Judge
porting the disclaimer were immediately otherwise.
against its insurer under the policy to two Smith dissented in an opinion in which Judges Read and Pigott concurred.
apparent.
Over the dissent of two judges, the major- years. The policy also provided that the 6. 19 N.Y.3d 730 (2012).
ity said that although the letters contained insured could recover the cost of replac- 7. 22 N.Y.3d 1105 (2014). Judges Graffeo, Read, Smith,
some “contradictory and confusing lan- ing destroyed property—but only after the Rivera, and Abdus-Salaam concurred. Judge Pigott dis-
Brokers
guage” and although the letters also con- property already had been replaced. The sented in an opinion in which Chief Judge Lippman con-
curred.
8. 21 N.Y.3d 606 (2013). Judge Smith wrote the major-
Under well-established New York law, tained “reservation of rights” language, the court decided that the two year contractual ity opinion, in which Chief Judge Lippman and Judges
insurance brokers have a common law duty letters “speciically and consistently stated” limitations period was unreasonable and Graffeo, Read, Pigott, and Rivera concurred. Judge Ab-
to obtain requested coverage for their cli- that Jinx-Proof’s insurance policy excluded unenforceable where the property could dus-Salaam dissented in part in an opinion.
ents within a reasonable time or inform their coverage for assault and battery claims. not reasonably be replaced in two years.
9. 22 N.Y.3d 511 (2014).
clients of their inability to do so. Brokers, According to the court, these statements The issue in Ragins v. Hospitals Ins.,10 10. 22 N.Y.3d 1019 (2013).
11. 22 N.Y.3d 80 (2013). Judge Read wrote the majority
however, typically have no continuing duty
“were suficient to apprise Jinx-Proof that
was whether excess insurers had to pay
decision, with Judge Rivera dissenting.