New York Insurance Coverage Law Update – December 2021 | Rivkin Radler LLP


New York Court of Appeals Rules Rebate Payment Under SEC Rules Not Excluded As Statutory Penalty

The Securities and Exchange Commission (SEC) alleged that Bear Stearns facilitated deceptive late trading and market timing practices by its clients in the buying and selling of mutual fund stocks. Bear Sterns has requested coverage from its insurers for part of its settlement with the SEC under policies providing coverage for “losses” that Bear Sterns has become required to pay in connection with any government investigation into legal violations. or regulations. The policies defined “loss” to include certain types of damages, but not “fines or penalties imposed by law”. Bear Sterns argued that $ 140 million of his “restitution” settlement payment (which was to be deposited into a “Fair Fund” to compensate mutual fund investors who allegedly suffered from the trading practices) came from estimates of customer gain and investor harm and, therefore, was not a “sanction imposed by law”. The New York Court of Appeals agreed, holding that a reasonable insured purchasing a policy covering losses for wrongdoing would have understood the term “penalty” to refer to “non-compensatory and purely punitive monetary penalties”. The Court of Appeal concluded that the insurers had failed to establish that the payment fell within the exclusion of the policies from “penalties imposed by law” and that the lower court had erred in granting summary judgment to the insurers on this base. [J.P. Morgan Sec. Inc. v. Vigilant Ins. Co., 2021 N.Y. LEXIS 2519 (N.Y. Nov. 23, 2021).]

Ministry 1 argues tenant’s insurer owes landlord additional insured coverage when claimant fell through cellar door used by tenant

The claimant fell through an exterior cellar door while delivering bread to the tenant’s restaurant in their rented premises. The plaintiff sued the owner, who was insured by Seneca Insurance Company. Seneca requested additional insured coverage for the homeowner under the Tenant’s policy with the New York Marine and General Insurance Company, which covered bodily injury “resulting from the property, maintenance or use of this property. part of the premises rented to the »tenant. The First Department’s Appeal Division upheld the lower court’s ruling that New York Marine had a primary duty to defend and indemnify the owner. The court ruled that contrary to New York Marine’s contention, the exterior staircase used by the tenant to enter and exit their space was implicitly part of the leased premises. Further, the court concluded that the accident necessarily resulted from the tenant’s “use” of the leased premises because the plaintiff was walking through the basement door to deliver items for the tenant’s business when the accident occurred. ‘is produced. [71 Lafayette Ave. LLC v. New York Mar. and Gen. Ins. Co., 199 A.D.3d 603 (1st Dep’t Nov. 30, 2021).]

The fourth department considers that the removal of items from the house by the maintenance company and their placement in a dumpster does not constitute “theft” under the homeowner’s insurance policy.

The insured defaulted on his mortgage, left his house and filed for bankruptcy. Geddes Federal Savings and Loan hired a maintenance company to inspect, secure and maintain the property, and they emptied the house and placed items in a dumpster on the front lawn. The insured requested coverage under their home insurance policy from Liberty Mutual, which declined coverage on the grounds that the loss was not theft (a covered risk). On appeal, the Appeal Division, Department 4, agreed with the insurer that “the average insured in ordinary intelligence” would not think that the employees of the maintenance company had committed theft by removing objects from. claimant’s house and placing them in dumpsters on the front lawn. . “However, the court did find a fair question of fact as to whether” one or more unknown persons entered the residence before it was cleaned by the maintenance company and stole the items which, according to the applicant, were missing ”. [Purisk v. Liberty Mut. Ins. Grp. Inc., 2021 N.Y. App. Div. LEXIS 6332 (4th Dep’t Nov. 12, 2021).]

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