Successful Appeal in a Contentious Coverage Dispute
Case Study

Successful Appeal in a Contentious Coverage Dispute

March 29, 2011

Goldberg Segalla partner Paul Steck prevailed in the Appellate Division, Second Department in a contentious coverage dispute dealing with the applicability of an insurer’s homeowner policy to an underlying personal injury action at the homeowner’s incorporated property which was named as an “additional interested party” on the homeowner’s policy. The underlying personal injury claim was ultimately disposed at trial; however, defense counsel (and plaintiff in the declaratory action) was claiming over $100K in legal fees.

The homeowner founded the corporate entity which took title to the subject property. Thereafter, the homeowner consulted with an agent of the insurer for insurance coverage for the property but failed to advise the agent the true owner of the property. Based on information provided by the homeowner, the insurer issued a deluxe homeowner’s policy in the name of the homeowner but listing the corporation as an additional interested party. The trial court granted summary judgment to insurer that is was not obligated to defend or indemnify the corporation in the underlying claim.

On appeal, the issue was whether the Trial Court properly ruled that there is no basis to reform the contract of insurance to include the corporation as a named insured. The Appellate Division, Second Department affirmed the lower court holding holding that the insurer established entitlement to summary judgment that it was not obligated to provide coverage under the subject policy as the corporation was not a named insured under the policy. Also, the Second Department held that there was no basis to reform the policy based on mutual mistake as the corporation failed to refute testimony that the insurer does not insure residential properties owned by corporations. Lastly, the Court affirmed dismissal of the corporation’s negligence claims as the homeowner/corporation failed to correct material errors as to the owner of the property despite numerous opportunities to do so in repeated renewals and thus could not claim detrimental reliance on the agents alleged errors.