Insurer May Be Vicariously Liable for Negligent Oil Spill Remediation Contractor

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BROOKLYN, N.Y., March 2 — The Second Department of the New York Supreme Court Appellate Division has held that a negligence claim alleged against an insurer in a dispute regarding the remediation of oil contamination should have been permitted to proceed, reversing the trial court’s dismissal of the claim.

In  Richard Bennett, et al. v. State Farm Fire and Casualty Co., Plaintiff  Richard Bennett and his family sustained a home heating oil spill in 2011. Bennett’s house at the time was insured by State Fire Farm and Casualty Co.,  and the policy included a third party liability claim protection.   State Farm paid for remediation  overseen by the NY State Dept. of Environmental Conservation, which acted as the third party claimant because of the spill.

A dispute arose, and Bennett sued a number of parties involved in the remediation, including State Farm.   The trial court granted State Farm’s motion to dismiss claims against it, including a claim that H2M, a remediation contractor allegedly  supervised and directed by State Farm, acted negligently in the cleanup.

While the Appellate Division affirmed the trial court’s ruling as it pertained to fraud, breach of fiduciary duty, and punitive damages claims against State Farm, it ruled that a negligence claim against State Farm was viable:

“The complaint also alleges that State Farm supervised and directed the work of H2M, potentially giving rise to vicarious liability on the part of State Farm for negligence, if any, of that contractor…Under these circumstances, the complaint states a cause of action for negligence against State Farm.”

Editor’s Note:  Extracontractual avenues of liability on the part of insurers continues to evolve.  Insurers must take care to place the necessary protective layers between themselves and third party repair and remediation vendors.  If they do not, they risk negligence liability on vicarious liability theories.

Bennett v. State Farm et al, (N.Y. App. 2nd Div. March 2, 2016)

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Author: CJ Haddick

C.J. Haddick is a Director with the law firm of Dickie, McCamey, & Chilcote, PC, based in Pittsburgh, Pa. He has advised and represented insurers in insurance coverage and bad faith litigation for more than a quarter of a century, and written and spoken throughout the United States on insurance coverage and bad faith prevention and litigation. He is Managing Director of the firm's Harrisburg, Pa. office. Reach him at chaddick@dmclaw.com or 717-731-4800.

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