National Union Tail Coverage On Liability Policy Insufficient, New York Judge Finds

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New York, Feb. 28 – A New York state judge has ruled that a 60-day Extended Reporting Period (ERP) Endorsement requiring that both the claim be made against the insured, and the insured’s report to the insurer take place only within the 60-day extended reporting period violates New York Insurance Regulations covering minimum ERP requirements.

The insured, New York Institute of Technology (NYIT)  sought defense and indemnity for an underlying defamation suit which was filed against it during the end of the  policy period. NYIT did not notify National Union of the claim, however, until after the polkcy expired but within the liability policy’s 60 day “tail” ERP.

National Union denied coverage on the ground that  the policy’s ERP provision only extended coverage for claims both made against the insured and reported within the 60-day tail period.   NYIT sued National Union in New York state court to compel defense and indemnity.   National Union then filed a motion to dismiss based on the language of the ERP.

New York State Trial Judge Barbara Jaffe denied the insurer’s dismissal motion, finding that National Union’s ERP provision was unenforceable, because it fell short of minimum requirements for extended reporting periods, also known as “tail coverage,” under applicable  New York insurance regulations.  She wrote:

“Pursuant to the applicable regulation, the policy should have afforded plaintiff an additional 60 days at the end of the policy term to provide defendant notice of the claim ‘for injury or damage that occurred,’ as it did here, ‘during the policy term,’ notwithstanding that plaintiff did not first receive notice of the claim against it during the ERP.”

Judge Jaffe found National Union policy’s ERP provision  was unambiguous.  She also found, however, that the ERP was invalid under New York Law.  Judge Jaffe found that as written, the National Union ERP imposed an “additional obstacle to coverage,”  and created a gap in coverage, excluding a class of claims for which the New York insurance regulations required coverage, i.e., claims made against the insured within the policy period, but not reported to the insurer until the tail period.

New York Institute of Technology vs. National Fire Union Ins. Co. of Pittsburgh, Inc. (New York County, New York, Feb. 23, 2017, Jaffe J.)

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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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