No Duty to Defend: Insurer Need Not Defend Insured Against Unjust Enrichment Claim (NY)
The Southern District of New York reaffirmed that New York liability insurance policies that provide coverage for bodily injury and property damage of the insured against a third-party generally do not afford coverage to the insured against unjust enrichment claims.
In Godfrey v. Executive Risk Indemnity Inc., the Court rejected Plaintiffs’ motion for a declaratory judgment that would require defendant insurance company to defend and indemnify Plaintiffs against an unjust enrichment claim made by a third-party in an underlying action. There, a third-party contractor renovated Plaintiffs’ New York City home where faulty water sprinklers went off, damaging a substantial portion of the apartment, requiring further renovation. The unforeseen renovation spiked up the final cost of the remodel. After Plaintiffs refused to pay the additional cost of the renovation, the third-party contractor sued the Plaintiffs alleging unjust enrichment in attempt to collect the remaining balance.
The Southern District of New York granted Defendant-insurer’s motion for summary judgment, concluding that New York Insurance policies regarding Personal Liability Coverage only covers damages for personal injury and property damage, not claims against the insured of unjust enrichment or breach of contract by a third-party. Despite the allegation of unjust enrichment being directly related to property damage that occurred in the Plaintiffs’ home, the Court emphasized that such relation does not establish an allegation of property damage in and of itself. Thus, because the Insurance Policy does not provide coverage against unjust enrichment claims, the Insurance Company has no duty to defend or indemnify Plaintiffs, its insured, in such suits.
This ruling highlights the duties and non-duties insurers have to their insured based on both the individual insurance policy and New York’s general insurance law. Additionally, merely because an action is related to damages that would be covered by the policy does not necessarily mean the insured may reasonably expect the policy to cover that action.Thanks to Alexa Schimp for her contribution to this article. Should you have any questions, please contact Heather Aquino.