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Fire Insurance Policies Must Follow The Standard Policy (NY)

March 25, 2022

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<p style="text-align: justify;">The Supreme Court of New York, Niagara County, recently rejected an attempt by a property insurer to rely on an exclusion not included in New York’s standard fire policy. In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2022/03/Niagara-BYG-Capital-LLC-v.-Leatherstocking-Coop.-Ins.-Co..pdf">Niagara BYG Capital, LLC v. Leatherstocking Coop. Ins. Co.,</a> </em>the plaintiff property owner hired a company to manage and renovate a multi-family home. The property manager hired several workers to perform certain work at the site, and plaintiff agreed to allow them to live in the home while they performed the work. One of the workers intentionally set fire to the premises and plaintiff sought coverage.</p>
<p style="text-align: justify;">The property insurer denied coverage for the fire, relying on a “Dishonest or Criminal Acts” exclusion in the policy. The insurer claimed that plaintiff knowingly “entrusted” the property to the person who set the fire, thereby triggering the exclusion. However, this exclusion is not contained in the standard fire insurance policy statutorily set forth in New York Insurance Law Section 3404 and provides less favorable coverage than the statutory policy. As such, plaintiff moved for summary judgment on the basis that the defendant’s denial violated the provisions of Insurance Law section 3404.</p>
<p style="text-align: justify;">The court observed that Insurance Law section 3404(b)(1) requires that any policy that insures against fire must incorporate terms and provisions no less favorable to the insured than those contained in the standard policy. It further found that while the standard policy includes several exclusions, it does not include the exclusion upon which the insurer relied in the case. As such, the exclusion impermissibly restricted the coverage mandated by statute by imputing the intentional act of another onto an innocent insured. Accordingly, the court declined to enforce the exclusion and granted plaintiff’s motion.</p>
<p style="text-align: justify;">The takeaway of the <em>Niagara BYG</em> case is that New York fire insurers should be careful to ensure that their policy exclusions should match those in New York’s standard fire policy set forth in Insurance Law section 3404. Exclusions not contained in the standard policy will be rejected by New York courts.</p>
<p style="text-align: justify;">Thank you to Tristan Montague for his contribution to this post. Please contact <a href="mailto:agibbs@wcmlaw.com">Andrew Gibbs</a> with any questions.</p>

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