Illusory CGL Policy Not Against Public Policy in NY
November 12, 2009
In <i>720-730 Fort Wash. Ave. Owners Corp. v. Utica First Insu. Co., </i>Utica denied coverage for an underlying tort action wherein a subcontractor’s employee was injured when a concrete block fell on him while working on 702-730 Fort Washington’s construction site. The policy had exclusions for bodily injury to any employee or any liability arising out of any roofing operations. The property owner argued that the exclusions rendered the insurance policy illusory and against public policy since it did not provide any of the insureds with the usual construction site coverage required under its agreement with the general contractor and subcontractors.
The Court ruled that Utica’s policy was misleading and did not provide the coverage necessary to protect Fort Washington from the construction site risks and the vicarious liability imposed by the Labor Law. However, the exclusions were judicially upheld and the inadequate insurance policy was found to not have violated any regulation or statutorily declared public policy. The Court suggested that the passing of a statute or regulation mandating the issuance of a “uniform construction site insurance policy” would reinforce the public policy goals sought under New York Labor Law; however, the Legislature has yet to act as such. In the meantime, the Court reminds insureds of the need to perform a due diligence review of the policy, citing the maxim caveat emptor – let the buyer beware.
Thanks to Chris O'Leary for his contribution to this post.