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Strict Interpretation of Exclusion Flushes Disclaimer Down the Drain (NY)

September 27, 2019

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<p style="text-align: justify;">Insurers are by now well aware of the New York rule placing the burden on the insurance company to demonstrate the allegations of the complaint fall squarely within an exclusion, and that such exclusions are given “strict and narrow interpretations.” In their recent decision in <em><a href="https://www.wcmlaw.com/wp-content/uploads/2019/09/Cohen-v.-Tri-State-Consumer-Ins.-Co..pdf">Cohen v. Tri-State Consumer Ins. Co.</a>,</em> the Second Department demonstrated just how narrow these interpretations can be.</p>
<p style="text-align: justify;">In Cohen, the plaintiffs’ home was damaged after a clogged toilet overflowed, and they sued the defendant insurance company under a homeowners’ insurance policy. The insurers disclaimed coverage relying upon an exclusion for losses caused by “water which backs up through sewers or drains.” Although the plain language of this exclusion appears at least arguably applicable to the claimed loss, New York Courts took a different view. In fact, the Nassau County Supreme Court granted the plaintiffs summary judgment, finding there was no question of fact as to whether the policy exclusion applied. The Second Department affirmed, ruling that plaintiff had demonstrated coverage in the first instance, and held that the exclusion relied upon by the insurer, strictly construed, clearly did not apply to the claimed loss.</p>
<p style="text-align: justify;">The case is a sobering reminder of the potential pitfalls of relying on a single exclusion, particularly without strong precedent in support, as the basis for denying a claim, and insurers and coverage defendants would be wise to keep it in mind in performing their coverage analysis.</p>
<p style="text-align: justify;">Thanks to Nicholas Schaefer for his contribution to this post. Please email <a href="mailto:VPinto@wcmlaw.com">Vito A. Pinto</a> with any questions.</p>

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