Three significant insurance disputes are pending before the New York Court of Appeals, and Hunton partner Syed Ahmad discusses the importance of those cases in Law 360’s article titled 3 Insurance Cases To Watch At NY’s High Court.
In KeySpan v. Munich Re, the Court will address whether Century Indemnity is responsible for cleanup costs during times when coverage for those costs was unavailable. Underlying that ruling is a dispute over whether pro rata or all sums allocation applies. The Court will have the opportunity to apply its decision last year in Viking Pump, which we previously covered here and here. As Ahmad noted, the KeySpan appeal “shows that the Viking Pump ruling can raise many more questions than it raises.”
In Gilbane Building v. St. Paul, the Court will deal with an additional insured issue. The lower court found that the party seeking coverage as an additional insured under the policy’s additional insured endorsement must have an actual written contract with the insured. Because the insured had merely agreed to obtain additional insured coverage for that party in a separate contract with another entity, the Appellate Division found that the party seeking coverage was not entitled to it. Ahmad pointed out that this “area of the law is considered muddled, primarily because the policy language adding parties as additional insureds is often divorced from the separate contracts requiring additional insured status.”
In the third case—Global Re v. Century Indemnity—involves a dispute over how reinsurance limits apply. The parties disagree about whether Global Re’s liability as a reinsurer is capped at the reinsurance accepted amount identified in the facultative reinsurance certificate even though Century Indemnity paid defense costs in addition to the limits of the policies that Global Re reinsured. To help it resolve that disagreement, the Second Circuit certified a question to the New York Court of Appeals, asking whether a prior decision from the New York high court imposed a rule or a strong presumption that a reinsurance accepted amount caps a reinsurer’s liability even where the reinsured policy covers defense costs in addition to its limits. Ahmad pointed out that this issue has been percolating in reinsurance disputes for some time and suggested that the Court of Appeals “take the opportunity to clarify this area of the law and reaffirm that disputes about contract terms should be resolved based on the actual terms, not a ‘one-size-fits all’ approach.”