General Liability Insurance Disputes in New York

Low Settlement Offers or Drawn-Out Claim Delays

New York courts recognize that insurers have a duty to act in good faith during claim handling. While punitive damages for bad faith are rare, policyholders may seek consequential damages for delays or low offers that result in additional economic loss (Bi-Economy Market, Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187 (2008)).

To clarify, the Court held that insureds may recover consequential damages for breach of the implied covenant of good faith and fair dealing—even if not explicitly listed in the policy.

Refusal to Defend a Lawsuit Despite Coverage Potential

New York follows the “eight corners rule,” meaning the insurer must compare the four corners of the complaint with the four corners of the policy. If any allegations potentially fall within coverage, the insurer has a broad duty to defend (Automobile Insurance v. Cook – CourtListener.com).

Coverage Disputes Involving Subcontractors, Additional Insureds, or Overlapping Policies

These disputes are common in New York construction and real estate, where additional insured endorsements and indemnity clauses are heavily litigated. Per Burlington Ins. Co. v. NYC Transit Auth., 29 N.Y.3d 313 (2017), the Court of Appeals clarified when a party qualifies as an additional insured based on causation, not just contract language.

Conflicts between primary and excess insurers or between multiple CGL carriers often arise when defense obligations are disputed per Pecker Iron Works v. Travelers Ins. Co., 99 N.Y.2d 391 (2003).

Retroactive Rescission of the Policy for Misrepresentation

Insurers in New York may attempt to rescind a policy ab initio (from the beginning) due to alleged misrepresentations in the application. However, Insurance Law § 3105 restricts this to material misrepresentations that would have changed the insurer’s underwriting decision. This was covered in Republic Ins. Co. v. Masters, 306 A.D.2d 275 (2d Dep’t 2003).

Denials Based on Exclusions (e.g., Employer Liability, Pollution, Intentional Acts)

New York courts regularly enforce and interpret CGL policy exclusions, including those for employer liability, pollution, and intentional or criminal acts. For example:

• Employer Liability Exclusion: Employer liability exclusions are often litigated under NY Labor Law §§ 200, 240(1), and 241(6), particularly in construction injury cases.
  
  • Source: Northfield Ins. Co. v. Bravo, 275 F. Supp. 3d 519 (S.D.N.Y. 2017)
• Pollution Exclusion: Courts in New York narrowly interpret “absolute” pollution exclusions depending on the nature of the pollutant and whether it fits the policy’s scope.
  
  • Source: Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640 (1993)
• Intentional Acts Exclusion: Coverage is generally denied when the insured’s conduct is found to be intentional or expected.
  
  • Source: Slayko v. Security Mut. Ins. Co., 98 N.Y.2d 289 (2002)