Employees of Evans Floor Specialist were busily refinishing wood floors in an apartment building in the Bronx. An employee tugged a vacuum cord out of an electric outlet sparked the chemical finish and floor ablaze. Evans notified its insurance carrier of the occurrence, which was described on the claim form as: “insd states that one of his employees started at first [sic] at insds residence by pulling a vacuum cord.” When asked to identify any injured persons or damaged property, the insured stated, “unknown, sedwick ave bronx.”

On this information alone, did the insurer now have a duty to investigate potential bodily injury claims? In Hermitage Ins. Co. v Evans Floor Specialist, Inc., the Appellate Division, First Department answered this question in the negative.

One year after the fire, both employees commenced a personal injury action against Evans claiming that they were injured during the fire. Hermitage disclaimed coverage based upon the application of its exclusion for bodily injury to the employees of the insured, and commenced a declaratory judgment action against Evans and the two injured-employees. The employees claimed that the disclaimer was untimely under Insurance Law § 3420(d). The trial court agreed, finding that Evans’ initial claim triggered Hermitage’s duty to investigate and that the employee exclusion ought to have been cited when the claim was first noticed.

But the Appellate Division, First Department, reversed the trial court ruling that Evans’ claim did not trigger any duty on the part of Hermitage to investigate the claim. The Court opined that while the occurrence/claim form presented the potential for a property damage claim from the owner; there was nothing to indicate that there was a potential bodily injury claim. As such, Hermitage was not under a duty to investigate any bodily injury claim, and its later disclaimer was timely.

Thanks to Steve Kaye for his contribution to this post.  For more information, please write to Mike Bono.