Every New York insurer evaluating a question of coverage has heard the duty to defend described as “exceedingly broad” and “broader than the duty to indemnify” in one way or another more often than they can count. They also know exclusions are interpreted narrowly, the burden of demonstrating a claim falls within a policy exclusion is on the insurer, and exceptions to exclusions are construed broadly in favor of finding coverage. However, as the First Department recently reminded us, despite all of these obstacles, insurers can still win summary judgment on coverage issues.
In Zurich Am. Ins. Co. v ACE Am. Ins. Co., the underlying personal injury case arose out of an accident wherein the claimant was injured during the unloading of rebar cages on a truck. Defendant insurer, ACE, asserted its “Aircraft, Auto or Watercraft” exclusion, which barred coverage for injuries “arising out of the ownership, maintenance, use or entrustment of any…auto…” where “[u]se includes operation and loading or unloading” to deny coverage for the accident. In opposition, the plaintiff insurer argued the claimant alleged the accident was caused in part because the cages were improperly constructed, maintained, and secured, which would fall outside the exclusion.
On appeal, the First Department reversed the trial court’s decision and held ACE had no duty to defend in the underlying personal injury action, because the accident still “‘arose out of’ the loading and unloading of the truck’” and therefore the exclusion was applicable. And although ambiguities are the enemy of a disclaimer, an ambiguity does not exist simply because the parties have different interpretations of a policy term. So while it is important to be realistic about chances of success and anticipating opposing arguments when evaluating coverage, courts will still enforce exclusions if asserted properly, and the mere existence of a credible opposing interpretation does not alone create a duty to defend.
Thanks to Nicholas Schaefer for his contribution to this post. Please contact Vito A. Pinto with any questions.